UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

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

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.)
5429 LBJ Freeway, Suite 1000, Dallas, Texas		75240
(Address of principal executive offices)		(Zip Code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Accelerated filer þ      Non-accelerated filer o

     The aggregate market value of the voting stock held by non-affiliates of the registrant on January 31, 2007 was approximately $258,956,102.

     The number of shares of the registrant’s common stock, $.01 par value, outstanding as of October 10, 2007 was 10,203,423 shares.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the information required in Part III of the Form 10-K have been incorporated by reference to the Registrant’s definitive Proxy Statement on Schedule 14-A to be filed with the Commission.

 

 

TABLE OF CONTENTS

				Page
PART I
ITEM 1.		BUSINESS			2
ITEM 1A.		RISK FACTORS			7
ITEM 1B.		UNRESOLVED STAFF COMMENTS			10
ITEM 2.		PROPERTIES			10
ITEM 3.		LEGAL PROCEEDINGS			12
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			12
PART II
ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			13
ITEM 6.		SELECTED FINANCIAL DATA			16
ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION			17
ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK			26
ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			27
ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			27
ITEM 9A.		CONTROLS AND PROCEDURES			27
ITEM 9B.		OTHER INFORMATION			27
PART III
ITEM 10.		DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT			28
ITEM 11.		EXECUTIVE COMPENSATION			28
ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			28
ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			28
ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES			28
PART IV
ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES			29
Offer of Employment Agreement to Maurice Levy
Sixth Amendment to the $30,000,000 Revolving Credit Facility
Consent of BDO Seidman, LLP
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer
Certification of Chief Financial Officer

PART I

     Statements and information presented within this Annual Report on Form 10-K for Dynamex Inc. (the “Company” and “Dynamex”) contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by the use of predictive, future tense or forward-looking terminology, such as “believes”, “anticipates”, “expects”, “estimates”, “may”, “will” or similar terms. Forward-looking statements also include projections of financial performance, statements regarding management’s plans and objectives and statements concerning any assumptions relating to the foregoing. Certain important factors which may cause actual results to vary materially from these forward-looking statements accompany such statements and appear elsewhere in this report, including without limitation, the factors disclosed under “Risk Factors.” All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified by these factors.

ITEM 1. BUSINESS

General

     Dynamex is a leading provider of same-day delivery and logistics services in the United States and Canada. The Company was organized under the laws of Delaware in 1992 as Parcelway Systems Holding Corp. and changed its name to Dynamex Inc. in 1995. Through its network of business centers, the Company provides same-day, on-demand, door-to-door delivery services utilizing its ground couriers. For many of its inter-city deliveries, the Company uses third party air or motor carriers in conjunction with its ground couriers to provide same-day service. In addition to on-demand delivery services, the Company offers local and regional distribution services, which encompass recurring, often daily, point-to-point deliveries or multiple destination deliveries that often require intermediate handling. The Company also offers outsourcing services as well as fleet and facilities management services. These services include designing and managing systems to maximize efficiencies in transporting, sorting and delivering customers’ products on a local and multi-city basis. With its fleet management service, the Company manages and may provide a fleet of dedicated vehicles at single or multiple customer sites. The Company’s on-demand delivery capabilities are available to supplement scheduled distribution arrangements or dedicated fleets as needed. Facilities management services include the Company’s operation and management of customers’ mailrooms. In Fiscal Year (FY) 2006, the Company began to license its technology and certain business processes primarily to small, privately held same-day transportation companies in order to increase market share, penetrate new markets and increase operational efficiencies.

Industry Overview

     The delivery and logistics industry is large, highly fragmented and growing. The industry is composed primarily of same-day, next-day and second-day service providers. The Company primarily services the same-day, intra-city delivery market. The same-day delivery and logistics industry in the United States and Canada consists of several thousand small, independent businesses serving local markets and a small number of multi-location regional or national operators. Relative to smaller operators in the industry, the Company believes that national operators such as the Company benefit from several competitive advantages including: national brand identity, professional management, the ability to service accounts on a multi-market basis and centralized administrative and management information systems.

     Management believes that the same-day delivery segment of the transportation industry is benefiting from several trends. For example, the trend toward outsourcing has resulted in numerous shippers turning to third party providers for a range of services including same-day delivery and management of in-house distribution. Many businesses that outsource their distribution requirements prefer to purchase such services from one source that can service multiple cities, thereby decreasing the number of vendors from which they purchase services. Additionally, the growth of “just-in-time” inventory practices designed to reduce inventory-carrying costs has increased the demand for the same-day delivery of such inventory. Technological developments such as e-mail and facsimile have increased the pace of business and other transactions, thereby increasing demand for the same-day delivery of a wide array of items, ranging from voluminous documents to critical manufacturing parts and medical devices. Consequently, there has been increased demand for the same-day transportation of items that are not suitable for fax

or electronic transmission, but for which there is an immediate need.

Business Strategy

     The Company intends to expand its operations in the U.S. and Canada to capitalize on the demand of local, regional and national businesses for innovative same-day transportation solutions. The key elements of the Company’s business strategy are as follows:

     Focus on Primary Services. The Company operates in one reportable business segment, same day delivery services, with three primary service offerings: (i) same-day, point-to-point on-demand delivery services, (ii) same-day local and regional distribution services and (iii) outsourcing services such as fleet management and facilities management. The Company focuses its same-day on-demand delivery business on transporting non-faxable, time sensitive items throughout metropolitan areas. By delivering items of greater weight over longer distances and providing value added on-demand services such as non-technical swap-out of failed equipment, the Company expects to raise the yield per delivery relative to the yield generated by delivering documents within a central business district. Additionally, these value added services are generally less vulnerable to price competition than traditional on-demand delivery services. Also, the Company intends to capitalize on the market trend towards outsourcing transportation requirements by concentrating its logistics services in same-day local and regional distribution and fleet management. The delivery transactions in a fleet management and distribution program are recurring in nature, thus creating the potential for long-term customer relationships.

     Target National, Regional and Local Accounts. The Company’s national account managers focus on acquiring and maintaining national, regional and local accounts. The Company anticipates that its (i) existing multi-city network of locations combined with its network of franchisees and service partners, (ii) ability to offer value added services such as fleet management to complement its basic same-day delivery services and (iii) experienced, operations oriented management team and sales force, will create further opportunities with many of its existing customers and attract new national, regional and local accounts.

     Create Strategic Alliances. By forming alliances with strategic partners that offer services that complement those of the Company, the Company and its partner can jointly market their services, thereby accessing one another’s customer base and providing such customers with a broader range of value added services. For example, the Company has formed an alliance with Purolator whereby on an exclusive basis the Company and Purolator provide one another with certain delivery services and market one another’s delivery services to their respective customers. Purolator reports that it is the largest overnight courier in Canada. See “— Sales and Marketing.”

     License Technology and Business Practices. Over the last ten years, the Company has developed industry leading proprietary software and has documented its business processes and practices. In fiscal year 2006, the Company began to franchise its technology and certain business processes to smaller, privately-owned industry participants in order to increase and solidify market share in existing markets, expand to and penetrate new markets, and increase operational efficiencies and decrease operational costs. At the end of our 2007 fiscal year, we had signed agreements with franchisees that cover 35 markets in various locations in the U.S. and Canada.

Services

     The Company capitalizes on its routing, dispatch and vehicle and personnel management expertise developed in the ground courier business to provide its customers with a broad range of value added, same-day distribution services. By creating innovative applications of its core services, the Company intends to expand the market for its distribution services and increase the yield per service provided.

     Same-Day On-Demand Delivery. The Company provides same-day, intra-city on-demand delivery services whereby Company messengers or drivers respond to a customer’s request for immediate pick-up and delivery. The Company also provides same-day inter-city delivery services by utilizing third-party air or motor carriers in conjunction with the Company’s ground couriers. The Company focuses on the delivery of non-faxable, time sensitive items throughout major metropolitan areas rather than traditional downtown document delivery. For the fiscal years ended July 31, 2007, 2006 and 2005, approximately 33%, 38%, and 39% respectively, of the Company’s sales were generated from same-day on-demand delivery services.

     Same-Day Local and Regional Distribution. The Company provides same-day scheduled local and regional

distribution services that include regularly scheduled deliveries made on a point-to-point basis and deliveries that may require intermediate handling, routing or sorting of items to be delivered to multiple locations. The Company’s on-demand delivery capabilities are available to supplement scheduled services as needed. A bulk shipment may be received at the Company’s warehouse where it is sub-divided into smaller bundles and sorted for delivery to specified locations. Same-day scheduled distribution services are provided on both a local and multi-city basis. For example, in Ontario Canada, the Company services the scheduled distribution requirements of a consortium of commercial banks. These banks require regular pick-up of non-negotiable materials that are then delivered by the Company on an intra- and inter-city basis. For the fiscal years ended July 31, 2007, 2006 and 2005, approximately 35%, 30%, and 30%, respectively, of the Company’s sales were generated from same-day scheduled distribution services.

     Outsourcing Services. The Company’s outsourcing services include fleet management and mailroom or other facilities management, such as maintenance of call centers for inventory tracking and delivery. With its outsourcing services, the Company is able to apply its same-day delivery capability and logistics experience to design and manage efficient delivery systems for its customers. The outsourcing service offerings can expand or contract depending on the customer’s needs. Management believes that the outsourcing trend has resulted in many customers increasing their use of third-party providers for a variety of delivery services.

     The largest component of the Company’s outsourcing services is fleet management. With its fleet management service, the Company provides transportation services primarily for customers that previously managed such operations in-house. This service is generally provided with a fleet of dedicated vehicles that can range from passenger cars to tractor-trailers (or any combination) and may display the customer’s logo and colors. In addition, the Company’s on-demand delivery capability may supplement the dedicated fleet as necessary, thereby allowing a smaller dedicated fleet to be maintained than would otherwise be required. The Company’s fleet management services include designing and managing systems to maximize efficiencies in transporting, sorting and delivering customers’ products on a local and multi-city basis. Because the Company does not own delivery vehicles, but instead contracts with drivers who do, the Company’s fleet management solutions are not limited by the Company’s need to utilize its own fleet.

     By outsourcing their fleet management, the Company’s customers (i) utilize the Company’s distribution and route optimization experience to deliver their products more efficiently, (ii) gain the flexibility to expand or contract fleet size as necessary, and (iii) reduce the costs and administrative burden associated with owning or leasing vehicles and hiring and managing transportation employees. For the fiscal years ended July 31, 2007, 2006 and 2005, approximately 32%, 32% and 31%, respectively, of the Company’s sales were generated from fleet management and other outsourcing services.

     While the volume of individual services provided varies significantly between locations, each of the Company’s business centers generally offers the same core services. Factors that impact business mix include customer base, competition, geographic characteristics, available labor and general economic environment. The Company can bundle its various delivery and logistics services to create customized distribution solutions and, by doing so, seeks to become the single source for its customers’ distribution needs.

Operations

     The Company’s operations are divided into regions, six U.S. and four Canadian, with each of the Company’s approximately 48 business centers assigned to the appropriate region. Business center operations are locally managed with regional and national oversight and support provided as necessary. A business center manager is assigned to each business center and is accountable for all aspects of such business center operations including its profitability. Each business center manager reports to a regional manager with similar responsibilities for all business centers within his region. Certain administrative and marketing functions may be centralized for multiple business centers in a given city or region. Dynamex believes that the strong operational and sales and marketing background of its senior management is important to building brand identity throughout the United States and Canada while simultaneously overseeing and encouraging individual managers to be successful in their local markets.

     Same-Day On-Demand Delivery. Most business centers have operations staffed by dispatchers, as well as customer service representatives and operations personnel. Incoming calls are received by trained customer service representatives who utilize computer systems to provide the customer with a job-specific price quote and to transmit

the order to the appropriate dispatch location. All of the Company’s clients have access to a web-based electronic data interface to enter dispatch requirements, make inquiries and receive billing information. A dispatcher coordinates shipments for delivery within a specific time frame. Shipments are routed according to the type and weight of the shipment, the geographic distance between the origin and destination, and the time allotted for the delivery. Coordination and deployment of delivery personnel for on-demand deliveries is accomplished either through communications systems linked to the Company’s computers, through pagers or by two-way communication devices.

     Same-Day Local and Regional Distribution. A dispatcher manages the delivery flow by coordinating the scheduled deliveries with available drivers. In many cases, certain drivers will handle a designated group of scheduled routes on a recurring basis. Any intermediate handling required for a scheduled distribution is conducted at the Company’s warehouse or the customer’s facility.

     Outsourcing Services. The largest component of the Company’s outsourcing services is its fleet management. Fleet management services are coordinated by the Company’s logistics specialists who have experience in designing, implementing and managing integrated networks for transportation services. Based upon the specialist’s analysis of a customer’s fleet and distribution requirements, the Company develops a plan to optimize fleet configuration and route design. The Company provides the vehicles and drivers necessary to implement the fleet management plan. Such vehicles and drivers are generally dedicated to a particular customer and may display the customer’s name and logo on its vehicles. The Company can supplement these dedicated vehicles and drivers with its on-demand capability as necessary.

     Prices for the Company’s services are determined at the local level based on the distance, weight and time-sensitivity of a particular delivery. The Company generally enters into customer contracts for local and regional distribution, and fleet and facilities management, which are generally terminable by such customer upon notice generally ranging from 30 to 90 days. The Company does not typically enter into contracts with its customers for on-demand delivery services.

     Substantially all of the Dynamex drivers are independent contractor owner-operators who provide their own vehicles, pay all expenses of operating their vehicles and receive a percentage of the delivery charge as compensation. Management believes that this creates a higher degree of responsiveness on the part of its drivers as well as significantly lowering the capital required to operate the business and reduces the Company’s fixed costs.

Sales and Marketing

     The Company markets its services through a sales force comprised of national and local sales representatives and telemarketers. The total sales force including management, strategic relationships, business development and administrative support totaled 105 persons at July 31, 2007. The Company’s national sales force, comprised of 23 persons, focus on regional and national customers who can utilize its services on a multi-market basis. Sixty-two local employee sales representatives target business opportunities in their local market, and seven specialized sales representatives contact existing customers to assess customer satisfaction and requirements. The Company’s sales force will seek to generate additional business from existing local accounts, which often include large companies with multiple locations. The expansion of the Company’s national sales program and continuing investment in technology to support its expanding operations have been undertaken at a time when large companies are increasing their demand for delivery providers who offer a range of delivery services at multiple locations.

     The Company’s local sales representatives make regular calls on existing and potential customers to identify such customers’ delivery and logistics needs. The Company’s national product and industry specialists augment the local marketing efforts and seek new applications of the Company’s primary services in an effort to expand the demand for such services. Customer service representatives on the local and national levels regularly communicate with customers to monitor the quality of services and to quickly respond to customer concerns. The Company maintains a database of its customers’ service utilization patterns and satisfaction level. This database is used to analyze opportunities and conduct performance audits.

     Fostering strategic alliances with customers who offer services that complement those of the Company is an important component of the Company’s marketing strategy. For example, under an agreement with Purolator, the Company serves as Purolator’s exclusive provider of same-day courier services, which services are then marketed by Purolator to its customers. The Company also provides Purolator with local and inter-city, same-day ground courier

service for misdirected Purolator shipments. Purolator reports that it is the largest overnight courier in Canada.

Customers

     The Company’s target customer is a business that distributes time-sensitive, non-faxable items to multiple locations. The primary industries served by the Company include financial services, electronics, pharmaceuticals, retail, office products, medical laboratories and hospitals, auto parts, legal services and Canadian governmental agencies. During the years ended July 31, 2007, 2006 and 2005, sales to Office Depot, Inc. represented approximately 14.2%, 10.6% and 9.8%, respectively, of the Company’s revenue. Sales to the Company’s five largest customers, including Office Depot, represented approximately 28%, 25% and 24% of the Company’s consolidated sales for the years ended July 31, 2007, 2006 and 2005, respectively.

     A significant number of the Company’s customers are located in Canada. For the fiscal years ended July 31, 2007, 2006 and 2005, approximately 38%, 36% and 33% of the Company’s sales, respectively, were generated in Canada. See Note 14 of Notes to the Consolidated Financial Statements for additional information concerning the Company’s foreign operations.

Competition

     The market for the Company’s same-day delivery and logistics services has been and is expected to remain highly competitive. The Company believes that the principal competitive factors in the markets in which it competes are reliability, quality, breadth of service and price.

     Most of the Company’s competitors in the same-day intra-city delivery market are privately held companies that operate in only one location, with no one competitor dominating the market. Price competition for basic delivery services is particularly intense.

     The market for the Company’s logistics services is also highly competitive, and can be expected to remain competitive as additional companies seek to capitalize on the growth in the industry. The Company’s principal competitors for such services are other delivery companies and in-house transportation departments. The Company generally competes on the basis of its ability to provide customized service regionally and nationally, which it believes is an important advantage in this highly fragmented industry, and on the basis of price.

     The Company’s principal competitors for drivers are other delivery companies within each market area. Management believes that its method of driver compensation, which is based on a percentage of the delivery charge, the large volume of available work and the use of proprietary technology, are factors that are attractive to drivers and help the Company to recruit and retain drivers.

Regulation

     The Company’s business and operations are subject to various federal (U.S. and Canadian), state, provincial and local regulations and, in many instances, require permits and licenses from state authorities. The Company holds nationwide general commodities authority from the Federal Highway Administration of the U.S. Department of Transportation to transport certain property as a motor carrier on an inter-state basis within the contiguous 48 states. Where required, the Company holds statewide general commodities authority. The Company holds permanent extra-provincial (and where required, intra-provincial) operating authority in all Canadian provinces where the Company does business.

     In connection with the operation of certain motor vehicles, the handling of hazardous materials in its courier operations and other safety matters, including insurance requirements, the Company is subject to regulation by the U. S. Department of Transportation, the states and by the appropriate Canadian federal and provincial regulations. The Company is also subject to regulation by the Occupational Safety and Health Administration, provincial occupational health and safety legislation and federal and provincial employment laws respecting such matters as hours of work and driver logbooks. To the extent the Company holds licenses to operate two-way radios to communicate with its fleet, the Federal Communications Commission regulates the Company. The Company believes that it is in substantial compliance with all of these regulations. The failure of the Company to comply with the applicable regulations could result in substantial fines or possible revocations of one or more of the Company’s operating permits.

Safety

     From time to time, the independent contractor owner-operators performing services for the Company are involved in accidents. The Company carries liability insurance with a per claim and an aggregate limit of $30 million. Independent contractor owner-operators are required to maintain liability insurance of at least the minimum amounts required by applicable state and provincial law (generally such minimum requirements range from $20,000 to $40,000). The Company also has insurance policies covering property and fiduciary trust liability, which coverage includes all drivers. The Company reviews prospective drivers to ensure that they have acceptable driving records and conducts criminal background investigations. In addition, where required by applicable law, contractually or by Company policy, the Company requires prospective drivers to take a physical examination and to pass a drug test. Drivers are provided information on any additional safety requirements as dictated by customer specifications.

Intellectual Property

     The Company has registered “DYNAMEX” and “DYNAMEX EXPRESS” as federal trademarks in the Canadian Intellectual Office and has filed applications in the U.S. Patents and Trademark’s office for federal trademark registration of such names. No assurance can be given that any such registration will be granted in the U.S., or that if granted, such registration will be effective to prevent others from using the trademark concurrently or to allow the Company to use the trademark in certain locations.

Employees

     At July 31, 2007, the Company had approximately 2,000 employees, of whom approximately 1,000 were employed in various management, supervisory, sales, administrative, and other corporate positions and approximately 1,000 were employed as messengers and mailroom workers. Additionally at July 31, 2007, the Company had contracts with approximately 4,500 independent contractor owner-operator drivers. Management believes that the Company’s relationship with such employees and independent contractor owner-operators is good. See “Risk Factors — Certain Tax Matters Related to Drivers.”

     Of the approximately 4,500 independent contractor owner-operator drivers used by the Company as of July 31, 2007, approximately 1,600 are located in Canada and approximately 2,900 are located in the U.S. Although the drivers and messengers located in Canada are generally independent contractors, approximately 70% are represented by major international labor unions. Management believes that the Company’s relationship with such unions is good. Unions represent none of the Company’s U.S. employees, drivers or messengers.

Available Information

     The Company electronically files its annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (“SEC”). Copies of the Company’s filings with the SEC may be obtained from its website at HTTP://WWW.DYNAMEX.COM or at the SEC’s website, at HTTP://WWW.SEC.GOV. Access to these filings is free of charge.

ITEM 1A. 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.

Competition May Adversely Affect Our Results

     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. We compete with other companies in the industry not only to be providers of services but also for qualified drivers. Some of these companies have longer operating histories and greater financial and other

resources than we do. Because of the low cost of entry, companies that do not currently operate delivery and logistics businesses may enter the industry in the future. See “Business — Competition.”

An Increase in Claims May Expose Us to Losses

     As of July 31, 2007, we utilized the services of approximately 4,500 independent contractor owner-operator drivers. From time to time such persons are involved in accidents or other activities that may give rise to liability claims. We currently carry liability insurance with a per occurrence and an aggregate limit of $30 million. Our independent contractor 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 $20,000 to $40,000). We also have insurance policies covering property and fiduciary trust liability, which coverage includes all drivers and messengers. We make no assurance that claims against us, whether under the liability insurance or the surety bonds, will not exceed the applicable amount of coverage, that our insurer will be solvent at the time of settlement of an insured claim, or that we will be able to obtain insurance at acceptable levels and costs in the future. If we were to experience a material increase in the frequency or severity of accidents, liability claims, workers’ compensation claims or unfavorable resolutions of claims, our business, financial condition and results of operations could be materially adversely affected. In addition, significant increases in insurance costs could reduce our profitability.

We Rely on Independent Contractor Owner-Operator Drivers to Make Deliveries for Our Customers

     Substantially all of our independent contractor owner-operator drivers at July 31, 2007 were independent contractors who own their own vehicles. We do 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 contractor owner-operators in the transportation industry, including those utilized by us, are employees, rather than independent contractors. We believe that the independent contractor owner-operators utilized by us are not employees under existing interpretations of federal (U.S. and Canadian), state and provincial laws. However, federal (U.S. and Canadian), state, provincial authorities or independent contractors may challenge this position, and other laws or regulations, including tax laws, or interpretations thereof, may be changed. If, as a result of any of the foregoing, we were required to pay withholding taxes and pay for and administer added employee benefits to these drivers, our operating costs would increase. Additionally, if we are required to pay back-up withholding with respect to amounts previously paid to such drivers, we may also be required to pay penalties or be subject to other liabilities. Any of the foregoing circumstances may adversely impact our financial condition and results of operations, and/or compel us to restate financial information from prior periods. See “Business — Services” and “— Employees.”

We May Be Adversely Affected by Local Delivery Industry and General Economic Conditions

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

Fluctuations of Foreign Exchange Rates May Adversely Affect Our Results

     About one-third of our operations are conducted in Canada. Exchange rate fluctuations between the U.S. and Canadian dollar result in fluctuations in the amounts relating to the Canadian operations reported in our consolidated financial statements. The Canadian dollar is the functional currency for the Canadian operations; therefore, any change in the exchange rate will affect our reported sales, expenses and net income for such period. We historically have not entered into hedging transactions with respect to our foreign currency exposure, but may do so in the future. We cannot be assured that fluctuations in foreign currency exchange rates will not have a material adverse effect on our business, financial condition or results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Failure to Maintain Permits and Licensing May Adversely Affect Our Ability to Operate

     Although certain aspects of the transportation industry have been significantly deregulated, our delivery

operations are still 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. If we fail to maintain required certificates, permits or licenses, or to comply with applicable laws, ordinances or regulations we may incur substantial fines or possible revocation of our authority to conduct certain of our operations. See “Business — Regulation.”

We Depend Upon Key Personnel for Our Continued Operations

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

Technological Advances May Adversely Affect Our Business

     Technological advances in the nature of facsimile, electronic mail and electronic signature capture have affected the market for on-demand document delivery services. Although we have shifted our 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 our business, financial condition and results of operations in the future.

We Are Highly Dependent Upon Our Technology Infrastructure

     We rely heavily on technology to operate our transportation and business networks, and any disruption to our technology infrastructure or the internet could harm our operations and our reputation among our customers. Our ability to attract and retain customers and to compete effectively depends in part upon the sophistication and reliability of our technology network, including our ability to provide features of service that are important to our customers. Any disruption to our computer systems and web site could adversely impact our customer service, our ability to receive orders and respond to prompt delivery assignments and result in increased costs. While we have invested and will continue to invest in technology security initiatives and disaster recovery plans, these measures cannot fully insulate us from technology disruptions and the resulting adverse effect on our operations and financial results.

We Are Dependent on Availability of Qualified Delivery Personnel

     We are dependent upon our ability to attract and retain, as employees or through independent contractor or other arrangements, qualified delivery personnel who possess the skills and experience necessary to meet the needs of our operations. We compete in markets in which unemployment is generally relatively low and the competition for independent contractor owner-operators and other employees is intense. We must continually evaluate and upgrade our pool of available independent contractor owner-operators to keep pace with demands for delivery services. We have no assurance that qualified delivery personnel will continue to be available in sufficient numbers and on terms acceptable to us. Our inability to attract and retain qualified delivery personnel could have a material adverse impact on our business, financial condition and results of operations.

We May Need for Additional Financing to Pursue Our Acquisition Strategy

     We intend to pursue acquisitions that are complementary to our existing operations, primarily through the acquisition of customer lists of small local delivery companies that can be tucked into our current operating locations. We may be required to incur additional debt, issue additional securities that may potentially result in dilution to current holders and also may result in increased goodwill, intangible assets and amortization expense. We have no assurance that we will be able to obtain additional financing if necessary, or that such financing can be obtained on terms we will deem acceptable. As a result, we may be unable to successfully implement our acquisition strategy. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources.”

Factors Beyond Our Control May Affect the Volatility of Our Stock Price

     Prices for our common stock will be determined in the marketplace and may be influenced by many factors,

including the depth and liquidity of the market for our common stock, investor perception of us and general economic and market conditions. Variations in our operating results, general trends in the industry and other factors could cause the market price of our common stock to fluctuate significantly. In addition, general trends and developments in the industry, government regulation and other factors could have a significant impact on the price of our common stock. The stock market has, on occasion, experienced extreme price and volume fluctuations that have often particularly affected market prices for smaller companies and that often have been unrelated or disproportionate to the operating performance of the affected companies, and the price of our common stock could be affected by such fluctuations.

Escalating Fuel Costs May Adversely Affect Our Financial Condition and Results of Operations

     The independent contractor owner-operators we engage are responsible for all vehicle expense including maintenance, insurance, fuel and all other operating costs. We make every reasonable effort to include fuel cost adjustments in customer billings that we pay to independent contractor owner-operators to offset the impact of fuel price increases. If future fuel cost adjustments are insufficient to offset independent contractor owner-operators’ costs, we may be unable to attract a sufficient number of independent contractor owner-operators that may negatively impact our business, financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     None.

ITEM 2. PROPERTIES

     The Company leased facilities in 83 locations at July 31, 2007. These facilities are principally used for operations and general and administrative functions. The chart below summarizes the locations of facilities that the Company leases:

		Number of
Location		Leased Properties
Canada
Alberta			4
British Columbia			5
Manitoba			2
Newfoundland			1
Nova Scotia			1
Ontario			13
Quebec			4
Saskatchewan			2
Canadian Total			32

		Number of
Location		Leased Properties
United States
Arizona			1
California			11
Colorado			1
Connecticut			1
Florida			1
Georgia			1
Illinois			2
Indiana			1
Kansas			1
Maryland			1
Massachusetts			1
Minnesota			1
Missouri			1
Nevada			1
New Jersey			2
New York			5
North Carolina			2
Ohio			1
Pennsylvania			3
Tennessee			1
Texas			6
Virginia			4
Washington			2
United States Total			51

     The Company believes that its properties are well maintained, in good condition and adequate for its present needs. The Company anticipates that suitable additional or replacement space will be available when required.

     Facility rental expense for the fiscal years ended July 31, 2007, 2006 and 2005 was approximately $9.8 million, $7.8 million and $6.2 million, respectively. The Company’s principal executive offices are located in Dallas, Texas. See Note 7 of Notes to the Consolidated Financial Statements for additional information.

ITEM 3. LEGAL PROCEEDINGS

     The California Employment Development Department (the “EDD”), in 2005, conducted an employment tax audit of certain of the Company’s operations in California for the period April 2003 through March 2005. As a result of the audit, the EDD concluded that certain independent contractors used by the Company should be reclassified as employees. Based on such reclassification, the EDD made a $345,000 assessment plus accrued interest against the Company, the bulk of which is for personal income taxes. The Company subsequently provided documentation to the EDD related to the original assessment which resulted in a reduction in the assessment of approximately $100,000. The assessment has been paid, and the Company has filed a Refund Claim.

     The California EDD conducted an employment tax audit of the Company’s other California operations in 2006. Based on its conclusion that certain independent contractors used by the Company should be reclassified as employees, a Notice of Assessment was issued by the EDD in April 2007 in the amount of $2.8 million, $2.0 of which the EDD claims represents personal income tax of the reclassified individuals. The Company has filed a Petition for Reassessment and intends to vigorously contest the assessment.

     On April 15, 2005, a purported class action was filed against the Company by a former Company driver in the Superior Court of California, Los Angeles County, alleging that the Company unlawfully misclassified its California drivers as independent contractors, rather than employees, and asserting, as a consequence, entitlement on behalf of the purported class claimants to overtime compensation and other benefits under California wage and hour laws, reimbursement of certain operating expenses, and various insurance and other benefits and the obligation of the Company to pay employer payroll taxes under federal and state law. The plaintiff filed a Motion for Class Certification on November 2, 2006. The Company responded in a Memorandum of Points and Authorities in Support of Defendants’ Opposition to Plaintiff’s Motion for Class Certification on November 29, 2006. A hearing was held on December 12, 2006, and on December 14, 2006, the Plaintiff’s Motion for Class Certification was denied. The Plaintiff filed a Notice of Appeal on January 5, 2007. During the summer of 2007, Plaintiff associated additional counsel for the Appeal. Plaintiff requested and was granted a 30 day extension to August 27, 2007, in which to file his Opening Brief. An additional 30 day extension was granted on August 27th, extending the time to September 26th. The Company’s answering brief will be due 30 days after the Opening brief is filed. Plaintiff will have 30 days following that in which to file a rebuttal brief. Thereafter the Court will schedule an Oral hearing, most likely in the early months of 2008.

     We believe that the Company’s independent contractor owner-operator drivers are properly classified as independent contractors and intend to vigorously defend this litigation. Given the nature and preliminary status of the claims, however, we cannot yet determine the amount or a reasonable range of potential loss in these matters, if any.

     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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information — The Company’s common stock commenced trading on the Nasdaq Global Select Market under the symbol “DDMX” on March 14, 2005. Previously, the common stock was listed on the AMEX. The following table summarizes, for the periods indicated, the range of high and low closing sale prices for our common stock, as reported on the Nasdaq Global Select Market. The NASDAQ prices represent inter-dealer quotations without retail markups, markdowns or commissions and may not represent actual transactions.

		Bid
Fiscal 2007		High				Low
First Quarter		$	22.42			$	19.00
Second Quarter			24.86				20.51
Third Quarter			27.39				22.56
Fourth Quarter			29.00				23.65

Fiscal 2006		High				Low
First Quarter		$	18.50			$	15.15
Second Quarter			21.06				15.65
Third Quarter			20.94				17.15
Fourth Quarter			22.25				18.38

Stock Price Performance

          Set forth below is a line graph indicating the stock price performance of the Company’s common stock for the period beginning August 1, 2002 and ending July 31, 2007 as contrasted with the Nasdaq Composite Index ** and the AMEX Composite Index and the Russell 2000 Stock Index***. The graph assumes that $100 was invested at the beginning of the period and has been adjusted for any stock dividends distributed after August 1, 2007. No cash or stock dividends have been paid during this period.

COMPARATIVE CUMULATIVE TOTAL RETURN
AMONG DYNAMEX INC.,
NASDAQ COMPOSITE INDEX, AMEX COMPOSITE INDEX
AND RUSSELL 2000 INDEX

ASSUMES $100 INVESTED ON AUGUST 1, 2002
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING JULY 31, 2007

     Holders — At September 28, 2007, the approximate number of holders of record of common stock was 250.

     Dividends — The Company has not declared or paid any cash dividends on its common stock since its inception. The Company does not anticipate paying any cash dividends in fiscal 2008. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources”.

     Securities Authorized for Issuance Under Equity Compensation Plans — The following table provides information regarding the Company’s equity compensation plan as of July 31, 2007.

		Number of securities to be				Weighted-average exercise				Number of securities
		issued upon exercise of				price of outstanding				remaining available for
		outstanding options,				options, warrants and				future issuance under equity
Plan category		warrants and rights				rights				compensation plans (1)
Equity compensation plans approved by security holders			485,050			$	15.47				350,947
Equity compensation plans not approved by security holders			—				—				—
Total			485,050			$	15.47				350,947

     Common Stock Repurchase — As of July 31, 2007, the Board of Directors had authorized the Company to purchase up to $38 million of Dynamex Inc. common stock. Through July 31, 2007, the Company had purchased a total of 1,841,000 shares at an average price of $19.77 per share for a total dollar cost of $36,402,000, of which 531,000 shares were purchased in the fourth quarter of FY 2007 at an average price of $24.19 for a total dollar cost of $12,843,000. All of the shares were cancelled during FY 2007. On September 19, 2007, the Board of Directors increased the authorization by $20 million. The Company intends to purchase additional common shares from time to time using available cash or temporary borrowings from its revolving credit facility at prices acceptable to the Company.

     The following table sets forth the purchases made during each month of the fourth quarter of the Company’s fiscal year ended July 31, 2007:

Total number of

shares purchased as

Total number

Average

part of

Approximate dollar value

of shares

price paid

a publicly

of shares that may yet be

Period

purchased

per share

announced plan

purchased under the plan

May 1 to May 31, 2007

47,900

$

26.03

47,900

$13.2 million

June 1 to June 30, 2007

40,240

$

25.69

40,240

$12.2 million

July 1 to July 31, 2007

442,800

$

23.85

442,800

$1.6 million

All purchases were made pursuant to a publicly announced program approved by the Board of Directors of the Company authorizing management to acquire up to $38 million of the Company’s common stock with no expiration date.

ITEM 6. SELECTED FINANCIAL DATA

     The following selected historical financial and other data for the three years ended July 31, 2007 and the balance sheet data at July 31, 2007 and 2006 have been derived from the audited consolidated financial statements of the Company appearing elsewhere herein. The following selected historical financial and other data for the two years ended July 31, 2004 and 2003 and the balance sheet data at July 31, 2005, 2004 and 2003 have been derived from the consolidated financial statements of the Company not appearing herein. The selected financial data are qualified in their entirety, and should be read in conjunction with the Company’s consolidated financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” appearing elsewhere herein.

		Years ending July 31,
		2007				2006				2005				2004				2003
						(in thousands, except per share amounts)
Statements of operations data:
Sales		$	413,774			$	358,374			$	321,103			$	287,856			$	250,801
Cost of sales			304,339				259,311				232,023				206,487				177,850
Gross profit			109,435				99,063				89,080				81,369				72,951
Selling, general and administrative expenses (1)			85,341				77,125				69,049				64,026				58,417
Depreciation and amortization			2,357				1,931				1,648				1,890				2,124
(Gain) loss on disposal of property and equipment			(20	)			1				(21	)			(41	)			19
Operating income			21,757				20,006				18,404				15,494				12,391
Interest expense, net			299				295				466				1,406				2,194
Other (income) expense, net (2)			(2,079	)			(275	)			(226	)			(182	)			(340	)
Income before income taxes			23,537				19,986				18,164				14,270				10,537
Income taxes (3)			8,575				7,594				6,979				1,437				2,959
Net income		$	14,962			$	12,392			$	11,185			$	12,833			$	7,578
Earnings per share:
basic		$	1.41			$	1.12			$	0.97			$	1.13			$	0.68
diluted		$	1.39			$	1.11			$	0.95			$	1.11			$	0.67
Weighted average common shares outstanding:
basic			10,612				11,057				11,544				11,314				11,208
diluted			10,738				11,197				11,804				11,532				11,364
Other data:
Earnings before interest, taxes, depreciation and amortization (EBITDA) (4)
Net income		$	14,962			$	12,392			$	11,185			$	12,833			$	7,578
Adjustments:
Income taxes			8,575				7,594				6,979				1,437				2,959
Interest expense, net			299				295				466				1,406				2,194
Depreciation and amortization			2,357				1,931				1,648				1,890				2,124
EBITDA		$	26,193			$	22,212			$	20,278			$	17,566			$	14,855

		July 31,
		2007				2006				2005				2004				2003
										(in thousands)
Balance sheet data:
Working capital		$	22,189			$	18,889			$	22,917			$	16,704			$	7,779
Total assets			121,040				110,525				109,475				102,072				95,541
Long-term debt, excluding current portion			—				905				8				10,000				14,116
Stockholders’ equity			81,409				79,212				83,896				69,310				54,328

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

     The following discussion should be read in conjunction with the information contained in the Company’s consolidated financial statements, including the notes thereto, and the other financial information appearing elsewhere in this report. Statements regarding future economic performance, management’s plans and objectives, and any statements concerning its assumptions related to the foregoing contained in Management’s Discussion and Analysis of Financial Condition and Results of Operation constitute forward-looking statements. Certain factors, which may cause actual results to vary materially from these forward-looking statements, accompany such statements or appear elsewhere in this report, including without limitation, the factors disclosed under “Risk Factors.”

General

     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 and sorting expenses, insurance and workers’ compensation costs. Substantially all of the drivers used by the Company provide their own vehicles, and more than 99% are independent contractor owner-operators 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 delivery personnel 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 business center 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 business center and corporate locations.

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

     During the years ended July 31, 2007, 2006 and 2005, sales to Office Depot, Inc. represented approximately 14.2%, 10.6% and 9.8%, respectively, of the Company’s revenue. Sales to the Company’s five largest customers, including Office Depot, represented approximately 28%, 25% and 24% of the Company’s consolidated sales for the years ended July 31, 2007, 2006 and 2005, respectively.

     The Company has no significant investment in transportation equipment. Depreciation and amortization expense primarily relates to office, communication, IT equipment and software, leasehold improvements and intangible assets.

     A significant portion of the Company’s sales is generated in Canada. For the fiscal years ended July 31, 2007, 2006 and 2005, approximately 38%, 36%, and 33%, respectively, of the Company’s sales were generated in Canada. Before deduction of corporate costs, the majority of which are incurred in the U.S., the cost structure of the Company’s operations in the U.S. and in Canada is similar.

     The conversion rate of Canadian dollars to U.S. dollars increased during the fiscal year ending July 31, 2007 compared to July 31, 2006 and increased during the fiscal year ending July 31, 2006 compared to July 31, 2005. As the Canadian dollar is the functional currency for the Company’s Canadian operations, these changes in the exchange rate have affected the Company’s reported sales. The effect of these changes on the Company’s net income for the fiscal years ended July 31, 2007, 2006 and 2005 has not been significant, although there can be no assurance that fluctuations in such currency exchange rate will not, in the future, have a material effect on the Company’s business, financial condition or results of operations.

Critical Accounting Policies

     The Company believes that the following are its most significant accounting policies:

     Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses. Actual results may differ from such estimates. The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance.

     Revenue recognition — Revenues are recognized after services are rendered to customers. There may be a time lag between pickup and delivery and the generation of an invoice. Accordingly, unbilled revenue is recognized for those shipments that have been delivered but have not been invoiced.

     Intangibles — Intangibles arise from acquisitions accounted for as purchased business combinations and include goodwill, covenants not-to-compete and other identifiable intangibles and from the payment of financing costs associated with the Company’s credit facility. Goodwill represents the excess of the purchase price over all tangible and identifiable intangible net assets acquired. The Company tests goodwill for impairment at least annually. The Company has two reporting units for the purposes of assessing potential future impairments of goodwill, Canada and the United States. These two regions were identified as reporting units in accordance with paragraph 30 of SFAS No. 142 because discrete financial information is available and management regularly reviews the operating results of these regions. The Company performs its annual goodwill impairment test as of the first day of the fourth quarter of each year. Based on this test, the Company determined that no impairment exists during the three years ended July 31, 2007. Other intangible assets are being amortized over periods ranging from 3 to 25 years.

     Other assets — Recoverable contract contingency costs - The Company has recorded as an Other Asset certain costs related to contractually reimbursable contingency costs incurred in connection with the launch of certain contracts in accordance with EITF 99-5, “Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements,” These costs will be recovered during the initial contract term, from a designated portion of the unit price specified in the contract. Should the contract be cancelled for any reason, the customer is obligated to reimburse the Company for any unamortized balance. Total recoverable contract contingency costs capitalized at July 31, 2007 and 2006 amount to $1,381 thousand and $581 thousand, respectively.

     Self-insured claims liability - The Company is primarily self-insured for U.S. workers’ compensation and vehicle liability claims. A liability for unpaid claims and the associated claim expenses, including incurred but unreported losses, are recorded based on the Company’s estimates of the aggregate liability for claims incurred. The Company’s estimates are based on actual experience and historical assumptions of development of unpaid liabilities over time. Factors affecting the determination of amounts to be accrued for claims include, but are not limited to, cost, frequency, or payment patterns resulting from new types of claims, the hazard level of our operations, tort reform or other legislative changes, unfavorable jury decisions, court interpretations, changes in the medical conditions of claimants and economic factors such as inflation. The method of calculating the estimated accrued liability for claims is subject to inherent uncertainty. If actual results are less favorable than what are used to calculate the accrued liability, the Company would have to record expenses in excess of what has already been accrued.

     Allowance for doubtful accounts — The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make payments when due or within a reasonable period of time thereafter. Estimates are used in determining this allowance based on the Company’s historical collection experience, current trends, credit policy and a percentage of accounts receivable by aging category. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make required payments, additional allowances may be required. The allowance for doubtful accounts represented approximately 2.0% of accounts receivable at July 31, 2007 compared to approximately 1.8% at July 31, 2006.

     Income taxes — Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of assets and liabilities for financial and income tax reporting. The net deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

     During the year ended July 31, 2007 and 2006, the Company repatriated approximately $3.6 million and $12.7 million, respectively from its Canadian subsidiary. Except for certain applicable state income taxes, the Company was able to substantially offset the U.S. income tax liability arising from the dividends with foreign tax credits. The Company establishes valuation allowances in accordance with the provisions of Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes” (“SFAS No. 109”). During the year ended July 31, 2004, the Company determined that it was more likely than not that the benefits of the taxable U.S. net operating losses (“NOL”) totaling $10.6 million at January 31, 2004 would be realized, and based on such determination, the Company reversed the valuation allowance during the second quarter of the fiscal year 2004, resulting in a credit to income tax expense of approximately $3.7 million. The Company utilized all of the NOL during the 2004 and 2005 fiscal years and all of its foreign tax credits in the 2007 fiscal year.

     Stock-based compensation — Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”) requires the measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in our consolidated statements of operations. The accounting provisions of SFAS No. 123(R) were adopted by the Company effective August 1, 2005.

     Prior to the effective date of SFAS No. 123(R), June 15, 2005, Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) encouraged but did not require companies to record compensation cost for stock based employee compensation plans at fair value. Effective August 1, 2003, the Company elected to adopt the fair value recognition provisions of SFAS No. 123 for stock-based employee compensation. Under the modified prospective method of adoption selected by the Company, stock-based employee compensation cost recognized in 2007, 2006 and 2005 was substantially the same as that which would

have been recognized had the fair value recognition provisions of SFAS No. 123(R) been applied to all awards granted after August 1, 1995. The fair value of each grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2007, 2006, and 2005, respectively: dividend yield of 0% for all years; expected volatility of 44%, 51%, and 70%; risk-free interest rate of 4.6%, 4.3%, and 4.2%, and expected lives of an average of 7.2, 5.3 and 5.3 years for options granted to employees and of 6.8, 7.7 and 7.7 years for options granted to non-employee directors for all years. The weighted average grant-date fair value of stock options granted during the years 2007, 2006 and 2005 was $11.97, $8.82 and $10.02, respectively.

     As discussed in Note 10 of Notes to the Consolidated Financial Statements, option expense in 2007, 2006 and 2005 amounted to $771,000, $717,000 and $459,000, respectively, under the fair value approach. Based on the outstanding and unvested awards as of July 31, 2007, the anticipated effect on net income for fiscal 2008, net of taxes, will be approximately $530,000.

     Foreign currency translation —Assets and liabilities in foreign currencies are translated into U.S. dollars at the rates in effect at the balance sheet date. Revenues and expenses are translated at average rates during the year. The net exchange differences resulting from these translations are recorded in stockholders’ equity. Where amounts denominated in a foreign currency are converted into U.S. dollars by remittance or repayment, the realized exchange differences are included as other income (expense) in the Consolidated Statement of Operations.

     Treasury stock acquired and retired — Treasury stock is recorded at cost. Delaware law permits treasury shares to be retired when appropriately authorized by the Board of Directors, and the Company has retired such shares by appropriate reductions in the value of common stock and additional paid-in capital.

     Other long-term liabilities — The Company recognizes a deferred rent liability for tenant improvement allowances within other long-term liabilities and amortizes those amounts over the term of the lease as a reduction of rent expense. For scheduled rent escalation clauses during the lease term, the Company records rental expense on a straight-line basis over the term of the lease.

Results of Operations

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

		Years Ended July 31,
		2007				2006				2005
Sales			100.0	%			100.0	%			100.0	%
Cost of sales:
Purchased transportation			65.4	%			65.0	%			64.3	%
Other			8.1	%			7.3	%			8.0	%
Cost of sales			73.5	%			72.3	%			72.3	%
Gross profit			26.5	%			27.7	%			27.7	%
Selling, general and administrative:
Salaries and employee benefits			14.1	%			15.0	%			14.8	%
Other			6.5	%			6.5	%			6.7	%
Selling, general and administrative			20.6	%			21.5	%			21.5	%
Depreciation and amortization			0.6	%			0.5	%			0.5	%
(Gain) loss on sale of property and equipment			0.0	%			0.0	%			0.0	%
Operating income			5.3	%			5.7	%			5.7	%
Interest expense			0.1	%			0.1	%			0.1	%
Other income			0.5	%			0.1	%			0.1	%
Income before income taxes			5.7	%			5.7	%			5.7	%
Income taxes			2.1	%			2.1	%			2.2	%
Net income			3.6	%			3.6	%			3.5	%

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

		Years Ended July 31,
		2007								2006								2005
Sales by service type:
On demand		$	137,418				33.2	%		$	134,179				37.5	%		$	124,206				38.6	%
Scheduled/distribution			144,708				35.0	%			109,037				30.4	%			97,464				30.4	%
Outsourcing			131,648				31.8	%			115,158				32.1	%			99,433				31.0	%
Total sales		$	413,774				100.0	%		$	358,374				100.0	%		$	321,103				100.0	%
Sales by country:
United States		$	257,025				62.1	%		$	230,768				64.4	%		$	213,718				66.6	%
Canada			156,749				37.9	%			127,606				35.6	%			107,385				33.4	%
Total sales		$	413,774				100.0	%		$	358,374				100.0	%		$	321,103				100.0	%

Year Ended July 31, 2007 Compared to Year Ended July 31, 2006

     Net income for the year ended July 31, 2007 was $15.0 million ($1.39 per fully diluted share) compared to $12.4 million ($1.11 per fully diluted share) for the year ended July 31, 2006. Net income for the year ended July

31, 2007, was favorably impacted by approximately $972,000 ($0.09 per fully diluted share) from the settlement of prior year cross border transfer pricing issues between the U.S. and Canada. See Footnote 13 of the Notes to the Condensed Consolidated Financial Statements.

Sales for the year ended July 31, 2007 were $414 million, a $56 million (15.5%) increase over the prior year. The average conversion rate between the Canadian dollar and the U.S. dollar increased 2.6% over the prior year period, which had the effect of increasing sales for the year ended July 31, 2007 by approximately $3.9 million (1.1%). Also during the period, fuel surcharges included in consolidated sales were essentially unchanged this year compared to last year. The core growth rate, the rate excluding the impact of the fuel surcharge and changes in the foreign exchange rate, was approximately 14.2% for the year ended July 31, 2007 (11.2% in the U.S. and 19.6% in Canada). Canadian sales, including fuel surcharges, , increased approximately 19.7% in Canadian dollars in the current fiscal year compared to last year. Sales for the year ended July 31, 2007 include sales for services provided on an interim basis to one customer in Canada of approximately $10 million U.S. (approximately $3 million for the three months ended July 31, 2007). The remaining sales increase is primarily attributable to volume increases from the expansion of business with existing and new customers. Management estimates that price increases accounted for substantially less than 5% of the increase in sales in FY 2007.

     Cost of sales for the year ended July 31, 2007 increased $45.0 million, or 17.4%, to $304.3 million from $259.3 million for the same period in the prior year. Cost of sales, as a percentage of sales was 73.5% for the year ended July 31, 2007, compared to 72.3% for the year ended July 31, 2006. Purchased transportation costs were 65.4% of sales this year compared to 65.0% last year, partially due to the decline in on-demand sales as a percentage of total sales in the year ended 2007 compared to the prior year. Although on-demand sales increased slightly this year compared to the prior year, it represented only 33.2% of total sales compared to 37.5% last year, as distribution and dedicated sales increased 33%. The increase in other cost of sales from 7.3% last year to 8.1% in this year was due principally to additional warehouse personnel, equipment and space required to support new business added this fiscal year.

     SG & A expenses for the year ended July 31, 2007 increased $8.2 million, or 10.7%, to $85.3 million compared to the prior year. Approximately $4.7 million of the dollar increase is attributable to higher compensation and benefits. The increase in compensation and benefits results from normal salary increases plus the additional personnel added over the last year to operate and manage new business and to increase engineering capacity in order to facilitate route optimization, enhance driver economics and reduce costs. Also, the current year includes approximately $1.4 million for additional warehouse and office space, computer licenses and support of $0.6 million and professional fees and contract start-up costs of $0.6 million. As a percentage of sales, SG & A expenses were 20.6% for the year ended July 31, 2007, compared to 21.5% for the year ended July 31, 2006.

     For the year ended July 31, 2007, depreciation and amortization was $2,357,000 compared to $1,931,000 for the same period in the prior year. The increase is primarily attributable to higher capital expenditures including lessor financed leasehold improvements, the acquisition of new route optimization software and the installation at corporate headquarters and some business centers of a voice-over-internet protocol (VoIP) telephone system beginning late in FY 2006.

     Other income, net for the year ended July 31, 2007, was $2,079,000 compared to $275,000 for the same period in the prior year. This increase is principally attributable to the resolution of cross-border transfer pricing issues between Canada and the U.S. for inter-company services for fiscal years 2001 through 2005. As a result, the Company realized interest income of approximately $425,000 from the overpayment of prior year Canadian taxes without a corresponding increase in interest expense from the U.S. as the Company had available net operating losses to offset the additional income, and the realization of $937,000 in foreign currency transaction gains on cash settlement of those inter-company charges. These inter-company charges were denominated in Canadian dollars, the value of which increased in U.S. dollars from those prior year levels. See Footnote 13 of the Notes to the Condensed Consolidated Financial Statements.

     Interest expense was $299,000, an increase of $4,000 or 1.4% for the year ended July 31, 2007. Interest expense, as a percentage of sales, was 0.1% in the current year, the same as the prior year.

     The effective income tax rate was 36.4% for the current year compared to 38.0% for the prior year. Excluding the impact of the one-time benefit from the resolution of prior year cross-border transfer pricing issues, income tax expense would have been approximately $8.2 million, 36.9% of income before taxes. See Footnote 8 of the Notes to

the Condensed Consolidated Financial Statements.

Year Ended July 31, 2006 Compared to Year Ended July 31, 2005

     Net income for the year ended July 31, 2006 was $12.4 million ($1.11 diluted earnings per common share) compared to $11.2 million ($0.95 diluted earnings per common share) for the year ended July 31, 2005. This improvement results from higher gross profit from increased sales and lower interest expense that was offset, in part, by higher selling, general and administrative expense.

     Sales increased $37 million to $358 million in FY 2006, an increase of 11.6% compared to the prior year. The average conversion rate between the Canadian dollar and the U.S. dollar increased 7.5% over the prior year period, which had the effect of increasing sales for the year by approximately $8.9 million, approximately 2.8%, had the conversion rate been the same as the prior year period. Also, higher fuel surcharges included in consolidated sales accounted for an estimated 2.9% 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 foreign exchange rate fluctuations, was approximately 5.9% for the year ended July 31, 2006 (approximately 5.4% in the U.S. and 7.0% in Canada) compared to the prior year. The core growth rate was negatively impacted by higher customer attrition, principally in the U.S., a significant portion of which occurred in the second fiscal quarter caused by service issues with a few customers and our decision to exit certain business relationships where margins were less than satisfactory. Canadian sales including fuel surcharges, in Canadian dollars, increased approximately 10.5% in the current fiscal year compared to the prior year.

     Cost of sales for FY 2006 increased $27 million (11.8%) to $259 million, and represented 72.3% of sales, the same percentage as the prior year. Approximately $21 million of the dollar increase in the current fiscal year resulted from actual cost increases while approximately $6 million was attributable to the strengthening of the Canadian dollar versus the U.S. dollar. The total cost of sales, as a percent of sales, was unchanged from the prior year although purchased transportation cost increased as a percentage of sales to 65.0% from 64.3% in 2005. The change in business mix along with the impact of the spike in fuel prices in the first quarter of the current fiscal year are the primary reasons for the increase. Other cost of sales declined as a percentage of sales to 7.3% in 2006 compared to 8.0% in 2005 primarily as a result of lower insurance costs.

     SG & A expenses increased $8.1 million, or 11.7% in FY 2006, to $77 million compared to $69 million in FY 2005 but remained constant as a percentage of sales at 21.5% in both years. Approximately $1.7 million of the dollar increase is attributable to the strengthening of the Canadian dollar versus the U.S. dollar. Excluding the impact of the exchange rate, the primary increase in SG & A was for compensation and benefits related to additional personnel including higher payroll taxes, normal increases in compensation, severance costs, higher stock option expense and higher premiums related to medical and dental coverage. In addition, the current year includes costs for additional space and communications for new business startups along with higher utility costs.

     Depreciation and amortization for FY 2006 was $1.9 million compared to $1.6 million in FY 2005. Management expects depreciation and amortization to be in the $2.5 million range for all of FY 2007 due to limited capital requirements associated with its non-asset based business.

     Interest expense was $0.3 million, a decrease of $0.2 million, or 37% in FY 2006, from expense of $0.5 million in FY 2005, resulting from a decline in the average outstanding debt balance. The Company’s bank debt was approximately $0.9 million as of July 31, 2006.

     Income tax expense for FY 2006 was $7.6 million compared to $7.0 million for FY 2005, an increase of $0.6 million. The effective income tax rate was 38.0% for FY 2006 versus 38.4% for FY 2005. We expect the effective income tax rate for FY 2007 to range between 39% and 40%.

Liquidity and Capital Resources

     Our primary sources of liquidity are cash flow provided from our operations and our revolving credit facility. Cash flow provided by operations for the fiscal years ended July 31, 2007, 2006 and 2005 were $24.6 million, $15.5 million and $14.5 million, respectively. We used this cash flow to fund working capital requirements and capital

expenditures, repurchase common stock of the Company and repay bank borrowings.

     Higher working capital requirements used $0.5 million of operating cash flow for the year ended July 31, 2007 compared to using $2.0 million and $3.0 million of operating cash flow in fiscal 2006 and 2005, respectively.

     During FY 2006 and 2007, the Board of Directors authorized management to repurchase up to $38 million of the Company’s common stock. The Company repurchased 1,219,500 ($21.5 million) and 621,500 shares ($14.9 million), respectively. On September 19, 2007, the Board of Directors authorized management to purchase an additional $20 million of Company stock. The Company intends to purchase additional common shares from time to time using available cash or temporary borrowings from its revolving credit facility at prices acceptable to the Company.

     During the fiscal years ended July 31, 2007, 2006 and 2005, the Company spent approximately $5.0 million, $2.2 million and $2.4 million, respectively, on capital expenditures. These expenditures primarily related to improvements in technology infrastructure to support the Company’s operations and in FY 2007, lessor financed leasehold improvements. 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 are independent contractors who provide their own vehicles.

     Our current revolving credit facility was initially established in 2004 and last amended in July 2007. The credit facility has no scheduled principal payments; however, the maturity date is currently extended to July 31, 2009. The revolving credit facility is secured by all of the Company’s U.S. assets and 100% of the stock of its domestic subsidiaries. On July 31, 2007, the Revolving Credit Facility was amended to permit treasury stock purchases not to exceed $20 million in aggregate amount during any fiscal year. Previously, stock repurchases were limited to a total of $35 million.

     During FY 2005 and FY 2007, the Company used $10 million and $0.9 million, respectively, of cash flow from operations to repay outstanding borrowings under the bank credit facility. The Company temporarily borrowed $0.9 million in FY 2006 to fund share repurchases. At July 31, 2007, there were $5.2 million letters of credit issued but no outstanding borrowings under the revolving credit agreement..

     The revolving credit facility requires us to satisfy certain financial and other covenants, including:

Compliance Area		Covenant		Level at July 31, 2007
Ratio of funded debt to EBITDA		Maximum of 2.00 to 1.00		0.19 to 1.00
Total indebtedness		$20 million, including LOC’s		$5.2 million
Letters of credit sublimit		$7.5 million		$5.2 million
Maximum treasury stock purchases in any one (1) year		$20 million		$14.9 million
Fixed charge coverage ratio		Equal to or greater than 1.50 to 1.00		1.83 to 1.00

     Management expects internally generated cash flow and temporary borrowings from its bank credit facility will be sufficient to fund its operations, capital requirements and common stock repurchases.

Contractual Obligations

     The following table sets forth the Company’s contractual commitments as of July 31, 2007 for the periods indicated (in thousands):

						Less than
		Total				1 year				1 - 3 years				3 - 5 years				Thereafter
Total		$	32,686			$	9,877			$	13,903			$	6,117			$	2,790

     The Company has entered into an employment agreement with its CEO which provides for the payment of a base salary in the annual amount of $525,000, participation in an executive bonus plan, an auto allowance, and

participation in other employee benefit plans. In addition, the Company has entered into retention agreements with certain key executive officers and other employees that provide certain benefits in the event their employment is terminated subsequent to a change in control of the Company, as defined in the retention agreements. The Company believes that it is unlikely that these circumstances will transpire, but if they did the potential exposure could range between $3.0 million and $3.5 million. As of July 31, 2007 the Company had outstanding letters of credit totaling $5.2 million.

Income Taxes

     The provision for income taxes was $8.6 million in fiscal 2007 compared to $7.6 million and $7.0 million in the years ended July 31, 2006 and 2005, respectively. The difference between the statutory rates and the effective federal income tax rates is primarily attributable to foreign and state income taxes, changes in the valuation allowance on net operating loss carryforwards and foreign tax credits, and other expenses that are non-deductible for tax purposes.

     During the year ended July 31, 2007, the Company repatriated approximately $3.6 million from its Canadian subsidiary. Except for certain applicable state income taxes, the Company was able to offset substantially all of the U.S. income tax liability arising from the dividends with foreign tax credits. The Company utilized substantially all of its available NOL’s during the 2004 and 2005 fiscal years and all of its foreign tax credits in fiscal year 2007.

Inflation

     The Company believes that it is experiencing some inflationary impacts from the rapid rise in fuel prices and will, along with other segments of the economy, experience further impacts of inflation in the form of utility cost and other cost increases. However, such inflationary pressures have not had a material effect on the Company’s results of operations for fiscal 2007. There can be no assurance the Company’s business will not be affected by inflation in the future.

Financial Condition

     The Company believes its financial condition is strong and that it has the financial resources necessary to meet its needs. Cash provided by operating activities and the Company’s credit facility should be sufficient to meet the Company’s operational requirements.

Recent Accounting Pronouncements

     In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes,” (FIN 48) that provides guidance on the accounting for uncertainty in income taxes recognized in financial statements. The Company will adopt FIN 48 on August 1, 2007. We are currently evaluating the impact of adopting FIN 48; however, we do not expect the adoption of this provision to have a material effect on our financial position, results of operations or cash flows.

     In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108 in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB No. 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The Company believes the adoption of SAB No. 108 had no material impact on its consolidated financial statements.

     In September 2006, the FASB issued Statement No. 157 (“SFAS 157”), “Fair Value Measurement,” This Statement establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. While SFAS 157 does not require any new value measurements, it may change the application of fair value measurements embodied in other accounting standards. SFAS 157 will be effective at the beginning of the Company’s 2008 fiscal year. The Company is currently assessing the effect of this pronouncement, but does not expect the impact on our consolidated financial statements to be material.

     In February 2007, the FASB issued Statement No. 159 (“SFAS 159”), “The Fair Value Option for Financial

Assets and Financial Liabilities — Including an Amendment of FASB Statement No 115.” This Statement permits an entity to choose to measure many financial instruments and certain other items at fair value. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings. The fair value option (a) may be applied instrument by instrument, (b) is irrevocable, and (c) is applied to entire instruments and not to portions of instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company believes the adoption of SFAS No. 159 will have no material impact on its consolidated financial statements.

     On August 1, 2005, the Company adopted the provisions of SFAS 123(R) discussed elsewhere herein.

“Safe Harbor” Statement Under The Private Securities Litigation Reform Act:

     With the exception of historical information, the matters discussed in this report are “forward looking statements” as that term is defined in Section 21E of the Securities Exchange Act of 1934.

     The risk factors described in this report could cause actual results to differ materially from those predicted. By way of example:

	•		The competitive nature of the same-day delivery business.
	•		The ability of the Company to attract and retain qualified courier personnel as well as retain key management personnel.
	•		A change in the current tax status of courier drivers from independent contractor drivers to employees.
	•		A significant increase in the number of workers’ compensation or vehicle liability claims such that the Company’s self insurance expense would increase significantly.
	•		A significant reduction in the exchange rate between the Canadian dollar and the U.S. dollar.
	•		Failure of 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.
	•		The ability of the Company to obtain adequate financing.
	•		The ability of the Company to pass on fuel cost increases to customers to maintain profit margins and the quality of driver pay.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Foreign Exchange Exposure

     Significant portions of the Company’s operations are conducted in Canada. Exchange rate fluctuations between the U.S. and Canadian dollar result in fluctuations in the amounts relating to the Canadian operations reported in the Company’s consolidated financial statements. The Company historically has not entered into hedging transactions with respect to its foreign currency exposure, but may do so in the future.

     The sensitivity analysis model used by the Company for foreign exchange exposure compares the revenue and net income figures from Canadian operations over the previous four quarters at the actual exchange rate versus a 10% decrease in the exchange rate. Based on this model, a 10% decrease would result in a decrease in revenue of approximately $15.7 million and a decrease in net income of approximately $0.9 million over this period. There can be no assurances 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 Company has no interest rate protection arrangements in effect at the present time. The Company

does not hold or issue derivative financial instruments for speculative or trading purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Item 15(a).

ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 9A. CONTROLS AND PROCEDURES

(a). Evaluation of disclosure control 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 Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the Company’s fiscal year. 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.

(b). Management’s report on internal control over financial reporting.

     Management’s report on internal control over financial reporting, which appears on page F-2 of this Annual Report, is incorporated herein by reference.

ITEM 9B. OTHER INFORMATION

     None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information set forth under the caption “Directors and Executive Officers” in the Company’s definitive proxy statement to be filed in connection with the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

     The Company has adopted a code of ethics that applies to all members of Board of Directors and employees of the Company, including, the principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. The Company has posted a copy of the code on the Company’s internet website at the internet address: http://www.dynamex.com. Copies of the code may be obtained free of charge from the Company’s website at the above internet address.

ITEM 11. EXECUTIVE COMPENSATION

     The information set forth under the caption “Directors and Executive Officers” in the Company’s definitive proxy statement to be filed in connection with the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information set forth under the caption “Beneficial Ownership of Common Stock” in the Company’s definitive proxy statement to be filed in connection with the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information set forth under the caption “Certain Relationships and Related Transactions” in the Company’s definitive proxy statement to be filed in connection with the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information set forth under the caption “Principal Accountant Fees and Services” in the Company’s definitive proxy statement to be filed in connection with the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

See Index to Consolidated Financial Statements on page F-1.

(b) Exhibits

Reference is made to the Exhibit Index on page E-1 for a list of all exhibits filed as a part of this report.

(c) Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are considered inapplicable and therefore have been omitted.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of the registrant and in the capacities indicated on October 12, 2007.

Name		Title
/s/ Richard K. McClelland   Richard K. McClelland		Chairman of the Board, Chief Executive Officer, President and Director (Principal Executive Officer)
/s/ Ray E. Schmitz   Ray E. Schmitz		Vice President, Chief Financial Officer (Principal Financial Officer)
/s/ Samuel T. Hicks   Samuel T. Hicks		Corporate Controller (Principal Accounting Officer)
/s/ Wayne Kern   Wayne Kern		Director
/s/ Stephen P. Smiley   Stephen P. Smiley		Director
/s/ Brian J. Hughes   Brian J. Hughes		Director
/s/ Bruce E. Ranck   Bruce E. Ranck		Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Dynamex Inc.
Management’s Report on Internal Controls over Financial Reporting		F-2
Reports of Independent Registered Public Accounting Firm		F-3
Consolidated Balance Sheets, July 31, 2007 and 2006		F-5
Consolidated Statements of Operations for the fiscal years ended July 31, 2007, 2006 and 2005		F-6
Consolidated Statements of Stockholders’ Equity for the fiscal years ended July 31, 2007, 2006 and 2005		F-7
Consolidated Statements of Cash Flows for the fiscal years ended July 31, 2007, 2006 and 2005		F-8
Notes to the Consolidated Financial Statements		F-9

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and
Stockholders of Dynamex Inc.

Management of Dynamex Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Dynamex Inc.’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of Dynamex Inc.’s internal control over financial reporting as of July 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework. Based on our assessment and those criteria, we believe that Dynamex Inc. maintained effective internal control over financial reporting as of July 31, 2007.

Dynamex Inc.’s independent registered public accounting firm, BDO Seidman, LLP, has issued an attestation report dated October 5, 2007 on the effectiveness of Dynamex Inc.’s internal control over financial reporting. That report is included herein.

/s/ Richard K. McClelland		/s/ Ray E. Schmitz
Richard K. McClelland Chairman of the Board, Chief Executive Officer, President and Director (Principal Executive Officer)		Ray E. Schmitz Vice President, Chief Financial Officer (Principal Financial Officer)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Dynamex Inc.
Dallas, Texas

We have audited the accompanying consolidated balance sheets of Dynamex Inc. and Subsidiaries (the “Company”) as of July 31, 2007 and 2006 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended July 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at July 31, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As more fully described in Note 1 to the consolidated financial statements, effective August 1, 2005, the Company adopted the provisions of SFAS 123(R), “Share-Based Payment.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of July 31, 2007, and our report dated October 5, 2007, expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP
BDO Seidman, LLP

Dallas, Texas
October 5, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Dynamex Inc.
Dallas, Texas

We have audited the internal control over financial reporting maintained by Dynamex Inc. and Subsidiaries (the “Company”) as of July 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Management of the Company is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2007, based on the COSO criteria..

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of July 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended July 31, 2007. Our report dated October 5, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/ BDO Seidman, LLP
BDO Seidman, LLP

Dallas, Texas
October 5, 2007

DYNAMEX INC.
Consolidated Balance Sheets
July 31, 2007 and 2006
(in thousands, except per share data)

		2007				2006
ASSETS
CURRENT
Cash and cash equivalents		$	8,857			$	6,058
Accounts receivable (net of allowance for doubtful accounts of $866 and $676, respectively)			42,649				36,425
Income taxes receivable			1,092				1,803
Prepaid and other current assets			3,559				2,689
Deferred income taxes			3,136				2,322
Total current assets			59,293				49,297
PROPERTY AND EQUIPMENT — net			8,495				5,967
GOODWILL			47,613				46,934
INTANGIBLES — net			326				390
DEFERRED INCOME TAXES			1,398				5,580
OTHER			3,915				2,357
Total assets		$	121,040			$	110,525
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable trade		$	15,426			$	11,168
Accrued liabilities			21,679				19,240
Total current liabilities			37,105				30,408
LONG-TERM DEBT			—				905
OTHER LONG-TERM LIABILITIES			2,526				—
Total liabilities			39,631				31,313
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; 10,145 and 10,638 outstanding, respectively			101				106
Additional paid-in capital			45,671				58,514
Retained earnings			31,122				16,160
Accumulated other comprehensive income:
Cumulative translation adjustment			4,515				4,432
Total stockholders’ equity			81,409				79,212
Total liabilities and stockholders’ equity		$	121,040			$	110,525

See accompanying notes to the consolidated financial statements.

DYNAMEX INC.
Consolidated Statements of Operations
Years ended July 31, 2007, 2006 and 2005
(in thousands except per share data)

		2007				2006				2005
Sales		$	413,774			$	358,374			$	321,103
Cost of sales:
Purchased transportation			270,804				233,084				206,316
Other direct costs			33,535				26,227				25,707
Cost of sales			304,339				259,311				232,023
Gross profit			109,435				99,063				89,080
Selling, general and administrative expenses:
Salaries and employee benefits			58,420				53,707				47,606
Other			26,921				23,418				21,443
Selling, general and administrative expenses			85,341				77,125				69,049
Depreciation and amortization			2,357				1,931				1,648
(Gain) loss on disposal of property and equipment			(20	)			1				(21	)
Operating income			21,757				20,006				18,404
Interest expense			299				295				466
Other income, net			2,079				275				226
Income before income taxes			23,537				19,986				18,164
Income taxes			8,575				7,594				6,979
Net income		$	14,962			$	12,392			$	11,185
Basic earnings per common share		$	1.41			$	1.12			$	0.97
Diluted earnings per common share		$	1.39			$	1.11			$	0.95
Weighted average shares:
Common shares outstanding			10,612				11,057				11,544
Adjusted common shares — assuming exercise of stock options			10,738				11,197				11,804

See accompanying notes to the consolidated financial statements.

Consolidated Statements of Stockholders’ Equity
Years ended July 31, 2007, 2006 and 2005
(in thousands)

																		Accumulated
										Additional								Other
		Common Stock								Paid-in				Retained				Comprehensive
		Shares				Amount				Capital				Earnings				Income				Total
BALANCE AT JULY 31, 2004			11,435			$	114			$	75,309			$	(7,417	)		$	1,304			$	69,310
Issuance of common stock, including tax benefit of $317			177				2				1,428												1,430
Stock option compensation											459												459
Net income															11,185								11,185
Unrealized foreign currency translation adjustment																			1,512				1,512
Total comprehensive income																							12,697
BALANCE AT JULY 31, 2005			11,612				116				77,196				3,768				2,816				83,896
Issuance of common stock, including tax benefit of $1,044			245				3				2,126												2,129
Stock option compensation											717												717
Treasury stock purchase and retirement			(1,219	)			(13	)			(21,525	)											(21,538	)
Net income															12,392								12,392
Unrealized foreign currency translation adjustment																			1,616				1,616
Total comprehensive income																							14,008
BALANCE AT JULY 31, 2006			10,638				106				58,514				16,160				4,432				79,212
Issuance of common stock, including tax benefit of $142			128				1				1,244												1,245
Stock option compensation											771												771
Treasury stock purchase and retirement			(621	)			(6	)			(14,858	)											(14,864	)
Net income															14,962								14,962
Unrealized foreign currency translation adjustment																			83				83
Total comprehensive income																							15,045
BALANCE AT JULY 31, 2007			10,145			$	101			$	45,671			$	31,122			$	4,515			$	81,409

See accompanying notes to the consolidated financial statements.

DYNAMEX INC.
Consolidated Statements of Cash Flows
Years ended July 31, 2007, 2006 and 2005
(in thousands)

		2007				2006				2005
OPERATING ACTIVITIES
Net income		$	14,962			$	12,392			$	11,185
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,357				1,931				1,648
Amortization of deferred bank financing fees			28				24				59
Provision for losses on accounts receivable			499				695				531
Stock option compensation			771				717				459
Deferred income taxes			3,368				1,716				3,652
Lessor financed leasehold improvements			1,997				—				—
Non-cash rent expense			860				—				—
(Gain) loss on disposal of property and equipment			(19	)			1				(21	)
Changes in current operating assets and liabilities:
Accounts receivable			(6,722	)			(5,417	)			(4,879	)
Prepaids and other current assets			(105	)			(1,377	)			(929	)
Accounts payable and accrued liabilities			6,589				4,837				2,812
Net cash provided by operating activities			24,585				15,519				14,517
INVESTING ACTIVITIES
Purchase of property and equipment			(4,961	)			(2,193	)			(2,423	)
Cash payment for acquisition			—				—				(100	)
Net proceeds from disposal of property and equipment			—				—				28
Purchase of investments			(278	)			(160	)			(358	)
Net cash used in investing activities			(5,239	)			(2,353	)			(2,853	)
FINANCING ACTIVITIES
Principal payments on long-term debt			(5	)			(3	)			(2	)
Net (payments) receipts under line of credit			(900	)			900				(10,000	)
Proceeds from stock option exercise			1,103				1,084				1,113
Tax benefit realized from exercise of stock options			142				1,044				317
Purchase and retirement of treasury stock			(14,864	)			(21,538	)			—
Other assets and deferred financing fees			(1,212	)			(964	)			(2	)
Net cash used in financing activities			(15,736	)			(19,477	)			(8,574	)
EFFECT OF EXCHANGE RATES ON CASH			(811	)			691				661
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			2,799				(5,620	)			3,751
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			6,058				11,678				7,927
CASH AND CASH EQUIVALENTS, END OF YEAR		$	8,857			$	6,058			$	11,678
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest		$	262			$	304			$	506
Cash paid for taxes		$	5,226			$	6,910			$	2,872

See accompanying notes to the consolidated financial statements.

1.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
		Description of business — Dynamex Inc. and Subsidiaries (the “Company” or “Dynamex”) provide 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.
		The operating subsidiaries of the Company, with country of incorporation, are as follows:

	•		Dynamex Operations East Inc. (U.S.)
	•		Dynamex Operations West Inc. (U.S.)
	•		Dynamex Fleet Services, Inc. (U.S.)
	•		Dynamex Franchise Holdings, Inc. (U.S.)
	•		Dynamex Domestic Franchising, Inc. (U.S.)
	•		Dynamex Canada Corp. (Canada)
	•		Dynamex Canada Franchise Holdings, Inc. (Canada)

Principles of consolidation — 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 are stated in thousands of dollars unless otherwise indicated.

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, the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses. Actual results may differ from such estimates. The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance.

Property and equipment — Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets for financial reporting purposes and principally on accelerated methods for tax purposes. Leasehold improvements are depreciated using the straight-line method over their estimated useful lives or the lease term, whichever is shorter. Ordinary maintenance and repairs are charged to expense as incurred. Expenditures that extend the physical or economic life of property and equipment are capitalized. The estimated useful lives of property and equipment are as follows:

Equipment		3-7 years
Software		3-5 years
Furniture		7 years
Vehicles		5 years

The Company periodically reviews property and equipment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation or amortization periods should be accelerated. When any such impairment exists, the related assets will be written down to their fair value.

The Company capitalizes both internal and external costs of developing or obtaining computer software for internal use. Costs incurred to develop internal-use software during the application development stage are capitalized, while data conversion, training and maintenance costs associated with internal-use software are expensed as incurred. As of July 31, 2007 and 2006, the net book value of capitalized software costs was $2,291 and $2,141, respectively. Amortization expense related to capitalized software was $737, $626 and $414 in fiscal years 2007, 2006 and 2005, respectively.

Business and credit concentrations — Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables.

The Company places its temporary cash investments with high-credit, quality financial institutions. At times such amounts may exceed F.D.I.C. limits. The Company limits the amount of credit exposure with any one financial institution and believes no significant concentration of credit risk exists with respect to cash investments.

The Company’s customers are not concentrated in any specific geographic region or industry. During the years ended July 31, 2007, 2006 and 2005, sales to Office Depot, Inc. represented approximately 14.2%, 10.6% and 9.8%, respectively, of the Company’s revenue. Sales to the Company’s five largest customers, including Office Depot, represented approximately 28%, 25% and 24% of the Company’s consolidated sales for the year ended July 31, 2007, 2006 and 2005, respectively.

A significant number of the Company’s customers are located in Canada. For the fiscal years ended July 31, 2007, 2006 and 2005, approximately 38%, 36% and 33% of the Company’s sales, respectively, were generated in Canada. See Note 14 of Notes to the Consolidated Financial Statements for additional information concerning the Company’s foreign operations.

Office Depot represented approximately 10.5% of the net accounts receivable at July 31, 2007 compared to 13% at July 31, 2006. There were no other significant accounts receivable from a single customer. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Goodwill and intangibles — Intangibles arise from acquisitions accounted for as purchased business combinations and include goodwill, covenants not-to-compete and other identifiable intangibles and from the payment of financing costs associated with the Company’s credit facility. Goodwill represents the excess purchase price over all tangible and identifiable intangible net assets acquired. Effective August 1, 2001 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”) which requires, among other things, that companies no longer amortize goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. The Company conducts on at least an annual basis a review of its reporting units to determine whether their carrying value exceeds their market value and, if so, performs a detailed analysis of the reporting unit’s assets and liabilities to determine whether the goodwill is impaired. The Company performed its goodwill impairment test as of the first day of the fourth quarter of fiscal 2007. Based on this test, no impairment was indicated. Other intangible assets are being amortized over periods ranging from 3 to 25 years. Deferred bank financing fees are amortized over the term of the related credit facility. Amortization of deferred financing fees is classified as interest expense in the consolidated statement of operations. Aggregate amortization expense during the years ended July 31, 2007, 2006 and 2005 totaled $32, $76 and $34, respectively. Estimated amortization expense for the succeeding five fiscal years is approximately $42 for the year 2008, and $19 thereafter.

Revenue recognition — Revenues are recognized when services are rendered to customers, that is, primarily when the pickup and delivery is complete. There may be a time lag between the completion of the service and the generation of an invoice. Accordingly, unbilled revenue is recognized for those shipments that have been completed but have not been invoiced.

Cash and cash equivalents — The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Allowance for doubtful accounts — The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make payments when due or within a reasonable period of time thereafter. Estimates are used in determining this allowance based on the Company’s historical collection experience, current trends, credit policy and aging category. If the financial condition of the Company’s customers were to deteriorate, thus impairing their ability to make required payments, additional allowances may be required. The Company’s allowance at July 31, 2007 is approximately 2.0% of outstanding accounts receivable compared to approximately 1.8% at July 31, 2006.

Financial instruments — Carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. Long-term debt consists primarily of variable rate borrowings under the bank credit agreement. The carrying

value of these borrowings approximates fair value.

Financing costs — During the fiscal years ended July 31, 2007, 2006, and 2005, the Company capitalized $3, $3 and $2, respectively of costs incurred in connection with debt financings and amendments (See Note 6 of Notes to the Consolidated Financial Statements). These costs are being amortized over the terms of the respective financings and are included in interest expense. The amounts of amortization and the write-off of previous deferred financing costs were $32 in 2007, $24 in 2006 and $59 in 2005.

Other assets — Recoverable contract contingency costs — The Company has recorded as an Other Asset certain costs related to contractually reimbursable contingency costs incurred in connection with the launch of certain contracts in accordance with EITF 99-5, “Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements,” These costs will be recovered during the initial contract term, from a designated portion of the unit price specified in the contract. Should the contract be cancelled for any reason, the customer is obligated to reimburse the Company for any unamortized balance. Total recoverable contract contingency costs capitalized at July 31, 2007 and 2006 amount to $1,381 and $581, respectively.

Other long-term liabilities — During July 2006 the Company entered into a new lease for its U.S. corporate headquarters. This lease agreement contains tenant improvement allowances and rent escalation clauses. The Company recognizes a deferred rent liability for tenant improvement allowances within other long-term liabilities and amortizes these amounts over the term of the lease as a reduction of rent expense. For scheduled rent escalation clauses during the lease term, the Company records rental expense on a straight-line basis over the term of the lease.

Self-insured claims liability — The Company is primarily self-insured for U.S. workers’ compensation and vehicle liability claims. A liability for unpaid claims and the associated claim expenses, including incurred but unreported losses, are recorded based on the Company’s estimates of the aggregate liability for claims incurred. The Company’s estimates are based on actual experience and historical assumptions of development of unpaid liabilities over time. Factors affecting the determination of amounts to be accrued for claims include, but are not limited to, cost, frequency, or payment patterns resulting from new types of claims, the hazard level of our operations, tort reform or other legislative changes, unfavorable jury decisions, court interpretations, changes in the medical conditions of claimants and economic factors such as inflation. The method of calculating the estimated accrued liability for claims is subject to inherent uncertainty. If actual results are less favorable than what are used to calculate the accrued liability, the Company would have to record expenses in excess of what has already been accrued.

Effective July 1, 2005 the Company elected to become primarily self-insured for vehicle liability claims. The Company estimates its liability for claims in a manner similar to workers’ compensation claims.

Income taxes — Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of assets and liabilities for financial and income tax reporting. The net deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

Stock-based compensation — Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”) requires the measurement and recording of all share-based payments to employees, including grants of stock options, be determined using a fair-value-based method. The accounting provisions of SFAS No. 123R were adopted by the Company effective August 1, 2005.

Prior to the effective date of SFAS No. 123(R), Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) encouraged but did not require companies to record compensation cost for stock based employee compensation plans at fair value. Effective August 1, 2003, the Company elected to adopt the fair value recognition provisions of SFAS No. 123 for stock-based employee compensation. Under the modified prospective method of adoption selected by the Company, stock-based employee compensation cost recognized in 2006, 2005 and 2004 was the same as that which would have been recognized had the fair value recognition provisions of SFAS No. 123(R) been applied to all awards granted after August 1, 1995.

The fair value of each grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2007, 2006, and 2005, respectively: dividend yield of 0% for all years; expected volatility of 44%, 51%, and 70%; risk-free interest rate of 4.6%, 4.3%, and 4.2%, and expected lives of an average of 5.3 years for options granted to employees and of 7.7 years for options granted to non-employee directors for all years. The weighted average grant-date fair value of stock options granted during the years 2007, 2006 and 2005 was $11.97, $8.82 and $10.02, respectively.

As discussed in Note 10 of Notes to the Consolidated Financial Statements, option expense in 2007, 2006 and 2005 amounted to $771, $717 and $459, respectively, under the fair value approach. Based on the outstanding and unvested awards as of July 31, 2007, the anticipated effect on net income for fiscal 2008, net of taxes, will be approximately $530.

Net income per share — Basic net income per common share is based on the weighted average number of common shares outstanding during the period. Diluted net income per common share is based on the weighted average common shares outstanding and all potentially dilutive common shares outstanding during the period determined using the treasury stock method. Diluted earnings per share reflect the potential dilution that could occur if outstanding stock options were exercised, that would then share in the earnings of the Company. Outstanding options to purchase 8, 20 and 10 shares of common stock at July 31, 2007, 2006 and 2005, respectively, were not included in the computation of net income per share as their effect would be antidilutive. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares.

Foreign currency translation — Assets and liabilities in foreign currencies are translated into U.S. dollars at the rates in effect at the balance sheet date. Revenues and expenses are translated at average rates during the year. The net exchange differences resulting from these translations are recorded in stockholders’ equity. Where amounts denominated in a foreign currency are converted into dollars by remittance or repayment, the realized exchange differences are included in the Consolidated Statement of Operations.

Treasury stock acquired and retired — Treasury stock is recorded at cost. Delaware law permits treasury shares to be retired when appropriately authorized by the Board of Directors, and the Company has retired such shares by appropriate reductions in the value of common stock and additional paid-in capital.

New accounting pronouncements — In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes,” (FIN 48) that provides guidance on the accounting for uncertainty in income taxes recognized in financial statements. The Company will adopt FIN 48 on August 1, 2007. We are currently evaluating the impact of adopting FIN 48; however, we do not expect the adoption of this provision to have a material effect on our financial position, results of operations or cash flows.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108 in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB No. 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The Company believes the adoption of SAB No. 108 had no material impact on its consolidated financial statements.

In September 2006, the FASB issued Statement No. 157 (“SFAS 157”), “Fair Value Measurement,” This Statement establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. While SFAS 157 does not require any new value measurements, it may change the application of fair value measurements embodied in other accounting standards. SFAS 157 will be effective at the beginning of the Company’s 2008 fiscal year. The Company is currently assessing the effect of this pronouncement, but does not expect the impact on our consolidated financial statements to be material.

In February 2007, the FASB issued Statement No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No 115.” This Statement permits an entity to choose to measure many financial instruments and certain other items at fair value. A business entity will report unrealized gains and losses on items for which the fair value option has been elected

in earnings. The fair value option (a) may be applied instrument by instrument, (b) is irrevocable, and (c) is applied to entire instruments and not to portions of instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company believes the adoption of SFAS No. 159 will have no material impact on its consolidated financial statements.

Reclassification — Certain reclassifications have been made to conform prior year data to the current presentation.

2.		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 antidilutive to earnings per share.

		Years Ended July 31,
		2007				2006				2005
Net income		$	14,962			$	12,392			$	11,185
Weighted average common shares outstanding			10,612				11,057				11,544
Common share equivalents related to options			126				140				260
Common shares and common share equivalents			10,738				11,197				11,804
Basic earnings per common share		$	1.41			$	1.12			$	0.97
Diluted earnings per common share		$	1.39			$	1.11			$	0.95

3.		INTANGIBLES
		Intangibles consist of the following:

		July 31,
		2007				2006
Carrying amount:
Deferred bank financing fees		$	132			$	129
Customer lists			92				80
Trademarks			470				470
			694				679
Less accumulated amortization:
Deferred bank financing fees			(123	)			(95	)
Customer lists			(78	)			(45	)
Trademarks			(167	)			(149	)
			(368	)			(289	)
Intangibles — net		$	326			$	390