Dynamex Inc. (NASDAQ: DDMX), the leading provider of same-day delivery and logistics services in the United States and Canada, today announced net income of $1.4 million, or $0.14 fully diluted net income per share, for the FY 2011 first quarter compared to $3.0 million, or $0.31 fully diluted net income per share, in the prior year quarter. The current quarter includes an $1.8 million pre-tax, $1.7 million after tax ($0.17 per fully diluted share), charge for merger related costs.

James L. Welch, President and Chief Executive Officer of Dynamex stated, “Following a successful fiscal 2010, the Company continued to build momentum during our fiscal first quarter producing better than expected sales. Core sales per day increased for the fifth consecutive quarter, which is directly correlated to our continued focus on our long-term strategic initiatives.”

Welch added, “Pricing remains highly competitive, and as a result, purchased transportation expenses were higher, as a percentage of sales, than the previous year. However, we believe the Company is showing significant improvement in its operations and is well positioned for continued expansion as the broader economy continues to slowly improve.”

Sales were $111 million in the current quarter, which represented an 11.2% year-over-year increase due to higher core sales and fuel surcharges and a stronger Canadian dollar. The increase in core sales (sales excluding changes in fuel surcharge and foreign exchange), accounts for 8.2% of the increase. Core sales increased approximately 9.1% in Canada and 8.3% in the U.S. Higher fuel surcharges and the stronger Canadian dollar account for approximately 1.3%, and 1.7% respectively, of the increase in sales this quarter.

Salaries and employee benefit costs increased $0.6 million in the current quarter, or 3.0% compared to the same quarter last year. The increase is principally attributable to higher medical and dental costs, higher severance, and the impact of the stronger Canadian dollar. Salaries and employee benefit costs represented 18.5% of sales in the current quarter compared to 20.0% in the same quarter last year.

Other expenses were $6.6 million, an increase of $0.9 million, or 15.7% compared to the prior year quarter. In the current year, other expenses include approximately $0.5 million for higher claims and legal settlements, and $0.5 million for contract labor directly related to the increase in sales. Other expenses represented 6.0% of sales this quarter compared to 5.7% last year.

Operating income was $3.0 million, a decline of 36% compared to the prior year quarter. Excluding merger related costs, operating income would have been approximately 3.3% higher this year than last year. Purchased transportation costs, the largest component of operating expenses, represented 65.7% of sales in the current year quarter, compared to 63.8% of sales in the prior year quarter. The increase in the percentage this year is primarily attributable to the impact of a more competitive pricing environment.

Income tax expense was $1.6 million, or 53.0% of income before taxes, in the current quarter compared to $1.6 million, or 34.3% of income before taxes, in the prior year quarter. The effective tax rate in the current year was impacted by merger related costs that are expensed for financial accounting purposes but not currently deductible for federal income tax purposes as these costs are required to be added to the tax basis of the Company. The prior year benefited from a reduction in the Canadian federal income tax rate and a $0.1 million reduction in deferred tax liabilities associated with the reduced tax rate. Excluding merger related costs, the Company’s current annual effective income tax rate in the U.S. is approximately 41.5% and 29.0% in Canada.

Bank Credit Facility

Amounts outstanding under the bank credit facility totaled $0.5 million at October 31, 2010. Acquisition and merger related costs, primarily in the U.S., were the primary drivers of borrowings this quarter.

EBITDA Margin

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) were $4.1 million, 3.7% of sales in the current quarter compared to $5.7 million, or 5.7% of sales in the same quarter last year (see Reconciliation of Non-GAAP Financial Measures on page 7 of this release). Excluding merger related costs of $1.8 million, the current year would have been $5.9 million, or 5.3% of sales.

Cash Flow

Net cash provided by operating activities was $1.2 million this year compared to $1.1 million in the prior year. The increase in net cash provided from operations was principally attributable to the lower working capital requirements offset by lower net income in the current quarter compared to the prior year quarter. The Company had cash and cash equivalents of $24.3 million at October 31, 2010, compared to $11.0 at October 31, 2009.

Net cash used in investing activities was $4.1 million compared to $0.6 last year. The increase was due to higher property and equipment additions and acquisitions this quarter compared to last year’s quarter. The company continues to expect capital expenditures to range between $2.0 million and $3.0 million for FY 2011.

Depreciation and Amortization

Depreciation and amortization (“D&A”) was $1.1 million in the quarter, the same as the prior year quarter. As a percent of sales, D&A was 1.0% this year compared to 1.1% last year.

Interest Expense

Interest expense for the three months ended October 31, 2010 was $43,000, $5,000 below the prior year period.

Dynamex is the leading provider of same-day delivery and logistics services in the United States and Canada. Additional press releases and investor relations information as well as the Company’s Internet e-commerce services package, dxNow™, is available at www.dynamex.com.

This release contains forward-looking statements that 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, the effect of changing economic conditions, acquisition strategy, competition, foreign exchange, the ability to meet the terms of current borrowing arrangements, 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. In light of such risks and uncertainties, the Company’s actual results could differ materially from such forward-looking statements. The Company does not undertake any obligation to publicly release any revision to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. 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.
 

DYNAMEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except per share data)
 
 

October 31,
 

July 31,

2010

2010
 
 

ASSETS
CURRENT
Cash and cash equivalents $

24,326

$
26,318
Accounts receivable (net of allowance for doubtful
accounts of $1,169 and $1,048, respectively) 54,168 47,455
Income taxes receivable 2,799 4,062
Prepaid and other current assets 3,929 4,032
Deferred income taxes   4,029   4,029
Total current assets 89,251 85,896
 
Property and equipment - net 11,332 11,138
Goodwill 50,711 48,058
Intangibles - net 2,557 2,091
Other assets   2,515   3,083
Total assets $ 156,366 $ 150,266
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
Accounts payable trade $ 10,493 $ 8,248
Accrued liabilities and other   26,920   24,577
Total current liabilities 37,413 32,825
 
Long-term debt -- --
Other long-term liabilities   7,222   7,676
Total liabilities   44,635   40,501
 
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;
9,756 and 9,753 outstanding, respectively 97 97
Additional paid-in capital 38,124 37,876
Retained earnings 67,699 66,310
Unrealized foreign currency translation adjustment   5,811   5,482
Total stockholders’ equity   111,731   109,765

Total liabilities and stockholders’ equity

$

156,366

$

150,266
 
DYNAMEX INC.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(in thousands except per share data)
(Unaudited)
 
 

Three months ended

October 31,

2010
 

2009
Sales $ 110,618 $ 99,447
 
Operating expenses:
Purchased transportation 72,717 63,450
Salaries and employee benefits 20,436 19,850
Facilities and communication 4,959 4,720
Other 6,626 5,725
Depreciation and amortization 1,087 1,062
Merger related costs 1,811 --
       
Total operating expenses   107,636     94,807  
 
Operating income 2,982 4,640
Interest expense 43 48
Other income, net   (19 )   (12 )
 
Income before income taxes 2,958 4,604
 
Income tax expense   1,569     1,578  
 
Net income $ 1,389   $ 3,026  
 
Basic earnings per common share: $ 0.14 $ 0.31
 
Diluted earnings per common share: $ 0.14 $ 0.31
 
Weighted average shares:
Common shares outstanding 9,754 9,725
Adjusted common shares - assuming
exercise of stock options 9,769 9,748
 
 
 
  Three months ended  
October 31,

2010
   

2009
 

Selected items as a percentage of sales:
Sales 100.0 % 100.0 %
Operating expenses:
Purchased transportation 65.7 % 63.8 %
Salaries and employee benefits 18.5 % 20.0 %
Facilities and communication 4.5 % 4.7 %
Other expenses 6.0 % 5.7 %
Depreciation and amortization 1.0 % 1.1 %
Merger related costs   1.6 %   0.0 %
 
Operating income 2.7 % 4.7 %
 
EBITDA Margin 3.7 % 5.7 %
EBITDA $ 4,088 $ 5,714
 

Reconciliation of Non-GAAP Financial Measures:
 
Net income $ 1,389 $ 3,026
Income tax expense 1,569 1,578
Interest expense 43 48
Depreciation and amortization   1,087     1,062  
EBITDA $ 4,088   $ 5,714  
 

Sales by Service Type
On Demand $ 34,145 30.9 % $ 31,430 31.6 %
Distribution & Other  

76,473
 

69.1

%
 

68,017
 

68.4

%
Total Sales

$

110,618
 

100.0

%

$

  99,447
 

100.0

%

 

Sales by Country
United States $ 68,862 62.3 % $ 63,020 63.4 %
Canada   41,756   37.7 %   36,427   36.6 %
Total Sales $ 110,618   100.0 % $ 99,447   100.0 %
 
DYNAMEX INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(in thousands)
 
 

Three months ended

October 31,

2010
 

2009
 
 
OPERATING ACTIVITIES
Net income $

1,389

$
3,026
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,087 1,062
Amortization of deferred bank financing fees

 

-
4
Provision for losses on accounts receivable 143 212
Stock option compensation 209 340
Deferred income taxes

 

-
171
Non-cash rent expense 14 (1 )
Gain on disposal of property and equipment

 

-
(5 )
Changes in current operating assets and liabilities
net of the effects from business acquisitions:
Accounts receivable (6,594 ) (8,083 )
Prepaids and other assets 1,370 1,971
Accounts payable and accrued liabilities   3,572     2,390  
Net cash provided by operating activities   1,190     1,087  
 
 
INVESTING ACTIVITIES
Purchase of property and equipment (761 ) (511 )
Acquisitions (3,720 ) (86 )
Withdrawal (purchase) of deferred compensation investments   405     (14 )
Net cash used in investing activities   (4,076 )   (611 )
 
 
FINANCING ACTIVITIES
Borrowings on short-term debt – revolver 3,000 -
Payments on short-term debt – revolver (2,500 ) -
Net proceeds from sale of common stock 39 71
Other assets and deferred offering costs   241     (291 )
Net cash provided by (used in) financing activities   780     (220 )
 
 
EFFECT OF EXCHANGE RATES ON CASH
FLOW INFORMATION   114     (259 )
 
 
NET INCREASE IN CASH AND
CASH EQUIVALENTS (1,992 ) (3 )
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD   26,318     11,016  
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 24,326   $ 11,013  
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 38   $ 5  
Cash paid for taxes $ 330   $ 581  
 

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