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, 2005

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DYNAMEX INC.

Delaware (State of incorporation)		86-0712225 (I.R.S. Employer Identification No.)
1870 Crown Drive, Dallas, Texas (Address of principal executive offices)		75234 (Zip Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     The number of shares of the registrant’s common stock, $.01 par value, outstanding as of November 28, 2005 was 11,109,797 shares.

 

 

DYNAMEX INC.

INDEX

		Page
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets October 31, 2005 (Unaudited) and July 31, 2005		2
Condensed Statements of Consolidated Operations (Unaudited) Three months ended October 31, 2005 and 2004		3
Condensed Statements of Consolidated Cash Flows (Unaudited) Three months ended October 31, 2005 and 2004		4
Notes to Condensed Consolidated Financial Statements (Unaudited)		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 3. Quantitative and Qualitative Disclosures About Market Risk		14
Item 4. Controls and Procedures		16
PART II
OTHER INFORMATION
Item 1. Legal Proceedings		17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 6. Exhibits and Reports on Form 8-K		17
Signatures		18
Exhibit Index		E-1
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer
Certification of Chief Financial Officer

PART I

Item 1. Financial Statements

DYNAMEX INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

		October 31,				July 31,
		2005				2005
		(Unaudited)
ASSETS
CURRENT
Cash and cash equivalents		$	11,321			$	11,678
Accounts receivable (net of allowance for doubtful accounts of $842 and $767, respectively)			38,544				31,703
Prepaid and other current assets			2,629				3,115
Deferred income taxes			1,942				1,992
Total current assets			54,436				48,488
PROPERTY AND EQUIPMENT — net			5,261				5,597
GOODWILL			46,464				46,088
INTANGIBLES — net			444				463
DEFERRED INCOME TAXES			7,062				7,625
OTHER			1,441				1,214
Total assets		$	115,108			$	109,475
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable trade		$	9,177			$	11,145
Accrued liabilities			16,376				14,426
Total current liabilities			25,553				25,571
LONG-TERM DEBT			9,308				8
Total liabilities			34,861				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; 11,620 and 11,612 outstanding, respectively			116				116
Additional paid-in capital			77,396				77,196
Treasury Stock, 500 shares			(7,792	)			—
Retained earnings			6,949				3,768
Accumulated other comprehensive income			3,578				2,816
Total stockholders’ equity			80,247				83,896
Total liabilities and stockholders’ equity		$	115,108			$	109,475

See accompanying notes to the condensed consolidated financial statements.

DYNAMEX INC.

Condensed Statements of Consolidated Operations

(in thousands except per share data)
(Unaudited)

		Three months ended
		October 31,
		2005				2004
Sales		$	90,569			$	76,560
Cost of sales:
Purchased transportation			59,220				48,437
Other direct costs			6,957				6,414
Cost of sales			66,177				54,851
Gross profit			24,392				21,709
Selling, general and administrative expenses:
Salaries and employee benefits			13,405				11,388
Other			5,617				4,833
Selling, general and administrative expenses			19,022				16,221
Depreciation and amortization			494				376
(Gain) loss on disposal of property and equipment			—				5
Operating income			4,876				5,107
Interest expense			84				157
Other income, net			(107	)			(50	)
Income before income taxes			4,899				5,000
Income taxes			1,718				1,827
Net income		$	3,181			$	3,173
Basic earnings per common share:		$	0.28			$	0.28
Diluted earnings per common share:		$	0.27			$	0.27
Weighted average shares:
Common shares outstanding			11,543				11,445
Adjusted common shares — assuming exercise of stock options			11,792				11,695

See accompanying notes to the condensed consolidated financial statements.

DYNAMEX INC.

Condensed Statements of Consolidated Cash Flows

(in thousands)
(Unaudited)

		Three months ended
		October 31,
		2005				2004
OPERATING ACTIVITIES
Net income		$	3,181			$	3,173
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			494				376
Amortization of deferred bank financing fees			6				8
Provision for losses on accounts receivable			288				175
Stock option compensation			118				80
Deferred income taxes			614				1,092
(Gain) loss on disposal of property and equipment			—				5
Changes in current operating assets and liabilities:
Accounts receivable			(7,129	)			(4,171	)
Prepaids and other current assets			486				(2,285	)
Accounts payable and accrued liabilities			(18	)			(263	)
Net cash used in operating activities			(1,960	)			(1,810	)
INVESTING ACTIVITIES
Purchase of property and equipment			(117	)			(615	)
Purchase of investments			(54	)			(154	)
Net cash used in investing activities			(171	)			(769	)
FINANCING ACTIVITIES
Principal payments on long-term debt			(1	)			(1,700	)
Proceeds from line of credit			9,300				—
Proceeds from stock option exercise			42				268
Tax benefit realized by exercise of stock options			40				126
Purchase of treasury stock			(7,792	)			—
Other assets and deferred financing fees			(150	)			26
Net cash provided by (used in) financing activities			1,439				(1,280	)
EFFECT OF EXCHANGE RATES ON CASH			335				644
NET DECREASE IN CASH AND CASH EQUIVALENTS			(357	)			(3,215	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			11,678				7,927
CASH AND CASH EQUIVALENTS, END OF YEAR		$	11,321			$	4,712
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest		$	110			$	112
Cash paid for taxes		$	1,221			$	855

See accompanying notes to the consolidated financial statements.

DYNAMEX INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Summary of Significant Accounting Polices

Description of Business — Dynamex Inc. (the “Company” or “Dynamex”) provides same-day delivery and logistics services in the United States and Canada. The Company’s primary services are (i) same-day, on-demand delivery, (ii) scheduled and distribution and (iii) fleet outsourcing and facilities management.

Basis of presentation — The consolidated financial statements include the accounts of Dynamex Inc. and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. All dollar amounts in the financial statements and notes to the financial statements except per share data are stated in thousands of dollars unless otherwise indicated. Except as otherwise indicated, references to years mean our fiscal year ending July 31, 2005 or ended July 31 of the year referenced, and comparisons are to the corresponding period of the prior year.

The accompanying interim financial statements are unaudited. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. The results of the interim periods presented are not necessarily indicative of results to be expected for the full fiscal year, and should be read in conjunction with the Company’s audited financial statements for the fiscal year ended July 31, 2005.

The accompanying interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position at October 31, 2005, the results of its operations for the three month periods ended October 31, 2005 and 2004, and cash flows for the three month periods ended October 31, 2005 and 2004. The tax provisions for the three month periods ended October 31, 2005 and 2004 are based upon management’s estimates of the Company’s annualized effective tax rate.

Certain reclassifications have been made to conform prior period data to the current presentation.

2. Comprehensive Income

The three components of comprehensive income are net income, foreign currency translation adjustments and unrealized gains (losses) on investments. Investments consist of payroll withholdings from participants in the Company’s deferred compensation plan that are invested in funds designated by the individual participants. Comprehensive income for the three months ended October 31, 2005 was as follows:

		Three months ended
		October 31,
		2005				2004
Net income		$	3,181			$	3,173
Unrealized gains on investments			24				6
Foreign currency translation gain			738				1,547
Comprehensive income		$	3,943			$	4,726

DYNAMEX INC.

3. Intangibles

At October 31, 2005, intangibles and related amortization expense for the three months ended October 31, 2005 and 2004 consisted of the following:

														Amortization Expense
						Accumulated								Three months ended October 31,
		Asset				Amortization				Net				2005				2004
Deferred bank financing fees		$	126			$	(76	)		$	50				6				8
Customer lists			80				(21	)			59				8				—
Trademarks and other			470				(135	)			335				5				5
Total		$	676			$	(232	)		$	444			$	19			$	13

Amortization of deferred financing fees is classified as interest expense in the condensed statements of consolidated operations. Estimated amortization expense for the succeeding five fiscal years, including deferred bank financing fees, is $75 for 2006, $75 for 2007 and $20 each year thereafter.

4. Computation of Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computation as required by Statement of Financial Accounting Standards No. 128, Earnings Per Share. Common stock equivalents related to stock options are excluded from diluted earnings per share calculation if their effect would be anti-dilutive to earnings per share.

		Three months ended
		October 31,
		2005				2004
Net income		$	3,181			$	3,173
Weighted average common shares outstanding			11,543				11,445
Common share equivalents related to options			249				250
Common shares and common share equivalents			11,792				11,695
Net income per common share:
Basic		$	0.28			$	0.28
Diluted		$	0.27			$	0.27

4. Purchases of Common Stock

On September 21, 2005, the Board of Directors of the Company authorized management to repurchase up to $10 million of Dynamex Inc. common shares from time to time. During the three months ended October 31, 2005, the Company repurchased 500 shares at an average price of $15.57 per share. As of November 16, 2005, the Company had repurchased 571 common shares at an average price of $15.68 per share leaving a balance of approximately $1 million in the current authorization. The repurchased shares are being held as treasury shares. The stock repurchases were temporarily financed by the Company’s revolving credit line, which at October 31, 2005, had an outstanding balance of $9,300, which is expected to be repaid upon receipt of a dividend from the Company’s Canadian subsidiary.

DYNAMEX INC.

5. Subsequent event

On November 10, 2005, the Revolving Credit Facility was amended to increase the facility from $15 million to $20 million.

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

The Company, through its national network of same-day delivery and logistics operations, is the leading provider of such services in the United States and Canada.

A significant portion of the Company’s revenues are generated in Canada. For the three month period ended October 31, 2005, Canadian revenues accounted for approximately 34.5% of total consolidated revenue, compared to 33.1% for the same period in 2004. The exchange rate between the Canadian dollar and the U.S. dollar increased 8.1% in the three month period ended October 31, 2005 compared to the corresponding period in the prior year. Had the exchange rate been the same as in the prior period, Canadian sales for the three month period ended October 31, 2005 would have accounted for 32.7% of total sales.

Sales consist primarily of charges to customers for delivery services and weekly or monthly charges for recurring services, such as facilities management. Sales are recognized when the service is performed. The yield (value per transaction) for a particular service is dependent upon a number of factors including size and weight of articles transported, distance transported, special handling requirements, requested delivery time and local market conditions. Generally, articles of greater weight transported over longer distances and those that require special handling produce higher yields.

Cost of sales consists of costs relating directly to performance of services, including driver and messenger costs, third party delivery charges, warehousing, facilities management, bad debts, insurance, and workers’ compensation costs. Substantially all of the drivers used by the Company provide their own vehicles, and approximately 99% of these owner-operators are independent contractors as opposed to employees of the Company. Drivers and messengers are generally compensated based on a percentage of the delivery charge. Consequently, the Company’s driver and messenger costs are variable in nature. To the extent that the drivers and messengers are employees of the Company, employee benefit costs related to them, such as payroll taxes and insurance, are also included in cost of sales.

Selling, general and administrative expenses (“SG & A”) include salaries, wages and benefit costs incurred at the branch level related to taking orders and dispatching drivers and messengers, as well as administrative costs related to such functions. Also included in SG & A expenses are regional and corporate level marketing and administrative costs and occupancy costs related to branch and corporate locations.

Generally, the Company’s on-demand services provide higher gross profit margins than do scheduled distribution or fleet management services because driver compensation for on-demand services is generally lower as a percentage of sales from such services. However, scheduled distribution and fleet management services generally have fewer administrative requirements related to order taking, dispatching drivers and billing. As a result of these variances, the Company’s margins are dependent in part on the mix of business for a particular period.

During the three months ended October 31, 2005 and 2004, sales to Office Depot, Inc. represented approximately 10.4% and 9.9%, respectively, of the Company’s revenue.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based on the Company’s financial statements, which have been prepared in accordance with accounting policies generally accepted in the United States of America. The Company believes certain critical accounting policies, as set forth in

8

DYNAMEX INC.

the Company’s Form 10-K for the year ended July 31, 2005, affect its more significant judgments and estimates used in the preparation of financial statements. As of, and for the three month period ended October 31, 2005, there have been no material changes or updates to the Company’s critical accounting policies.

Results of Operations

The following table sets forth for the periods indicated, certain items from the Company’s condensed statements of consolidated operations, expressed as a percentage of sales:

		Three months ended
		October 31,
		2005				2004
Sales			100.0	%			100.0	%
Cost of sales:
Purchased transportation			65.4	%			63.3	%
Other direct costs			7.7	%			8.4	%
Cost of sales			73.1	%			71.7	%
Gross profit			26.9	%			28.3	%
Selling, general and administrative expenses:
Salaries and employee benefits			14.8	%			14.9	%
Other			6.2	%			6.3	%
Selling, general and administrative expenses			21.0	%			21.2	%
Depreciation and amortization			0.5	%			0.5	%
(Gain) loss on disposal of property and equipment			0.0	%			0.0	%
Operating income			5.4	%			6.7	%
Interest expense			0.0	%			0.2	%
Other income, net			-0.1	%			-0.1	%
Income before income taxes			5.5	%			6.5	%
Income taxes			1.9	%			2.4	%
Net income			3.6	%			4.1	%

The following tables sets forth for the periods indicated, the Company’s sales accumulated by service type and country:

		Three months ended
		October 31,
		2005								2004
Sales by service type:
On demand		$	34,586				38.2	%		$	30,613				40.0	%
Scheduled/distribution			28,248				31.2	%			21,970				28.7	%
Outsourcing			27,735				30.6	%			23,977				31.3	%
Total sales		$	90,569				100.0	%		$	76,560				100.0	%
Sales by country:
United States		$	59,354				65.5	%		$	51,228				66.9	%
Canada			31,215				34.5	%			25,332				33.1	%
Total sales		$	90,569				100.0	%		$	76,560				100.0	%

DYNAMEX INC.

Three months ended October 31, 2005 compared to three months ended October 31, 2004

Net income for the three months ended October 31, 2005 was $3.2 million ($0.27 per fully diluted share), the same amounts as reported for the three months ended October 31, 2004.

Sales for the three months ended October 31, 2005 were $91 million, an 18.3% increase over $77 million for the same period in 2004 . The current year quarter had one more business day than the prior year. On a sales per day basis, sales increased 16.5% in the current year quarter versus the prior year. The average conversion rate between the Canadian dollar and the U.S. dollar increased 8.1% over the prior year quarter, which had the effect of increasing sales for the three months ended October 31, 2005 by approximately $2.3 million had the conversion rate been the same as the prior year period. Excluding the effect of this increase, sales per day would have been approximately 13.5% higher in the current quarter compared to the prior year. Also during the quarter, the price of fuel spiked dramatically due to hurricanes in the Gulf Coast of the U.S. Management estimates that 3.0% to 4.0% of the year-over-year increase in sales is attributable to fuel surcharges. U.S. sales per day increased approximately 14.1% and Canadian sales per day, in Canadian dollars, increased approximately 12.2% this quarter compared to last year.

Cost of sales for the three months ended October 31, 2005 increased $11.3 million, or 20.6%, to $66.2 million from $54.9 million for the same period in the prior year. Cost of sales, as a percentage of sales was 73.1% for the three months ended October 31, 2005, slightly lower than the 73.2% in the fourth quarter of FY 2005 but higher than the 71.6% for the same period in the prior year. The primary reason for the increase in cost of sales this quarter was the increase in purchased transportation costs as a percentage of sales from 63.3% of sales last year to 65.4% of sales in the current year quarter. The impact of route optimization for certain customers last year, rapidly escalating fuel prices that were not recovered timely due to fuel surcharge mechanisms in certain contracts, “Greenfield” operations in the Southeast U.S. where margins are lower during initial phases and the continuing shift in business mix are the primary reasons for the increase in purchased transportation costs. Management expects purchased transportation costs to decline slightly as a percentage of sales over the next three quarters of FY 2006.

SG & A expenses for the three months ended October 31, 2005 increased $2.8 million, or 17.3%, to $19.0 million from $16.2 million for the same period in the prior year. Approximately $443 of this increase is due to the increase in the exchange rate between the Canadian dollar and the U.S. dollar. Excluding the impact of the exchange rate, over 80% of the increase in SG & A was in salaries and benefits that included approximately $320 in charges for discretionary bonuses and severance costs. The remaining increase in salaries and benefits is primarily attributable to additional personnel required to operate and manage new business added over the last year as well as additional sales and IT personnel. As a percentage of sales, SG & A expenses were 21.0% for the three months ended October 31, 2005, compared to 21.2% in the same period last year. Management expects the percentage to improve further over the remaining quarters of this fiscal year.

For the three months ended October 31, 2005, depreciation and amortization was $494 compared to $376 for the same period in the prior year. The increase is primarily attributable to implementation of its new proprietary DECS software system late in FY 2005. Management does not expect a significant change in the level of depreciation and amortization expense due to limited capital requirements associated with its non-asset based business.

Interest expense was $84, a decrease of $73 or 46.5% for the current quarter. This decrease is primarily attributable to lower outstanding debt and a lower interest rate. Interest expense as a percentage of sales, was 0.1% in the current quarter compared to 0.2% in the prior period. Interest expense is expected to decline throughout the remainder of FY 2006 following the repatriation of a dividend from the Company’s Canadian subsidiary.

The effective income tax rate was 35.1% for the current quarter compared to 36.5% for the prior year, primarily due to a lower effective tax rate on Canadian income

Liquidity and Capital Resources

Net cash used in operating activities was $1.9 million for the three months ended October 31, 2005 compared to $1.8 million for the same period in 2004. The large increase in accounts receivable in the three months ended October 31, 2005, compared to July 31, 2005 is due primarily to an increase in days sales outstanding along with the growth in sales. In the U.S. payments were delayed from Florida based customers due to hurricane Wilma. Payments on those accounts were received in November 2005. For various reasons, payments on Canadian receivables were delayed. Management expects to see considerable improvement by the end of the ensuing quarter.

DYNAMEX INC.

Net cash provided by operations, prior to changes in current operating assets and liabilities, was $4.7 million for the three months ended October, 2005 compared to $4.9 million for the three months ended October 31, 2004.

Capital expenditures for the three months ended October 31, 2005 were approximately $0.1 million compared to $0.6 million in 2004. The 2005 expenditures related primarily to improvements in the Company’s technology infrastructure to support its operations. Management expects capital expenditures to be in the $2 million to $3 million range for the full fiscal year. The Company does not have significant capital expenditure requirements to replace or expand the number of vehicles used in its operations because substantially all of its drivers provide their own vehicles.

On November 10, 2005, the Revolving Credit Facility was amended to increase the facility from $15 million to $20 million. At October 31, 2005, loans of $9.3 million plus letters of credit totaling $3.7 million were outstanding. The average interest rate on the outstanding loan balance was 6.75% at October 31, 2005.

On April 22, 2005, the Company entered into the First Amendment (the “Amendment”) to the March 2, 2004 $30 million Revolving Credit Facility (the “Credit Facility”) (together the “Amended Credit Facility”). The Amendment decreased the facility from $30 million to $15 million, and reduced the applicable margin on LIBOR contracts from a range of 1.25% — 1.75% to 1.00% — 1.50%, based on the ratio of Funded Debt to EBITDA, as defined in the Credit Facility. The Amendment also extended the maturity date to November 30, 2008 from November 30, 2007 and reduced the restrictions on Permitted Acquisitions. The Amended Credit Facility has no scheduled principal payments; however, the Company is required to maintain certain financial ratios related to minimum amounts of stockholders’ equity, fixed charges to cash flow, funded debt to cash flow and funded debt to eligible receivables, as defined. Amounts outstanding under the Amended Credit Facility are secured by all of the Company’s U.S. assets and 100% of the stock of its domestic subsidiaries. The Credit Facility also contains restrictions on incurring additional debt and investments by the Company.

The Company’s EBITDA (earnings before interest, taxes, depreciation and amortization) was approximately $5.5 million (6.0% of sales) for the three months ended October 31, 2005, compared to $5.5 million (7.2% of sales) in the same period last year. The decrease as a percentage of sales is due to the higher revenues offset by higher cost of sales and increased SG & A expenses mentioned above including salaries and wages, stock options expense, software maintenance, and Sarbanes-Oxley consultant costs. Management has included EBITDA in its discussion herein as a measure of liquidity because it believes that it is a widely accepted financial indicator of a company’s ability to service and/or incur indebtedness, maintain current operating levels of fixed assets and acquire additional operations and businesses. EBITDA should not be considered as a substitute for statement of operations or cash flow data from the Company’s financial statements, which have been prepared in accordance with generally accepted accounting principles. In addition, the Company’s definition of EBITDA may not be identical to similarly entitled measures used by other companies. The following table reconciles net income presented in accordance with generally accepted accounting principles (“GAAP”) to EBITDA, which is a non-GAAP financial measure:

		Three months ended
		October 31,
		2005				2004
Net income		$	3,181			$	3,173
Adjustments:
Income tax expense			1,718				1,827
Interest expense			84				157
Depreciation and amortization			494				376
EBITDA		$	5,477			$	5,533

Management expects that its future capital requirements will generally be met from internally generated cash flow. The Company’s access to other sources of capital, such as additional bank borrowings and the issuance of debt securities, is affected by, among other things, general market conditions affecting the availability of such capital.

DYNAMEX INC.

Inflation

The Company does not believe that inflation has had a material effect on the Company’s results of operations nor does it believe it will do so in the foreseeable future. However, there can be no assurance the Company’s business will not be affected by inflation in the future.

Risk Factors

In addition to other information in this report, the following risk factors should be considered carefully in evaluating the Company and its business. This report contains forward-looking statements, which involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the following risk factors and elsewhere in this report.

Certain Tax Matters Related to Drivers

Substantially all of the Company’s drivers own their own vehicles and as of October 31, 2005, approximately 99% of these owner-operators were independent contractors as opposed to employees of the Company. The Company does not pay or withhold any federal, state or provincial employment tax with respect to or on behalf of independent contractors. From time to time, taxing authorities in the U.S. and Canada have sought to assert that independent owner-operators in the transportation industry, including those utilized by the Company, are employees, rather than independent contractors. The Company believes that the independent owner-operators utilized by the Company are not employees under existing interpretations of federal (U.S. and Canadian), state and provincial laws. However, there can be no assurance that federal (U.S. and Canadian), state, provincial authorities or independent contractors will not challenge this position, or that other laws or regulations, including tax laws, or interpretations thereof, will not change. If, as a result of any of the foregoing, the Company were required to pay withholding taxes and pay for and administer added employee benefits to these drivers, the Company’s operating costs would increase. Additionally, if the Company is required to pay back-up withholding with respect to amounts previously paid to such drivers, it may also be required to pay penalties or be subject to other liabilities as a result of incorrect classification of such drivers. Any of the foregoing circumstances could have a material adverse impact on the Company’s financial condition and results of operations, and/or to restate financial information from prior periods.

In addition to the drivers that are independent contractors, certain of the Company’s drivers are employed by the Company and supply and operate their own vehicles during the course of their employment. The Company reimburses these employees for all or a portion of the operating costs of those vehicles. The Company believes that these reimbursement arrangements do not represent additional compensation to those employees. However, there can be no assurance that federal (U.S. and Canadian), state or provincial taxing authorities will not seek to recharacterize some or all of such payments as additional compensation. If such amounts were so recharacterized, the Company would have to pay additional employment related taxes on such amounts, and may also be required to pay penalties, which could have an adverse impact on the Company’s financial condition and results of operations, and/or to restate financial information from prior periods.

Claims Exposure

As of October 31, 2005, the Company utilized the services of approximately 4,800 drivers and messengers. From time to time such persons are involved in accidents or other activities that may give rise to liability claims. The Company currently carries liability insurance with a per occurrence and an aggregate limit of $30 million with a per claim deductible of $250. Owner-operators are required to maintain liability insurance of at least the minimum amounts required by applicable state or provincial law (generally such minimum requirements range from $35 to $75). The Company also has insurance policies covering property and fiduciary trust liability, which coverage includes all drivers and messengers. There can be no assurance that claims against the Company, whether under the liability insurance or the surety bonds, will not exceed the applicable amount of coverage, that the Company’s insurer will be solvent at the time of settlement of an insured claim, or that the Company will be able to obtain insurance at acceptable levels and costs in the future. If the Company were to experience a material increase in the frequency or severity of accidents, liability claims, workers’ compensation claims or unfavorable resolutions of claims, the Company’s business, financial condition and results of operations could be materially adversely affected. In addition, significant increases in insurance costs could reduce the Company’s profitability.

DYNAMEX INC.

Highly Competitive Industry

The market for same-day delivery and logistics services has been and is expected to remain highly competitive. Competition is often intense, particularly for basic delivery services. High fragmentation and low barriers to entry characterize the industry. Other companies in the industry compete with the Company not only for provision of services but also for acquisition candidates and qualified drivers. Some of these companies have longer operating histories and greater financial and other resources than the Company. Additionally, companies that do not currently operate delivery and logistics businesses may enter the industry in the future.

Foreign Exchange

Significant portions of the Company’s operations are conducted in Canada. Exchange rate fluctuations between the U.S. and Canadian dollars result in fluctuations in the amounts relating to the Canadian operations reported in the Company’s consolidated financial statements. The Canadian dollar is the functional currency for the Company’s Canadian operations; therefore, any change in the exchange rate will affect the Company’s reported sales for such period. The Company historically has not entered into hedging transactions with respect to its foreign currency exposure, but may do so in the future. There can be no assurance that fluctuations in foreign currency exchange rates will not have a material adverse effect on the Company’s business, financial condition or results of operations.

Permits and Licensing

The Company’s delivery operations are subject to various federal (U.S. and Canadian), state, provincial and local laws, ordinances and regulations that in many instances require certificates, permits and licenses. Failure by the Company to maintain required certificates, permits or licenses or to comply with applicable laws, ordinances or regulations could result in substantial fines or possible revocation of the Company’s authority to conduct certain of its operations.

Dependence on Key Personnel

The Company’s success is largely dependent on the skills, experience and performance of certain key members of its management. The loss of the services of any of these key employees could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company’s future success and plans for growth also depend on its ability to attract and retain skilled personnel in all areas of its business. There is strong competition for skilled personnel in the same-day delivery and logistics businesses.

Risks Associated with the Same-day Transportation Industry; General Economic Conditions

The Company’s sales and earnings are especially sensitive to events that affect the same-day transportation industry including extreme weather conditions, economic factors affecting the Company’s customers and shortages of or disputes with labor, any of which could result in the Company’s inability to service its clients effectively or the inability of the Company to profitably manage its operations. In addition, downturns in the level of general economic activity and employment in the U.S. or Canada may negatively impact demand for the Company’s services.

Technological Advances

Technological advances in the nature of facsimile and electronic mail have affected the market for on-demand document delivery services. Although the Company has shifted its focus to the distribution of non-faxable items and logistics services, there can be no assurance that these or other technologies will not have a material adverse effect on the Company’s business, financial condition and results of operations in the future.

Dependence on Availability of Qualified Delivery Personnel

The Company is dependent upon its ability to attract and retain qualified delivery personnel who possess the skills and experience necessary to meet the needs of its operations. The Company competes in markets in which unemployment is relatively low and the competition for couriers and other employees is intense. The Company must continually evaluate and upgrade its pool of available delivery and support personnel to keep pace with demands for delivery services. There can be no assurance that qualified delivery personnel will continue to be

DYNAMEX INC.

that the above projected exchange rate decrease will materialize. Fluctuations of exchange rates are beyond the control of the Company’s management.

Interest Rate Exposure

The sensitivity analysis model used by the Company for interest rate exposure compares interest expense fluctuations over a one-year period based on current debt levels and current average interest rates versus current debt levels at current average interest rates with a 10% increase. Based on this model, a 10% increase would result in an increase in interest expense of approximately $63. There can be no assurances that the above projected interest rate increase will materialize. Fluctuations of interest rates are beyond the control of the Company’s management.

DYNAMEX INC.

Item 4. Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934) as of October 31, 2005 (the end of the period covered by this Quarterly Report on Form 10-Q). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

DYNAMEX INC.

PART II

Item 1. Legal Proceedings

The Company is a party to various legal proceedings arising in the ordinary course of its business. Management believes that the ultimate resolution of these proceedings will not, in the aggregate, have a material adverse effect on the financial condition, results of operations, or liquidity of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     (c) Common Stock Repurchases

Total number

Average

Total number of

Approximate dollar value

of shares

price paid

shares purchased as part of

of shares that may yet be

Period

purchased

per share

a publicly announced plan

purchased under the plan

October 10 to 31, 2005

500,400

$15.57

500,400

$2.2 million

All purchases were made in open market transactions pursuant to a plan approved by the Board of Directors of the Company on September 21, 2005 authorizing management to acquire up to $10 million of the Company’s common stock outstanding.

Item 6. Exhibits

          Exhibits:

	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 2002
	32.2		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

DYNAMEX INC.

SIGNATURES

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 thereunto duly authorized.

				DYNAMEX INC.
Dated: December 12, 2005		by		/s/ Richard K. McClelland
				Richard K. McClelland
				President, Chief Executive Officer and
				Chairman of the Board
				(Principal Executive Officer)
Dated: December 12, 2005		by		/s/ Ray E. Schmitz
				Ray E. Schmitz
				Vice President – Chief Financial Officer
				(Principal Financial Officer)
Dated: December 12, 2005		by		/s/ Samuel T. Hicks
				Samuel T. Hicks
				Corporate Controller
				(Principal Accounting Officer)

EXHIBIT INDEX

Exhibits

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 2002

32.2

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