DYNAMEX INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------

FORM 10-K

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

FOR THE FISCAL YEAR ENDED JULY 31, 2002

OR

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

COMMISSION FILE NUMBER: 000-21057

DYNAMEX INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 86-0712225
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

1870 CROWN DRIVE, DALLAS, TEXAS 75234
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(214) 561-7500

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

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 [X] No [ ]

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. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant on October 17, 2002 was approximately $32,500,000.

The number of shares of the registrant's common stock, $.01 par value,
outstanding as of October 17, 2001 was 11,206,817 shares.

DOCUMENTS INCORPORATED BY REFERENCE

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

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TABLE OF CONTENTS

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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. Through its network of branch offices, 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 traditional on-demand delivery services, the
Company offers scheduled 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,
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 a customer's mailroom and call center management.

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 U.S. and Canada
primarily 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 national accounts and centralized administrative and
management information systems.

Management believes that the same-day delivery segment of the
transportation industry is benefiting from several recent 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:

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Focus on Primary Services. The Company provides three primary services: (i)
same-day on-demand delivery services, (ii) same-day scheduled 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, the
Company intends to capitalize on the market trend towards outsourcing
transportation requirements by concentrating its logistics services in same-day
scheduled distribution and fleet management. The delivery transactions in a
fleet management and scheduled distribution program are recurring in nature,
thus creating the potential for long-term customer relationships. Additionally,
these value added services are generally less vulnerable to price competition
than traditional on-demand delivery services.

Target National and Regional Accounts. The Company's national account
managers focus on pursuing and maintaining national and regional accounts. The
Company anticipates that its (i) existing multi-city network of locations
combined with its network of 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 and regional 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, the
largest Canadian overnight courier company, 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. See "--
Sales and Marketing."

Licensing Agreements. While the downturn in the on-demand market has created
challenges for the Company, it has also created opportunities in that Dynamex
has been able to work with certain on-demand competitors that have decided to
exit the business and turned to Dynamex as an exit strategy. Through the use of
licensing agreements under which the Company is granted the exclusive right to
provide same-day ground courier and related services to customers who were
previously receiving these services from the licensor, the Company is able to
expand its market share while offering a seamless integration to the customers
in terms of service and attention. Licensing agreements are a low cost, limited
risk growth strategy that fits with the Company's strategy to grow their
national accounts business and leverage their size to pursue other regional and
national opportunities.

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. 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 continue to raise the yield per delivery relative to the
yield generated from downtown document deliveries. For the fiscal years ended
July 31, 2002, 2001 and 2000, approximately 49%, 55% and 58%, respectively, of
the Company's revenues were generated from on-demand same-day delivery services.

Same-Day Scheduled Distribution. The Company provides same-day scheduled
distribution services for time-sensitive local deliveries. Scheduled
distribution services 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 the scheduled
drivers 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

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specified locations. Same-day scheduled distribution services are provided on
both a local and multi-city basis. For example, in the suburban Washington,
D.C./Baltimore area the Company provides scheduled, as well as on-demand
delivery services for a group of local hospitals and medical laboratories,
transferring samples between these facilities. 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, 2002, 2001 and 2000, approximately 25%, 21% and 19%,
respectively, of the Company's revenues 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 along with the customer's needs.
Management believes that the trend toward outsourcing has resulted in many
customers reducing their reliance on in-house transportation departments and
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 created to maximize efficiencies in transporting,
sorting and delivering customers' products on a local and multi-city basis.
Because the Company generally does not own vehicles but instead hires 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 example, the Company has configured and now
manages a distribution fleet for one of the largest distributors to drugstores
in Canada. For the fiscal years ended July 31, 2002, 2001 and 2000,
approximately 26%, 24% and 23%, respectively, of the Company's revenues were
generated from fleet management and other outsourcing services.

While the volume and profitability of each service provided varies
significantly from branch office to branch office, each of the Company's branch
offices generally offers the same core services. Factors, which impact the
business mix per branch, 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 two U.S. regions and one Canadian
region, with each of the Company's approximately 40 branches assigned to the
appropriate region. Branch operations are locally managed with regional and
national oversight and support provided as necessary. A branch manager is
assigned to each branch office and is accountable for all aspects of such branch
operations including its profitability. Each branch manager reports to a
regional manager with similar responsibilities for all branches within his
region. Certain administrative and marketing functions may be centralized for
multiple branches in a given city or region. Dynamex believes that the strong
operational background of its senior management is important to building brand
identity throughout the United States while simultaneously overseeing and
encouraging individual managers to be successful in their local markets.

Same-Day On-Demand Delivery. Most branches have operations centers 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, page specific drivers, 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

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deployment of delivery personnel for on-demand deliveries is accomplished either
through communications systems linked to the Company's computers, through pagers
or by radio.

Same-Day Scheduled Distribution. A dispatcher coordinates and assigns
scheduled deliveries to the drivers and manages the delivery flow. 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 at a third-party facility such as the
airport.

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 branch level based
on the distance, weight and time-sensitivity of a particular delivery. The
Company generally enters into customer contracts for scheduled 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 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 reducing
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 Company's national sales
force, comprised of approximately 12 persons, includes product specialists
dedicated to specific services, such as fleet management. Additionally, some of
these specialists have developed expertise in servicing certain industries such
as banks and telecommunications companies. Approximately 95 local employee sales
representatives target business opportunities from the branch offices and
approximately 10 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 by the Company's
specialized sales force 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 that weigh from one to seventy pounds to multiple locations.
The primary industries served by the Company include financial services,
electronics,

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pharmaceuticals, medical laboratories and hospitals, auto parts, legal services
and Canadian governmental agencies. Management believes that for the fiscal year
ended July 31, 2002, no single industry accounted for more than 10% of the
Company's annual revenues. A significant number of the Company's customers are
located in Canada. For the fiscal years ended July 31, 2002, 2001 and 2000,
approximately 33%, 34% and 33% of the Company's revenues, respectively, were
generated in Canada. See Note 14 of Notes to 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 become more 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, is
attractive to drivers and helps 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
United States 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, driver logbooks and workers'
compensation. 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 Company's drivers are involved in accidents. The
Company carries liability insurance with a per claim and an aggregate limit of
$20 million. 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 $35,000 to $75,000). 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. In addition, where required by
applicable law, the Company requires prospective drivers to take a physical
examination and to pass a drug test. Branch managers are responsible for
training drivers on any additional safety requirements as dictated by customer
specifications.

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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 preventing the Company from
using the trademark in certain locations.

EMPLOYEES

At October 1, 2002, the Company had approximately 3,200 employees, of whom
approximately 1,500 primarily were employed in various management, supervisory,
administrative, and other corporate positions and approximately 1,700 were
employed as drivers, messengers and mailroom workers. Additionally at October 1,
2002, the Company had contracts with approximately 3,400 independent
owner-operator drivers. Management believes that the Company's relationship with
such employees and independent owner-operators is good. See "Risk Factors --
Certain Tax Matters Related to Drivers."

Of the approximately 4,600 drivers and messengers used by the Company as of
October 1, 2002, approximately 1,600 are located in Canada and approximately
3,000 are located in the U.S. Although the drivers and messengers located in
Canada are generally independent contractors, approximately 72% 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.

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.

Acquisition Strategy; Possible Need for Additional Financing

The Company completed its last acquisition in August 1998. Currently, there
are no pending nor are there any contemplated acquisitions. Should the Company
pursue acquisitions in the future, the Company 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. Additionally, the Company must
obtain the consent of its primary lenders to consummate any acquisition. There
can be no assurance that the Company's primary lenders will consent to such
acquisitions or that if additional financing is necessary, it can be obtained on
terms the Company deems acceptable. As a result, the Company might be unable to
successfully implement its acquisition strategy. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Highly Competitive Industry

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

Claims Exposure

As of October 1, 2002, the Company utilized the services of approximately
4,600 drivers and messengers. From time to time such persons are involved in
accidents or other activities that may give rise to liability claims. The
Company currently carries liability insurance with a per claim and an aggregate
limit of $20 million. Owner-operators are required to maintain liability
insurance of at least the minimum amounts required by applicable state or
provincial law (generally such minimum requirements range from $35,000 to
$75,000). The Company also has insurance policies covering property and
fiduciary

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trust liability, which coverage includes all drivers and messengers. There can
be no assurance that claims against the Company, whether under the liability
insurance or the surety bonds, will not exceed the applicable amount of
coverage, that the Company's insurer will be solvent at the time of settlement
of an insured claim, or that the Company will be able to obtain insurance at
acceptable levels and costs in the future. If the Company were to experience a
material increase in the frequency or severity of accidents, liability claims,
workers' compensation claims or unfavorable resolutions of claims, the Company's
business, financial condition and results of operations could be materially
adversely affected. In addition, significant increases in insurance costs could
reduce the Company's profitability.

Certain Tax Matters Related to Drivers

Substantially all of the Company's drivers own their own vehicles and as of
October 1, 2002, approximately 74% of these owner-operators were independent
contractors as opposed to employees of the Company. The Company does not pay or
withhold any federal, state or provincial employment tax with respect to or on
behalf of independent contractors. From time to time, taxing authorities in the
U.S. and Canada have sought to assert that independent owner-operators in the
transportation industry, including those utilized by the Company, are employees,
rather than independent contractors. The Company believes that the independent
owner-operators utilized by the Company are not employees under existing
interpretations of federal (U.S. and Canadian), state and provincial laws.
However, there can be no assurance that federal (U.S. and Canadian), state or
provincial authorities will not challenge this position, or that other laws or
regulations, including tax laws, or interpretations thereof, will not change.
If, as a result of any of the foregoing, the Company were required to pay
withholding taxes and pay for and administer added employee benefits to these
drivers, the Company's operating costs would increase. Additionally, if the
Company is required to pay back-up withholding with respect to amounts
previously paid to such drivers, it may also be required to pay penalties or be
subject to other liabilities as a result of incorrect classification of such
drivers. If the drivers are deemed to be employees rather than independent
contractors, then the Company may be required to increase their compensation
since they will no longer be receiving commission-based compensation. Any of the
foregoing circumstances could have a material adverse impact on the Company's
financial condition and results of operations, and/or to restate financial
information from prior periods. See "Business -- Services" and "-- Employees."

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

Foreign Exchange

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 Canadian dollar is the
functional currency for the Company's Canadian operations; therefore, any change
in the exchange rate will affect the Company's reported revenues for such
period. The Company historically has not entered into hedging transactions with
respect to its foreign currency exposure, but may do so in the future. There can
be no assurance that fluctuations in foreign currency exchange rates will not
have a material adverse effect on the Company's business, financial condition or
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 14 of Notes to Consolidated
Financial Statements.

Permits and Licensing

Although recent legislation has significantly deregulated certain aspects of
the transportation industry, the Company's 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. Failure by the Company to maintain required certificates, permits
or licenses, or to comply with applicable laws, ordinances or regulations could
result in substantial fines or possible revocation of the Company's authority to
conduct certain of its operations. Furthermore, delays in obtaining approvals
for the transfer or grant of certificates, permits or licenses, or failure to
obtain such approvals, could

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impede the implementation of the Company's acquisition program. See "Business --
Regulation."

Dependence on Key Personnel

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

Risks Associated with the Local Delivery Industry; General Economic Conditions

The Company's sales and earnings are especially sensitive to events that
affect the delivery services industry including extreme weather conditions,
economic factors affecting the Company's significant customers and shortages of
or disputes with labor, any of which could result in the Company's inability to
service its clients effectively or the inability of the Company to profitably
manage its operations. In addition, downturns in the level of general economic
activity and employment in the U.S. or Canada may negatively impact demand for
the Company's services. The Company's sales were negatively impacted by a
slowdown in the economy during the years ended July 31, 2001 and 2002. The
terrorist attacks in the United States on September 11, 2001, and the U.S.
response to such attacks, also negatively impacted the Company's sales during
the year ended July 31, 2002.

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

Dependence on Availability of Qualified Courier Personnel

The Company is dependent upon its ability to attract, train and retain, as
employees or through independent contractor or other arrangements, qualified
courier personnel who possess the skills and experience necessary to meet the
needs of its operations. The Company competes in markets in which unemployment
is relatively low and the competition for couriers and other employees is
intense. The Company must continually evaluate, train and upgrade its pool of
available couriers to keep pace with demands for delivery services. There can be
no assurance that qualified courier personnel will continue to be available in
sufficient numbers and on terms acceptable to the Company. The inability to
attract and retain qualified courier personnel could have a material adverse
impact on the Company's business, financial condition and results of operations.

Volatility of Stock Price

Prices for the Company's common stock will be determined in the marketplace
and may be influenced by many factors, including the depth and liquidity of the
market for the common stock, investor perception of the Company and general
economic and market conditions. Variations in the Company's operating results,
general trends in the industry and other factors could cause the market price of
the 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 the 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 the common stock could be affected by such
fluctuations.

8

ITEM 2. PROPERTIES

The Company leases facilities in 61 locations. These facilities are
principally used for operations and general and administrative functions. The
chart below summarizes the locations of facilities that the Company leases:

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. The
Company's facilities rental expense for the fiscal years ended July 31, 2002,
2001 and 2000 were approximately $4.7, $4.9 and $4.5 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

In November and December 1998, two class action lawsuits were filed in the
United States District Court for the Northern District of Texas, naming the
Company, Richard K. McClelland, the Company's Chief Executive Officer, and
Robert P. Capps, the Company's former Chief Financial Officer, as defendants.
The lawsuits arose from the Company's

9

November 2, 1998 announcement that the Company was (i) revising its results of
operations for the year ended July 31, 1998 from that which had been previously
announced on September 16, 1998 and (ii) restating its results of operations for
the third quarter of fiscal 1998 from that which had been previously reported.
On February 5, 1999, the Court entered an Order consolidating the actions and
approved the selection of three law firms as co-lead counsel. A consolidated and
amended complaint was filed on March 22, 1999. In addition to the defendants
named in the original complaints, the amended complaint also named as defendants
the underwriters of the Company's May 1998 secondary offering of common stock,
Schroder & Co., Inc., William Blair & Company, and Hoak Breedlove Wesneski & Co.
(the "Underwriter Defendants"). On May 6, 1999, defendants filed a motion to
dismiss the consolidated and amended complaint in its entirety.

On June 14, 1999, the Company issued a press release announcing that the
Audit Committee of the Board of Directors had formed a Special Committee of
outside directors to review potentially unsupportable accounting entries for the
third and fourth quarters of fiscal year 1998. On September 17, 1999, the
Company issued a press release announcing that the Special Committee had
completed its review of the Company's financial reporting and that the Company
would restate its previously reported financial results for the fiscal years
1997 and 1998 and the first three quarters of fiscal year 1999.

On October 14, 1999, pursuant to a stipulation of the parties, plaintiffs
filed a second amended class action complaint that added allegations relating to
the information disclosed in the Company's June 14 and September 17, 1999 press
releases. In addition to the defendants named in the amended complaint, the
Second Amended Class Action Complaint named Deloitte & Touche and Deloitte &
Touche LLP (the Court subsequently dismissed Deloitte & Touche LLP without
prejudice pursuant to the stipulation of the parties). The Second Amended Class
Action Complaint alleged that the defendants issued a series of materially false
and misleading statements and omitted material facts concerning the Company's
financial condition and business operations. The lawsuit alleged violations of
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934. The plaintiffs sought
unspecified damages on behalf of all other purchasers of the Company's common
stock during the period of September 18, 1997 through and including September
17, 1999 (the "Class").

On September 20, 2000, the Company, Richard McClelland, Robert Capps and the
Underwriter Defendants signed a memorandum of understanding setting forth the
terms of a proposed settlement of this action. Deloitte & Touche was not a party
to the memorandum of understanding. On December 13, 2000, the Settling Parties
signed a Stipulation of Agreement of Settlement. The settlement provided that
the Company's primary directors and officers liability insurer, American Home
Insurance Company, pay $2 million towards the settlement. In addition, the
Company paid $1 million and contributed one million shares of common stock
towards the proposed settlement. The Company also agreed to pay to the class 75%
of any recoveries, after legal expenses and costs, from the Company's excess
insurer, Reliance Insurance Company, and former auditors, Deloitte & Touche LLP
and Deloitte & Touche. A separate agreement was also reached to settle all
claims by the Company and by plaintiffs in the class action against Deloitte &
Touche LLP and Deloitte & Touche for the total amount of $2.25 million.

On April 10, 2000, Reliance Insurance Company filed a notice of action in
the Superior Court of Justice in Ontario, Canada, seeking a declaratory judgment
that defendants in the shareholder class action were not entitled to
reimbursement under the Reliance insurance policy for losses incurred in
connection with that action. The Reliance policy provided $3 million in excess
coverage to supplement the $2 million in coverage provided to the Company
pursuant to the underlying policy issued by American Home Assurance Company.

Dynamex, Richard McClelland, and Robert Capps filed a complaint in the
United States District court for the Northern District of Texas that named
Reliance Insurance Company as a defendant. The complaint alleged claims for
breach of contract and breach of the duty of good faith and fair dealing arising
from the failure of Reliance to contribute to the settlement of the
above-referenced shareholder litigation. The plaintiffs sought unspecified
damages.

Reliance Insurance Company and Dynamex, Richard McClelland and Robert Capps
signed an agreement to settle their respective claims. Pursuant to the
agreement, in the fourth quarter 2001 Reliance paid $1.9 million to the Company
for the benefit of the Company and the Class.

These settlements were finalized and approved by the Court on June 29, 2001.
As a result of the settlements, the Company recovered $695,000 from Reliance
Insurance Company, Deloitte & Touche LLP and Deloitte & Touche including legal
fees and costs incurred in connection with the Company's claims against these
entities. The amount

10

recovered is reflected in the fiscal 2001 Consolidated Statement of Operations
as a reduction to the Provision for settlement of shareholder litigation. As
explained above, the additional amounts recovered by the Company from Reliance
Insurance Company, Deloitte & Touche LLP and Deloitte & Touche were contributed
to the settlement of the shareholder class action. The Company has satisfied its
obligations under the terms of the settlement by paying $1.0 million in fiscal
2001 and distributing one million shares of common stock during fiscal 2002 to
class members and their counsel.

The Company received informal requests for information from the Staff of the
Securities and Exchange Commission for documents and testimony concerning the
circumstances of the restatement of the Company's prior period financial
statements. In early November 2001, the Company received written notification
from the SEC that the inquiry into the circumstances of the restatements of the
Company's financial statements has been closed with no formal action being
recommended.

The Company is also 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

11

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information -- The Company's common stock is traded on the AMEX under
the symbol "DDN". The following table summarizes the high and low sale prices
per share of common stock for the periods indicated, as reported on the AMEX:

Holders -- As of October 17, 2002, the approximate number of holders of
record of common stock was 442.

Dividends -- The Company has not declared or paid any cash dividends on its
common stock since its inception. The Company intends to retain future earnings
for the operation and expansion of its business and does not anticipate paying
any cash dividend in the foreseeable future. In addition, the Company's Credit
Agreement restricts the payment of dividends. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".

12

ITEM 6. SELECTED FINANCIAL DATA

The following selected historical financial data for the three years ended
July 31, 2002 have been derived from the audited consolidated financial
statements of the Company appearing elsewhere herein. The following selected
historical financial data for the years ended July 31, 1999 and 1998 has been
derived from the consolidated financial statements of the Company not appearing
elsewhere herein. The net impact of $19.3 million related to the FASB Statement
No. 142 goodwill impairment charge has been excluded from the Statements of
Operations Data for the year ended July 31, 2002. The selected financial data
are qualified in the 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
Operations" appearing elsewhere herein.

13

1) EBITDA is defined as income excluding interest, taxes, depreciation and
amortization of goodwill and other assets (as presented on the face of the
income statement). EBITDA is supplementally presented because management
believes that it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness, maintain current operating
levels of fixed assets and acquire additional operations and businesses.
EBITDA should not be considered as a substitute for statement of income or
cash flow data from the Company's financial statements, which have been
prepared in accordance with generally accepted accounting principles. In
addition, the Company's definition of EBITDA may not be identical to
similarly entitled measures used by other companies. Cash flows provided by
operating activities for the three years ended July 31, 2002 were $9,687,
$7,771, and $8,162 respectively. Cash flows used in investing activities for
the three years ended July 31, 2002 were $1,350, $2,736, and $3,185
respectively. Cash flows used in financing activities for the three years
ended July 31, 2002 were $12,287, $2,423, and $2,280 respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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 Operations 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

In May 1995, the Company acquired Dynamex Express, the ground courier
operations of Air Canada ("Dynamex Express"), which was led by Richard K.
McClelland, the Company's Chief Executive Officer, and which had a national
network of 20 locations across Canada. In December 1995, the Company acquired
the on-demand ground courier operations of Mayne Nickless Incorporated and Mayne
Nickless Canada Inc. which had operations in eight U.S. cities and two Canadian
cities. In August 1996 in conjunction with its initial public offering ("IPO"),
the Company acquired five same-day delivery businesses in three U.S. and two
Canadian cities. Subsequent to the IPO and through July 31, 1997, the Company
acquired 11 same-day delivery businesses in six U.S. and two Canadian cities.
Between August 1, 1997 and July 31, 1998, the Company acquired nine same-day
delivery businesses in eight U.S. cities and one Canadian city. In August 1998,
the Company acquired two same-day delivery businesses in two U.S. cities. As a
result of these various acquisitions, the historical operating results of the
Company for the periods prior to fiscal 1999 are not necessarily comparable.

Sales consist primarily of charges to customers for individual delivery
services and weekly or monthly charges for recurring services, such as fleet
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 and third party delivery charges,
if any. Substantially all of the drivers used by the Company own their own
vehicles, and approximately 74% of these owner-operators are independent
contractors as opposed to employees of the Company. Drivers and messengers are
generally compensated based on a percentage of the delivery charge.
Consequently, the Company's driver and messenger costs are variable in nature.
To the extent that the drivers and messengers are employees of the Company,
employee benefit costs related to them, such as payroll taxes and insurance, are
also included in cost of sales.

Selling, general and administrative expenses include costs incurred at the
branch level related to taking orders and dispatching drivers and messengers, as
well as administrative costs related to such functions. Also included in
selling, general and administrative expenses are regional and corporate level
marketing and administrative costs and occupancy costs related to branch and
corporate locations.

Generally, the Company's on-demand services provide higher gross profit
margins than do scheduled distribution or fleet management services because
driver compensation for on-demand services is generally lower as a percentage of
sales

14

from such services. However, scheduled distribution and fleet management
services generally have fewer administrative requirements related to order
taking, dispatching drivers and billing. As a result of these variances, the
Company's margins are dependent in part on the mix of business for a particular
period.

As the Company has no significant investment in transportation equipment,
depreciation and amortization expense primarily relates to depreciation of
office, communication and computer equipment and the amortization of intangible
assets acquired in the Company's various acquisitions, each of which has been
accounted for using the purchase method of accounting. Effective August 2001,
the Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 142 requires,
among other things, that companies no longer amortize goodwill, but instead test
goodwill for impairment at least annually. In addition, SFAS No. 142 requires
that the Company identify reporting units for the purposes of assessing
potential future impairments of goodwill. The Company completed its goodwill
impairment analysis during the fourth quarter of fiscal 2002 and recognized a
transitional goodwill impairment loss related to its United States operations of
$30.0 million and recorded the charge net of $10.7 million of deferred tax
benefits as the cumulative effect of a change in accounting principle in the
Consolidated Statement of Operations. The valuations performed as part of the
analysis employed a combination of present value techniques to measure fair
value corroborated by comparisons to estimated market multiples. Third party
specialists were engaged to assist in the valuations. As required by SFAS No.
142, the charge was recorded in the first quarter of fiscal year 2002.

A significant portion of the Company's revenues is generated in Canada. For
the fiscal years ended July 31, 2002, 2001 and 2000, approximately 33%, 34%, and
33%, respectively, of the Company's revenues 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 very
similar. Consequently, when expressed as a percentage of U.S. or Canadian sales,
as appropriate, the operating profit generated in each such country (before
deduction of corporate costs) is not materially different.

The conversion rate between the U.S. dollar and Canadian dollar decreased
during the fiscal year ending July 31, 2002 compared to July 31, 2001 and during
the fiscal year ending July 31, 2001 compared to July 31, 2000. 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 revenues. The
effect of these changes on the Company's net income (loss) for the fiscal years
ended July 31, 2002, 2001 and 2000 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 adverse 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 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.

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 SFAS No 142 which requires, among other
things, that companies no longer amortize goodwill. Amortization of goodwill
totaled $3.6 million in each of the years ended July 31, 2001 and 2000. Other
intangible assets are being amortized over periods ranging from 3 to 25 years.

Self-Insured Claims Liability. We retain the risk of loss for workers'
compensation 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. These
estimates include the Company's actual experience based on information received
from the Company's insurance carrier and historical assumptions of development
of unpaid liabilities over time. Factors affecting the determination of amounts
to be accrued for workers' compensation 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

15

of claimants and economic factors such as inflation The method of calculating
the estimated accrued liability for workers' compensation claims is subject to
inherent uncertainty. If actual results are less favorable than what are used to
calculate the accrued liability, we 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.

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. The following table excludes a non-cash foreign currency translation loss
of $0.7 million related to the Canadian tax restructuring and the net impact of
$19.3 million related to the SFAS No. 142 goodwill impairment charge for the
period ended July 31, 2002, a recovery of $0.7 million and gains on sales of
surplus radio licenses of $0.4 million for the period ended July 31, 2001 and
expense of $2.3 million related to the settlement of the shareholder
class-action lawsuit for the period ended July 31, 2000. Due to the adoption of
SFAS No. 142, there was no goodwill amortization during the year ended July 31,
2002. During each of the years ended July 31, 2001 and 2000, the Company
recorded $3.6 million in goodwill amortization.

(a) Excludes foreign currency translation loss, litigation settlement,
non-recurring and unusual charges and adjustments described in the paragraph
above.

YEAR ENDED JULY 31, 2002 COMPARED TO YEAR ENDED JULY 31, 2001

The net loss for the year ended July 31, 2002 was $16.3 million compared to
net income of $2.0 million for the year ended July 31, 2001. The net loss for
2002 includes a non-cash after-tax adjustment of $19.3 million to adjust the
carrying value of goodwill to fair market value in accordance with SFAS No. 142
as well as one-time charges totaling $1.2 million associated with restructuring
Canadian operations. Net income for 2001 includes other income of approximately
$0.7 million related to the settlement of claims related to the shareholder
class-action lawsuit and gains on sales of surplus radio licenses of $0.4
million. The following discussion and analysis excludes the aforementioned
goodwill impairment, non-recurring and unusual charges and adjustments.

Sales for the year ended July 31, 2002 were $236 million compared to $249
million in 2001, a decline of approximately 5.4%. The decline is attributable to
a number of factors. First, the economic slowdown in the U.S. and Canada that
began during the second half of fiscal 2001 continued and had a negative impact
on sales in 2002, primarily

16

on-demand services. Second, the decline in the exchange rate between the U.S.
and Canadian dollar had the effect of reducing sales by slightly over $2.4
million had the exchange rate been the same as the prior year. Third, the phase
out of a contract with a single customer negatively impacted sales by
approximately $1.2 million during 2002, and sales growth for the fiscal year
2003 will be negatively impacted by approximately $4 million of sales to this
customer. While the Company is disappointed in the loss of this contract, a
large portion of the services provided is not part of the Company's core
competencies.

Cost of sales decreased $7.0 million (4.0%) to $166 million in 2002
compared to $173 million in the prior year. As a percentage of sales, cost of
sales increased from 69.3% in 2001 to 70.3% in 2002. This increase in cost is
primarily attributable to a change in the overall business mix of the Company.
On-demand sales were approximately 55% of total sales in fiscal year 2001
compared to 49% in fiscal year 2002. Scheduled and distribution and other
specialized service revenues increased as a percentage of total sales while
on-demand revenues have declined both as percentage of sales and in absolute
dollars. Historically on-demand revenues have lower cost of sales and higher
selling, general and administrative costs compared to scheduled and distribution
and other specialized service revenues. As a result of this change in business
mix, cost of sales has increased as a percentage of sales while selling, general
and administrative ("SG & A") costs have declined as a percentage of sales.

SG & A costs were $57 million for the fiscal year ended July 31, 2002
compared to $61 million for the year ended July 31, 2001. As a percentage of
sales, SG & A expenses decreased from 24.4% in 2001 to 24.1% in 2002. The
decline from 2001 to 2002 is attributable to a number of factors. Compensation
and employee benefits declined $2.1 million as a result of the change in the
business mix that requires fewer personnel in the dispatch and customer service
areas, as well as lower administrative salaries due to fewer personnel. Through
on-going cost reduction initiatives, the Company has eliminated approximately
$1.2 million of non-essential employee related costs including travel and
entertainment, as well as reductions of over $900,000 of communication,
occupancy and other office costs. Management anticipates that SG & A costs as a
percentage of sales for fiscal 2003 will remain at or slightly below current
levels.

Depreciation and amortization was $3.0 million in 2002 compared to $7.4
million in the prior year. This decrease is primarily attributable to the
adoption of SFAS No. 142 ($3.6 million), which requires that companies no longer
amortize goodwill, and the reduction in amortization of covenants not-to-compete
that are fully amortized after three years ($0.8 million). Most of the Company's
acquisitions occurred in fiscal years 1996 through 1998, therefore, all
covenants were fully amortized in fiscal 2001 and prior years.

Interest expense decreased $2.1 million or 41% in the fiscal year ended
July 31, 2002 compared to 2001. This decrease is primarily attributable to a
lower level of debt in 2002 and lower interest rates compared to the prior year.

YEAR ENDED JULY 31, 2001 COMPARED TO YEAR ENDED JULY 31, 2000

Net income for the year ended July 31, 2001 was $2.0 million compared to a
net loss of $3.4 million for the year ended July 31, 2000. Net income for 2001
includes other income of approximately $0.7 million related to the settlement of
claims related to the shareholder class-action lawsuit and gains on sales of
surplus radio licenses of $0.4 million. The results for 2000 include a provision
for the settlement of the shareholder class-action lawsuit of $2.3 million. The
Company also provided a 100% valuation allowance of approximately $2.4 million
for federal net operating losses and the shareholder class action lawsuit
settlement incurred in the fiscal year ended July 31, 2000. The following
discussion and analysis excludes the aforementioned non-recurring and unusual
charges and adjustments.

Sales for the year ended July 31, 2001 were $249 million compared to $251
million in 2000, a decline of less than 1%. The decline is attributable to a
number of factors. First, the Company exited approximately $4 million of
marginally profitable business in several locations in Canada at the beginning
of fiscal year 2001. Second, the economic slowdown in the U.S. negatively
impacted U.S. sales in 2001, primarily in the third and fourth quarters of the
fiscal year. Third, the decline in the exchange rate between the U.S. and
Canadian dollar had the effect of reducing sales by slightly over $3 million had
the exchange rate been the same as the prior year.

Cost of sales increased $1.2 million (0.7%) to $173 million in 2001
compared to $172 million in the prior year. As a percentage of sales, cost of
sales increased from 68.3% in 2000 to 69.3% in 2001. This increase in cost is
primarily attributable to a change in the overall business mix of the Company.
On-demand sales were approximately 58% of total sales in fiscal year 2000
compared to 55% in fiscal year 2001. Scheduled and distribution and other
specialized service

17

revenues increased as a percentage of total sales while on-demand revenues have
declined both as percentage of sales and in absolute dollars. Historically
on-demand revenues have lower cost of sales and higher selling, general and
administrative costs compared to scheduled and distribution and other
specialized service revenues. As a result of this change in business mix, cost
of sales has increased as a percentage of sales while SG & A costs have declined
as a percentage of sales.

SG & A costs were $61 million for the fiscal year ended July 31, 2001
compared to $64 million for the year ended July 31, 2000. As a percentage of
sales, SG & A expenses decreased from 25.6% in 2000 to 24.4% in 2001. The
decline from 2000 to 2001 is attributable to a number of factors. Sales
commissions were lower ($0.5 million) in the current year due to a decline in
new sales that was due, in large part, to the slowing U.S. economy in 2001. The
Dallas and Chicago branch operations were restructured along with cost saving
initiatives at other locations resulting in reduced administrative costs ($0.8
million) and improved profitability. In the prior year, the Company incurred
contract accounting labor costs ($0.9 million) associated with the audit of
fiscal year 1999 and the re-audit of fiscal years 1998 and 1997. Legal and other
professional fees associated with the class action lawsuit were substantially
less ($0.7 million) than the prior year because of the settlement announced
early in fiscal year 2001. The consolidation of certain administrative functions
including billing and collections resulted in reduced employee-related costs in
fiscal year 2001. In the prior year, the Company also invested more heavily in
technology in building its infrastructure.

Depreciation and amortization was $7.4 million in 2001 compared to $8.9
million in the prior year. This decrease is attributable to the reduction in
amortization of covenants not-to-compete that are fully amortized after three
years and to a reduction in depreciation of property and equipment. Most of the
Company's acquisitions occurred in fiscal years 1996 through 1998, therefore,
all covenants were fully amortized prior to or during the current fiscal year.
In addition certain property and equipment acquired through acquisitions has
been fully depreciated and has not been replaced with new equipment because the
old equipment is still in service. Also the Company has or will replace driver
communication equipment with two-way mobile data units that do not require an
up-front capital expenditure by the Company.

Interest expense decreased $0.7 million or 12% in the fiscal year ended
July 31, 2001 compared to 2000. This decrease is primarily attributable to a
lower level of debt in 2001 and lower interest rates in the fourth quarter of
2001 compared to the prior year. In the prior year fourth quarter, the bank
group imposed the default rate of interest in accordance with the bank credit
agreement because the Company did not have audited financial statements on file
with the Securities and Exchange Commission for the prior three years. Also in
the prior year fourth quarter, the Company was assessed special fees by the bank
group of approximately $200,000.

LIQUIDITY AND CAPITAL RESOURCES

In fiscal years ended July 31, 2002, 2001 and 2000, the Company's capital
needs arose primarily from its capital expenditures and working capital needs.
There were no acquisitions made in fiscal year 2002, 2001 or 2000.

As of July 31, 2001, the Company's bank credit agreement consisted of an
amortizing term loan of $32.2 million and a revolving credit facility of $19.5
million due November 30, 2001. On November 9, 2001, the Company amended its bank
credit agreement. Under the terms of the Third Amended and Restated Credit
Agreement, the Company prepaid $5 million of the amortizing term loan from
available cash and the facility was extended through February 28, 2003. The
revolving credit facility is governed by an eligible accounts receivable
borrowing base agreement, defined as 80% of accounts receivable less than 60
days past due. Required principal payments on the amortizing term loan consist
of $1.375 million quarterly, until maturity, at which time any amounts
outstanding under the facility are due. Interest on outstanding borrowings is
payable monthly at prime plus 0.50% or LIBOR plus 3.50%. In addition, the
Company is required to pay a commitment fee of 0.50% for any unused amounts of
the revolving credit facility. Effective September 27, 2002, the credit
agreement was amended to extend the maturity date to November 30, 2003. The
amended facility consists of an amortizing term loan of $18.3 million and a
$19.5 million revolving credit facility. As of July 31, 2002 borrowings under
the revolving credit facility totaled approximately $12,466 and the Company had
outstanding letters of credit totaling $3,884.

Amounts outstanding under the Credit Facility are secured by all of the
Company's U.S. assets and 100% of the stock of the Company's principal Canadian
subsidiaries. The agreement contains restrictions on the payment of dividends,
incurring additional debt, capital expenditures and investments by the Company.
In addition, the Company is required to maintain certain financial ratios
related to minimum amounts of stockholders' equity, fixed charges to cash flow
and funded debt to cash flow, and to reduce the amortizing term loan principal
at the end of each quarter beginning July 31, 2001, by the amount of excess cash
flow, all as defined in the agreement. The agreement also requires the Company
to obtain the consent of the lender for additional acquisitions in certain
instances. On October 4, 2002 the credit agreement was

18

amended to adjust the financial ratio related to the minimum amount of
stockholders' equity. This amendment had been contemplated by the Company and
its lenders and was necessary as a result of the impact of the goodwill
impairment recorded upon adoption of SFAS No. 142.

The Company has entered into various interest rate protection agreements on
a portion of the borrowings under the revolving credit facility. On November 9,
2001, the Company entered into an interest rate protection arrangement on $13
million of the borrowings under the Credit Agreement. The interest rate has been
fixed at 6.14%. This arrangement matures February 28, 2003. At July 31, 2002,
the Company had unpaid settlements of approximately $16 related to the interest
rate swap. The fair value of this agreement at July 31, 2002 and 2001 was a
liability of approximately $78 and $64, respectively. At July 31, 2002 the
weighted average interest rate for all outstanding borrowings was approximately
5.33%.

During the fiscal years ended July 31, 2002, 2001 and 2000, the Company
spent approximately $1.4 million, $2.2 million and $2.7 million, respectively,
on capital expenditures, which expenditures primarily related to improvements in
infrastructure and technology to support the Company's operations. Management
expects the amount of capital expenditures for these purposes in future years to
be at or slightly above expenditures made in the year ended July 31, 2002. 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 owner-operators who provide their own vehicles. The Company's
expansion of its national marketing program consists primarily of increased
hiring and salary expenditures related to additional product specialists. These
marketing expenditures have not, nor does management expect that in the future
they will have, a significant impact on the Company's liquidity. See "Business
- -- Sales and Marketing."

The Company's cash flow provided by operations for the fiscal years ended
July 31, 2002, 2001 and 2000 were approximately $9.7 million, $7.8 and $8.2
million, respectively. Consequently, increases in working capital and purchases
of property and equipment during such periods were financed entirely by
internally generated cash flow. Changes in working capital provided $1.2 million
of operating cash flow in fiscal 2002, compared to uses of operating cash flow
totaling $2.8 million and $1.2 million in the years ended July 31, 2001 and
2000, respectively.

Management expects that its future capital requirements will generally be
met from internally generated cash flow. The Company's access to other sources
of capital, such as additional bank borrowings and the issuance of debt
securities, is affected by, among other things, general market conditions
affecting the availability of such capital. The Company completed its last
acquisition in August 1998. Currently there are no pending nor are there any
contemplated acquisitions. Should the Company pursue acquisitions in the future,
the Company may be required to incur additional debt. There can be no assurance
that the Company's primary lenders will consent to such acquisitions or that if
additional financing is necessary, it can be obtained on terms the Company deems
acceptable. As a result, the Company may be unable to make additional
acquisitions.

The Company leases certain equipment and properties under non-cancelable
lease agreements, which expire at various dates. At July 31, 2002 minimum annual
lease payments for such leases are as follows:

2003 $ 4,811
2004 3,513
2005 2,097
2006 1,105
2007 522
Thereafter 479
-------------
$ 12,529
=============

INCOME TAXES

The provision for income taxes was $3.6 million in fiscal 2002, compared to
$2.5 million and $1.7 million in the years ended July 31, 2001 and 2000,
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 other expenses that are non-deductible for tax purposes.

The Company has incurred taxable net operating losses in the United States
of $2,723,000, $2,333,000 and $4,410,000 for the years ended July 31, 2002, 2001
and 2000, respectively. In addition, the Company has generated unused foreign
tax

19

credits related to its Canadian operations and other tax credits of $127,000.
The Company has established 100% valuation allowance in accordance with the
provisions of SFAS No. 109 for U.S. operating losses and foreign and other tax
credits not currently deductible. The Company continually reviews the adequacy
of the valuation allowance and releases the allowance, when it is determined
that it is more likely than not that the benefits will be realized. The
remaining deferred tax assets represent deductions made for financial statement
purposes that are available to offset future taxable income.

INFLATION

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

FINANCIAL CONDITION

The Company believes its financial condition remains 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 needs.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) finalized
Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations (SFAS No. 143). SFAS No. 143 requires that the fair value
for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made, and that the
carrying amount of the asset, including capitalized asset retirement costs, be
tested for impairment. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. Management does not believe this statement will have a
material effect on the Company's financial position or results of operations.

In August 2001, the FASB finalized Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144). SFAS No. 144 prescribes financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of, and specifies when to test a long-lived asset for
recoverability. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. Management does not believe this statement will have a
material effect on the Company's financial position or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS No. 145). This statement
eliminates the current requirement that gains and losses on debt extinguishment
must be classified as extraordinary items in the income statement. Instead, such
gains and losses will be classified as extraordinary items only if they are
deemed to be unusual and infrequent, in accordance with the current GAAP
criteria for extraordinary classification. In addition, SFAS No. 145 eliminates
an inconsistency in lease accounting by requiring that modifications of capital
leases that result in reclassification as operating leases be accounted for
consistent with sale-leaseback accounting rules. The statement also contains
other non-substantive corrections to authoritative accounting literature. The
changes related to debt extinguishment will be effective for fiscal years
beginning after May 15, 2002, and the changes related to lease accounting will
be effective for transactions occurring after May 15, 2002. Adoption of this
standard will not have any immediate effect on the Company's consolidated
financial statements. The Company will apply this guidance prospectively.

"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.

While the Company believes its strategic plan is on target and the business
outlook remains strong, several important factors have been identified, which
could cause actual results to differ materially from those predicted. By way of
example:

o The competitive nature of the same-day delivery business.

20

o The ability of the Company to attract and retain qualified courier
personnel as well as retain key management personnel.

o A change in the current tax status of courier drivers from independent
contractor drivers to employees or a change in the treatment of the
reimbursement of vehicle operating costs to employee drivers.

o A significant reduction in the exchange rate between the Canadian dollar
and the U.S. dollar.

o 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.

o The ability of the Company to obtain adequate financing.

o 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 $7.8 million and a decrease in net income of $.1
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 entered into interest rate protection arrangements on a
portion of the borrowings under the Credit Facility. On November 9, 2001, the
Company entered into an interest rate protection arrangement on $13 million of
borrowings under the Credit Agreement. The interest rate on $13 million was
fixed at 6.14%. This arrangement matures on February 28, 2003. The Company does
not hold or issue derivative financial instruments for speculative or trading
purposes.

The sensitivity analysis model used by the Company for interest rate
exposure compares interest expense fluctuations over a one-year period based on
current debt levels and current interest rates versus current debt levels at
current interest rates with a 10% increase. Based on this model, a 10% increase
would result in an increase in interest expense of $.1 million. There can be no
assurances that the above projected interest rate increase will materialize.
Fluctuations of interest rates are beyond the control of the Company's
management.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14(a).

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

None

21

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 2003 Annual Meeting of Stockholders is incorporated herein by
reference.

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 2003 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 2003 Annual Meeting of Stockholders is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the fiscal year ended July 31, 2001, the Company paid $55,000 to a
company affiliated with Kenneth Bishop, a director of the Company, for rent on
certain properties owned by such company. Rent payments for these properties
were $10,000 per month. The lease of the facilities was terminated in the third
quarter of the fiscal year ended July 31, 2001.

22

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements

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

(a)(2) 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 inapplicable and therefore have
been omitted.

(a)(3) 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.

(b) Reports on Form 8-K

None

23

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.

Dynamex Inc.,
A Delaware corporation

By: /s/ Ray E. Schmitz
- -----------------------------------
Ray E. Schmitz, Vice-President and Chief Financial Officer
Dated: October 29, 2002

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 29, 2002.

I, Richard K. McClelland, certify that:

1. I have reviewed this annual report on Form 10-K of Dynamex Inc.;

24

2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in the annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.

Date: October 29, 2002

/s/ RICHARD K. McCLELLAND
- -------------------------
Name: Richard K. McClelland
Title: President and Chief Executive Officer

I, Ray E. Schmitz, certify that:

1. I have reviewed this annual report on Form 10-K of Dynamex Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in the annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.

Date: October 29, 2002

/s/ RAY E. SCHMITZ
- ------------------
Name: Ray E. Schmitz
Title: Vice President and Chief Financial Officer

25

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and
Stockholders of Dynamex Inc.

We have audited the accompanying consolidated balance sheets of Dynamex Inc. as
of July 31, 2002 and 2001 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended July 31, 2002. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Dynamex Inc. as of
July 31, 2002 and 2001 and the results of its operations and its cash flows for
each of the three years in the period ended July 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective
August 1, 2001, Dynamex Inc. changed its method of accounting for goodwill.

/s/ BDO Seidman, LLP
- -------------------------------
BDO SEIDMAN, LLP

Dallas, Texas
October 11, 2002

F-2

DYNAMEX INC.
CONSOLIDATED BALANCE SHEETS
July 31, 2002 and 2001
(in thousands except share data)
- -------------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

F-3

DYNAMEX INC.
Consolidated Statements of Operations
Years ended July 31, 2002, 2001 and 2000
(in thousands except per share data)
- -------------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

F-4

DYNAMEX INC.
Consolidated Statements of Stockholders' Equity
Years ended July 31, 2002, 2001 and 2000
(in thousands)
- -------------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

F-5

DYNAMEX INC.
Consolidated Statements of Cash Flows
Years ended July 31, 2002, 2001 and 2000
(in thousands)
- -------------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

F-6

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The operating subsidiaries of the Company, with country of incorporation,
are as follows:

o Dynamex Operations East Inc. (U.S.)

o Dynamex Operations West Inc. (U.S.)

o Dynamex Dedicated Fleet Services, Inc. (U.S.)

o Dynamex Canada Corp. (Canada)

o Alpine Enterprises Ltd. (Canada)

o Roadrunner Transportation, Inc. (U.S.)

o New York Document Exchange Corp. (U.S.)

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
operations. 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
Leasehold Improvements 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.

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.

F-7

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Company's customers are not concentrated in any specific geographic
region or industry. No single customer accounted for a significant amount of
the Company's sales and there were no 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.

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 will conduct 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, perform a detailed analysis of
the reporting units assets and liabilities to determine whether the goodwill
is impaired. 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,
2002, 2001 and 2000 totaled $85, $4,297 and $5,331, respectively. Estimated
amortization expense for the succeeding five fiscal years is approximately
$30 for 2003 and approximately $20 per year thereafter.

Revenue recognition - Revenue and direct expenses are recognized when
services are rendered to customers.

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

Financial instruments - Carrying values of cash and cash equivalents,
accounts receivable, accounts payable and current portion of long-term debt
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.

The Company utilizes interest rate swaps to reduce interest rate fluctuation
risk. Fair value of these instruments is determined based on estimated
settlement costs using current interest rates. Mark-to-market adjustments
under these agreements are recorded quarterly as an adjustment to interest
expense. The Company does not hold or issue derivative financial instruments
for speculative or trading purposes. In the event that this swap was
terminated prior to its contractual maturity, it is the Company's policy to
recognize the resulting gain or loss immediately.

Financing Costs - During the fiscal years ended July 31, 2002, 2001 and
2000, the Company incurred $909, $208 and $445, respectively of costs
incurred in connection with debt financings and amendments (See Note 6).
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 $587 in 2002, $490 in
2001 and $650 in 2000.

Self-Insured Claims Liability - The Company retains the risk of loss for
workers' compensation 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. These estimates include the Company's actual experience
based on information received from the Company's insurance carrier and
historical assumptions of development of unpaid liabilities over time.
Factors affecting the determination of amounts to be accrued for workers'
compensation 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 workers' compensation 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.

F-8

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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, "Accounting for Stock Based Compensation," (SFAS 123) encourages but
does not require companies to record compensation cost for stock based
employee compensation plans at fair value. In accordance with SFAS 123, the
Company has elected to continue to account for stock based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to
acquire the stock. (See Note 11 of Notes to the Consolidated Financial
Statements)

Net income (loss) per share - Basic net income (loss) per common share is
based on the weighted average number of common shares outstanding during the
period. Diluted net income is based on the weighted average common shares
outstanding and all potentially dilutive common shares outstanding during
the period. 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. Due to the Company's net loss in the
year ended July 31, 2000, diluted loss per share is the same as basic loss
per share. Outstanding options to purchase 736 and 557 shares of common
stock at July 31, 2002 and 2001, 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 for 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 operations.

New accounting pronouncements - In June 2001, the Financial Accounting
Standards Board (FASB) finalized Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS
No. 143 requires that the fair value for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made, and that the carrying amount of the asset, including
capitalized asset retirement costs, be tested for impairment. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002. Management does
not believe this statement will have a material effect on the Company's
financial position or results of operations.

In August 2001, the FASB finalized Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144). SFAS No. 144 prescribes financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets
to be disposed of, and specifies when to test a long-lived asset for
recoverability. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. Management does not believe this statement will have a
material effect on the Company's financial position or results of
operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS No. 145). This statement
eliminates the current requirement that gains and losses on debt
extinguishment must be classified as extraordinary items in the income
statement. Instead, such gains and losses will be classified as
extraordinary items only if they are deemed to be unusual and infrequent, in
accordance with the current GAAP criteria for extraordinary classification.
In addition, SFAS No. 145 eliminates an inconsistency in lease accounting by
requiring that modifications of capital leases that result in
reclassification as operating leases be accounted for consistent with
sale-leaseback accounting rules. The statement also contains other
non-substantive corrections to authoritative accounting literature. The
changes related to debt extinguishment will be effective for fiscal years
beginning after May 15, 2002, and the changes related to lease accounting
will be effective for transactions occurring after May 15, 2002. Management
does not believe this statement will have

F-9

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

a material effect on the Company's financial position or results of
operations.

Comprehensive Income (Loss) - Comprehensive income (loss) consists of net
income (loss) and unrealized gains and losses on foreign currency
translation. Balance sheet accounts of foreign operations are translated
using the year-end exchange rate, and income statement accounts are
translated on a monthly basis using the average exchange rate for the
period. Unrealized gains and losses on foreign currency translation
adjustments are recorded in shareholders' equity as other comprehensive
income.

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 (loss) 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 (loss) per share calculation if their effect would be
anti-dilutive to earnings (loss) per share before effect of change in
accounting principle.

F-10

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

3. INTANGIBLES

Intangibles consist of the following:

Effective August 1, 2001, the Company adopted SFAS No. 142. SFAS No. 142
requires, among other things, that companies no longer amortize goodwill,
but instead test goodwill for impairment at least annually. In addition,
SFAS No. 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill. The Company
completed its goodwill impairment analysis during the fourth quarter of
fiscal 2002 and recognized a transitional goodwill impairment loss related
to its United States operations of $30.0 million and recorded the charge
net of $10.7 million of deferred tax benefits as the cumulative effect of a
change in accounting principle in the Consolidated Statements of
Operations. The valuations performed as part of the analysis employed a
combination of present value techniques to measure fair value corroborated
by comparisons to estimated market multiples. Third party specialists were
engaged to assist in the valuations. As required by SFAS No. 142, the
charge was recorded in the first quarter of fiscal year 2002.

Amortization of goodwill ceased effective August 1, 2001. A reconciliation
of the previously reported net income (loss) is as follows:

F-11

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

5. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

6. LONG-TERM DEBT

Long-term debt consists of the following:

a) Bank Credit Agreement

As of July 31, 2001, the Company's bank credit agreement consisted of an
amortizing term loan of $32.2 million and a revolving credit facility of
$19.5 million due November 30, 2001. On November 9, 2001, the Company
amended its bank credit agreement. Under the terms of the Third Amended and
Restated Credit Agreement, the Company prepaid $5 million of the amortizing
term loan from available cash and the facility was extended through
February 28, 2003. The revolving credit facility is governed by an eligible
accounts receivable borrowing base agreement, defined as 80% of accounts
receivable less than 60 days past due. Required principal payments on the
amortizing term loan consist of $1.375 million quarterly, until maturity,
at which time any amounts outstanding under the facility are due. Interest
on outstanding borrowings is payable monthly at

F-12

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

prime plus 0.50% or LIBOR plus 3.50%. In addition, the Company is required
to pay a commitment fee of 0.50% for any unused amounts of the revolving
credit facility. Effective September 27, 2002, the credit agreement was
amended to extend the maturity date to November 30, 2003. The amended
facility consists of an amortizing term loan of $18.3 million and a $19.5
million revolving credit facility. As of July 31, 2002 borrowings under the
revolving credit facility totaled approximately $12,466 and the Company had
outstanding letters of credit totaling $3,884.

Amounts outstanding under the credit facility are secured by all of the
Company's U.S. assets and 100% of the stock of the Company's principal
Canadian subsidiaries. The agreement contains restrictions on the payment
of dividends, incurring additional debt, capital expenditures and
investments by the Company. In addition, the Company is required to
maintain certain financial ratios related to minimum amounts of
stockholders' equity, fixed charges to cash flow and funded debt to cash
flow, and to reduce the amortizing term loan principal at the end of each
quarter beginning July 31, 2001, by the amount of excess cash flow, all as
defined in the agreement. The agreement also requires the Company to obtain
the consent of the lender for additional acquisitions in certain instances.
On October 4, 2002 the credit agreement was amended to adjust the financial
ratio related to the minimum amount of stockholders' equity. This amendment
had been contemplated by the Company and its lenders and was necessary as a
result of the impact of the goodwill impairment recorded upon adoption of
SFAS No. 142.

The Company has entered into various interest rate protection agreements on
a portion of the borrowings under the revolving credit facility. On
November 9, 2001, the Company entered into an interest rate protection
arrangement on $13 million of the borrowings under the credit agreement.
The interest rate has been fixed at 6.14%. This arrangement matures
February 28, 2003. At July 31, 2002, the Company had unpaid settlements of
approximately $16 related to the interest rate swap. The fair value of this
agreement at July 31, 2002 and 2001 was a liability of approximately $78
and $64, respectively. At July 31, 2002 the weighted average interest rate
for all outstanding borrowings was approximately 5.33%.

The counter party to these agreements is a major financial institution with
which the Company also has other financial relationships. The Company
believes that the risk of loss due to nonperformance by the counter party
to these agreements is remote and, in any event, the amount of such loss
would be immaterial to the Company's results of operations.

b) Seller Financing Notes and Other

In connection with various acquisitions the Company issued various notes to
the sellers of those businesses. The notes bear interest of 10% per annum.

Scheduled principal payments in each of the next five years and thereafter
on long-term debt and capital lease obligations are as follows:

7. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The Company leases certain equipment and properties under non-cancelable
lease agreements, which expire at various dates.

F-13

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

At July 31, 2002, minimum annual lease payments for such leases are as
follows:

Rent expense related to operating leases amounted to approximately $8,222,
$7,069 and $6,131 for the years ended July 31, 2002, 2001 and 2000,
respectively.

CONTINGENCIES

In November and December 1998, two class action lawsuits were filed in the
United States District Court for the Northern District of Texas, naming the
Company, Richard K. McClelland, the Company's Chief Executive Officer, and
Robert P. Capps, the Company's former Chief Financial Officer, as
defendants. The lawsuits arose from the Company's November 2, 1998
announcement that the Company was (i) revising its results of operations
for the year ended July 31, 1998 from that which had been previously
announced on September 16, 1998 and (ii) restating its results of
operations for the third quarter of fiscal 1998 from that which had been
previously reported. On February 5, 1999, the Court entered an Order
consolidating the actions and approved the selection of three law firms as
co-lead counsel. A consolidated and amended complaint was filed on March
22, 1999. In addition to the defendants named in the original complaints,
the amended complaint also named as defendants the underwriters of the
Company's May 1998 secondary offering of common stock, Schroder & Co.,
Inc., William Blair & Company, and Hoak Breedlove Wesneski & Co. (the
"Underwriter Defendants"). On May 6, 1999, defendants filed a motion to
dismiss the consolidated and amended complaint in its entirety.

On June 14, 1999, the Company issued a press release announcing that the
Audit Committee of the Board of Directors had formed a Special Committee of
outside directors to review potentially unsupportable accounting entries
for the third and fourth quarters of fiscal year 1998. On September 17,
1999, the Company issued a press release announcing that the Special
Committee had completed its review of the Company's financial reporting and
that the Company would restate its previously reported financial results
for the fiscal years 1997 and 1998 and the first three quarters of fiscal
year 1999.

On October 14, 1999, pursuant to a stipulation of the parties, plaintiffs
filed a second amended class action complaint that added allegations
relating to the information disclosed in the Company's June 14 and
September 17, 1999 press releases. In addition to the defendants named in
the amended complaint, the Second Amended Class Action Complaint named
Deloitte & Touche and Deloitte & Touche LLP (the Court subsequently
dismissed Deloitte & Touche LLP without prejudice pursuant to the
stipulation of the parties). The Second Amended Class Action Complaint
alleged that the defendants issued a series of materially false and
misleading statements and omitted material facts concerning the Company's
financial condition and business operations. The lawsuit alleged violations
of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections
10(b) and 20(a) of the Securities Exchange Act of 1934. The plaintiffs
sought unspecified damages on behalf of all other purchasers of the
Company's common stock during the period of September 18, 1997 through and
including September 17, 1999 (the "Class").

On September 20, 2000, the Company, Richard McClelland, Robert Capps and
the Underwriter Defendants signed a memorandum of understanding setting
forth the terms of a proposed settlement of this action. Deloitte & Touche
was not a party to the memorandum of understanding. On December 13, 2000,
the Settling Parties signed a Stipulation of Agreement of Settlement. The
settlement provided that the Company's primary

F-14

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

directors and officers liability insurer, American Home Insurance Company,
pay $2 million towards the settlement. In addition, the Company paid $1
million and contributed one million shares of common stock towards the
proposed settlement. The Company also agreed to pay to the class 75% of any
recoveries, after legal expenses and costs, from the Company's excess
insurer, Reliance Insurance Company, and former auditors, Deloitte & Touche
LLP and Deloitte & Touche. A separate agreement was also reached to settle
all claims by the Company and by plaintiffs in the class action against
Deloitte & Touche LLP and Deloitte & Touche for the total amount of $2.25
million.

On April 10, 2000, Reliance Insurance Company filed a notice of action in
the Superior Court of Justice in Ontario, Canada, seeking a declaratory
judgment that defendants in the shareholder class action were not entitled
to reimbursement under the Reliance insurance policy for losses incurred in
connection with that action. The Reliance policy provided $3 million in
excess coverage to supplement the $2 million in coverage provided to the
Company pursuant to the underlying policy issued by American Home Assurance
Company.

Dynamex, Richard McClelland, and Robert Capps filed a complaint in the
United States District court for the Northern District of Texas that named
Reliance Insurance Company as a defendant. The complaint alleged claims for
breach of contract and breach of the duty of good faith and fair dealing
arising from the failure of Reliance to contribute to the settlement of the
above-referenced shareholder litigation. The plaintiffs sought unspecified
damages.

Reliance Insurance Company and Dynamex, Richard McClelland and Robert Capps
signed an agreement to settle their respective claims. Pursuant to the
agreement, in the fourth quarter 2001 Reliance paid $1.9 million to the
Company for the benefit of the Company and the Class.

These settlements were finalized and approved by the Court on June 29,
2001. As a result of the settlements, the Company recovered $695 from
Reliance Insurance Company, Deloitte & Touche LLP and Deloitte & Touche
including legal fees and costs incurred in connection with the Company's
claims against these entities. The amount recovered is reflected in the
fiscal 2001 Consolidated Statement of Operations as a reduction to the
Provision for settlement of shareholder litigation. As explained above, the
additional amounts recovered by the Company from Reliance Insurance
Company, Deloitte & Touche LLP and Deloitte & Touche were contributed to
the settlement of the shareholder class action. The Company has satisfied
its obligations under the terms of the settlement by paying $1.0 million in
fiscal 2001 and distributing one million shares of common stock during
fiscal 2002 to class members and their counsel.

The Company received informal requests for information from the Staff of
the Securities and Exchange Commission ("SEC") for documents and testimony
concerning the circumstances of the restatement of the Company's prior
period financial statements. In early November 2001, the Company received
written notification from the SEC that the inquiry into the circumstances
of the restatements of the Company's financial statements has been closed
with no formal action being recommended.

The Company is also 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

F-15

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

8. INCOME TAXES

The United States and Canadian components of income (loss) before income
taxes are as follows:

The provision for income tax before the deferred tax impact of the cumulative
effect of change in accounting principle consisted of the following:

Current tax expense (benefit):
Canada $ 1,455 $ 1,991 $ 1,546
U.S. 2,264 (109) --
------------ ------------ ------------
Total current tax expense 3,719 1,882 1,546
------------ ------------ ------------
Deferred tax expense (benefit):
Canada 44 47 87
U.S. (105) 532 85
------------ ------------ ------------
Total deferred tax expense (benefit) (61) 579 172
------------ ------------ ------------
Total income tax provision $ 3,658 $ 2,461 $ 1,718
------------ ------------ ------------

Differences between financial accounting principles and tax laws cause
differences between the bases of certain assets and liabilities for
financial reporting purposes and tax purposes. The tax effects of these
differences, to the extent they are temporary, are recorded as deferred tax
assets and liabilities under SFAS 109 and consisted of the following
components (in thousands):

F-16

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Company has established valuation allowances in accordance with the
provisions of SFAS No. 109. The valuation allowances primarily relate to
U.S. operating losses not currently deductible and foreign tax credits. The
Company continually reviews the adequacy of the valuation allowances and
releases the allowances when it is determined that it is more likely than
not that the benefits will be realized.

The Company has a federal net operating loss carryforward of $13,674 as of
July 31, 2002. This carryforward is available to offset future United States
federal taxable income. The net operating losses expire as follows: $222 in
the year 2009, $2,720 in the year 2013, $2,025 in the year 2019, $4,737 in
the year 2020, $1,507 in the year 2021 and $2,463 in the year 2022.

The Company has not provided for U.S. Federal and foreign withholding taxes
on the foreign subsidiaries' undistributed earnings as of July 31, 2002.
Such earnings are intended to be reinvested indefinitely.

The differences in income tax provided and the amounts determined by
applying the statutory rate to income before income taxes result from the
following:

9. RELATED PARTY TRANSACTIONS

The Company leased a facility from a member of the Company's Board of
Directors. During the years ended July 31, 2001 and 2000, the Company paid
approximately $55 and $120, respectively, in rent to this party. Rent
payments for this property were $10 per month. This lease was terminated in
the third quarter of the fiscal year ended July 31, 2001.

10. RESERVE FOR DOUBTFUL ACCOUNTS

The changes in the reserve for doubtful accounts are summarized below:

11. STOCK OPTION PLAN

Effective June 5, 1996, the Company's stockholders approved the Amended and
Restated 1996 Stock Option

F-17

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Plan (the "Option Plan"). The Option Plan has been subsequently amended to
increase the maximum aggregate amount of common stock with respect to which
options may be granted to 1,100,000 shares. The Option Plan provides for the
granting of both incentive stock options and non-qualified stock options. In
addition, the Option Plan provides for the granting of restricted stock,
which may include, without limitation, restrictions on the right to vote
such shares and restrictions on the right to receive dividends on such
shares. The exercise price of all options granted under the Option Plan may
not be less than the fair market value of the underlying common stock on the
date of grant. Generally, the options vest and become exercisable ratably
over a five-year period, commencing one year after the grant date.

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options and, accordingly, no compensation cost has
been recognized for stock options in the financial statements. Had the
Company determined compensation cost based on the fair value at the grant
date for its stock options consistent with the method set forth under SFAS
No. 123, the Company's net earnings (loss) would have been reduced to the
pro forma amounts indicated below:

The fair value of each grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2002, 2001 and 2000, respectively: dividend
yield of 0% for all years; expected volatility of 73%, 77% and 72%;
risk-free interest rate of 5.10%, 5.50%, and 4.31%; and expected lives of an
average of 10 years for all years. The weighted average fair value of
options granted during 2002, 2001 and 2000 was $1.86, $1.40 and $1.32,
respectively.

Stock option activity during the periods indicated is as follows:

F-18

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The following table summarizes information about stock options outstanding
at July 31, 2002:

12. EMPLOYEES' DEFINED CONTRIBUTION PLAN

The Company sponsors a defined contribution plan (the Plan) for the benefit
of substantially all of its employees who meet certain eligibility
requirements, primarily age and length of service. The Plan allows employees
to invest up to 15% of their current gross cash compensation on a pre-tax
basis at their option. Beginning January 1, 2002, changes in the tax law
provided for catch-up contributions which allow participants over 50 years
of age to contribute an additional $1 per year, rising $1 per year each year
thereafter, until reaching an additional $5 per year in 2006. The Company
may make discretionary contributions to the Plan as determined by the
Company's Board of Directors. The Company did not make any discretionary
contributions to the Plan during the years ended July 31, 2002, 2001 and
2000.

13. SHAREHOLDER RIGHTS AGREEMENT

In June 1996, the Board of Directors of the Company approved a Rights
Agreement which is designed to protect stockholders should the Company
become the target of coercive and unfair takeover tactics. Pursuant to the
Rights Agreement, the Board of Directors declared a dividend of one
preferred stock purchase right (a "Right") for each outstanding share of
Common Stock on May 31, 1996. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of the Series A
Preferred Stock, at a price of $45.00 per one one-hundredth of a share of
Series A preferred Stock, subject to possible adjustment.

F-19

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

14. SEGMENT INFORMATION

Dynamex Inc. operates in one reportable business segment, same-day delivery
services. The Company evaluates the performance of its geographic regions,
United States and Canada, based upon operating income (loss) before unusual
and non-recurring items. The following table summarizes selected financial
information for the United States and Canada for the years ended July 31,
2002, 2001 and 2000:

F-20

DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

15. QUARTERLY DATA (UNAUDITED)

Summarized quarterly financial data for 2002 and 2001 is as follows (in
thousands except per share amounts and business days):

Net income for the quarter ended October 31, 2001 was restated from the
previously reported amount to reflect the impairment of goodwill resulting
from the Company's adoption of SFAS No. 142. The impairment totaled $19.3
million, net of taxes. Net income for the quarter ended January 31, 2002
includes charges of $1.2 million related to the restructuring of the
Company's Canadian operations. Net income for the quarter ended July 31,
2001 includes other income of approximately $695 related to the settlement
of claims related to the shareholder class-action lawsuit and gains on sales
of surplus radio licenses of $375.

F-21

INDEX TO EXHIBITS

- ----------

(1) Filed herewith.

(2) Filed as an exhibit to the registrant's Registration Statement on Form S-1
(File No. 333-05293), and incorporated herein by reference.

(3) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended July 31, 1997, and incorporated herein by reference.

(4) Filed as an exhibit to Registration Statement on Form S-1 (File No.
333-49603), and incorporated herein by reference.

(5) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended July 31, 1998, and incorporated herein by reference.

(6) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended July 31, 1999, and incorporated herein by reference.

(7) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended July 31, 2000, and incorporated herein by reference.

(8) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended July 31, 2001, and incorporated herein by reference.

E-2