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Exhibit 99.3
FOR IMMEDIATE RELEASE
For further information contact:
Jeff MacDowell
Vice President -
Finance and Corporate Development
(972) 756-8171
DYNAMEX ANNOUNCES RESULTS OF
SPECIAL COMMITTEE REVIEW
RECOMMENDATIONS WILL RESULT IN RESTATEMENT OF PRIOR PERIODS
FOURTH QUARTER AND FISCAL YEAR 1999 PRELIMINARY RESULTS
AMEX HALTS TRADING
September 17, 1999 -- Dallas, Texas -- Dynamex Inc. (Amex: DDN) today announced
the results of the review of the Special Committee of the Board of Directors.
The review will result in the Company restating its previously reported
financial results for fiscal years 1997 and 1998, the first three quarters of
fiscal year 1998, and the first three quarters of fiscal year 1999. The
Company's previously issued 1997 and 1998 annual financial statements and the
independent auditors' reports thereon, as well as the interim financial
statements for 1997, 1998 and 1999, should not be relied upon.
Based on preliminary, unaudited information available for the fourth quarter
ended July 31, 1999 and the prior period adjustments described below, the
Company expects to report a net loss for the fourth quarter and fiscal year
1999 of approximately $90,000, or $0.01 per share (basic and diluted) and $1.6
million or $0.16 per share (basic and diluted), respectively. Excluding
expenses for severance, the Special Committee process, and shareholder
litigation, expected fourth quarter net income would be approximately $350,000,
or $0.03 per share (basic and diluted).
The Company has attempted in this press release to disclose to investors all
available material information related to the restatement of prior period
financial statements. The Company has been advised by the American Stock
Exchange that trading in the Company's stock will remain halted until the
re-audited financial information is filed with the SEC and the Exchange has had
time to review the filings.
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RESTATEMENT
The Company's restatement of its previously reported financial results is
anticipated to reduce previously reported net income by approximately $1.5
million, or $0.22 per share (basic and diluted) for the fiscal year ended July
31, 1997, by approximately $2.3 million, or $0.29 per share (basic and diluted)
for the fiscal year ended July 31, 1998, by approximately $717,000, or $0.07
per share (basic and diluted) for the three months ended October 31, 1998, and
by approximately $68,000, or $0.01 per share (basic and diluted) for the three
months ended January 31, 1999. The restatement of previously reported financial
results is anticipated to increase previously reported net income by
approximately $137,000, or $0.01 per share (basic and diluted) for the three
months ended April 30, 1999.
The Company anticipates the net effect of these adjustments will result in net
income of $2.0 million, or $0.31 per share basic ($0.30 per share diluted) and
$1.1 million, or $0.13 per share (basic and diluted) for fiscal year 1997 and
1998, respectively. The net effect of these adjustments is anticipated to
result in net income of $230,000, or $0.02 per share (basic and diluted) and
$502,000, or $0.05 per share (basic and diluted) for the first and third
quarters of the fiscal year 1999, respectively. The Company anticipates a loss
of $2.2 million, or $0.22 per share (basic and diluted) for the second quarter
of fiscal year 1999.
The restated amounts described herein, as well as the current fiscal year, are
subject to audit by Deloitte & Touche LLP. This audit may, and very likely
will, result in further adjustments and also change the period in which certain
of the adjustments are recorded. The audit will commence immediately.
Management intends to work diligently to file its fiscal year 1999 Form 10-K on
a timely basis and to file amended reports for prior periods concurrently, but
there can be no assurance that these filings will be made on a timely basis.
The adjustments fall primarily into four categories:
1) Acquisition Accounting: The cumulative net adjustments to the previously
reported financial statements relate primarily to the application of purchase
accounting to the Company's acquisitions. More specifically, the purchase price
of acquired businesses was not properly allocated to covenants not to compete.
Instead, amounts allocated to covenants not to compete were amortized over
periods in excess of the non-compete periods specified in the applicable
contracts. Salaries and wages and other operating expenses, which should have
been expensed in a current period, also were capitalized as part of the
purchase consideration for certain companies acquired by the Company. In
addition, adjustments to the allocation of purchase price of acquired companies
were made outside the allowable timeframe under generally accepted accounting
principles.
2) Deferral of Expenses: Certain operating expenses, abandoned asset balances
and office closure expenses were deferred rather than being properly recorded
as a current operating expense.
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3) Unsupported Entries: Certain entries, primarily adjustments to the Company's
reserves for workers compensation and bad debts, were made during the second
and third quarters of fiscal year 1998 without proper support or documentation.
The bad debt adjustment was corrected in the fourth quarter of fiscal year
1998. A portion of the workers compensation adjustment was previously recorded
in conjunction with the Company's filing of its Form 10-Q for the second
quarter of fiscal year 1999.
4) Revenue Recognition: With respect to two transactions in fiscal year 1998,
revenue was recognized prior to services being rendered or before all
contingencies were resolved. These adjustments were previously recorded in
conjunction with the Company's filing of its Form 10-Q for the period ending
January 31, 1999.
These restatements are the result of a review by a Special Committee of the
Board of Directors. The Company's June 15, 1999 press release announced that a
Special Committee of outside directors had been formed to review potentially
unsupportable accounting entries. The Special Committee, assisted by the law
firm of Weil, Gotshal & Manges LLP, and accountants from Deloitte & Touche LLP,
as well as the Company's current financial management, performed an extensive
inquiry with respect to the Company's previously issued financial statements.
The entries requiring adjustment and leading to the restatement of financial
statements for the fiscal years 1997 and 1998 as well as first quarter 1999
were made prior to the employment of the Company's current financial officers.
The review resulted in the Special Committee recommending to the Board of
Directors the above-described adjustments, and the subsequent approval of the
restatement by the Board of Directors.
The Board of Directors also accepted all of the Special Committee's
recommendations including those to continue to improve the Company's accounting
systems and financial reporting process. Among other things, Ray Schmitz, the
Company's current Controller, will be given the additional title of Chief
Accounting Officer and be made responsible for overall financial controls and
reporting. Mr. Schmitz joined Dynamex on January 25, 1999.
In addition, the Company installed a new integrated accounting and financial
management system in the United States in the fourth quarter of fiscal year
1999 and is scheduled to complete installation of the same system in Canada on
October 31, 1999. All accounting functions now have been centralized in Dallas
and Toronto. A new centralized and integrated human resources and payroll
system is being installed and is scheduled for completion early in the next
calendar year. The Company also is completing the conversion of its front-end
order entry and dispatch system to one common platform. The Company expects the
front-end system conversions to be completed by early in the next calendar
year.
FOURTH QUARTER OF FISCAL YEAR 1999 PRELIMINARY RESULTS
The Company also announced, based on preliminary, unaudited information
available for the fourth quarter ended July 31, 1999 and the effect of prior
period adjustments described above, that it expects to report a net loss of
approximately $90,000, or $0.01 per share (basic and diluted) based on revenues
of approximately $60.8 million. Gross profit for the quarter is expected to be
approximately $19.5 million or 32.1% of revenues. Selling, general and
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administrative expenses are expected to be approximately $15.9 million or 26.1%
of revenues including approximately $410,000 of expenses associated with the
Special Committee and shareholder litigation. Operating income for the quarter
is expected to be approximately $1.1 million or 1.7% of revenues. EBITDA
(Earnings before interest, taxes, depreciation and amortization) for the
quarter before severance and expenses associated with the Special Committee
process and shareholder litigation is expected to be approximately $4.1 million
or 6.7% of revenues.
Same branch revenue growth (percentage increase in revenues for operations
owned for more than one year) for the fourth quarter 1999 versus fourth quarter
1998 is expected to be approximately 2.8%. Same branch revenue growth at the
Company's Canadian operations during the fourth quarter is expected to be
approximately 6.5% in Canadian dollars and approximately 5.9% in US dollars.
Same branch revenue growth in the Company's US operations during the fourth
quarter is expected to be approximately 1.4%. Revenue growth was adversely
affected by the termination of service contracts with unacceptable
profitability margins in New England (revenues of approximately $2.5 million
annually) and by reduced revenues associated with a systems conversion and
competition in Dallas (revenues of approximately $2.0 million annually).
Excluding the operations in New England and Dallas, same branch revenue growth
is expected to be approximately 4.7% overall and 4.2% in the US operations.
In addition to the reduced profitability resulting from severance and expenses
associated with the Special Committee process and shareholder litigation as
well as the revenue declines in New England and Dallas described above, the
quarter was impacted negatively due to losses incurred with two regional
service agreements. A solution was implemented in September that involved
re-pricing and route adjustments. Start up costs related to one of the
contracts also negatively impacted earnings.
Accounts receivable at July 31, 1999 is expected to be approximately $26.8
million. Days sales outstanding (on a 90-day basis) are expected to be
approximately 39.7 days for the quarter ended July 31, 1999 as compared with
39.9 days at April 30, 1999.
Based upon the cumulative effect of the restatements described above and the
preliminary, unaudited information for the fourth quarter of fiscal year 1999,
the Company may be in violation of certain financial covenants under its bank
credit agreement. The Company is working with its banks to achieve any
necessary waivers or amendments, although there is no assurance that such
waivers or amendments will be achieved. As of July 31, 1999, borrowings
outstanding and letters of credit under the revolving credit agreement were
$46.4 million and $861,000, respectively. Total debt outstanding as of July 31,
1999 was $47.1 million.
Richard K. McClelland, Chairman and CEO of Dynamex, said, "While the effects of
our accounting history continue to create challenges for Dynamex, the
underlying business is profitable and growing. We are continuing to rapidly
centralize accounting and payroll using new systems that have been deployed
during the past few months. These systems also are enabling us to rapidly
deploy our e-commerce strategy through dxNow.com(TM). I continue to have great
confidence in our people and our strategy."
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Mr. McClelland continued, "Importantly, the issues identified in this press
release will not impact our ability to continue to meet or exceed the needs of
our clients."
Dynamex is a leading provider of same-day delivery and logistics services in
the United States and Canada.
This release 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, those that
may arise during the completion of the Company's fiscal year 1999 audit or the
preparation of restated financial statements for fiscal year 1997, fiscal year
1998, and each quarter commencing with the first quarter of 1997 (including the
possibility that additional entries may be identified that impact the Company's
financial results for the current and/or prior reporting periods or that there
may be a change in the period in which certain of the adjustments are
recorded), 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. In light of such risks and uncertainties, the Company's
actual results could differ materially from such forward-looking statements.
Prior to the filing of periodic reports relating to the restatement, 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.
- Tables follow -
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DYNAMEX INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(In thousands, except per share data)
(Unaudited)
================================================================================
Fiscal Year ended Quarter ended
------------------------------------ --------------------------------------------------
7/31/1997 7/31/1998 7/31/1999 10/31/1998 1/31/1999 4/30/1999 7/31/1999
--------- --------- --------- ---------- --------- --------- ---------
(Restated) (Restated) (Preliminary) (Restated) (Restated) (Restated) (Preliminary)
Sales $132,587 $208,019 $ 239,658 $59,443 $ 58,124 $ 61,283 $ 60,808
Cost of sales 88,008 140,185 162,396 39,984 39,746 41,376 41,290
-------- -------- --------- ------- -------- -------- --------
Gross profit 44,579 67,834 77,262 19,459 18,378 19,907 19,518
SG&A expenses 34,269 53,745 63,857 15,787 16,744 15,458 15,868
Unusual items -- -- 2,066 -- 1,733 53 280
Gain on sale of assets -- -- (185) -- -- (185) --
Depreciation and amortization 4,439 8,196 9,184 2,286 2,279 2,302 2,317
-------- -------- --------- ------- -------- -------- --------
Operating income 5,871 5,893 2,340 1,386 (2,378) 2,279 1,053
Interest expense 1,600 4,228 4,607 943 1,332 1,179 1,153
-------- -------- --------- ------- -------- -------- --------
Income (loss) before taxes 4,271 1,665 (2,267) 443 (3,710) 1,100 (100)
Income tax expense (benefit) 1,899 614 (676) 213 (1,477) 598 (10)
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Income before extraordinary item 2,372 1,051 (1,591) 230 (2,233) 502 (90)
Extraordinary loss of early
retirement of debt 335 -- -- -- -- -- --
Net income (loss) $ 2,037 $ 1,051 $ (1,591) $ 230 $ (2,233) $ 502 $ (90)
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Earnings (loss) per common
share - basic: $ 0.31 $ 0.13 $ (0.16) $ 0.02 $ (0.22) $ 0.05 $ (0.01)
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Earnings (loss) per common
share - assuming dilution: $ 0.30 $ 0.13 $ (0.16) $ 0.02 $ (0.22) $ 0.05 $ (0.01)
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Weighted average shares:
Common shares outstanding 6,670 7,937 10,095 10,069 10,069 10,085 10,158
Adjusted common shares -
assuming exercise of stock options 6,839 8,136 10,095 10,127 10,069 10,222 10,158
====================================================================================================================================
Adjusted EBITDA (Earnings before
interest, taxes, depreciation,
amortization, unusual items,
and gain on sale) $ 10,310 $ 14,089 $ 13,405 $ 3,672 $ 1,634 $ 4,449 $ 3,650
Gross profit as % of sales 33.6% 32.6% 32.2% 32.7% 31.6% 32.5% 32.1%
SG&A as % of sales 25.8% 25.8% 26.6% 26.6% 28.8% 25.2% 26.1%
Adjusted EBITDA as % of sales 7.8% 6.8% 5.6% 6.2% 2.8% 7.3% 6.0%
Operating income as % of sales 4.4% 2.8% 1.0% 2.3% -4.1% 3.7% 1.7%
Net income as % of sales 1.5% 0.5% -0.7% 0.4% -3.8% 0.8% -0.1%
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DYNAMEX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
(Unaudited)
================================================================================
Fiscal Year ended
---------------------------------------------
7/31/1997 7/31/1998 7/31/1999
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(Restated) (Restated) (Preliminary)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,326 $ 1,361 $ 3,043
Accounts receivable (net) 20,750 26,636 26,847
Prepaid and other current assets 3,905 7,910 7,339
Deferred income taxes 597 888 1,361
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TOTAL CURRENT ASSETS 26,578 36,795 38,590
Property and equipment - net 5,601 9,747 10,034
Intangibles - net 52,481 77,528 87,638
Deferred income taxes 252 670 --
Other assets 1,832 687 724
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TOTAL ASSETS $ 86,744 $ 125,427 $ 136,986
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable trade $ 1,759 $ 2,813 $ 3,912
Accrued liabilities 9,258 14,239 15,762
Income taxes payable 2,968 -- --
Current portion of long-term debt 740 777 418
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TOTAL CURRENT LIABILITIES 14,725 17,829 20,092
Deferred income taxes 215
Long-term debt 32,388 36,287 46,692
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TOTAL LIABILITIES 47,113 54,116 66,999
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock -- --
Common stock 73 101 102
Receivable from stockholder (204) (102)
Additional paid-in capital 40,967 72,307 72,759
Retained earnings (1,225) (174) (1,765)
Unrealized foreign currency translation adjustment (184) (719) (1,007)
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TOTAL STOCKHOLDERS' EQUITY 39,631 71,311 69,987
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 86,744 $ 125,427 $ 136,986
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