<PAGE> 1
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UNITED STATES
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 quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 000-21057
DYNAMEX INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0712225
(State of incorporation) (I.R.S. Employer Identification No.)
1431 Greenway Drive 75038
Suite 345 (Zip Code)
Irving, Texas
(Address of principal executive offices)
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
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of December 11, 1998 was 10,069,490 shares.
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DYNAMEX INC. AND SUBSIDIARIES
===============================================================================
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets 2
October 31, 1998 (Unaudited) and July 31, 1998
Condensed Consolidated Statements of Income 3
(Unaudited) Three Months ended October 31, 1998
and 1997
Condensed Consolidated Statements of Cash Flows 4
(Unaudited) Three Months ended October 31, 1998
and 1997
Notes to the Condensed Consolidated Financial
Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7
Item 3. Quantitative and Qualitative Disclosures About Market
Risk. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 12
Item 6. Exhibits and Reports on Form 8-K. 12
</TABLE>
1
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DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
===============================================================================
<TABLE>
<CAPTION>
October 31, July 31,
1998 1998
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 1,401 $ 1,361
Accounts receivable (net of allowance for doubtful accounts
of $960 and $967, respectively) 30,869 27,171
Prepaid and other current assets 6,539 5,932
Deferred income taxes 821 888
--------- ---------
TOTAL CURRENT ASSETS 39,630 35,352
Property and equipment - net 10,921 9,890
Intangibles - net 89,215 81,955
Deferred income taxes 777 670
Other assets 584 687
--------- ---------
TOTAL ASSETS $ 141,127 $ 128,554
========= =========
LIABILITIES
CURRENT
Accounts payable trade $ 5,263 $ 2,813
Accrued liabilities 13,230 13,735
Income taxes payable - -
Current portion of long-term debt 639 777
--------- ---------
TOTAL CURRENT LIABILITIES 19,132 17,325
Long-term debt 46,287 36,287
--------- ---------
TOTAL LIABILITIES 65,419 53,612
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; $0.01 par value, 10,000 shares authorized;
none outstanding - -
Common stock; $0.01 par value, 50,000 shares authorized;
10,069 and 10,069 outstanding, respectively 101 101
Receivable from stockholder (204) (204)
Additional paid-in capital 72,307 72,307
Retained earnings 4,575 3,628
Unrealized foreign currency translation adjustment (1,071) (890)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 75,708 74,942
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 141,127 $ 128,554
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 4
DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Three months ended
October 31,
--------------------
1998 1997
-------- ---------
<S> <C> <C>
Sales $59,468 $46,550
Cost of sales 39,829 31,514
------- -------
Gross profit 19,639 15,036
Selling, general and administrative expenses 15,239 11,115
Depreciation and amortization 1,831 1,404
------- -------
Operating income 2,569 2,517
Interest expense 943 828
------- -------
Income before taxes 1,626 1,689
Income taxes 679 722
------- -------
Net income $ 947 $ 967
======= =======
Earnings per common share - basic:
------- -------
Net income $ 0.09 $ 0.13
======= =======
Earnings per common share -
assuming dilution:
------- -------
Net income $ 0.09 $ 0.13
======= =======
Weighted average shares:
Common shares outstanding 10,069 7,363
Adjusted common shares - assuming
exercise of stock options 10,127 7,495
</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,
----------------------
1998 1997
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 947 $ 967
Adjustment to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,831 1,404
Deferred income taxes (123) --
Changes in assets and liabilities:
Accounts receivable (3,610) (2,148)
Prepaids and other assets (25) 185
Accounts payable and accrued liabilities 1,186 (1,600)
-------- --------
Net cash provided by (used in) operating activities 206 (1,192)
-------- --------
INVESTING ACTIVITIES
Payments for acquisitions (8,455) (18,113)
Purchase of property and equipment (1,676) (903)
-------- --------
Net cash used in investing activities (10,131) (19,016)
-------- --------
FINANCING ACTIVITIES
Principal payment on long-term debt (137) --
Net borrowings under line of credit 10,000 20,440
Other assets, deferred offering expenses and intangibles 102 (266)
-------- --------
Net cash provided by financing activities 9,965 20,174
-------- --------
NET INCREASE (DECREASE) IN CASH 40 (34)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,361 1,326
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,401 $ 1,292
======== ========
SUPPLEMENTAL DISCLOSURE ON NON-CASH INFORMATION
Cash paid for interest $ 813 $ 454
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
In conjunction with the acquisitions described, liabilities
were assumed as follows:
Fair value of assets acquired $ 8,536 $ 20,809
Cash paid (8,455) (18,113)
-------- --------
Liabilities assumed and incurred $ 81 $ 2,696
======== ========
</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 Dedicated Fleet Services, Inc., Dynamex
Canada Inc. (formerly Parcelway Courier Systems Canada Ltd.), Alpine Enterprises
Ltd., Road Runner Transportation, Inc., New York Document Exchange Corp., U.S.C.
Management Systems, Inc., Cannonball, Inc., and Facilities Management &
Consulting, 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, 1998. Certain prior period amounts
have been reclassified for comparative purposes.
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, 1998, and the
results of its operations for the three month periods ended October 31, 1998 and
1997 and its cash flows for the three month periods ended October 31, 1998 and
1997. The results of the interim periods presented are not necessarily
indicative of results to be expected for the full fiscal year.
2. ACQUISITIONS
During the three months ended October 31, 1998, the Company acquired
two same-day delivery businesses operating in two U.S. cities. The aggregate
consideration for these two acquisitions was approximately $1.8 million in cash.
For certain of the acquisitions completed during the three months ended
October 31, 1998, the allocation of the purchase consideration to net assets is
preliminary as of October 31, 1998 and will be finalized as additional
information becomes available regarding the fair value of assets acquired and
liabilities assumed.
3. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
Per Share," which requires presentation of basic and diluted earnings per share.
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. As required, the Company adopted the
provisions of SFAS No. 128 in the quarter ended January 31, 1998. All prior
period weighted average and per share information has been restated in
accordance with SFAS No. 128. Outstanding stock options issued by the Company
represent the only dilutive effect reflected in diluted weighted average shares.
The effect of the stock options which are antidilutive in the periods covered by
these financial statements may be dilutive in the future.
4. COMPREHENSIVE INCOME
Comprehensive income for each of the three months ended October 31,
1998 and 1997 is $766,000 and $776,000, respectively.
5. CONTINGENCIES
In November and December 1998, two class action lawsuits were filed in
the United States District Court for the Northern District of Texas, naming the
Company and certain of its executive officers as defendants. The lawsuits arise
from the Company's November 2, 1998 announcement that it was (i) revising its
results of operations for the year ended July 31, 1998 from that which had been
previously announced on September 16, 1998 and (ii) restating its results of
operations for the third quarter of fiscal 1998 from that which had been
previously reported.
5
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DYNAMEX INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
===============================================================================
The lawsuits allege violations of the Securities Act of 1933 and Securities
Exchange Act of 1934 in connection with the Company's public filing under such
laws during fiscal 1998. The Company is unable to determine the likely outcome
of this matter or the amount of any potential liability related to these claims
at present.
At this date, no class has been certified nor has any discovery or
other proceedings commenced. The Company believes that the lawsuits are without
merit and intends to contest them vigorously.
On September 23, 1998, the Company announced that it had entered into
an agreement to acquire Q International Courier, Inc., the parent company of
Quick International Courier ("Quick"). Terms of the agreement call for the
Company to pay $51.0 million in cash and issue 1.5 million shares of its common
stock in exchange for all of the capital stock of Quick. Dynamex will also
assume $12.0 million in debt of Quick, and has agreed to reimburse the owners of
Quick for transaction costs and expenses not to exceed $ 1.35 million. In
addition to the above, Dynamex will be required to pay up to an additional $4.5
million in cash should its common stock not trade at $12.00 per share or above
for any 60 days during the two-year period ending September 23, 2000. The
Company expects this transaction to close in early 1999.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
The following discussion should be read in conjunction with the
information contained in the Company's consolidated financial statements,
including the notes thereto, and the other financial information appearing
elsewhere in this report. Statements regarding future economic performance,
management's plans and objectives, and any statements concerning its assumptions
related to the foregoing contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute forward-looking
statements. Certain factors which may cause actual results to vary materially
from these forward-looking statements accompany such statements, appear
elsewhere in this report, and are contained in the Company's Annual Report on
Form 10-K for the fiscal year ended July 31, 1998.
GENERAL
The Company is a leading provider of same-day delivery and logistics
services in the United States and Canada. Through internal growth and
acquisitions, the Company has built a national network of same-day delivery and
logistics systems in Canada and has established operations in 21 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 October 31, 1998,
the Company completed 22 acquisitions at various dates. 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.
A significant portion of the Company's revenues are generated in
Canada. For the three-month period ended October 31, 1998, Canadian revenues
accounted for approximately 31.4% of total consolidated revenue. For the
three-month period ended October 31, 1997, Canadian revenue accounted for 39.9%
of total consolidated revenue. The increase in the proportion of revenues
generated in the United States is a result of the majority of the Company's
acquisitions over the last year taking place in the United States. Before
consideration of corporate costs, the majority of which are incurred in the
United States, the cost structure of the Company's operations in the United
States and in Canada is very similar. Therefore, operating profit, expressed as
a percentage of sales, generated in each country is not materially different.
The conversion rate between the Canadian dollar and the U.S. dollar has
declined significantly during the quarter ended October 31, 1998 as compared to
the same period in 1997. As the Canadian dollar is the functional currency for
the Company's Canadian operations, this decline has had a negative effect on the
Company's reported revenues. The effect of this decline on the Company's net
income for the three months ended October 31, 1998 has not been material,
although there can be no assurance that fluctuations in such currency exchange
rate will not in the future have material adverse effect on the Company's
business, financial condition or results of operations.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items
from the Company's consolidated statements of income expressed as a percentage
of sales:
<TABLE>
<CAPTION>
Three months ended
October 31,
----------------------
1998 1997
-------- ---------
<S> <C>
Sales 100.0% 100.0%
Cost of sales 67.0% 67.7%
----- -----
Gross profit 33.0% 32.3%
Selling, general and
administrative expenses 25.6% 23.9%
Depreciation and amortization 3.1% 3.0%
----- -----
Operating income 4.3% 5.4%
Interest expense 1.6% 1.8%
----- -----
Income before taxes 2.7% 3.6%
===== =====
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
THREE MONTHS ENDED OCTOBER 31, 1998 COMPARED TO THREE MONTHS ENDED OCTOBER 31,
1997.
Sales for the three months ended October 31, 1998 increased $12.9
million, or 27.8%, to $59.5 million from $46.6 million for the three months
ended October 31, 1997. This increase was primarily due to the acquisitions that
occurred at various dates in fiscal year 1998 and in the three months of fiscal
year 1999, as well as increased sales from the Company's existing operations.
Due to a decline in the conversion rate between the U.S. dollar and the Canadian
dollar, the Company's reported sales for the three months ended October 31, 1998
were approximately $1.9 million less than would have been reported for such
period had the conversion rate been the same as in the three months ended
October 31, 1997.
Cost of sales for the three months ended October 31, 1998 increased
$8.3 million, or 26.4%, to $39.8 million from $31.5 million for the three months
ended October 31, 1997 primarily due to the acquisitions and increased sales
from existing operations. As a percentage of sales, such amounts remained
relatively consistent at 67.0% for the three months ended October 31, 1998 as
compared to 67.7% for the three months ended October 31, 1997. Due to a decline
in the conversion rate between the U.S. dollar and the Canadian dollar, the
Company's reported cost of sales for the three months ended October 31, 1998
were approximately $1.1 million less than would have been reported for such
period had the conversion rate been the same as in the three months ended
October 31, 1997.
Selling, general and administrative expenses for the three months ended
October 31, 1998 increased $4.1 million, or 37.1%, to $15.2 million from $11.1
million for the three months ended October 31, 1997, primarily reflecting the
expenses of the acquired operations and increased spending for technology,
accounting, administrative support and marketing. As a percentage of sales,
selling, general and administrative expenses increased to 25.6% for the three
months ended October 31, 1998 as compared to 23.9% for the three months ended
October 31, 1997.
Depreciation and amortization for the three months ended October 31,
1998 increased $427,000, or 30.4%, to $1.8 million from $1.4 million for the
three months ended October 31, 1997 and, as a percentage of sales, to 3.1% from
3.0%. This increase results from depreciation and amortization of assets
acquired with the acquisitions discussed above, including intangible assets such
as goodwill.
Interest expense for the three months ended October 31, 1998 increased
$115,000, or 13.9%, to $943,000 from $828,000 for the three months ended October
31, 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 needs.
During the three months ended October 31, 1998, the Company completed two
acquisitions for aggregate consideration of approximately $1.8 million.
Additionally, the Company paid approximately $6.7 million to former owners of
previously acquired companies as additional consideration during such period.
In connection with certain acquisitions, the Company agreed to pay the
sellers additional consideration if the acquired operations meet certain
performance goals related to their earnings before interest, taxes, depreciation
and amortization, as adjusted for certain factors. The maximum amount of
additional consideration payable, if all performance goals are met, is
approximately $13.2 million, of which $12.3 million is payable in cash and
$900,000 is payable in shares of the Company's Common Stock. These payments of
additional consideration are to be made on specified dates through October 2000.
Management intends to fund the cash portion of this additional consideration
with internally generated cash flow and, to the extent necessary, with
borrowings under the credit facility.
Capital expenditures for the three months ended October 31, 1998 were
approximately $1.7 million. Management expects the Company's capital
expenditures, consisting primarily of improvements to facilities and
technologies, to increase somewhat as its operations continue to expand.
However, the amount of these capital expenditures is expected to remain
relatively minor compared to the capital requirements related to the Company's
acquisition program. The Company does not have significant capital expenditure
requirements to replace or expand the number of vehicles used in its operations
because substantially all of its drivers are owner-operators who provide their
own vehicles.
Cash flow provided by operations for the three months ended October 31,
1998 was approximately $206,000, and consequently, increases in working capital
during such period were completely financed by internally generated cash flow.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
The Company has a revolving credit agreement with a group of banks (the
"Agreement"). The Agreement (i) provides for total borrowings of up to $115.0
million, (ii) extends the maturity date from August 31, 2000 to May 31, 2001 and
(iii) increases the purchase price thresholds above which the Company must
obtain the primary lenders consent to consummate acquisitions. As of October 31,
1998, approximately $45.2 million was outstanding under the Agreement. Interest
under the Agreement is payable quarterly at prime, or certain other interest
rate elections based on LIBOR plus an applicable margin ranging from 1.25% to
2.00 %. The applicable margin can vary from quarter to quarter based on the
ratio of the Company's funded debt to cash flow, each as defined in the
Agreement. At October 31, 1998 the weighted average interest rate for all
outstanding borrowings was approximately 7.12%.
The Company has entered into interest rate protection arrangements with
its agent bank on a portion of the borrowings under the credit facility. The
interest rate on $15.0 million of outstanding debt has been fixed at 6.26%, plus
the applicable margin, and a collar of between 5.50% and 6.50%, plus the
applicable margin, has been placed on $9.0 million of outstanding debt. These
hedging arrangements mature on August 31, 2000. Amounts outstanding under the
credit facility are secured by all of the Company's U.S. assets and 65% of the
stock of its Canadian subsidiary. The credit facility also contains restrictions
on the payment of dividends, incurring additional debt, capital expenditures and
investments by the Company as well as requiring the Company to maintain certain
financial ratios. Under certain circumstances, the Company must obtain the
lender's consent to consummate acquisitions.
The Company's EBITDA, defined as income excluding interest, taxes,
depreciation and amortization of goodwill and other intangible assets, increased
to approximately $4.4 million for the three months ended October 31, 1998 from
approximately $3.9 million for the three months ended October 31, 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, 1998 increased to
approximately $20.5 million from approximately $18.0 million as of July 31,
1998. 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.
Management expects that the Company's capital requirements; other than
to fund acquisitions, will be met from internally generated cash flow.
Management expects to continue to meet the capital requirements of its
acquisition program from the following sources: (i) internally generated cash
flow, (ii) proceeds from borrowings under its revolving credit facility and
(iii) the issuance of its common stock to the sellers of acquired businesses.
However, the portion 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.
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
inadequate, 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 that the Company does not find attractive, 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.
On September 23, 1998, the Company announced that it had entered into
an agreement to acquire Q International Courier, Inc., the parent company of
Quick International Courier ("Quick"). Terms of the agreement call for the
Company to pay $51.0 million in cash and issue 1.5 million shares of its common
stock in exchange for all of the capital stock of Quick. Dynamex will also
assume $12.0 million in debt of Quick. In addition to the above, Dynamex will be
required to pay up to an additional $4.5 million in cash should its common stock
not trade at $12.00 per share or above for any 60 days during the two-year
period ending September 23, 2000. The Company expects this transaction to close
in early 1999.
In November and December, 1998 two class action lawsuits were filed by
shareholders against the Company and certain officers. At this time the Company
is unable to determine the likely outcome of this matter or the amount of any
potential liability related to these claims.
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
YEAR 2000 COMPLIANCE
Currently, there is significant uncertainty among software users
regarding the impact of the year 2000 on installed software. To address this
issue, the Company has formed a year 2000 compliance team to determine the
Company's readiness and to prepare for the year 2000, and the readiness of third
parties with whom the Company has material relationships. The Company has
determined the following phases for the year 2000 project, the percentage
completed of each phase and the anticipated completion date for any phases not
complete.
<TABLE>
<CAPTION>
Anticipated
Phase Brief description of phase Percent complete completion date
<S> <C> <C> <C>
Awareness Generate awareness of year 2000 problem 100%
throughout the organization.
Inventory Create a list of all relevant items to be 100%
included in the project.
Assessment Prioritize the inventory and determine 100%
the scope of the remediation and
testing effort.
Conversion Make all necessary changes to the 95% December 31, 1998
inventory items to attain compliance.
Testing Verify through a structured testing 95% December 31, 1998
process that all inventory is compliant.
Implementation Deploy the inventory items back into 90% December 31, 1998
production after testing is complete.
</TABLE>
The Company anticipates spending approximately $450,000 to address the
year 2000 problem in certain of the Company's databases, order entry software
and certain telephone systems used in dispatch. As the testing and
implementation phases near completion, the need to develop contingency plans for
any unresolved issues will be considered.
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.
10
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
===============================================================================
FOREIGN EXCHANGE EXPOSURE
Significant portions of the Company's operations are conducted in
Canada. Exchange rate fluctuations between the U.S. and Canadian dollar result
in fluctuations in the amounts relating to the Canadian operations reported in
the Company's consolidated financial statements. The Company historically has
not entered into hedging transactions with respect to its foreign currency
exposure, but may do so in the future.
INTEREST RATE EXPOSURE
The Company has entered into interest rate protection agreements on a
portion of the borrowing under its revolving credit facility. Through an
interest rate swap, the interest rate on $15.0 million of outstanding debt has
been fixed at 6.26%, plus the applicable margin, and a collar of between 5.50%
and 6.50%, plus applicable margin, has been placed on $9.0 million of
outstanding debt. Both of these hedging agreements have three-year terms and
expire on August 31, 2000. The Company does not hold or issue derivative
financial instruments for speculative or trading purposes.
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In November and December 1998, two class action lawsuits were filed in
the United States District Court for the Northern District of Texas, naming the
Company and certain of its executive officers as defendants. The lawsuits arise
from the Company's November 2, 1998 announcement that it was (I) revising its
results of operations for the year ended July 31, 1998 from that which had been
previously announced on September 16, 1998 and (ii) restating its results of
operations for the third quarter of fiscal 1998 from that which had been
previously reported. These revisions generally related to non-cash charges
associated with various acquisitions consummated by the Company. The lawsuits
allege violations of the Securities Act of 1933 and Securities Exchange Act of
1934 in connection with the Company's public filing under such laws during
fiscal 1998.
At this date, no class has been certified nor has any discovery or
other proceedings commenced. The Company believes that the lawsuits are without
merit and intends to contest them vigorously.
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:
No reports on Form 8-K were filed during the quarter ended
October 31, 1998.
12
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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 15, 1998 by /s/ Richard K. McClelland
---------------------------------------
Richard K. McClelland
President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Dated: December 15, 1998 by /s/ Robert P. Capps
---------------------------------------
Robert P. Capps
Executive Vice-President - Chief
Financial Officer
(Principal Financial Officer)
13
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
11.1 Calculation of Net Income Per Common Share
27.1 Financial Data Schedule
</TABLE>
14
<PAGE> 1
EXHIBIT 11.1
DYNAMEX INC. AND SUBSIDIARIES
CALCULATION OF NET INCOME PER COMMON SHARE
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
October 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Net income $ 947 $ 967
======== ========
Weighted average common
shares outstanding 10,069 7,363
Common share equivalents related
to options and warrants 58 132
-------- --------
Common shares and common share
equivalents 10,127 7,495
======== ========
Common stock price used under
treasury stock method $ 8.23 $ 8.48
======== ========
Net income per common share:
Basic $ 0.09 $ 0.13
======== ========
Diluted $ 0.09 $ 0.13
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 1,401
<SECURITIES> 0
<RECEIVABLES> 31,829
<ALLOWANCES> 960
<INVENTORY> 0
<CURRENT-ASSETS> 39,630
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 141,127
<CURRENT-LIABILITIES> 19,132
<BONDS> 46,287
0
0
<COMMON> 101
<OTHER-SE> 75,607
<TOTAL-LIABILITY-AND-EQUITY> 141,127
<SALES> 59,468
<TOTAL-REVENUES> 59,468
<CGS> 0
<TOTAL-COSTS> 39,829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 943
<INCOME-PRETAX> 1,626
<INCOME-TAX> 679
<INCOME-CONTINUING> 947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 947
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
