<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 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 June 5, 1998 was 9,999,583 shares.
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<PAGE> 2
DYNAMEX INC. AND SUBSIDIARIES
===============================================================================
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets 2
April 30, 1998 (Unaudited) (As Restated) and
July 31, 1997
Condensed Consolidated Statements of Income 3
(Unaudited) Three and Nine Months ended April 30,
1998 (As Restated) and 1997
Condensed Consolidated Statements of Cash Flows 4
(Unaudited) Nine Months ended April 30, 1998 (As
Restated) 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. 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 13
</TABLE>
1
<PAGE> 3
DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except per share data)
===============================================================================
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
----------- ------------
(Unaudited)
(As Restated -
See note 5)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 2,741 $ 1,326
Accounts receivable - net 27,796 20,867
Prepaid and other current assets 4,637 3,301
Deferred income taxes 594 597
--------- ---------
TOTAL CURRENT ASSETS 35,768 26,091
PROPERTY AND EQUIPMENT - net 7,856 5,787
INTANGIBLES - net 77,495 54,036
DEFERRED INCOME TAXES 747 405
OTHER ASSETS 2,090 1,832
--------- ---------
TOTAL ASSETS $ 123,956 $ 88,151
========= =========
LIABILITIES
CURRENT
Accounts payable trade $ 923 $ 1,759
Accrued liabilities 12,955 9,196
Income taxes payable 1,388 2,968
Current portion of long-term debt 521 740
--------- ---------
TOTAL CURRENT LIABILITIES 15,787 14,663
LONG-TERM DEBT 63,345 32,388
--------- ---------
TOTAL LIABILITIES 79,132 47,051
--------- ---------
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; 7,412 and 7,338 shares outstanding, respectively 74 73
Additional paid-in capital 41,646 40,967
Retained earnings 3,599 250
Unrealized foreign currency translation adjustment (495) (190)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 44,824 41,100
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 123,956 $ 88,151
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
2
<PAGE> 4
DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousand except per share data)
(Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30,
--------------------------- --------------------------
1998 1997 1998 1997
---------- ----------- ----------- ----------
(As Restated - (As Restated -
See Note 5) See Note 5)
<S> <C> <C> <C> <C>
SALES $ 53,131 $ 34,155 $148,393 $ 91,001
COST OF SALES 34,905 22,501 99,042 60,600
-------- -------- -------- --------
GROSS PROFIT 18,226 11,654 49,351 30,401
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 13,124 8,365 36,011 22,930
DEPRECIATION AND AMORTIZATION 1,693 997 4,550 2,514
-------- -------- -------- --------
OPERATING INCOME 3,409 2,292 8,790 4,957
INTEREST EXPENSE 1,123 345 3,022 853
-------- -------- -------- --------
INCOME BEFORE TAXES 2,286 1,947 5,768 4,104
INCOME TAXES 944 779 2,419 1,639
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 1,342 1,168 3,349 2,465
EXTRAORDINARY LOSS ON EARLY
RETIREMENT OF DEBT (net of income
tax benefit of $222) -- -- -- (335)
-------- -------- -------- --------
NET INCOME $ 1,342 $ 1,168 $ 3,349 $ 2,130
======== ======== ======== ========
EARNING PER COMMON SHARE - BASIC:
Income before extraordinary item $ 0.18 $ 0.17 $ 0.45 $ 0.38
Extraordinary loss -- -- -- (0.05)
-------- -------- -------- --------
Net income $ 0.18 $ 0.17 $ 0.45 $ 0.33
======== ======== ======== ========
EARNINGS PER COMMON SHARE -
ASSUMING DILUTION:
Income before extraordinary item $ 0.18 $ 0.17 $ 0.44 $ 0.37
Extraordinary loss -- -- -- (0.05)
-------- -------- -------- --------
Net income $ 0.18 $ 0.17 $ 0.44 $ 0.32
======== ======== ======== ========
WEIGHTED AVERAGE SHARES:
Common shares outstanding 7,412 6,966 7,395 6,465
Adjusted common shares - assuming exercise
of stock options 7,629 7,075 7,590 6,652
</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>
Nine months ended
April 30,
--------------------------
1998 1997
----------- ----------
(As Restated -
See Note 5)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,349 $ 2,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,550 2,514
Extraordinary loss on early retirement of debt -- 557
Changes in current assets and current liabilities:
Accounts receivable (3,805) (3,150)
Prepaids and other assets (26) (965)
Accounts payable and accrued liabilities (657) 1,551
-------- --------
Net cash provided by operating activities 3,411 2,637
-------- --------
INVESTING ACTIVITIES
Payments for acquisitions (28,517) (16,544)
Purchase of property and equipment (3,033) (1,377)
-------- --------
Net cash used in investing activities (31,550) (17,921)
-------- --------
FINANCING ACTIVITIES
Principal payment on long-term debt -- (5,498)
Net borrowing under line of credit 30,454 678
Net proceeds from sale of common stock -- 21,148
Other asset, deferred offering expenses and intangibles (900) (746)
-------- --------
Net cash provided by financing activities 29,554 15,582
-------- --------
NET INCREASE IN CASH 1,415 298
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,326 894
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,741 $ 1,192
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR INTEREST
Cash paid for interest $ 2,785 $ 898
======== ========
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 $ 31,646 $ 21,771
Cash paid (28,517) (16,544)
-------- --------
Liabilities assumed and incurred $ 3,129 $ 5,227
======== ========
</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., Road Runner Transportation,
Inc., New York Document Exchange Corporation and U.S.C. Management Systems, 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 April 30, 1998, and the
results of its operations for the three and nine month periods ended April 30,
1998 and 1997 and its cash flows for the nine month periods ended April 30, 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 nine months ended April 30, 1998, the Company acquired eight
same-day delivery businesses operating in eight U.S. cities and one Canadian
city for total consideration of approximately $28.5 million in cash and 74,118
shares of common stock.
For certain of the acquisitions completed during the nine months ended
April 30, 1998, the allocation of the purchase consideration to net assets is
preliminary as of April 30, 1998 and will be finalized as additional information
becomes available regarding the fair value of assets acquired and liabilities
assumed.
In May 1998, the Company completed the acquisition of a same-day
delivery business operating in one U.S. city for total consideration of
approximately $5.3 million in cash and 39,960 shares of common stock.
The following summary presents the results of operations for the nine
months ended April 30, 1998 and 1997, on an unaudited pro forma basis, as if the
acquisitions completed during the nine months ended April 30, 1998 had occurred
as of August 1, 1996. The pro forma operating results are for illustrative
purposes only and do not purport to be indicative of the actual results which
would have occurred had the transactions been consummated as of those earlier
dates, nor are they indicative of results of operations which may occur in the
future. (amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
April 30,
-------------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Sales $ 163,695 $ 144,722
================ ================
Net income $ 3,638 $ 2,987
================ ================
Earnings per common share - basic: $ 0.49 $ 0.40
================ ================
Earnings per common share -
assuming dilution $ 0.48 $ 0.39
================ ================
</TABLE>
5
<PAGE> 7
DYNAMEX INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
===============================================================================
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.
4. SUBSEQUENT EVENT
In May, 1998, the Company completed a public offering of 2,817,166
shares of Common stock at a price of $12.875 per share. Of the 2,817,166 shares
offered, 2,500,000 shares were sold by the Company and 317,166 shares were sold
by selling shareholders. Net proceeds to the Company were approximately $29.9
million and were used to reduce amounts outstanding under the Company's
revolving credit facility. Concurrent with the closing of the offering, the
Company's revolving credit facility was amended to (i) provide for total
borrowings of up to $115.0 million, (ii) extend the maturity date from August
31, 2000 to May 31, 2001 and (iii) increase the purchase price thresholds above
which the Company must obtain the primary lenders consent to consummate
acquisitions.
5. RESTATEMENT
Subsequent to the issuance of its Condensed Consolidated Financial
Statements for the three month and nine month periods ended April 30, 1998, the
Company determined that certain adjustments were required to be made to
previously reported amounts. These adjustments relate primarily to i)
settlements of employment agreements and ii) write-off of certain assets deemed
to be uncollectable or unrealizable and adjustment of certain differences in
account reconciliations. As a result, the Condensed Consolidated Balance Sheet
(Unaudited) at April 30, 1998, the Condensed Consolidated Statements of Income
(Unaudited) for the three month and nine month periods ended April 30, 1998 and
the Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine
month period ended April 30, 1998, have been restated from the previously
reported amounts to properly record settlement of the employment agreements as
expense and write-off certain assets.
A summary of the effect of the restatement on the Condensed
Consolidated Balance Sheet at April 30, 1998 (Unaudited), is as follows (in
thousands):
<TABLE>
<CAPTION>
As Previously
Reported As Restated
----------------- ---------------
<S> <C> <C>
Accounts receivable - net $ 27,984 $ 27,796
Property and equipment - net 7,873 7,856
Intangibles - net 77,518 77,495
Deferred income taxes 399 747
Other assets 2,191 2,090
Accrued liabilities 12,894 12,955
Income taxes payable 1,538 1,388
Retained earnings 3,899 3,599
Unrealized foreign currency translation adjustment (903) (495)
</TABLE>
6
<PAGE> 8
DYNAMEX INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
===============================================================================
A summary of the effect of the restatement on the Condensed
Consolidated Statements of Income (Unaudited) for the three and nine month
periods ended April 30, 1998, is as follows (in thousands except per share
data):
<TABLE>
<CAPTION>
As Previously As Previously
Reported As Restated Reported As Restated
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
April 30, 1998 April 30, 1998 April 30, 1998 April 30, 1998
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Selling, general and administrative $ 12,691 $ 13,124 $ 35,578 $ 36,011
Depreciation and amortization 1,676 1,693 4,533 4,550
Income taxes 1,094 944 2,569 2,419
Net income 1,642 1,342 3,649 3,349
Earnings per common share:
Basic 0.22 0.18 0.49 0.45
Assuming dilution 0.22 0.18 0.48 0.44
</TABLE>
7
<PAGE> 9
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, 1997.
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 April 30, 1998, the
Company completed 19 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 and nine month periods ended April 30, 1998, Canadian
revenues accounted for approximately 36% and 38%, respectively, of total
consolidated revenues. For the three and nine month periods ended April 30,
1997, Canadian revenues accounted for 51% and 56%, respectively, of total
consolidated revenues. 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 fiscal 1998 as compared to the same periods 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 nine months ended April 30, 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
Subsequent to the issuance of its Condensed Consolidated Financial
Statements for the three month and nine month periods ended April 30, 1998, the
Company determined that certain adjustments were required to be made to
previously reported amounts. These adjustments relate primarily to i)
settlements of employment agreements and ii) write-off of certain assets deemed
to be uncollectable or unrealizable and adjustment of certain differences in
account reconciliations. As a result, the Condensed Consolidated Balance Sheet
(Unaudited) at April 30, 1998, the Condensed Consolidated Statements of Income
(Unaudited) for the three month and nine month periods ended April 30, 1998 and
the Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine
month period ended April 30, 1998, have been restated from the previously
reported amounts to properly record settlement of the employment agreements as
expense and write-off certain assets. Dollar amounts included in the following
discussion of results of operations reflect restated amounts.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
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 Nine months ended
April 30, April 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
-------------------------------- --------------------------------
(as restated) (as restated)
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.7% 65.9% 66.7% 66.6%
------------ ------------- -------------- ------------
Gross profit 34.3% 34.1% 33.3% 33.4%
Selling, general and administrative expenses 24.7% 24.5% 24.3% 25.2%
Depreciation and amortization 3.2% 2.9% 3.1% 2.8%
------------ ------------- -------------- ------------
Operating income 6.4% 6.7% 5.9% 5.4%
Interest expense 2.1% 1.0% 2.0% 0.9%
------------ ------------- -------------- ------------
Income before taxes and extraordinary item 4.3% 5.7% 3.9% 4.5%
============ ============= ============== ============
</TABLE>
THREE MONTHS ENDED APRIL 30, 1998 COMPARED TO THREE MONTHS ENDED APRIL 30, 1997.
Sales for the three months ended April 30, 1998 increased $19.0
million, or 55.6%, to $53.1 million from $34.2 million for the three months
ended April 30, 1997 primarily due to the acquisitions which occurred at various
dates in fiscal year 1997 and in the nine months of fiscal year 1998, 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 April 30, 1998 were approximately
$494,000 less than would have been reported for such period had the conversion
rate been the same as in the three months ended April 30, 1997.
Cost of sales for the three months ended April 30, 1998 increased $12.4
million, or 55.1%, to $34.9 million from $22.5 million for the three months
ended April 30, 1997 primarily due to the acquisitions and increased sales from
existing operations. As a percentage of sales, such amounts remained relatively
consistent at 65.7% for the three months ended April 30, 1998 as compared to
65.9% for the three months ended April 30, 1997.
Selling, general and administrative expenses for the three months ended
April 30, 1998 increased $4.8 million, or 56.9%, to $13.1 million from $8.4
million for the three months ended April 30, 1997, primarily reflecting the
expenses of the acquired operations and increased spending for marketing,
technology and administrative support. As a percentage of sales, selling,
general and administrative expenses remained relatively consistent at 24.7% for
the three months ended April 30, 1998 as compared to 24.5% for the three months
ended April 30, 1997. Selling, general and administrative expenses for the three
months ended April 30, 1998 include approximately $60,000 in payment to former
owners of acquired businesses pursuant to settlement of employment agreements.
In addition, selling, general and administrative expenses for the three months
ended April 30, 1998 include charges of approximately $370,000 related to the
write-off of certain assets deemed to be uncollectable or unrealizable and
adjustment of certain differences in account reconciliations.
Depreciation and amortization for the three months ended April 30, 1998
increased $696,000, or 69.8%, to $1.7 million from $997,000 for the three months
ended April 30, 1997 and, as a percentage of sales, to 3.2% from 2.9%. These
increases result 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 April 30, 1998 increased
$778,000, or 225.5%, to $1.1 million from $345,000 for the three months ended
April 30, 1997 as a result of the additional borrowings required to finance the
acquisitions.
NINE MONTHS ENDED APRIL 30, 1998 COMPARED TO NINE MONTHS ENDED APRIL 30, 1997.
Sales for the nine months ended April 30, 1998 increased $57.4 million,
or 63.1%, to $148.4 million from $91.0 million for the nine months ended April
30, 1997 primarily due to the acquisitions which occurred at various dates in
fiscal
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
year 1997 and in the first nine months of fiscal year 1998, 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 nine months ended April 30, 1998 were approximately $1.4 million
less than would have been reported for such period had the conversion rate been
the same as in the nine months ended April 30, 1997.
Cost of sales for the nine months ended April 30, 1998 increased $38.4
million, or 63.4%, to $99.0 million from $60.6 million for the nine months ended
April 30, 1997 primarily due to the acquisitions and increased sales volumes
from existing operations. As a percentage of sales, such costs remained
relatively consistent at 66.7% for the nine months ended April 30, 1998 as
compared to 66.6% for the nine months ended April 30, 1997.
Selling, general and administrative expenses for the nine months ended
April 30, 1998 increased $13.1 million, or 57.0%, to $36.0 million from $22.9
million for the nine months ended April 30, 1997, primarily reflecting the
expenses of the acquired operations and increased spending for marketing,
technology and administrative support. As a percentage of sales, selling,
general and administrative expenses decreased to 24.3% from 25.2% which reflects
the spreading of certain fixed costs over a larger revenue base, as well as the
elimination of certain costs through the consolidation of administrative and
support functions in certain branches.
Depreciation and amortization for the nine months ended April 30, 1998
increased $2.0 million, or 81.0%, to $4.6 million from $2.5 million for the nine
months ended April 30, 1997 and, as a percentage of sales, to 3.1% from 2.8%.
These increases primarily result from depreciation and amortization of assets
acquired with the acquisitions previously discussed.
Interest expense for the nine months ended April 30, 1998 increased
$2.2 million, or 254.3%, to $3.0 million from $853,000 for the nine months ended
April 30, 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 nine months ended April 30, 1998, the Company completed eight
acquisitions for aggregate consideration of approximately $29.2 million. Of this
aggregate consideration, approximately $630,000 was paid by the issuance of
74,118 shares of the Company's Common Stock to the sellers of the acquired
businesses and approximately $28.5 million was paid in cash. Subsequent to April
30, 1998, the Company completed one additional acquisition for total
consideration of approximately $5.3 million in cash and 39,960 shares of the
Company's stock. The cash portion of the consideration paid for these
acquisitions was provided by proceeds from the Company's revolving credit
facility.
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 $20.7 million, of which $19.8 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 nine months ended April 30, 1998 were
approximately $3.0 million. Management expects the Company's capital
expenditures, consisting primarily of improvements to facilities and technology,
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 nine months ended April 30,
1998 was approximately $3.4 million and, consequently, increases in working
capital during such period were completely financed by internally generated cash
flow.
On May 19, 1998, the Company completed a public offering of 2,817,166
shares of Common stock at a price of $12.875 per share. Of the 2,817,166 shares
offered, 2,500,000 shares were sold by the Company and 317,166 shares were sold
by selling shareholders. Net proceeds to the Company were approximately $29.9
million and were used to reduce amounts outstanding under the Company's
revolving credit facility.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
Concurrent with the closing of the offering, the Company amended its
revolving credit facility to (i) provide for total borrowings of up to $115.0
million, (ii) extend the maturity date from August 31, 2000 to May 31, 2001 and
(iii) increase the purchase price thresholds above which the Company must obtain
the primary lenders consent to consummate acquisitions. As of April 30, 1998,
approximately $60.7 million was outstanding under the facility. Interest under
the facility 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 credit facility. At
April 30, 1998, the weighted average interest rate for all outstanding
borrowings was approximately 7.64%.
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 $13.3 million for the nine months ended April 30, 1998 from
approximately $7.5 million for the nine months ended April 30, 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 April 30, 1998 increased to approximately $20.0 million
from approximately $11.4 million 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.
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.
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 compliance team
will determine the various phases of the project and the applicable completion
dates for each of the phases. The Company anticipates having all phases of the
compliance project completed by December 31, 1998. Estimated costs to address
the year 2000 problem in certain of the Company's databases, order entry
software and certain telephone systems is $450,000. As the compliance project
nears completion, the need to develop contingency plans for any unresolved
issues will be considered.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
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.
12
<PAGE> 14
PART II. OTHER INFORMATION
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
April 30, 1998.
13
<PAGE> 15
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 14, 1998 by /s/ Richard K. McClelland
--------------------------------------
Richard K. McClelland
President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Dated: December 14, 1998 by /s/ Robert P. Capps
--------------------------------------
Robert P. Capps
Executive Vice President- Chief
Financial Officer
(Principal Financial Officer)
14
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<S> <C>
11.1 Calculation of Net Income Per Common Share
27.1 Financial Data
</TABLE>
<PAGE> 1
EXHIBIT 11.1
DYNAMEX INC. AND SUBSIDIARIES
CALCULATION OF NET INCOME PER COMMON SHARE
(in thousand except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30,
------------------------ ------------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 1,342 $ 1,168 $ 3,349 $2,130
======= ======= ======= ======
Weighted average common
shares outstanding 7,412 6,966 7,395 6,465
Common share equivalents related
to options and warrants 217 109 195 187
------- ------- ------- ------
Common shares and common share
equivalents 7,629 7,075 7,590 6,652
======= ======= ======= ======
Common stock price used under
treasury stock method $ 11.89 $ 7.94 $ 10.31 $ 9.22
======= ======= ======= ======
Net income per common share:
Basic $ 0.18 $ 0.17 $ 0.45 $ 0.33
======= ======= ======= ======
Diluted $ 0.18 $ 0.17 $ 0.44 $ 0.32
======= ======= ======= ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUL-31-1998 JUL-31-1998
<PERIOD-START> FEB-01-1998 AUG-01-1997
<PERIOD-END> APR-30-1998 APR-30-1998
<CASH> 2,741 2,741
<SECURITIES> 0 0
<RECEIVABLES> 28,297 28,297
<ALLOWANCES> 501 501
<INVENTORY> 0 0
<CURRENT-ASSETS> 35,768 35,768
<PP&E> 14,921 14,921
<DEPRECIATION> 7,065 7,065
<TOTAL-ASSETS> 123,956 123,956
<CURRENT-LIABILITIES> 15,787 15,787
<BONDS> 63,345 63,345
0 0
0 0
<COMMON> 74 74
<OTHER-SE> 44,750 44,750
<TOTAL-LIABILITY-AND-EQUITY> 123,956 123,956
<SALES> 53,131 148,393
<TOTAL-REVENUES> 53,131 148,393
<CGS> 0 0
<TOTAL-COSTS> 34,905 99,042
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,123 3,022
<INCOME-PRETAX> 2,286 5,768
<INCOME-TAX> 944 2,419
<INCOME-CONTINUING> 1,342 3,349
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,342 3,349
<EPS-PRIMARY> .18 .45
<EPS-DILUTED> .18 .44
</TABLE>
