UPDATE 2-Pacer posts profit; reaches deal with Union Pacific

* Q3 EPS $0.02 vs est loss $0.01/shr

* Extends agreement with Union Pacific, resolves claims

* Expects to move away from intermodal marketing business

* Shares up 23 percent after market (Adds details from SEC filing)

Nov 3 (Reuters) - Third-party logistics provider Pacer International (PACR.O) posted a surprise third-quarter profit and said it has signed new arrangements with Union Pacific (UNP.N), sending its shares up 23 percent in after-hours trade.

Pacer said the new agreement with the No.1 U.S. railroad features a multi-year line-haul services extension that replaces the parties' current terms for domestic big-box shipments -- 48 to 53 feet containers -- that were to expire in 2011.

The agreement also resolves outstanding claims relating to domestic container transportation between the companies, and calls for a payment of $30 million to Pacer.

Union Pacific had asserted two claims totaling $140 million against Pacer for retroactive and prospective rate adjustments for containers shipped on their railroad.

In a regulatory filing with the U.S. Securities and Exchange Commission, Pacer said the amendment provides that rates and other terms and conditions of the existing agreement will no longer apply to domestic big-box shipments.

"The new arrangements provide a gradual increase to new linehaul rates and establish Pacer with a continued position on the entire Union Pacific network, with access to all intermodal services at competitive rates," Chief Executive Michael Uremovich said in the filing.

The new rate structure will likely affect Pacer's business relationships with intermodal marketing companies (IMCs), but the company will not cease to do business with them, the CEO said.

"We expect this business will transition away from Pacer, but it will be up to each IMC customer to determine the details surrounding this," Uremovich said.

For the first nine months of 2009, Pacer recognized about $190 million in revenue from the intermodal marketing business.

Pacer has been severely hit by the economic downturn that has taken a toll on freight demand and pricing. Since the end of 2008, it has cut jobs, suspended its 15-cent quarterly dividend and reduced wage levels to save costs.

It also amended its credit facility twice this year to stay in line with its financial covenants.

For the third quarter, Pacer posted a net income of $0.6 million, or 2 cents a share, compared with $20.8 million, or 59 cents a share, a year ago.

Revenue fell 25 percent to $418.7 million. [ID:nWNAB9310]

Shares of the Concord, California-based company rose 23 percent to $3.34 in after-hours trade. They closed at $2.71 Tuesday on Nasdaq. (Reporting by A.Ananthalakshmi in Bangalore; Editing by Ratul Ray Chaudhuri)