<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED OCTOBER 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 FOR THE TRANSACTION PERIOD
------ FROM __________ TO _________.
COMMISSION FILE NUMBER: 000-21057
------------------------
DYNAMEX INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 86-0712225
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1431 GREENWAY DRIVE
SUITE 345
IRVING, TEXAS 75038
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:
(972) 756-8180
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
7,411,623 SHARES OF COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AS OF
DECEMBER 5, 1997.
<PAGE> 2
DYNAMEX INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets 2
October 31, 1997 (Unaudited) and July 31, 1997
Condensed Consolidated Statements of Operations (Unaudited) 3
Three Months ended October 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows (Unaudited) 4
Three Months ended October 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
October 31, July 31,
1997 1997
--------- ---------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT
Cash and cash equivalents $ 1,292 $ 1,326
Accounts receivable - net 26,051 20,867
Prepaid and other current assets 4,352 3,301
Deferred income taxes 595 597
--------- ---------
32,290 26,091
PROPERTY AND EQUIPMENT - net 6,450 5,787
INTANGIBLES - net 70,187 54,036
DEFERRED INCOME TAXES 402 405
OTHER ASSETS 1,955 1,832
--------- ---------
$ 111,284 $ 88,151
========= =========
LIABILITIES
CURRENT
Accounts payable trade $ 1,132 $ 1,759
Accrued liabilities 12,311 9,196
Income taxes payable 558 2,968
Current portion of long-term debt 794 740
--------- ---------
14,795 14,663
LONG-TERM DEBT 53,933 32,388
--------- ---------
68,728 47,051
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; $0.01 par value, 10,000,000
shares authorized; none outstanding -- --
Common stock; $0.01 par value, 50,000,000 shares
authorized; 7,411,623 and 7,337,505 shares outstanding 74 73
Additional paid-in capital 41,646 40,967
Retained earnings 1,217 250
Unrealized foreign currency translation adjustment (381) (190)
--------- ---------
42,556 41,100
--------- ---------
$ 111,284 $ 88,151
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
2
<PAGE> 4
DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-----------------------------
1997 1996
-------- --------
<S> <C> <C>
SALES $ 46,550 $ 26,900
COST OF SALES 31,514 17,994
-------- --------
GROSS PROFIT 15,036 8,906
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 11,115 6,925
DEPRECIATION AND AMORTIZATION 1,404 684
-------- --------
OPERATING INCOME 2,517 1,297
INTEREST EXPENSE 828 271
-------- --------
INCOME BEFORE TAXES 1,689 1,026
INCOME TAXES 722 408
-------- --------
INCOME BEFORE EXTRAORDINARY ITEM 967 618
EXTRAORDINARY LOSS ON EARLY RETIREMENT
OF DEBT (net of income tax benefit of $222) -- (335)
-------- --------
NET INCOME $ 967 $ 283
======== ========
Net income before extraordinary item per common share $ 0.13 $ 0.10
Extraordinary loss per common share -- (0.05)
-------- --------
Net income per common share $ 0.13 $ 0.05
======== ========
Weighted average common shares outstanding 7,495 5,953
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
3
<PAGE> 5
DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 967 $ 283
Adjustment to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,404 684
Extraordinary loss on early retirement of debt -- 558
Unrealized foreign currency adjustment (191) 251
Changes in current assets and current liabilities:
Accounts receivable (2,148) (1,905)
Prepaids and other assets 185 (389)
Accounts payable and accrued liabilities (1,409) 1,669
-------- --------
Net cash provided by (used in) operating activities (1,192) 1,151
-------- --------
INVESTING ACTIVITIES
Payments for acquisitions (18,113) (6,849)
Purchase of property and equipment (903) (444)
-------- --------
Net cash used in financing activities (19,016) (7,293)
-------- --------
FINANCING ACTIVITIES
Principal payment on long-term debt -- (14,372)
Net borrowing under line of credit 20,440 --
Net proceeds from sale of common stock -- 21,148
Other assets, deferred offering expenses and intangibles (266) (156)
-------- --------
Net cash provided by financing activities 20,174 6,620
-------- --------
NET INCREASE (DECREASE) IN CASH (34) 478
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,326 894
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,292 $ 1,372
======== ========
SUPPLEMENTAL DISCLOSURE ON NON-CASH INFORMATION
Cash paid for interest $ 454 $ 291
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Inconjunction with the acquisition described, liabilities were assumed as
follows:
Fair value of assets acquired $ 20,809 $ 8,719
Cash paid (18,113) (6,849)
-------- --------
Liabilities assumed and incurred $ 2,696 $ 1,870
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
4
<PAGE> 6
DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
Dynamex Inc. (the "Company") provides same-day delivery and logistics
services in the United States and Canada. The Company's primary services are (i)
same-day, on-demand delivery, (ii) scheduled distribution and (iii) fleet
management.
The financial statements of the Company include the accounts of the
Company and its wholly-owned subsidiaries: Dynamex Operations East, Inc.,
Dynamex Operations West, Inc., Dynamex Canada Inc. and Road Runner
Transportation, Inc. All significant intercompany balances and transactions are
eliminated on consolidation. The accounts of Dynamex Canada Inc. are translated
into United States dollars with the Canadian dollar as the functional currency.
The accompanying interim financial statements are unaudited. Certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted, although the Company believes the disclosures included herein are
adequate to make the information presented not misleading. These interim
financial statements should be read in conjunction with the Company's financial
statements for the fiscal year ended July 31, 1997.
The accompanying interim financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's financial position at October 31, 1997, and the
results of its operations and its cash flows for the three month periods ended
October 31, 1997 and 1996. The results of the interim periods presented are not
necessarily indicative of results to be expected for the full fiscal year.
2. ACQUISITIONS
Through two separate transactions during September 1997, the Company
acquired the same-day delivery business of four affiliated companies operating
in Atlanta, Georgia and of three related companies operating in New York, New
York for total consideration of approximately $18,422,000 in cash and 74,118
shares of common stock.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading provider of same-day delivery and logistics
services in the U.S. and Canada. Through internal growth and acquisitions, the
Company has built the only national network of same-day delivery and logistics
systems in Canada and has established operations in 20 U.S. metropolitan areas.
The Company completed its initial public offering ("IPO") in August 1996 and
concurrently completed the acquisition of five same-day transportation
companies. Subsequent to the IPO and through July 31, 1997, the Company
completed 11 acquisitions at various dates. During the first quarter of fiscal
year 1998, the Company completed three additional acquisitions. All of these
acquisitions have been accounted for using the purchase method of accounting.
Accordingly, the results of the acquired operations are included in the
Company's consolidated results of operations from the date of acquisition. As a
result of the effect of these various acquisitions, the historical operating
results of the Company for a given period are not necessarily comparable to
prior or subsequent periods.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's
consolidated statements of operations expressed as a percentage of sales:
<TABLE>
<CAPTION>
Three Months Ended
October 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Sales 100.0% 100.0%
Cost of sales 67.7 66.9
------- -------
Gross profit 32.3 33.1
Selling, general and
administrative expenses 23.9 25.8
Depreciation and amortization 3.0 2.5
------- -------
Operating income 5.4 4.8
Interest expense 1.8 1.0
------- -------
Income before taxes and extraordinary item 3.6% 3.8%
======= =======
</TABLE>
Three months ended October 31, 1997 vs. three months ended October 31, 1996.
Sales for the three months ended October 31, 1997 increased
$19,650,000, or 73.0%, to $46,550,000 from $26,900,000 for the three months
ended October 31, 1996 due primarily to the acquisitions which occurred at
various dates in fiscal year 1997 and in the first quarter of fiscal year 1998,
as well as increased sales from the Company's existing operations. The increased
sales from existing operations result primarily from increased volume.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Cost of sales for the three months ended October 31, 1997 increased
$13,520,000, or 75.1%, to $31,514,000 from $17,994,000 for the three months
ended October 31, 1996 reflecting the acquisitions described above. As a
percentage of sales, such amounts increased from 66.9% to 67.7%. This change
reflects the generally lower gross profit associated with certain services,
specifically outsourcing or fleet management services and scheduled distribution
services. These lower gross margin services comprise an increasing proportion of
the Company's business. This shift is inspite of the effect of the recent
acquisitions which in many cases have a large proportion of higher gross margin
on-demand business.
Selling, general and administrative expenses increased $4,190,000, or
60.5%, to $11,115,000 for the first quarter of fiscal year 1998 from $6,925,000
for the first quarter of fiscal year 1997, reflecting the expenses of the
acquired operations. As a percentage of sales, these expenses decreased from
25.8% to 23.9% which reflects spreading certain fixed costs over a larger
revenue base, the generally lower administrative costs required for outsourcing
and scheduled distribution services, as well as the elimination of other costs
through the consolidation of administrative and support functions in certain
branches. This decrease in the percentage of selling, general and administrative
costs as compared to sales is inspite of increased spending for marketing,
technology and administrative support during the first quarter of fiscal 1998.
Depreciation and amortization increased both in absolute terms, to
$1,404,000 for the three months ended October 31, 1997 from $684,000 in the same
quarter of the prior year, and as a percentage of sales, to 3.0% from 2.5%.
These increases result from depreciation and amortization of assets acquired
with the acquisitions discussed above, including intangible assets such as
goodwill.
Interest expense increased $557,000 to $828,000 for the first quarter
of fiscal year 1998 from $271,000 for the first quarter of fiscal year 1997 as a
result of the additional borrowings required to finance the acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital needs arise primarily from its acquisition
program and, to a lesser extent, capital expenditures and working capital. In
the first quarter of fiscal year 1998, three acquisitions were completed for
total consideration of approximately $18,793,000. In addition, capital
expenditures for the quarter totaled $903,000. Cash flow used in operations for
the three months ended October 31, 1997 amounted to $1,192,000, reflecting
working capital demands which exceeded internally generated cash flow.
Of the total consideration of approximately $18,793,000 for the
acquisitions during the first quarter of fiscal year 1998, approximately
$680,000 was paid by the issuance of 74,118 shares of the Company's common stock
to the sellers of the acquired businesses and approximately $18,113,000 of the
consideration was paid in cash. The cash portion of the consideration for the
acquisitions was provided by proceeds from the Company's revolving credit
facility.
In addition to the consideration paid upon completion of certain
acquisitions, the sellers may be paid additional consideration if the acquired
operations meet certain performance goals related to the earnings before
interest, taxes, depreciation and amortization of the businesses. The maximum
amount of additional consideration payable, if all performance goals are met, is
approximately $11,000,000, of which $10,100,000 is payable in cash and $900,000
is payable in shares of the Company's common stock.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
In August 1997, the Company amended its revolving credit facility. The
amended facility provides for total borrowings of up to $75,000,000, of which
approximately $53,100,000 was outstanding as of October 31, 1997. Any amounts
outstanding under the facility are due August 31, 2000. Interest under the
facility is payable quarterly at prime, or certain other interest rate elections
based on LIBOR plus an applicable margin of from 1.25% to 2.00%. The applicable
margin can vary from quarter to quarter and is based on the ratio of the
Company's total debt, as defined, to EBITDA. At October 31, 1997, the weighted
average interest rate for all outstanding borrowings was approximately 7.56%.
The Company's EBITDA increased to approximately $3,900,000 in the first
quarter of fiscal year 1998 compared with approximately $2,000,000 in the same
period of fiscal year 1997. Management has included EBITDA in its discussion
herein as a measure of liquidity because it believes that it is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness, maintain current operating levels of fixed assets and acquire
additional operations and businesses. EBITDA should not be considered as a
substitute for statement of operations or cash flow data from the Company's
financial statements, which have been prepared in accordance with generally
accepted accounting principles. In addition, the Company's working capital as of
October 31, 1997 increased to approximately $17,500,000 from approximately
$11,400,000 as of July 31, 1997. These increases in liquidity are due in part to
the increased level of operations arising from acquired businesses and internal
sales growth, as well as from improved profitability in the Company's existing
operations.
In as much as the Company utilizes owner-operators almost exclusively
in its operations, it does not have significant capital expenditure requirements
to replace or expand the number of vehicles used in its operations. The amount
of the Company's capital expenditures, related to facilities improvements and
technology improvements, is expected to increase somewhat as its operations
continue to expand. However, the amount of these capital expenditures is
expected to remain relatively small compared to the Company's overall capital
needs related to its acquisition program.
Management expects to continue to meet its capital requirements from
the following sources: (i) internally generated cash flow, (ii) proceeds from
its revolving credit facility and (iii) the issuance of its common stock to the
sellers of acquired businesses. However, the proportion of future acquisition
costs which will be funded with such common stock is dependent upon the sellers'
willingness to accept the stock as partial consideration and the Company's
willingness to issue such stock based on the market price of the stock.
Additionally, the Company's primary lender must consent to any acquisitions
consummated in the next 12 months.
The extent to which these existing sources of capital will be adequate
to fund the Company's acquisition program is dependent upon the number of
economically and strategically attractive acquisitions available to the Company,
the size of the acquisitions and the amount of internally generated cash flow.
Should these factors be such that currently available capital resources are
exhausted, the Company may seek additional sources of capital. Such sources
could include additional bank borrowings or the issuance of debt or equity
securities. Should these additional sources of capital not be available or be
available only on terms which the Company does not find acceptable, the Company
may be forced to reduce its acquisition activity. This in turn could negatively
affect the Company's ability to implement its business strategy in the manner,
or in the time frame, anticipated by management.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Should other sources of capital, such as the issuance of additional
shares of common stock in a public offering, become available on overall
favorable conditions, the Company may seek to raise such additional capital
before its existing sources of capital are exhausted.
INFLATION
The Company does not believe that inflation has had a material effect
on the Company's results of operations nor does it believe it will do so in the
foreseeable future.
9
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(c) During the three months ended October 31, 1997, the Company has
sold or issued the following unregistered securities:
(1) In September 1997, the Company issued 74,118
shares of Common Stock to the shareholders of
Elite Courier as partial consideration for the
acquisition of such transportation company.
In issuing such securities, the Company relied on the exemption from
the registration and prospectus delivery requirements of the Securities Act
provided by Section 4(2) of the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
11.1 Calculation of Net Income Per Common Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Report dated October 7, 1997 concerning the acquisition of
City Courier, Inc. and related companies.
10
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYNAMEX INC.
Dated: December 12, 1997 by /s/Richard K. McClelland
------------------------
Richard K. McClelland
President, Chief Executive
Officer and Chairman of the
Board (Principal Executive
Officer)
Dated: December 12, 1997 by /s/ Robert P. Capps
-------------------
Robert P. Capps
Vice President- Chief
Financial Officer
(Principal Financial
Officer)
11
<PAGE> 13
EXHIBIT INDEX
EXHIBITS
--------
<TABLE>
<S> <C>
11.1 Calculation of Net Income Per Common Share
27.1 Financial Data
</TABLE>
12
<PAGE> 1
EXHIBIT 11.1
DYNAMEX INC. AND SUBSIDIARIES
CALCULATION OF NET INCOME PER COMMON SHARE
(In Thousands except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-------------------
1996 1997
------ ------
<S> <C> <C>
Net Income $ 283 $ 967
====== ======
Weighted Average Common shares Outstanding 5,235 7,363
Common Share Equivalents Related to
Options and Warrants 718 132
------ ------
Common Shares and Common Share Equivalents 5,953 7,495
====== ======
Common Stock Price used under Treasury Stock Method $10.13 $ 8.48
====== ======
Net Income per Common Share $ 0.05 $ 0.13
====== ======
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS YEAR
<FISCAL-YEAR-END> JUL-31-1998 JUL-31-1997 JUL-31-1997
<PERIOD-START> AUG-01-1997 AUG-01-1996 AUG-01-1996
<PERIOD-END> OCT-31-1997 OCT-31-1996 JUL-31-1997
<CASH> 1,292 1,372 1,326
<SECURITIES> 0 0 0
<RECEIVABLES> 26,865 15,260 21,483
<ALLOWANCES> 814 423 616
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 32,290 17,954 26,091
<PP&E> 12,956 6,922 12,640
<DEPRECIATION> 6,506 3,622 6,853
<TOTAL-ASSETS> 111,284 51,357 88,151
<CURRENT-LIABILITIES> 14,795 9,677 14,663
<BONDS> 53,933 9,040 32,388
0 0 0
0 0 0
<COMMON> 74 67 73
<OTHER-SE> 42,482 32,523 41,027
<TOTAL-LIABILITY-AND-EQUITY> 111,284 51,357 88,151
<SALES> 46,550 26,900 131,867
<TOTAL-REVENUES> 46,550 26,900 131,867
<CGS> 0 0 0
<TOTAL-COSTS> 44,033 25,603 87,193
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 828 271 1,481
<INCOME-PRETAX> 1,689 1,026 6,332
<INCOME-TAX> 722 408 2,485
<INCOME-CONTINUING> 967 618 3847
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 (335) (335)
<CHANGES> 0 0 0
<NET-INCOME> 967 283 3512
<EPS-PRIMARY> 0.13 0.05 0.51
<EPS-DILUTED> 0.13 0.05 0.51
</TABLE>
