<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 2
[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
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements.
Important Explanatory Note 2
Condensed Consolidated Balance Sheets 3
April 30, 1998 (Unaudited) (As Restated) and July 31, 1997
Condensed Consolidated Statements of Income (Unaudited) 4
Three and Nine Months ended April 30, 1998 (As Restated) and 1997
Condensed Consolidated Statements of Cash Flows (Unaudited) 5
Nine Months ended April 30, 1998 (As Restated) and 1997
Notes to the Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 14
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL STATEMENTS
IMPORTANT EXPLANATORY NOTE
As discussed in Notes 1 and 5 to the Condensed Consolidated Financial
Statements of Dynamex Inc. (the "Company") included herein, the Company has
discovered unsupportable accounting entries that increased net income
approximately $450,000 in the third quarter 1998 with a corresponding decrease
in fourth quarter 1998 net income. The Audit Committee of the Company's Board of
Directors has formed a Special Committee of outside directors to review the
matter further. The Special Committee has engaged the law firm of Weil, Gotshal
& Manges LLP ("Weil, Gotshal") to assist in the review. Weil, Gotshal has
engaged Deloitte & Touche LLP to assist in connection with the review.
Management believes all required adjustments, including adjustments for the
unsupportable accounting entries, have been made to the accompanying financial
statements. However, this filing is subject to the outcome of the review by the
Special Committee and there can be no assurances that further adjustments will
not be necessary
2
<PAGE> 4
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 notes 1 and 5)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,741 $ 1,326
Accounts receivable - net 27,592 20,867
Prepaid and other current assets 4,302 3,301
Deferred income taxes 594 597
-------------- ----------
TOTAL CURRENT ASSETS 35,229 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 $ 123,417 $ 88,151
============== ==========
LIABILITIES
CURRENT LIABILITIES
Accounts payable trade $ 923 $ 1,759
Accrued liabilities 13,105 9,196
Income taxes payable 1,141 2,968
Current portion of long-term debt 521 740
-------------- ----------
TOTAL CURRENT LIABILITIES 15,690 14,663
LONG-TERM DEBT 63,345 32,388
-------------- ----------
TOTAL LIABILITIES 79,035 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 3,157 250
Unrealized foreign currency translation adjustment (495) (190)
-------------- ----------
TOTAL STOCKHOLDERS' EQUITY 44,382 41,100
-------------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 123,417 $ 88,151
============== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
3
<PAGE> 5
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 Notes 1 and 5) See Notes 1 and 5)
<S> <C> <C> <C> <C>
SALES $ 53,131 $ 34,155 $ 148,393 $ 91,001
COST OF SALES 35,594 22,501 99,731 60,600
--------- --------- --------- ---------
GROSS PROFIT 17,537 11,654 48,662 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 2,720 2,292 8,101 4,957
INTEREST EXPENSE 1,123 345 3,022 853
--------- --------- --------- ---------
INCOME BEFORE TAXES 1,597 1,947 5,079 4,104
INCOME TAXES 697 779 2,172 1,639
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 900 1,168 2,907 2,465
EXTRAORDINARY LOSS ON EARLY
RETIREMENT OF DEBT (net of income
tax benefit of $222) -- -- -- (335)
--------- --------- --------- ---------
NET INCOME $ 900 $ 1,168 $ 2,907 $ 2,130
========= ========= ========= =========
EARNING PER COMMON SHARE - BASIC
Income before extraordinary item $ 0.12 $ 0.17 $ 0.39 $ 0.38
Extraordinary loss -- -- -- (0.05)
--------- --------- --------- ---------
Net income $ 0.12 $ 0.17 $ 0.39 $ 0.33
========= ========= ========= =========
EARNINGS PER COMMON SHARE -
ASSUMING DILUTION
Income before extraordinary item $ 0.12 $ 0.17 $ 0.38 $ 0.37
Extraordinary loss -- -- -- (0.05)
--------- --------- --------- ---------
Net income $ 0.12 $ 0.17 $ 0.38 $ 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
4
<PAGE> 6
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 Notes 1 and 5)
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 2,907 $ 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 513 (965)
Accounts payable and accrued liabilities (754) 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
5
<PAGE> 7
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. These
condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
information. Accordingly, certain information and disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or
omitted.
The Company has discovered unsupportable accounting entries that
increased net income approximately $450,000 in the third quarter 1998 with a
corresponding decrease in fourth quarter 1998 net income. The unsupportable
entries related to the timing of the sale of an asset and the reduction in
accruals for workers' compensation and bad debts. The Audit Committee of the
Company's Board of Directors has formed a Special Committee of outside directors
to review the matter further. The Special Committee has engaged the law firm of
Weil, Gotshal & Manges LLP ("Weil, Gotshal") to assist in the review. Weil,
Gotshal has engaged Deloitte & Touche LLP to assist in connection with the
review. Management believes all required adjustments, including adjustments for
the unsupportable accounting entries, have been made to the accompanying
financial statements. However, these financial statements are subject to the
outcome of the review by the Special Committee and there can be no assurances
that further adjustments will not be necessary.
Subject to the foregoing, management believes that the accompanying
interim financial statements contain all adjustments necessary for a fair
presentation of the Company's financial position at April 30, 1998, 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, and should be
read in conjunction with the Company's financial statements for the fiscal year
ended July 31, 1997. Certain prior period amounts have been reclassified for
comparative purposes.
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)
6
<PAGE> 8
DYNAMEX INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Nine months ended
April 30,
---------------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Sales $ 163,695 $ 144,722
============= =============
Net income $ 3,196 $ 2,987
============= =============
Earnings per common share - basic: $ 0.43 $ 0.40
============= =============
Earnings per common share -
assuming dilution $ 0.42 $ 0.39
============= =============
</TABLE>
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
A summary of the effect of this restatement on the Condensed
Consolidated Balance Sheet at April 30, 1998 (Unaudited), is as follows (in
thousands):
<TABLE>
<CAPTION>
As Previously Amendment #2
Reported Restatement
------------- ------------
<S> <C> <C>
Accounts receivable - net $ 27,796 $ 27,592
Prepaid and other current assets 4,637 4,302
Accrued liabilities 12,955 13,105
Income taxes payable 1,388 1,141
Retained earnings 3,599 3,157
</TABLE>
7
<PAGE> 9
DYNAMEX INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements (Unaudited)
===============================================================================
A summary of the effect of this 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 Amendment #2
Reported Restatement
Three Months Three Months
Ended Ended
April 30, 1998 April 30, 1998
-------------- --------------
<S> <C> <C>
Cost of sales $ 34,905 $ 35,594
Income taxes 944 697
Net income 1,342 900
Earnings per common share:
Basic 0.18 0.12
Assuming dilution 0.18 0.12
</TABLE>
<TABLE>
<CAPTION>
As Previously Amendment #2
Reported Restatement
Nine Months Nine Months
Ended Ended
April 30, 1998 April 30, 1998
-------------- --------------
<S> <C> <C>
Cost of sales $ 99,042 $ 99,731
Income taxes 2,419 2,172
Net income 3,349 2,907
Earnings per common share:
Basic 0.45 0.39
Assuming dilution 0.44 0.38
</TABLE>
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
===============================================================================
This discussion contains forward-looking statements which involve
assumptions regarding Company operations and future prospects. Although the
Company believes its expectations are based on reasonable assumptions, such
statements are subject to risk and uncertainty, including, among other things,
statements with respect to the outcome of the Special Committee's review,
acquisition strategy, competition, foreign exchange, and risks associated with
the local delivery industry. These and other risks are mentioned from time to
time in the Company's filings with the Securities and Exchange Commission.
Caution should be taken that these factors could cause the actual results to
differ from those stated or implied in this and other Company communications.
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.
The Company has discovered unsupportable accounting entries that
increased net income approximately $450,000 in the third quarter 1998 with a
corresponding decrease in fourth quarter 1998 net income. The Audit Committee of
the Company's Board of Directors has formed a Special Committee of outside
directors to review the matter further. The Special Committee has engaged the
law firm of Weil, Gotshal & Manges LLP ("Weil, Gotshal") to assist in the
review. Weil, Gotshal has engaged Deloitte & Touche LLP to assist in connection
with the review. Management believes all required adjustments, including
adjustments for the unsupportable entries, have been made to the accompanying
financial statements. However, these financial statements are subject to the
outcome of the review by the Special Committee and there can be no assurances
that further adjustments will not be necessary.
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 a material adverse effect on the Company's business, financial
condition or results of operations.
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items
from the Company's Condensed 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 67.0% 65.9% 67.2% 66.6%
---------- -------- ----------- -------
Gross profit 33.0% 34.1% 32.8% 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 5.1% 6.7% 5.4% 5.4%
Interest expense 2.1% 1.0% 2.0% 0.9%
---------- -------- ----------- -------
Income before taxes and extraordinary item 3.0% 5.7% 3.4% 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
$13.1 million, or 58.2%, to $35.6 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
increased to 67.0% 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.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
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 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 $39.1
million, or 64.6%, to $99.7 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
increased to 67.2% 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.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
===============================================================================
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.
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 $12.7 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 $19.5 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. Other than the
Company's propriety software system that is currently used in its
Minneapolis/St. Paul operations, the Company uses software that has been
licensed from third-party vendors. The Company is in the process of determining
the extent to which its licensed and proprietary software is year 2000
compliant and the cost of obtaining such compliance. The Company does not
believe that its cost of addressing the year 2000 issue or the effects of any
year 2000 non-compliance in any proprietary or licensed software will result in
any material adverse impact on the Company's business or financial condition.
12
<PAGE> 14
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.
13
<PAGE> 15
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.
14
<PAGE> 16
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: June 18, 1999 by /s/Richard K. McClelland
-------------------------------
Richard K. McClelland
President, Chief Executive
Officer and Chairman of the Board
(Principal Executive Officer)
Dated: June 18, 1999 by /s/ Ray E. Schmitz
-------------------------------
Ray E. Schmitz
Vice President- Controller
(Principal Accounting Officer)
15
<PAGE> 17
EXHIBIT INDEX
EXHIBITS
11.1 Calculation of Net Income Per Common Share
27.1 Financial Data
16
<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 $ 900 $ 1,168 $ 2,907 $ 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 $ 0.12 $ 0.17 $ 0.39 $ 0.33
========= ========= ========= =========
Diluted $ 0.12 $ 0.17 $ 0.38 $ 0.32
========= ========= ========= =========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JUL-31-1998 JUL-31-1998
<PERIOD-START> AUG-01-1997 FEB-01-1998
<PERIOD-END> APR-30-1998 APR-30-1998
<CASH> 2,741 2,741
<SECURITIES> 0 0
<RECEIVABLES> 28,093 28,093
<ALLOWANCES> 501 501
<INVENTORY> 0 0
<CURRENT-ASSETS> 35,229 35,229
<PP&E> 14,921 14,921
<DEPRECIATION> 7,065 7,065
<TOTAL-ASSETS> 123,417 123,417
<CURRENT-LIABILITIES> 15,690 15,690
<BONDS> 63,345 63,345
0 0
0 0
<COMMON> 74 74
<OTHER-SE> 44,308 44,308
<TOTAL-LIABILITY-AND-EQUITY> 123,417 123,417
<SALES> 148,393 53,131
<TOTAL-REVENUES> 148,393 53,131
<CGS> 99,731 35,594
<TOTAL-COSTS> 99,731 35,594
<OTHER-EXPENSES> 40,561 14,817
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,022 1,123
<INCOME-PRETAX> 5,079 1,597
<INCOME-TAX> 2,172 697
<INCOME-CONTINUING> 2,907 900
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,907 900
<EPS-BASIC> .39 .12
<EPS-DILUTED> .38 .12
</TABLE>
