Dynamex Announces Second Quarter Fiscal Year 2006 Results
DALLAS--March 1, 2006--| Second Quarter Highlights: |
-- Sales increase 9.8% to $86 million
-- Net income increases 4.9% to $2.7 million, $0.24 per fully diluted share
-- Announces initiative to license technology and business processes via franchise model
Dynamex Inc. , the leading provider of same-day delivery and logistics services in the United States and Canada, today announced net income of $2.7 million or $0.24 diluted earnings per common share for the FY 2006 second quarter compared to $2.6 million or $0.22 diluted earnings per common share in the prior year quarter.
Sales increased 9.8% to $86 million in the FY 2006 second quarter compared to the same quarter last year. Excluding the impact of exchange rate fluctuations between the Canadian dollar and the U.S. dollar, sales increased 8.3%. Higher fuel surcharges in the current period accounted for slightly less than 3% of the increase in sales this year compared to the prior year.
The core growth rate, the rate excluding the impact of fuel surcharges and changes in the foreign exchange rate, was approximately 5.5% this quarter, which is below our target range of 8% to 12%. Customer attrition in the U.S., which includes the impact of exiting certain relationships that did not achieve acceptable levels of profitability, was exceptionally high during the quarter resulting in a reduction in the overall core growth rate of approximately 3.0% to 3.5%.
We expect the FY 2006 third quarter core growth rate to be generally in line with the current quarter with the rate expected to begin to escalate in the FY 2006 fourth quarter, but will likely remain below the low end of our target range in both quarters.
Selling, general and administrative ("SG&A") expenses increased 9.9% to $19.1 million in the FY 2006 second quarter compared to the prior year period. Excluding changes in the Canadian/U.S. dollar exchange rate, SG&A increased 8.6%. As a percentage of sales, SG&A expenses were 22.1% in FY 2006, the same percentage as the prior year. Excluding the impact of foreign exchange, compensation increased approximately $650,000 while employee benefits including medical and dental costs, stock option expense and payroll taxes increased approximately $500,000.
Operating income was $4.2 million in the current year quarter, an increase of 4.3% over the prior year quarter. The increase is attributable to the gross profit generated from increased sales this year compared to the prior year.
Income tax expense was $1.5 million, 36% of income before taxes in the current year quarter compared to $1.4 million, 36% of income before taxes in the prior year.
Second Quarter Highlights
"We continue to position the Company for increased growth and profitability and our overall performance in the second quarter improved from the year-ago period," said Dynamex Chairman and CEO, Rick McClelland. "We did not accomplish our top line goals in the quarter but the organizational changes we announced recently are intended to enhance our growth rate by a closer alignment of sales and operations locally and regionally which will also allow us to intensify our National Accounts marketing activities.
"The attrition we experienced during the quarter represented an unusually high percentage of sales from an historical perspective," McClelland continued. "This level of attrition is unacceptable and we made certain organizational and structural changes, which we believe, will improve service levels and result in an attrition rate that is more in line with historical levels.
"General business conditions in our marketplace remain favorable and the strengthening of our operational and regional sales organizations will enable us to leverage future growth opportunities and return top-line growth to acceptable levels," said McClelland. "Our national account base and sales pipeline remain strong as we are actively pursuing a number of solid opportunities in terms of both new business and expanded relationships with existing customers. We were recently awarded new business in the U.S. which is expected to generate incremental sales in excess of $15 million annually once all locations are fully operational. However, the bulk of this new business is not scheduled to begin until the FY 2006 fourth quarter or early in FY 2007 and thus will have a minimum impact on sales this fiscal year.
"In addition to our normal sales and marketing activity, we have initiated preliminary discussions with a number of transportation and logistics firms regarding the licensing of our technology and certain business processes," McClelland concluded. "The reaction has been very favorable and we believe that this may become an additional revenue engine for the company and a means of further enhancing operating income."
Margins
The gross margin was 27.5% of sales in the current year quarter compared to 27.7% in the prior year. Purchased transportation totaled 64.9% of sales this year compared to 64.2% last year. The increase in purchased transportation, as a percentage of sales, is primarily attributable to the change in business mix and a higher percentage of fuel surcharge revenues this year compared to the prior year.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $4.7 million, a 5.7% increase over the same quarter last year (see Reconciliation of Non-GAAP Financial Measures on page 7 of this release). EBITDA, as a percentage of sales, was 5.5%, down from 5.7% in the prior year due to the lower gross profit margin.
Depreciation and Amortization
Depreciation and amortization ("D&A") in the second quarter 2006 increased to $448,000 from $369,000 in the second quarter of 2005, due in large part to computer software billing and receivable systems placed in service late in the third quarter of the current year. As a percent of sales, D&A was 0.5%, the same as the prior year.
Interest Expense
Interest expense for the three months ended January 21, 2006 was $90,000, $26,000 below the prior year period. During the current year quarter, the Company used temporary borrowings under the bank credit facility to fund stock repurchases. The Company subsequently transferred excess cash from Canada and used those funds to eliminate the balance of outstanding debt.
Outlook
The following outlook for FY 2006 is provided in connection with Regulation FD and to ensure that all investors continue to have equal access to information. The following outlook contains forward-looking statements that involve assumptions regarding Company operations and future prospects. Caution should be taken that the actual results could differ materially from those stated or implied in this and other Company communications.
The Company expects that the year-over-year core sales growth rate will likely range between 5% and 7% for the third and fourth quarters of fiscal year 2006.
The Company expects net income for FY 2006 to range between $1.00 and $1.10 per fully diluted share. In addition to the impact of reduction in expected sales growth, the revised outlook includes incremental costs to relocate the corporate headquarters and startup costs associated with new business of approximately $300,000.
Investor Call
The Company will host an investor conference call on Thursday, March 2, 2006 at 10:00 a.m. Central Standard Time. All interested parties may access the call Toll-Free at 1-877-407-9039. A participant will need the following information to access the conference call:
Company name - "Dynamex." A telephone replay of the conference call will be available through March 9, 2006 at Toll-Free 1-877-660-6853, enter Account Number 3055 and Conference ID Number 193878.
The conference call will also be available on the Internet through Thomson's website, located at www.earnings.com, and the link is also available through the Company's website at www.dynamex.com. To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, an Internet replay will be available shortly after the call for 30 days.
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(TM), 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)
(Unaudited)
January July
31, 2006 31, 2005
---------- ----------
ASSETS
CURRENT
Cash and cash equivalents $ 7,945 $ 11,678
Accounts receivable (net of allowance for
doubtful accounts of $877 and $767,
respectively) 34,519 31,703
Prepaid and other current assets 1,546 3,115
Deferred income tax 2,736 1,992
---------- ----------
Total current assets 46,746 48,488
Property and equipment - net 5,085 5,597
Goodwill 46,862 46,088
Intangibles - net 424 463
Deferred income taxes 6,593 7,625
Other assets 1,514 1,214
---------- ----------
Total assets $ 107,224 $ 109,475
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT
Accounts payable trade $ 7,747 $ 11,145
Accrued liabilities 16,776 14,426
---------- ----------
Total current liabilities 24,523 25,571
Long-term debt 7 8
---------- ----------
Total liabilities 24,530 25,579
========== ==========
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; 11,703 and 11,612 outstanding,
respectively 117 116
Additional paid-in capital 78,655 77,196
Treasury stock, 623 shares (9,997) --
Retained earnings 9,635 3,768
Unrealized foreign currency translation
adjustment 4,284 2,816
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 82,694 83,896
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,224 $ 109,475
========== ==========
DYNAMEX INC.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(in thousands except per share data)
(Unaudited)
Three months ended Six months ended
January 31, January 31,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Sales $ 86,346 $ 78,646 $ 176,915 $ 155,206
Cost of sales:
Purchased transportation 56,034 50,510 115,252 98,948
Other 6,550 6,352 13,508 12,765
---------- ---------- ---------- ----------
62,584 56,862 128,760 111,713
---------- ---------- ---------- ----------
Gross profit 23,762 21,784 48,155 43,493
Selling, general and
administrative Expenses:
Salaries, wages &
employee benefits 13,470 12,206 26,874 23,593
Other 5,631 5,171 11,249 10,005
---------- ---------- ---------- ----------
19,101 17,377 38,123 33,598
---------- ---------- ---------- ----------
Depreciation and
amortization 448 369 941 745
(Gain) loss on disposal of
property and equipment -- (2) 1 3
---------- ---------- ---------- ----------
Operating income 4,213 4,040 9,090 9,147
Interest expense 90 116 175 273
Other (income) expense (57) (54) (164) (104)
---------- ---------- ---------- ----------
Income before taxes 4,180 3,978 9,079 8,978
Income tax expense 1,494 1,417 3,212 3,244
---------- ---------- ---------- ----------
Net income $ 2,686 $ 2,561 $ 5,867 $ 5,734
========== ========== ========== ==========
Basic earnings per
common share: $ 0.24 $ 0.22 $ 0.52 $ 0.50
Diluted earnings per
common share: $ 0.24 $ 0.22 $ 0.51 $ 0.49
Weighted average shares:
Common shares
outstanding 11,108 11,547 11,326 11,496
Adjusted common shares -
assuming exercise of
stock options 11,347 11,798 11,552 11,732
DYNAMEX INC.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(in thousands except percentage data)
(Unaudited)
Continued
Three months ended Year ended
January 31, January 31,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Selected items as a percentage of sales:
---------------------------------------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales:
Purchased transportation 64.9% 64.2% 65.1% 63.8%
Other 7.6% 8.1% 7.6% 8.2%
---------- ---------- ---------- ----------
72.5% 72.3% 72.7% 72.0%
---------- ---------- ---------- ----------
Gross profit 27.5% 27.7% 27.3% 28.0%
Selling, general and
administrative expenses:
Salaries, wages &
employee benefits 15.6% 15.5% 15.2% 15.2%
Other 6.5% 6.6% 6.4% 6.4%
---------- ---------- ---------- ----------
22.1% 22.1% 21.6% 21.6%
---------- ---------- ---------- ----------
Depreciation and
amortization 0.5% 0.5% 0.5% 0.5%
(Gain) loss on disposal of
property and equipment 0.0% 0.0% 0.0% 0.0%
---------- ---------- ---------- ----------
Operating income 4.9% 5.1% 5.2% 5.9%
EBITDA Margin 5.5% 5.7% 5.8% 6.4%
EBITDA $ 4,718 $ 4,463 $ 10,195 $ 9,996
Reconciliation of Non-GAAP Financial Measures:
---------------------------------------------
Net income $ 2,686 $ 2,561 $ 5,867 $ 5,734
Income tax expense 1,494 1,417 3,212 3,244
Interest expense 90 116 175 273
Depreciation and
amortization 448 369 941 745
---------- ---------- ---------- ----------
EBITDA $ 4,718 $ 4,463 $ 10,195 $ 9,996
---------- ---------- ---------- ----------
Sales by Service Type
---------------------
On Demand $ 32,022 37.1% $ 30,774 39.1%
Scheduled/Distribution 26,456 30.6% 23,636 30.1%
Outsourcing 27,868 32.3% 24,236 30.8%
---------- ----------
Total Sales $ 86,346 100.0% $ 78,646 100.0%
========== ==========
Sales by Country
----------------
United States $ 55,274 64.0% $ 51,755 65.8%
Canada 31,072 36.0% 26,891 34.2%
---------- ----------
Total Sales $ 86,346 100.0% $ 78,646 100.0%
========== ==========
Sales by Service Type
---------------------
On Demand $ 66,609 37.7% $ 61,386 39.5%
Scheduled/Distribution 54,703 30.9% 45,606 29.4%
Outsourcing 55,603 31.4% 48,214 31.1%
---------- ----------
Total Sales $ 176,915 100.0% $ 155,206 100.0%
========== ==========
Sales by Country
----------------
United States $ 114,628 64.8% $ 102,983 66.4%
Canada 62,287 35.2% 52,223 33.6%
---------- ----------
Total Sales $ 176,915 100.0% $ 155,206 100.0%
========== ==========
DYNAMEX INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(in thousands)
Six months ended
January 31,
---------------------
2006 2005
---------- ----------
OPERATING ACTIVITIES
Net income $ 5,867 $ 5,734
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 941 745
Amortization of deferred bank financing fees 12 17
Provision for losses on accounts receivable 393 233
Deferred income taxes 289 1,971
Stock option compensation 447 275
(Gain) loss on disposal of property and
equipment 1 3
Changes in current operating assets and
liabilities:
Accounts receivable (3,208) (3,927)
Prepaids and other assets 1,569 (851)
Accounts payable and accrued liabilities (1,048) (279)
---------- ----------
Net cash provided by operating activities 5,263 3,921
---------- ----------
INVESTING ACTIVITIES
Purchase of property and equipment (350) (888)
Proceeds from sale of property and equipment -- 2
Purchase of investments (100) (210)
---------- ----------
Net cash used in investing activities (450) (1,096)
---------- ----------
FINANCING ACTIVITIES
Principal payments on long-term debt (1) --
Net borrowings under line of credit -- (4,201)
Net proceeds from sale of common stock 607 1,059
Tax benefit realized from exercise of stock
options 405 126
Purchase of treasury stock (9,997) --
Other assets and deferred offering costs (192) --
---------- ----------
Net cash used in financing activities (9,178) (3,016)
---------- ----------
EFFECT OF EXCHANGE RATES ON CASH FLOW
INFORMATION 632 521
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,733) 330
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,678 7,927
---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,945 $ 8,257
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 199 $ 266
========== ==========
Cash paid for taxes $ 3,099 $ 1,483
========== ==========