##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 31, 2006
 OR
 o
    
    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
(State of incorporation)
    
    86-0712225
(I.R.S. Employer Identification No.)5429 LBJ Freeway, Suite 1000, Dallas, Texas
(Address of principal executive offices)
    
    75240
(Zip Code)
 Registrants telephone number, including area code:
(214) 560-9000
 þ o
  o þ o
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##### 



INDEX
  
 PagePART IFINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets
October 31, 2006 (Unaudited) and July 31, 2006
    
    
    2Condensed Statements of Consolidated Operations (Unaudited)
Three months ended October 31, 2006 and 2005
    
    
    3Condensed Statements of Consolidated Cash Flows (Unaudited)
Three months ended October 31, 2006 and 2005
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    9Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    13Item 4.
    
    Controls and Procedures
    
    
    14PART IIOTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    15Item 1A.
    
    Risk Factors
    
    
    15Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 6.
    
    Exhibits
    
    
    16Signatures
    
    
    17Exhibit Index
    
    E-1Fifth Amendment to Revolving Credit FacilityCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive Officer - Section 906Certification of Chief Financial Officer - Section 906
  1




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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 
  DYNAMEX INC.
 
   October 31,
    
    
    July 31,2006
    
    
    2006(Unaudited)ASSETSCURRENTCash and cash equivalents
    
    $
    5,354
    
    
    $
    6,058Accounts receivable (net of allowance for doubtful accounts
of $773 and $676, respectively)
    
    
    42,643
    
    
    
    36,425Income taxes receivable
    
    
    566
    
    
    
    1,577Prepaid and other current assets
    
    
    3,276
    
    
    
    2,689Deferred income taxes
    
    
    2,446
    
    
    
    2,322Total current assets
    
    
    54,285
    
    
    
    49,071PROPERTY AND EQUIPMENT  net
    
    
    6,811
    
    
    
    5,967GOODWILL
    
    
    47,018
    
    
    
    46,934INTANGIBLES  net
    
    
    371
    
    
    
    390DEFERRED INCOME TAXES
    
    
    5,247
    
    
    
    5,580OTHER
    
    
    3,416
    
    
    
    2,357Total assets
    
    $
    117,148
    
    
    $
    110,299LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable trade
    
    $
    10,740
    
    
    $
    11,168Accrued liabilities
    
    
    18,978
    
    
    
    19,014Total current liabilities
    
    
    29,718
    
    
    
    30,182LONG-TERM DEBT
    
    
    3,804
    
    
    
    905OTHER LONG-TERM LIABILITIES
    
    
    1,421
    
    
    
    Total liabilities
    
    
    34,943
    
    
    
    31,087COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred stock; $0.01 par value, 10,000 shares authorized;
none outstanding
    
    
    
    
    
    
    Common stock; $0.01 par value, 50,000 shares authorized;
10,600 and 10,638 outstanding, respectively
    
    
    106
    
    
    
    106Additional paid-in capital
    
    
    57,743
    
    
    
    58,514Retained earnings
    
    
    19,809
    
    
    
    16,160Accumulated other comprehensive income
    
    
    4,547
    
    
    
    4,432Total stockholders equity
    
    
    82,205
    
    
    
    79,212Total liabilities and stockholders equity
    
    $
    117,148
    
    
    $
    110,299
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DYNAMEX INC.
 
  
 Three months endedOctober 31,2006
    
    
    2005Sales
    
    $
    100,615
    
    
    $
    90,569Cost of sales:Purchased transportation
    
    
    65,832
    
    
    
    59,220Other direct costs
    
    
    7,856
    
    
    
    6,957Cost of sales
    
    
    73,688
    
    
    
    66,177Gross profit
    
    
    26,927
    
    
    
    24,392Selling, general and administrative expenses:Salaries and employee benefits
    
    
    14,081
    
    
    
    13,405Other
    
    
    6,447
    
    
    
    5,617Selling, general and administrative expenses
    
    
    20,528
    
    
    
    19,022Depreciation and amortization
    
    
    592
    
    
    
    494Loss on disposal of property and equipment
    
    
    8
    
    
    
    Operating income
    
    
    5,799
    
    
    
    4,876Interest expense
    
    
    111
    
    
    
    84Other income, net
    
    
    (92
    )
    
    
    (107
    )Income before income taxes
    
    
    5,780
    
    
    
    4,899Income taxes
    
    
    2,131
    
    
    
    1,718Net income
    
    $
    3,649
    
    
    $
    3,181Basic earnings per common share:
    
    $
    0.34
    
    
    $
    0.28Diluted earnings per common share:
    
    $
    0.34
    
    
    $
    0.27Weighted average shares:Common shares outstanding
    
    
    10,601
    
    
    
    11,543Adjusted common shares  assuming
exercise of stock options
    
    
    10,755
    
    
    
    11,792
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DYNAMEX INC.
 
    Three months endedOctober 31,2006
    
    
    2005OPERATING ACTIVITIESNet income
    
    $
    3,649
    
    
    $
    3,181Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    592
    
    
    
    494Amortization of deferred bank financing fees
    
    
    6
    
    
    
    6Provision for losses on accounts receivable
    
    
    156
    
    
    
    288Stock option compensation
    
    
    149
    
    
    
    118Deferred income taxes
    
    
    209
    
    
    
    614Lessor financed leasehold improvements
    
    
    1,162
    
    
    
    Non-cash rent expense
    
    
    229
    
    
    
    Loss on disposal of property and equipment
    
    
    8
    
    
    
    Changes in current operating assets and liabilities:Accounts receivable
    
    
    (6,319
    )
    
    
    (7,129
    )Prepaids and other current assets
    
    
    424
    
    
    
    486Accounts payable and accrued liabilities
    
    
    (432
    )
    
    
    (18
    )Net cash used in operating activities
    
    
    (167
    )
    
    
    (1,960
    )INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (1,579
    )
    
    
    (117
    )Purchase of investments
    
    
    (166
    )
    
    
    (54
    )Net cash used in investing activities
    
    
    (1,745
    )
    
    
    (171
    )FINANCING ACTIVITIESPrincipal payments on long-term debt
    
    
    (1
    )
    
    
    (1
    )Net borrowings under line of credit
    
    
    2,900
    
    
    
    9,300Proceeds from stock option exercise
    
    
    135
    
    
    
    42Tax benefit realized by exercise of stock options
    
    
    39
    
    
    
    40Purchase and retirement of treasury stock
    
    
    (1,094
    )
    
    
    (7,792
    )Other assets and deferred financing fees
    
    
    (905
    )
    
    
    (150
    )Net cash provided by financing activities
    
    
    1,074
    
    
    
    1,439EFFECT OF EXCHANGE RATES ON CASH
    
    
    134
    
    
    
    335NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (704
    )
    
    
    (357
    )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    6,058
    
    
    
    11,678CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    5,354
    
    
    $
    11,321SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    98
    
    
    $
    110Cash paid for taxes
    
    $
    962
    
    
    $
    1,221
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DYNAMEX INC.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. Summary of Significant Accounting Polices
 Description of Business
 Basis of presentation 
   Business and credit concentrations 
   Other assets  Recoverable contract contingency costs
  5




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DYNAMEX INC.
 2. Comprehensive Income
  Three months endedOctober 31,2006
    
    
    2005Net income
    
    $
    3,649
    
    
    $
    3,181Unrealized gains (losses) on investments
    
    
    (12
    )
    
    
    24Foreign currency translation gains
    
    
    127
    
    
    
    738Comprehensive income
    
    $
    3,764
    
    
    $
    3,943
 3. Intangibles  net
  Amortization ExpenseAccumulated
    
    
    
    
    
    
    Three months ended October 31,Asset
    
    
    Amortization
    
    
    Net
    
    
    2006
    
    
    2005Deferred bank financing fees
    
    $
    129
    
    
    $
    (101
    )
    
    $
    28
    
    
    
    6
    
    
    
    6Customer lists
    
    
    80
    
    
    
    (53
    )
    
    
    27
    
    
    
    8
    
    
    
    8Trademarks and other
    
    
    470
    
    
    
    (154
    )
    
    
    316
    
    
    
    5
    
    
    
    5Total
    
    $
    679
    
    
    $
    (308
    )
    
    $
    371
    
    
    $
    19
    
    
    $
    19
  4. Computation of Earnings Per Share
 Earnings Per Share
 6




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DYNAMEX INC.
 Three months endedOctober 31,2006
    
    
    2005Net income
    
    $
    3,649
    
    
    $
    3,181Weighted average common shares outstanding
    
    
    10,601
    
    
    
    11,543Common share equivalents related to options
    
    
    154
    
    
    
    249Common shares and common share equivalents
    
    
    10,755
    
    
    
    11,792Net income per common share:Basic
    
    $
    0.34
    
    
    $
    0.28Diluted
    
    $
    0.34
    
    
    $
    0.27
 5. Repurchase of Equity Securities
  6. Contingencies
     7




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DYNAMEX INC.
    8




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DYNAMEX INC.
 
 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, competition, foreign exchange, and risks associated with the same-day transportation
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
        Critical Accounting Policies
  9




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DYNAMEX INC.
  Recent Accounting Pronouncements
   Results of Operations
  Three months endedOctober 31,2006
    
    2005Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales:Purchased transportation
    
    
    65.4
    %
    
    
    65.4
    %Other direct costs
    
    
    7.8
    %
    
    
    7.7
    %Cost of sales
    
    
    73.2
    %
    
    
    73.1
    %Gross profit
    
    
    26.8
    %
    
    
    26.9
    %Selling, general and administrative expenses:Salaries and employee benefits
    
    
    14.0
    %
    
    
    14.8
    %Other
    
    
    6.4
    %
    
    
    6.2
    %Selling, general and administrative expenses
    
    
    20.4
    %
    
    
    21.0
    %Depreciation and amortization
    
    
    0.6
    %
    
    
    0.5
    %Loss on disposal of property and equipment
    
    
    0.0
    %
    
    
    0.0
    %Operating income
    
    
    5.8
    %
    
    
    5.4
    %Interest expense
    
    
    0.1
    %
    
    
    0.1
    %Other income, net
    
    
    -0.1
    %
    
    
    -0.1
    %Income before income taxes
    
    
    5.8
    %
    
    
    5.4
    %Income taxes
    
    
    2.1
    %
    
    
    1.9
    %Net income
    
    
    3.7
    %
    
    
    3.5
    %
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DYNAMEX INC.
  Three months endedOctober 31,2006
    
    
    2005Sales by service type:On demand
    
    
    36,525
    
    
    
    36.3
    %
    
    $
    34,586
    
    
    
    38.2
    %Scheduled/distribution
    
    
    31,657
    
    
    
    31.5
    %
    
    
    28,248
    
    
    
    31.2
    %Outsourcing
    
    
    32,433
    
    
    
    32.2
    %
    
    
    27,735
    
    
    
    30.6
    %Total sales
    
    $
    100,615
    
    
    
    100.0
    %
    
    $
    90,569
    
    
    
    100.0
    %Sales by country:United States
    
    $
    63,962
    
    
    
    63.6
    %
    
    $
    59,354
    
    
    
    65.5
    %Canada
    
    
    36,653
    
    
    
    36.4
    %
    
    
    31,215
    
    
    
    34.5
    %Total sales
    
    $
    100,615
    
    
    
    100.0
    %
    
    $
    90,569
    
    
    
    100.0
    %
 Three months ended October 31, 2006 compared to three months ended October 31, 2005
       11




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DYNAMEX INC.
  Liquidity and Capital Resources
        12




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DYNAMEX INC.
  Three months endedOctober 31,2006
    
    
    2005Net income
    
    $
    3,649
    
    
    $
    3,181Adjustments:Income tax expense
    
    
    2,131
    
    
    
    1,718Interest expense
    
    
    111
    
    
    
    84Depreciation and amortization
    
    
    592
    
    
    
    494EBITDA
    
    $
    6,483
    
    
    $
    5,477
  Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Exchange Exposure
   13




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DYNAMEX INC.
 Interest Rate Exposure
  
 Item 4. Controls and Procedures
   14




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DYNAMEX INC.
 
 PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
       
 Item 1A. Risk Factors.
  15




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DYNAMEX INC.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
 (c)
    
    Common Stock Repurchases
 Total number
    
    Average
    
    Total number of
    
    Approximate dollar valueof shares
    
    price paid
    
    shares purchased as part of
    
    of shares that may yet bePeriod
    
    purchased
    
    per share
    
    a publicly announced plan
    
    purchased under the planAugust 3 to
September 2, 2006
    
    
    47,100
    
    
    $
    20.13
    
    
    
    47,100
    
    
    $7.5 millionOctober 3 to
November 2, 2006
    
    
    7,300
    
    
    $
    20.04
    
    
    
    7,300
    
    
    $7.4 million
  
 Item 6.
    
    ExhibitsExhibits:
 10.14
    
    Fifth Amendment to the $30,000,000 Revolving Credit Facility
by and among the Company and Bank of America, N.A., as administrative agent and
a lender, dated October 5, 2006.31.1
    
    Certification of Chief Executive Officer of the Registrant,
pursuant to 17 CFR 240. 13a  15(e) or 17 CFR 240. 15d  15(e)31.2
    
    Certification of Chief Financial Officer of the Registrant,
pursuant to 17 CFR 240. 13a  15(e) or 17 CFR 240. 15d  15(e)32.1
    
    Certification of Chief Executive Officer of the Registrant,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer of the Registrant,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 16




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DYNAMEX INC.
 
 SIGNATURES
  DYNAMEX INC.Dated: December 7, 2006
    
    by
    
    /s/ Richard K. McClellandRichard K. McClellandPresident, Chief Executive Officer andChairman of the Board(Principal Executive Officer)Dated: December 7, 2006
    
    by
    
    /s/ Ray E. SchmitzRay E. SchmitzVice President  Chief Financial Officer(Principal Financial Officer)Dated: December 7, 2006
    
    by
    
    /s/ Samuel T. HicksSamuel T. HicksCorporate Controller(Principal Accounting Officer)
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EXHIBIT INDEX
 Exhibits
 10.14
    
    Fifth Amendment to the $30,000,000 Revolving Credit Facility by and among the Company and
Bank of America, N.A., as administrative agent and a lender, dated October 5, 2006.31.1
    
    Certification of Chief Executive Officer of the Registrant, pursuant to 17 CFR 240. 13a -
15(e) or 17 CFR 240. 15d  15(e)31.2
    
    Certification of Chief Financial Officer of the Registrant, pursuant to 17 CFR 240. 13a -
15(e) or 17 CFR 240. 15d  15(e)32.1
    
    Certification of Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 E - 1