1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 30, 1997
DYNAMEX INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-21057 86-0712225
(State or Other Jurisdiction of (Commission File Number) (IRS employment
Incorporation or Organization) identification no.)
1431 Greenway Drive
Suite 345
Irving, Texas 75038
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 756-8180
Page 1 of __ pages
Exhibit index on page 2
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 30, 1997 the Company acquired the stock of City Courier,
Inc., New York Document Exchange Corporation and Eastside/Westside, Inc.
(collectively, the "New York Companies"). The New York Companies are engaged in
the same-day transportation and facilities management business, in the
metropolitan New York City area. The stockholders of the New York Companies
received $12.1 million in cash in the transaction. In addition, the Company
assumed obligations amounting to $2.5 million. The consideration was determined
in arms-length negotiations between the Company and the stockholders of the New
York Companies. The transaction is being accounted for using the purchase
method of accounting.
The cash portion of the purchase price was obtained by the Company
pursuant to its revolving credit agreement with NationsBank.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Combined financial statements of the New York Companies for the year ended
May 31, 1997 are included herein.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial statements of the Company reflecting the acquisition
of the New York Companies are not currently available but will be filed not
later than 60 days from the date on which this report on Form 8-K was required
to be filed.
(c) EXHIBITS.
2.1 Stock Purchase Agreement dated September 30, 1997 by and among Dynamex Inc.
and the Shareholders of City Courier, Inc., New York Document Exchange
Corporation and Eastside/Westside, Inc.
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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 hereunto duly authorized.
DYNAMEX INC.
Date: October 7, 1997 By: /s/ Robert P. Capps
----------------------------
Robert P. Capps
Vice President,
Chief Financial Officer
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4
Combined Financial Statements of
NEW YORK DOCUMENT EXCHANGE
CORPORATION, EASTSIDE-WESTSIDE,
INC., AND CITY COURIER, INC.
May 31, 1997
5
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
New York Document Exchange Corporation,
Eastside-Westside, Inc., and City Courier, Inc.
We have audited the accompanying combined balance sheet of New York Document
Exchange Corporation, Eastside-Westside, Inc., and City Courier, Inc. (the
"Companies"), all of which are under common ownership and common management, as
of May 31, 1997 and the related combined statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of the Companies' at May 31,
1997 and the combined results of their operations and their combined cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE
Chartered Accountants
Toronto, Ontario
August 1, 1997
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TABLE OF CONTENTS
Page
----
Combined Balance Sheet 1
Combined Statement of Operations 2
Combined Statement of Stockholders' Equity 3
Combined Statement of Cash Flows 4
Notes to the Combined Financial Statements 5-10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED BALANCE SHEET
MAY 31, 1997
- -------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 338,480
Accounts receivable (net of allowance for
doubtful accounts of $59,488) 2,155,850
Due from affiliates 83,329
Stockholders' loans receivable 296,495
Other current assets (Note 4) 138,920
-----------
3,013,074
PROPERTY AND EQUIPMENT (Note 5) 94,212
INTANGIBLES, NET (Note 6) 8,604
OTHER ASSETS 29,730
-----------
$ 3,145,620
===========
LIABILITIES
CURRENT
Accounts payable $ 206,481
Accrued payroll 241,650
Accrued workmen's compensation 177,680
Other accrued liabilities 35,932
Accrued death benefit (Note 9) 1,500,000
Income taxes payable 152,365
Line of credit (Note 7) 196,298
Capital lease obligation - current (Note 8) 26,225
Deferred taxes payable 413,823
-----------
2,950,454
CAPITAL LEASE OBLIGATIONS (Note 8) 14,372
-----------
2,964,826
-----------
COMMITMENTS AND CONTINGENCIES (Note 12) --
STOCKHOLDERS' EQUITY
Common stock
New York Document Exchange Corporation - ($1 par value;
authorized 200 shares; issued 150 shares) 150
Eastside-Westside, Inc. - ($5 par value; authorized 200 shares;
issued 111 shares) 555
City Courier, Inc. (No par value; authorized 200 shares;
issued 100 shares) 41,000
Additional paid-in capital 58,651
Treasury stock (500)
Stock subscription receivable (1,000)
Retained earnings 81,938
-----------
180,794
-----------
$ 3,145,620
===========
See notes to combined financial statements.
Page 1 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1997
- -------------------------------------------------------------------------------
REVENUE $ 21,835,219
COST OF SALES 16,657,053
------------
GROSS MARGIN 5,178,166
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,592,612
------------
OPERATING INCOME 585,554
INTEREST EXPENSE 46,388
------------
INCOME BEFORE UNDERNOTED ITEM AND INCOME TAXES 539,166
DEATH BENEFIT EXPENSE (Note 9) 1,500,000
------------
LOSS BEFORE INCOME TAXES (960,834)
INCOME TAXES (Note 10) 113,790
------------
NET LOSS $ (1,074,624)
============
See notes to combined financial statements.
Page 2 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED MAY 31, 1997
- -------------------------------------------------------------------------------
Common Stock
----------------------------------------------------------------------------
New York Document
Exchange Corporation Eastside - Westside, Inc. City Courier, Inc.
-------------------- ------------------------- ----------------------- Additional
Number Number Number Paid-in
of Shares Amount of Shares Amount of Shares Amount Capital
---------- ------ --------- ------ --------- ------ ----------
BALANCE, BEGINNING
OF YEAR 150 $150 111 $555 100 $41,000 $ 108,195
NET LOSS -- -- -- -- -- -- --
TREASURY STOCK
REACQUIRED -- -- -- -- -- -- (49,544)
--- ---- --- ---- --- ------- ---------
BALANCE, ENDING
OF YEAR 150 $150 111 $555 100 $41,000 $ 58,651
=== ==== === ==== === ======= =========
Treasury Stock
---------------------- Stock
Number Subscription Retained
of Shares Amount Receivable Earnings Total
---------- ---------- ------------ -------------- -------------
BALANCE, BEGINNING
OF YEAR -- $-- $(1,000) $ 1,156,562 $ 1,305,462
NET LOSS -- -- -- (1,074,624) (1,074,624)
TREASURY STOCK
REACQUIRED 50 (500) -- -- (50,044)
-- ----- ------- ----------- -----------
BALANCE, ENDING
OF YEAR 50 $(500) $(1,000) $ 81,938 $ 180,794
== ===== ======= =========== ===========
See notes to combined financial statements.
Page 3 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDING MAY 31, 1997
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net loss $(1,074,624)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 52,415
Deferred income taxes (106,553)
Changes in assets and liabilities
Increase in accounts receivable (96,027)
Increase in due from affiliates (61,100)
Increase in other current assets (32,849)
Increase in accounts payable and accrued expenses 1,515,760
Increase in income taxes payable 100,897
-----------
Net cash provided by operating activities 297,919
-----------
FINANCING ACTIVITIES:
Obligations under capital lease (23,583)
Borrowings on credit facility 695,000
Repayments of credit facility (695,000)
Reacquisition of common stock (50,044)
Advances to stockholders (69,725)
-----------
Net cash used in financing activities (143,352)
-----------
INVESTING ACTIVITIES:
Acquisition of property and equipment (27,106)
Increase in other assets 2,178
-----------
Net cash used in investing activities (24,928)
-----------
NET INCREASE IN CASH 129,639
CASH, BEGINNING OF THE YEAR 208,841
-----------
CASH, END OF THE YEAR $ 338,480
===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Income taxes paid $ 68,746
Interest paid $ 46,388
===========
See notes to combined financial statements.
Page 4 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
New York Document Exchange Corporation, Eastside-Westside, Inc., and
City Courier, Inc. (collectively the "Companies") provide facility
management, overnight courier, messenger, and mail box subscription
services in the New York City metropolitan area. The majority of
revenues are earned from messenger and facilities management services.
2. PRINCIPLES OF COMBINATION
The Companies are commonly owned by a single shareholder and operate
under common management, and have been combined due to their
interdependence and form of operations. The combined financial
statements include the accounts of the Companies after all intercompany
balances have been eliminated.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Companies recognize messenger service revenue when deliveries are
completed or services are performed. Facilities management service
revenue is recognized in accordance with the terms of the customer
contract.
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided annually at rates calculated to
write-off the assets over their estimated useful lives as follows:
Furniture and fixtures - 5-7 years - straight-line basis
Computer software - 5 years - straight-line basis
Leaseholds - applicable useful life or lease term
if shorter
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Page 5 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes
New York Document Exchange Corporation and City Courier, Inc., with the
consent of its stockholders, have elected under the Internal Revenue and
the New York State Tax Codes to be S corporations. In lieu of
corporation income taxes, the stockholders of an S corporation are taxed
on their proportionate share of the Company's taxable income. Therefore
no provision or liability for federal income tax has been included in
the financial statements. Provision for New York state income taxes has
been included to the extent the corporate tax rate exceeds the highest
personal income tax rate. The City of New York does not recognize S
corporation status, therefore, a provision has been made for New York
City corporation taxes.
Eastside-Westside, Inc., is a C corporation, as such the financial
statements include a provision for federal, state and local corporation
taxes.
Fair Value of Financial Instruments
The financial statements include the following financial instruments:
cash, trade accounts receivable, due from affiliates, stockholders'
loans receivable, accounts payable, and the bank indebtedness. With the
exception of the bank indebtedness, no separate comparison of fair
values is presented for the aforementioned financial instruments since
their fair values are not significantly different that their balance
sheet carrying values. Based upon prevailing market interest rates, the
fair value of the bank indebtedness approximates its carrying value.
4. OTHER CURRENT ASSETS
Other current assets consist of the following:
Employee and messenger loans and advances $ 45,328
Prepaid expenses 25,599
Prepaid insurance 67,993
--------
$138,920
========
Page 6 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Furniture and equipment $479,307
Computer software 6,719
Leasehold improvements 26,263
--------
512,289
Accumulated depreciation 418,077
--------
$ 94,212
========
Included in property and equipment are assets recorded under capital
leases aggregating $75,454, with related accumulated depreciation of
$21,877.
6. INTANGIBLES
Intangibles, arising from the purchase of assets of another company, are
carried at cost and amortized on a straight-line basis over the life of
the agreements or a period of 5 to 10 years. Intangibles consist of the
following:
Covenant not to compete $239,925
Customer lists 38,388
Customer contracts 50,383
Organizational costs 28,161
--------
356,857
Accumulated amortization 348,253
--------
$ 8,604
========
7. LINE OF CREDIT
The line of credit is due on demand. The balance represents the amount
drawn on a $300,000 revolving line of credit. The outstanding balance
may not exceed 80% of eligible accounts receivable as defined. The loan
is evidenced by ninety-day notes which bear interest at the prime rate
plus 2%. The loan is guaranteed by the stockholders' of the Companies.
Interest on the note payable for the year amounted to $17,887.
The stockholders of the Companies have negotiated a credit facility with
a bank, whereby the stockholders may borrow up to $750,000 under a
demand note payable, bearing interest at the bank's base lending rate
plus 1% per annum. The proceeds of this loan are for the direct use of
the Companies. Borrowings under this agreement have been guaranteed by
the stockholders, with a cross guaranty by the Companies. The bank has
further secured the loan by a lien on the Companies' assets. At May 31,
1997 no outstanding balance existed. Interest expense incurred during
the year related to this loan amounted to $19,601.
Page 7 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
8. LEASES
The Companies are obligated under various non-cancellable capital and
operating leases for computer and office equipment, and storage space.
Rent expense, under the operating leases aggregated $180,521, for the
year ended May 31, 1997. Minimum future rental commitments under the
capital and operating leases at May 31, 1997 are as follows:
Capital
Lease Operating
Obligations Leases
----------- ------
1998 $ 30,249 $148,442
1999 15,241 113,510
2000 -- 108,417
2001 -- 72,117
2002 -- 40,058
-------- --------
TOTAL MINIMUM PAYMENTS 45,490 $482,544
========
LESS: AMOUNT REPRESENTING INTEREST (4,893)
--------
TOTAL PRESENT VALUE OF NET MINIMUM
LEASE PAYMENTS AT MAY 31, 1997 40,597
LESS: CURRENT PORTION (26,225)
--------
LONG-TERM PORTION $ 14,372
========
Interest expense includes $8,900 with respect to these capital lease
obligations.
9. ACCRUED DEATH BENEFIT
On August 15, 1996 Eastside-Westside, Inc. entered into a salary
continuation and death benefit agreement with a stockholder. The
agreement stated that in the event of the stockholder's death, which
occurred in November 1996, the spouse or the estate is entitled to
receive weekly payments for a period of ten years, and other related
benefits. If during the term of the agreement, Eastside-Westside, Inc.
is sold, the spouse or the estate then becomes entitled to receive
immediate payment. This amount is estimated at $1,500,000 and due to the
pending sale of Eastside-Westside, Inc. the amount has been accrued as a
current liability and included in the determination of the net loss for
the year.
Page 8 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
10. PROVISION FOR FEDERAL, STATE AND LOCAL INCOME TAXES
Provisions for federal, state and local income taxes consist of the
following:
Current Deferred Total
------- -------- -----
Federal $ 80,740 $ (40,535) $ 40,205
State 32,090 (9,110) 22,980
Local 42,215 8,390 50,605
--------- --------- --------
$ 155,045 $ (41,255) $113,790
========= ========= ========
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
The sources of the net deferred tax liability relate
to differences between accrual and cash accounting $ 413,823
==========
In addition to the amount disclosed above, there is a potential tax
benefit of approximately $680,000 related to the death benefit expense,
which has been offset by a valuation allowance.
The effective tax rate on income before taxes differs from the United
States statutory rate. The following summary reconciles taxes at the
United States statutory rate with the effective rates:
Taxes on income at U.S. statutory rate 34.0%
Increase (reduction) in taxes resulting from
State and local income taxes (net of federal tax benefit) 9.0
Corporations taxed as electing S corporation status (25.2)
Vacation allowance (32.9)
Other 3.3
-----
Taxes on income at effective rates (11.8)%
=====
Page 9 of 10
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NEW YORK DOCUMENT EXCHANGE CORPORATION,
EASTSIDE-WESTSIDE, INC., AND CITY COURIER, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
- -------------------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS
The Companies have advanced funds to three of their stockholders which
are non-interest bearing and are due on demand. Amounts due to the
Companies from these stockholders totalled $296,495 as of May 31, 1997.
The Companies provide services to a company which is controlled by a
stockholder. $1,888,035 is included in revenue. At May 31, 1997 the
balance due from this Company totalled $19,579.
New York Document Exchange Corporation utilizes the services of
independent contractors that are employed by a company which is
controlled by a stockholder. For the year ended May 31, 1997, $1,888,035
of services are included in Trucking expense. At May 31, 1997 $62,565 is
owed to the Companies.
12. COMMITMENTS AND CONTINGENCIES
New York Document Exchange Corporation and City Courier, Inc. are
currently being audited by the United States Department of Labor, Wage
and Hour Division, to determine if they are in compliance with the Fair
Labor Standards Act. To date, the Department of Labor has not issued an
assessment nor has it quantified the amount of back wages, if any, that
may be due as a result of the examination.
13. LETTER OF INTENT
On May 15, 1997, holders of the Companies' voting common stock signed a
non-binding letter of intent to sell all of the Companies' common stock.
There can be no assurances the sale will be completed.
Page 10 of 10
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Stock Purchase Agreement dated September 30, 1997 by and among
Dynamex Inc. and the Shareholders of City Courier, Inc., New York
Document Exchange Corporation and Eastside/Westside, Inc.