DYNAMEX INC - 10-K Annual Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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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, 2003

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. [ ]

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant on September 23, 2003 was approximately $107,970,000.

The number of shares of the registrant's common stock, $.01 par value,
outstanding as of September 23, 2003 was 11,246,617 shares.

DOCUMENTS INCORPORATED BY REFERENCE

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

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TABLE OF CONTENTS

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 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 accounts on a multi-market basis and centralized
administrative and management information systems.

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

BUSINESS STRATEGY

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

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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.

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 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,
2003, 2002 and 2001, approximately 47%, 49%, and 54% respectively, of the
Company's sales were generated from same-day on-demand delivery services.

Same-Day Scheduled Distribution. The Company provides same-day scheduled
distribution services that include regularly scheduled deliveries made on a
point-to-point basis and deliveries that may require intermediate handling,
routing or sorting of items to be delivered to multiple locations. The Company's
on-demand delivery capabilities are available to supplement scheduled services
as needed. A bulk shipment may be received at the Company's warehouse where it
is sub-divided into smaller bundles and sorted for delivery to specified
locations. Same-day scheduled distribution services are provided on both a local
and multi-city basis. For example, in 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,

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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, 2003, 2002 and 2001, approximately 25%, 25% and 22%,
respectively, of the Company's sales were generated from same-day scheduled
distribution services.

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

The largest component of the Company's outsourcing services is fleet
management. With its fleet management service, the Company provides
transportation services primarily for customers that previously managed such
operations in-house. This service is generally provided with a fleet of
dedicated vehicles that can range from passenger cars to tractor-trailers (or
any combination) and may display the customer's logo and colors. In addition,
the Company's on-demand delivery capability may supplement the dedicated fleet
as necessary, thereby allowing a smaller dedicated fleet to be maintained than
would otherwise be required. The Company's fleet management services include
designing and managing systems to maximize efficiencies in transporting, sorting
and delivering customers' products on a local and multi-city basis. Because the
Company does not own delivery vehicles, but instead contracts 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, 2003, 2002 and 2001,
approximately 28%, 26% and 24%, respectively, of the Company's sales were
generated from fleet management and other outsourcing services.

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

OPERATIONS

The Company's operations are divided into regions, two U.S. and one
Canadian, with each of the Company's approximately 44 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 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.

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

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

Prices for the Company's services are determined at the local level based on
the distance, weight and time-sensitivity of a particular delivery. The Company
generally enters into customer contracts for 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 as well as
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 13 persons, focus on regional and national
customers who can utilize services on a multi-market basis. Approximately 100
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 to analyze opportunities
and conduct performance audits.

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

CUSTOMERS

The Company's target customer is a business that distributes time-sensitive,
non-faxable items to multiple locations. The primary industries served by the
Company include financial services, electronics, pharmaceuticals, medical
laboratories and hospitals, auto parts, legal services and Canadian governmental
agencies. For the fiscal year ended July 31, 2003, no single customer accounted
for more than 10% of the Company's annual sales. A significant number of the
Company's customers are located in Canada. For the fiscal years ended July 31,
2003, 2002 and 2001, approximately 34%, 33% and 34% of the

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Company's sales, 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, the large
volume of available work and the use of proprietary technology, are factors that
are attractive to drivers and help the Company to recruit and retain drivers.

REGULATION

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

In connection with the operation of certain motor vehicles, the handling of
hazardous materials in its courier operations and other safety matters,
including insurance requirements, the Company is subject to regulation by the
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 owner-operators performing services for the Company
are involved in accidents. The Company carries liability insurance with a per
claim and an aggregate limit of $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.
Drivers are provided information on any additional safety requirements as
dictated by customer specifications.

INTELLECTUAL PROPERTY

The Company has registered "DYNAMEX" and "DYNAMEX EXPRESS" as federal
trademarks in the Canadian

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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 July 31, 2003, the Company had approximately 2,150 employees, of whom
approximately 950 primarily were employed in various management, supervisory,
administrative, and other corporate positions and approximately 1,200 were
employed as drivers, messengers and mailroom workers. Additionally at July 31,
2003, the Company had contracts with approximately 3,450 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 4,200 drivers and messengers used by the Company as of
July 31, 2003, approximately 1,700 are located in Canada and approximately 2,500
are located in the U.S. Although the drivers and messengers located in Canada
are generally independent contractors, approximately 69% 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.

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 July 31,2003, the Company utilized the services of approximately 4,200
drivers and messengers. From time to time such persons are involved in accidents
or other activities that may give rise to liability claims. The Company
currently carries liability insurance with a per occurrence and an aggregate
limit of $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 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
July 31, 2003, approximately 82% 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

6

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. 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 re-characterize some or all of such payments as additional
compensation. If such amounts were so re-characterized, 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."

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. For example, sales of the Company's premium priced
on-demand services were negatively impacted by the slowdown in the economy
during the three years ended July 31, 2003.

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 sales for such period.
The Company historically has not entered into hedging transactions with respect
to its foreign currency exposure, but may do so in the future. There can be no
assurance that fluctuations in foreign currency exchange rates will not have a
material adverse effect on the Company's business, financial condition or
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 6 of Notes to Consolidated
Financial Statements.

Permits and Licensing

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

7

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.

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

Dependence on Availability of Qualified Delivery Personnel

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

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."

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 66 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.
Facility rental expense for the fiscal years ended July 31, 2003, 2002 and 2001
was approximately $4.8 million, $4.7 million and $4.9 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.

9

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

10

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 September 23, 2003, the approximate number of holders of
record of common stock was 365.

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
to reduce outstanding debt and to finance the operation and expansion of its
business and does not anticipate paying any cash dividend in fiscal 2004. 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".

11

ITEM 6. SELECTED FINANCIAL DATA

The following selected historical financial data for the three years ended
July 31, 2003 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, 2000 and 1999 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 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 their
entirety, and should be read in conjunction with the Company's consolidated
financial statements, including the notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere herein.

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

12

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.

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

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

Cost of sales consists of costs relating directly to performance of
services, including driver and messenger costs, third party delivery charges,
insurance and worker's compensation costs. Substantially all of the drivers used
by the Company own their own vehicles, and approximately 82% 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 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 software 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 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 the year ended July 31, 2001.

A significant portion of the Company's sales is generated in Canada. For the
fiscal years ended July 31, 2003, 2002 and 2001, approximately 34%, 33%, and
34%, respectively, of the Company's sales were generated in Canada. Before
deduction of corporate costs, the majority of which are incurred in the U.S.,
the cost structure of the Company's operations in the U.S. and in Canada is
similar.

13

The conversion rate of Canadian dollars to U.S. dollars increased during the
fiscal year ending July 31, 2003 compared to July 31, 2002 and decreased during
the fiscal year ending July 31, 2002 compared to July 31, 2001. As the Canadian
dollar is the functional currency for the Company's Canadian operations, these
changes in the exchange rate have affected the Company's reported sales. The
effect of these changes on the Company's net income (loss) for the fiscal years
ended July 31, 2003, 2002 and 2001 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 of the purchase
price over all tangible and identifiable intangible net assets acquired.
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's operations are
conducted in two geographic regions, Canada and the United States. These two
regions were identified as reporting units in accordance with paragraph 30 of
SFAS No. 142 because discrete financial information is available and management
regularly reviews the operating results of these regions. Management performed a
valuation on each of these reporting units using a discounted cash flow model.
This model indicated a valuation that was far in excess of the Company's market
capitalization, however,management did not believe this could be used as the
sole indicator of fair value. Accordingly, the Company engaged an independent
business valuation firm to perform a valuation of these reporting units. The
independent firm utilized a methodology combining the income approach and the
market approach. The income approach is based on the present value of future
economic benefits that accrue to the shareholders. The market approach
establishes value through the analysis of the market price of the common stock
of comparable, publicly traded companies. The independent firms' conclusion of
the value of Dynamex was derived by applying a weight of 30% to the value
determined under the income approach and 70% to the value determined under the
market approach. Using this valuation as the purchase price in a purchase price
allocation model, the implied value of the goodwill for the United States
segment was approximately $36.5 million, compared to a carrying value of
approximately $66.5 million. As a result, the Company recognized a goodwill
impairment loss related to this segment of $30.0 million. Although the
performance of the United States operations has improved, the large amount of
goodwill recorded during the competitive acquisition environment of the late
1990s was not fully supported by the valuation model. The implied value of the
goodwill for the Company's Canadian operations was in excess of $29 million
compared to a carrying value of approximately $8 million. The Company completed
its goodwill impairment analysis during the fourth quarter of fiscal 2002 and
recorded the $30.0 million 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. As required by SFAS No. 142, the charge was recorded in
the first quarter of fiscal year 2002. The Company performed its annual goodwill
impairment test as of the first day of the fourth quarter of fiscal 2003. Based
on this test, the fair value of the goodwill exceeds the carrying amount. Other
intangible assets are being amortized over periods ranging from 3 to 25 years.

Self-Insured Claims Liability. The Company is financially self-insured for
U.S. 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. The Company's estimates are based on actual experience and historical
assumptions of development of unpaid liabilities over time. Factors affecting
the determination of amounts to be accrued for 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

14

inherent uncertainty. If actual results are less favorable than what are used to
calculate the accrued liability, the Company would have to record expenses in
excess of what has already been accrued.

Allowance for doubtful accounts - The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of its
customers to make payments when due or within a reasonable period of time
thereafter. Estimates are used in determining this allowance based on the
Company's historical collection experience, current trends, credit policy and a
percentage of accounts receivable by aging category. If the financial condition
of the Company's customers were to deteriorate, resulting in an impairment of
their ability to make required payments, additional allowances may be required.
In fiscal 2001, the Company deployed additional resources to manage accounts
receivable and collection activities resulting in reduced time to collect the
receivables and lower bad debt expense. These improvements led to lower
allowances for doubtful accounts in the years ending July 31, 2002 and 2001. The
Company has increased the allowance at July 31, 2003 to approximately 2.7% of
outstanding accounts receivable, compared to 2.4% of outstanding receivables at
July 31, 2002, due primarily to the financial condition of a single customer.

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.

As of July 31, 2003, the Company has available federal and state net
operating loss carryforwards to offset future taxable income of $12.7 million.
In addition, the Company has generated unused foreign tax credits related to its
Canadian operations and other tax credits of $1.1 million. The Company
continuously reviews the probability of realization of deferred tax assets and
has established valuation allowances when it is more likely than not that the
tax benefit will not be realized. As of July 31, 2003, the Company has
established valuation allowances totaling $4.3 million in accordance with the
provisions of Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" (SFAS No. 109) for U.S. operating losses and other tax credits
not currently deductible. Prior to the 2003 fiscal year, the Company had a
history of taxable net operating losses in the United States. In the year ended
July 31, 2003, the Company generated U.S. taxable income of approximately $2.1
million, including $1.2 million of dividend income from the Company's Canadian
subsidiary. Based on such a limited period and the relatively small amount from
operations, management does not believe that this is sufficient evidence to
support a determination that it is more likely than not that the remaining tax
benefits available from U.S. operating losses will be realized. However, should
this trend of taxable income continue, it may become necessary, as early as
fiscal 2004, to release a portion or all of the valuation allowance.

Stock-based compensation - Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation," (SFAS No. 123) encourages but
does not require companies to record compensation cost for stock based employee
compensation plans at fair value. In accordance with SFAS No. 123, the Company
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 during
the fiscal years ending on or before July 31, 2003. 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)

Effective August 1, 2003, the Company elected to adopt the fair value
recognition provisions of SFAS No. 123 for stock-based employee compensation.
Under the modified prospective method of adoption selected by the Company,
stock-based employee compensation cost recognized in 2004 will be the same as
that which would have been recognized had the fair value recognition provisions
of SFAS No. 123 been applied to all awards granted after August 1, 1995. Based
on the outstanding and unvested awards as of April 30, 2003, the anticipated
effect on net income for fiscal 2004, net of taxes, will be approximately
$200,000.

Foreign currency translation -Assets and liabilities in foreign currencies
are translated into U.S. dollars at the rates in effect at the balance sheet
date. Revenues and expenses are translated at average rates 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 U. S. dollars by remittance or repayment, the realized exchange
differences are included as other income (expense) in the Consolidated Statement
of Operations.

15

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. Due to the adoption of SFAS No. 142, there was no goodwill amortization
during each of the years ended July 31, 2003 and 2002. During the year ended
July 31, 2001, the Company recorded $3.6 million in goodwill amortization.

YEAR ENDED JULY 31, 2003 COMPARED TO YEAR ENDED JULY 31, 2002

Net income for the year ended July 31, 2003 was $7.6 million compared to a
net loss of $16.3 million for the year ended July 31, 2002. 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 value in accordance with SFAS No. 142. The
following discussion and analysis excludes the goodwill impairment.

Sales for the year ended July 31, 2003 were $251 million compared to $236
million in 2002, an increase of approximately 6.3%. The Company's investment in
a U.S. national sales organization beginning in January 2001 began to show a
return on this investment in the current fiscal year, as evidenced by new
contracts signed with several large national accounts. Local and national
accounts teams are focused on demonstrating the value of our comprehensive menu
of services, and during a soft economy clients are drawn to the benefits of our
scheduled, distribution and outsourcing services. Sales of these services
increased $11.6 million, or 9.7% over last year, while on-demand sales grew
2.8%, or $3.2 million. These increases result in part from increased sales
volume, and in part from the increase in the exchange rate between the U.S. and
Canadian dollar. The Canadian dollar was stronger compared to the U.S. dollar in
fiscal 2003, which had the effect of increasing reported sales by approximately
$4.3 million.

Cost of sales increased $12 million (7.2%) to $178 million in 2003 compared
to $166 million in the prior year. As a percentage of sales, cost of sales
increased from 70.3% in 2002 to 70.9% in 2003. This increase in cost as a
percentage of sales is primarily attributable to higher insurance costs and bad
debt expense and a change in the overall business mix of the Company's sales.
Scheduled , distribution and outsourcing sales were a larger percentage of total
sales, increasing from 50.9% in the prior year, to 52.5% in 2003. Historically
on-demand sales have lower cost of sales and higher selling, general and
administrative costs (SG & A) compared to scheduled, distribution and
outsourcing sales.

SG & A costs were $58 million for the year ended July 31, 2003 compared to
$57 million for the fiscal year ended July 31, 2002. The increase from 2002 to
2003 is attributable to a number of factors. The increase in the exchange rate
between the Canadian dollar and the U.S. dollar had the effect of increasing
reported SG & A costs by approximately $0.8 million. Compensation and employee
benefits costs were $1.6 million more than in 2002. Approximately one third of
the increase is due to the change in the exchange rate between the Canadian
dollar and the U.S. dollar. The remaining increase is due principally to higher
compensation and benefits associated with the lifting of the salary freeze
earlier this fiscal year, additional operating personnel to handle new business,
higher sales commissions related to new business, additional sales

16

personnel and higher unemployment taxes and medical insurance premiums. The
increase in compensation and employee benefits was partially offset by
reductions in communications costs ($0.4 million) and legal and professional
fees ($0.5 million).. As a percentage of sales, SG & A expenses decreased from
24.1% in 2002 to 23.3% in 2003.

Depreciation and amortization was $2.1 million in 2003 compared to $2.9
million in the prior year. This decrease is due to lower capital expenditures in
recent years. The Company purchased enterprise software several years ago, which
was fully amortized at the end of 2002. In 2003, the decision was made to
transition to two-way mobile data units to communicate with drivers, which
requires no initial capital expenditure.

Interest expense was $2.2 million in 2003, a decrease of $0.9 million, or
28%, compared to 2002. This decrease is due to a lower level of debt in 2003 and
lower interest rates compared to the prior year.

Other income of $0.3 million in 2003 consists primarily of realized foreign
currency transaction gains of $0.2 million and interest income of $0.1 million.
In the prior year, a foreign currency transaction loss of $0.7 million related
to the Canadian tax restructuring was offset by interest income totaling $0.3
million.

The effective tax rate was 28% in 2003 compared to 55% in 2002. Taxable
income in the U.S. was offset by the utilization of net operating loss
carryforwards (NOLs) generated in prior years. The deferred tax asset resulting
from these NOLs has been fully reserved for financial reporting purposes,
therefore there was no tax expense reported related to this income. In March
2003, the Company's Canadian subsidiary paid a $2.5 million dividend to the U.S.
The payment of this dividend resulted in a foreign tax credit of $0.4 million,
which reduced tax expense in the U.S. In addition, the Canadian statutory
federal tax rate decreased marginally in 2003. The effective rate in 2002 was
high due to a $0.2 million non-recurring tax expense and a $0.7 million foreign
exchange loss not deductible for tax purposes related to the tax reorganization
of the Company's Canadian operations.

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 the tax
reorganization of our 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 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 sales increased as a percentage of total sales while
on-demand sales have declined both as percentage of sales and in absolute
dollars. Historically on-demand sales have lower cost of sales and higher
selling, general and administrative costs compared to scheduled and distribution
and other specialized service sales. 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

17

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.

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.

LIQUIDITY AND CAPITAL RESOURCES

In fiscal years ended July 31, 2003, 2002 and 2001, the Company's used
capital primarily for capital expenditures, working capital needs and debt
reduction.

As of July 31, 2003, the Company's bank credit agreement consisted of an
amortizing term loan of $11.6 million and a revolving credit facility of $19.5
million due November 30, 2005. This Third Amendment to the Third Amended and
Restated Credit Agreement ("Credit Facility") was executed May 30, 2003. The
amount available under the revolving credit facility is based on a formula,
generally 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, with a final payment of $625,000 due on November 30, 2005.
Interest on outstanding borrowings is payable monthly at prime plus a margin
ranging from 0.5% to 0.0%, or LIBOR plus a margin ranging from 3.5% to 2.0%,
based on the ratio of Total Debt to EBITDA, as defined in the agreement. At July
31, 2003, the Company's Total Debt to EBITDA ratio was 1.62 to 1.00, therefore
the applicable margin is 0.125% for prime based loans and 2.5% for LIBOR based
loans, effective August 1, 2003. In addition, the Company is required to pay a
commitment fee for any unused amounts of the revolving credit facility, ranging
from 0.5% to 0.25% per annum based on the ratio of Total Debt to EBITDA. This
fee is currently 0.375%. As of July 31, 2003 borrowings under the Credit
Facility totaled approximately $19,615,000 and the Company had outstanding
letters of credit totaling $4,194,000.

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 year beginning July 31, 2003, by the amount of excess cash
flow, all as defined in the agreement. Since the Company's Total Debt to EBITDA
was less than 1.75 to 1.00 at July 31, 2003, the restriction on the payment of
dividends and the requirement to reduce the amortizing term loan by the amount
of excess cash flow were waived. The agreement also requires the Company to
obtain the consent of the lender for additional acquisitions in certain
instances.

Effective July 31, 2003, the Company entered into an interest rate
protection arrangement on the amortizing term loan portion of the Credit
Facility. The interest rate has been fixed at the LIBOR margin plus 1.49% (4.99%
at July 31, 2003). This arrangement matures November 30, 2005. At July 31, 2003,
unpaid settlements related to the interest rate swap were not material. The fair
value of the Company's interest rate protection arrangements at July 31, 2003
was an asset of $31,000 and at July 31,2002 was a liability of $78,000. At July
31, 2003 the weighted average interest rate for all outstanding borrowings was
approximately 4.85%.

During the fiscal years ended July 31, 2003, 2002 and 2001, the Company
spent approximately $1.7 million, $1.4 million and $2.2 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
range between $2 million and $3 million. 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.

18

The Company's cash flow provided by operations for the fiscal years ended
July 31, 2003, 2002 and 2001 were approximately $12.5 million, $9.7 million and
$7.8 million, respectively. This internally generated cash flow financed
entirely the Company's increases in working capital and purchases of property
and equipment. Changes in working capital provided $0.9 million and $1.2 million
of operating cash flow in fiscal 2003 and 2002, respectively, compared to a use
of operating cash flow totaling $2.8 million in the year ended July 31, 2001.

Management expects internally generated cash flow will be sufficient to
support its future capital requirements. 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 and there currently are no pending or contemplated
acquisitions. The Company's ability to make future acquisitions is dependent
upon many factors, including the availability of capital, and currently requires
approval by the Company's primary lenders. There can be no assurance that such
capital will be available or that it can be obtained on terms the Company deems
acceptable, or that the Company will be able to obtain the lender's consent.

CONTRACTUAL OBLIGATIONS

The following table sets forth the Company's contractual commitments as of
July 31, 2003 for the periods indicated (in thousands):

The Company has entered into an employment agreement with its CEO which
provides for the payment of a base salary in the annual amount of $300,000,
participation in an executive bonus plan, an auto allowance, and participation
in other employee benefit plans. In addition, the Company has entered into
retention agreements with certain key executive officers and other employees
that provide certain benefits in the event their employment is terminated
subsequent to a change in control of the Company, as defined in the retention
agreements. The Company believes that it is unlikely that these circumstances
will transpire, but if they did the potential exposure could range between $3.0
million and $3.5 million. As of July 31, 2003 the Company had outstanding
letters of credit totaling $4,194,000.

INCOME TAXES

The provision for income taxes was $3.0 million in fiscal 2003, compared to
$3.7 million and $2.5 million in the years ended July 31, 2002 and 2001,
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.

As of July 31, 2003, the Company has available federal and state net
operating loss carryforwards to offset future taxable income of $12.7 million.
In addition, the Company has generated unused foreign tax credits related to its
Canadian operations and other tax credits of $1.1 million. The Company
continuously reviews the probability of realization of deferred tax assets and
has established valuation allowances when it is more likely than not that the
tax benefit will not be realized. As of July 31, 2003, the Company has
established valuation allowances totaling $4.3 million in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS No. 109) for U.S. operating losses and other tax credits
not currently deductible. Prior to the 2003 fiscal year, the Company had a
history of taxable net operating losses in the United States. In the year ended
July 31, 2003, the Company generated U.S. taxable income of approximately $2.1
million, including $1.2 million of dividend income from the Company's Canadian
subsidiary. Based on such a limited period and the relatively small amount of
taxable income generated from operations, management does not believe that this
is sufficient evidence to support a determination that it is more likely than
not that the remaining tax benefits available from U.S. operating losses will be
realized. However, should this trend of taxable

19

income continue, it may become necessary, as early as fiscal 2004, to release a
portion or all of the valuation allowance.

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 January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation No. 46 requires unconsolidated
variable interest entities to be consolidated by their primary beneficiaries if
the entities do not effectively disperse the risks and rewards of ownership
among their owners and other parties involved. The provisions of Interpretation
No. 46 are applicable immediately to all variable interest entities created
after January 31, 2003 and variable interest entities in which an enterprise
obtains an interest after that date, and for variable interest entities created
before that date, the provisions are effective July 1, 2003. The Company does
not have an interest in any variable interest entities and therefore adoption of
Interpretation No. 46 will not have a material effect on the financial
condition, results of operations, or liquidity of the Company.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
activities (SFAS No. 149). SFAS No. 149 amends and clarifies financial reporting
for derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under SFAS No. 133, Accounting for
Derivatives Instruments and Hedging Activities. This statement is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The Company believes adoption of
SFAS No. 149 will not have a material effect on the financial condition, results
of operations, or liquidity of the Company.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity (SFAS No. 150). SFAS No. 150 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity, and is effective for financial
instruments entered into after May 31, 2003. The Company believes it does not
have any financial instruments with characteristics of both liabilities and
equity and that adoption of SFAS No. 150 will not have a material effect on the
financial condition, results of operations, or liquidity of the Company.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT:

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

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

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

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.

20

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 approximately $8.5 million and a decrease in net
income of approximately $0.3 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

Effective July 31, 2003, the Company entered into an interest rate
protection arrangement on the amortizing term loan portion of the Credit
Facility. The interest rate has been fixed at the LIBOR margin plus 1.49% (4.99%
at July 31, 2003). This arrangement matures November 30, 2005. 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 approximately $37,000. 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 15(a).

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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with the participation of the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule 13a-14(c) under the Securities
Exchange Act of 1934). Based upon the evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective.

21

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

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 2004 Annual Meeting of Stockholders is incorporated herein by
reference.

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

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "Directors and Executive
Officers" in the Company's definitive proxy statement to be filed in connection
with the 2004 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 2004 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.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth under the caption "Principal Accountant Fees and
Services" in the Company's definitive proxy statement to be filed in connection
with the 2004 Annual Meeting of Stockholders is incorporated herein by
reference.

22

PART IV

ITEM 15. 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

Report on Form 8-K filed on June 6, 2003 concerning the June 4, 2003
press release announcing third quarter fiscal year 2003 results.

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 20, 2003

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 20, 2003.

24

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

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, 2003 and 2002 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended July 31, 2003. 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, 2003 and 2002 and the results of its operations and its cash flows for
each of the three years in the period ended July 31, 2003 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
September 26, 2003

F-2

DYNAMEX INC.
CONSOLIDATED BALANCE SHEETS
July 31, 2003 and 2002
(in thousands, except per share data)

See accompanying notes to the consolidated financial statements.

F-3

DYNAMEX INC.
Consolidated Statements of Operations
Years ended July 31, 2003, 2002 and 2001
(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, 2003, 2003 and 2001
(in thousands)

See accompanying notes to the consolidated financial statements.

F-5

DYNAMEX INC.
Consolidated Statements of Cash Flows
Years ended July 31, 2003, 2002 and 2001
(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
expense as incurred. Expenditures that extend the physical or economic life
of property and equipment are capitalized. The estimated useful lives of
property and equipment are as follows:

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

The Company capitalizes both internal and external costs of developing or
obtaining computer software for internal use. Costs incurred to develop
internal-use software during the application development stage are
capitalized, while data conversion, training and maintenance costs
associated with internal-use software are expensed as incurred. As of July
31, 2003 and 2002, the net book value of capitalized software costs was
$1,307 and $1,224, respectively. Amortization expense related to capitalized
software was $555, $903 and $823 in fiscal years 2003, 2002 and 2001,
respectively.

F-7

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

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

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

The Company's customers are not concentrated in any specific geographic
region or industry. 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 unit's assets and liabilities to determine whether the
goodwill is impaired. The Company performed its goodwill impairment test as
of the first day of the fourth quarter of fiscal 2003. Based on this test,
the fair value of the goodwill exceeds the carrying amount. 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, 2003, 2002 and 2001 totaled $33, $85
and $4,297, respectively. Estimated amortization expense for the succeeding
five fiscal years is approximately $20 per year.

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.

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. In fiscal 2001, the Company deployed additional resources
to manage accounts receivable and collection activities resulting in reduced
time to collect the receivables and lower bad debt expense. These
improvements led to lower allowances for doubtful accounts in the years
ending July 31, 2002 and 2001. The Company has increased the allowance at
July 31, 2003 to approximately 2.7% of outstanding accounts receivable,
compared to 2.4% of outstanding receivables at July 31, 2002, due primarily
to the financial condition of a single customer.

Financial instruments - Carrying values of cash and cash equivalents,
accounts receivable, accounts payable and the 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, the resulting gain or loss
would be recognized immediately.

F-8

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

Financing costs - During the fiscal years ended July 31, 2003, 2002 and
2001, the Company incurred $878, $909 and $208, 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 $632 in 2003, $587 in
2002, and $490 in 2001.

Self-insured claims liability - The Company is financially self-insured
for U.S. 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. The Company's estimates are based on actual experience and
historical assumptions of development of unpaid liabilities over time.
Factors affecting the determination of amounts to be accrued for 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.

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 No. 123) encourages
but does not require companies to record compensation cost for stock based
employee compensation plans at fair value. In accordance with SFAS No. 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 during the fiscal years ending on or before July 31, 2003.
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).

Effective August 1, 2003, the Company elected to adopt the fair value
recognition provisions of SFAS No. 123 for stock-based employee
compensation. Under the modified prospective method of adoption selected by
the Company, stock-based employee compensation cost recognized in 2004 will
be the same as that which would have been recognized had the fair value
recognition provisions of SFAS No. 123 been applied to all awards granted
after August 1, 1995. Based on the outstanding and unvested awards as of
July 31, 2003, the anticipated effect on net income for fiscal 2004, net of
taxes, will be approximately $200.

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 per common share 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. Outstanding
options to purchase 297, 736 and 557 shares of common stock at July 31,
2003, 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 the Consolidated Statement of Operations.

F-9

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

New accounting pronouncements - In January 2003, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation No. 46 requires unconsolidated
variable interest entities to be consolidated by their primary beneficiaries
if the entities do not effectively disperse the risks and rewards of
ownership among their owners and other parties involved. The provisions of
Interpretation No. 46 are applicable immediately to all variable interest
entities created after January 31, 2003 and variable interest entities in
which an enterprise obtains an interest after that date, and for variable
interest entities created before that date, the provisions are effective
July 1, 2003. The Company does not have any interest in variable interest
entities and therefore adoption of Interpretation No. 46 will not have a
material effect on the financial condition, results of operations, or
liquidity of the Company.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
activities (SFAS No. 149). SFAS No. 149 amends and clarifies financial
reporting for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities under
SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities.
This statement is effective for contracts entered into or modified after
June 30, 2003, and for hedging relationships designated after June 30, 2003.
The Company believes adoption of SFAS No. 149 will not have a material
effect on the financial condition, results of operations, or liquidity of
the Company.

In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity (SFAS No. 150). SFAS No. 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity, and is
effective for financial instruments entered into after May 31, 2003. The
Company believes it does not have any financial instruments with
characteristics of both liabilities and equity and that adoption of SFAS No.
150 will not have a material effect on the financial condition, results of
operations, or liquidity of the Company.

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.

F-10

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

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 antidilutive
to earnings (loss) per share before effect of change in accounting
principle.

3. INTANGIBLES

Intangibles consist of the following:

F-11

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

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's operations are conducted in two geographic regions, Canada and the
United States. These two regions were identified as reporting units in
accordance with paragraph 30 of SFAS No. 142 because discrete financial
information is available and management regularly reviews the operating
results of these regions. Management performed a valuation on each of these
reporting units using a discounted cash flow model. This model indicated a
valuation that was far in excess of the Company's market capitalization and
management did not believe this could be used as the sole indicator of fair
value. Accordingly, the Company engaged an independent business valuation
firm to perform a valuation of these reporting units. The independent firm
utilized a method combining the income approach and the market approach. The
income approach is based on the present value of future economic benefits
that accrue to the shareholders. The market approach establishes value
through the analysis of the market price of the common stock of comparable,
publicly traded companies. The independent firms' conclusion of the value of
Dynamex was derived by applying a weight of 30% to the value determined
under the income approach and 70% to the value determined under the market
approach. Using this valuation as the purchase price in a purchase price
allocation model, the implied value of the goodwill for the United States
segment was approximately $36.5 million, compared to a carrying value of
approximately $66.5 million. As a result, the Company recognized a goodwill
impairment loss related to this segment of $30.0 million. Although the
performance of the United States operations has improved, the large amount
of goodwill recorded during the competitive acquisition environment of the
late 1990s was not fully supported by the valuation model. The implied value
of the goodwill for the Company's Canadian operations was in excess of $29
million compared to a carrying value of approximately $8 million. The
Company completed its goodwill impairment analysis during the fourth quarter
of fiscal 2002 and recorded the $30.0 million 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. 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 is as follows:

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DYNAMEX INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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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, 2003, the Company's bank credit agreement consisted of an
amortizing term loan of $11.6 million and a revolving credit facility of
$19.5 million due November 30, 2005. This Third Amendment to the Third
Amended and Restated Credit Agreement ("Credit Facility") was executed May
30, 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, with a final payment of $625
due on November 30, 2005. Interest on outstanding borrowings is payable
monthly at prime plus a margin ranging from 0.5% to 0.0%, or LIBOR plus a
margin

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

ranging from 3.5% to 2.0%, based on the ratio of Total Debt to EBITDA, as
defined. At July 31, 2003, the Company's Total Debt to EBITDA ratio was 1.62
to 1.00, therefore the applicable margin will be 0.125% for prime based
loans and 2.5% for LIBOR based loans, beginning August 1, 2003. In addition,
the Company is required to pay a commitment fee for any unused amounts of
the revolving credit facility, ranging from 0.5% to 0.25% per annum based on
the ratio of Total Debt to EBITDA. This fee will be 0.375% beginning August
1, 2003. As of July 31, 2003 borrowings under the Credit Facility totaled
approximately $19,615 and the Company had outstanding letters of credit
totaling $4,194.

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 year beginning July 31,
2003, by the amount of excess cash flow, all as defined in the agreement. If
the Company's Total Debt to EBITDA is less than 1.75 to 1.00, the
restriction on the payment of dividends and the requirement to reduce the
amortizing term loan by the amount of excess cash flow are waived. The
agreement also requires the Company to obtain the consent of the lender for
additional acquisitions in certain instances.

Effective July 31, 2003, the Company entered into an interest rate
protection arrangement on the amortizing term loan portion of the Credit
Facility. The interest rate has been fixed at the LIBOR margin plus 1.49%
(4.99% at July 31, 2003). This arrangement matures November 30, 2005. At
July 31, 2003, unpaid settlements related to the interest rate swap were not
material. The fair value of the Company's interest rate protection
arrangements at July 31, 2003 and 2002 was an asset of $31 and a liability
of $78, respectively. At July 31, 2003 the weighted average interest rate
for all outstanding borrowings was approximately 4.85%.

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. In addition, during 2001, the Company
negotiated extended payment terms on contingent consideration due to former
owners pursuant to the various purchase agreements, and converted $1,240 of
the cash payments due into notes payable. The notes bear interest of 10% per
annum.

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

2004 $ 5,728
2005 5,500
2006 8,616
---------
$ 19,844
=========

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

7. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

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

At July 31, 2003, minimum annual lease payments for such leases are as
follows:

Rent expense related to operating leases amounted to approximately $8,501,
$8,222, and $7,069 for the years ended July 31, 2003, 2002 and 2001,
respectively.

CONTINGENCIES

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

8. INCOME TAXES

The United States and Canadian components of income 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 $ 1,619 $ 1,455 $ 1,991
U.S. 316 2,264 (109)
------- ------- -------
Total current tax expense 1,935 3,719 1,882
------- ------- -------
Deferred tax expense (benefit):
Canada -- 44 47
U.S. 1,024 (105) 532
------- ------- -------
Total deferred tax expense
(benefit) 1,024 (61) 579
------- ------- -------
Total income tax provision $ 2,959 $ 3,658 $ 2,461
======= ======= =======

F-15

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

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 Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes (SFAS No. 109) and consisted of the
following components (in thousands):

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. In the year ended July 31, 2003, the
Company generated U.S. taxable income of approximately $2.1 million. Based
on a one year time frame and with income of approximately $1.2 million of
the income resulting from a dividend from the Company's Canadian subsidiary,
management does not believe that this is sufficient evidence to support a
determination that it is more likely than not that the benefits will be
realized. However, should this trend of taxable income continue, it may
become necessary, as early as fiscal 2004, to release a portion or all of
the valuation allowance.

The Company has a federal net operating loss carryforward of $11,574 as of
July 31, 2003. This carryforward is available to offset future United States
federal taxable income. The net operating losses expire as follows: $842 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, 2003.
Such earnings are intended to be reinvested indefinitely.

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

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

During the year ended July 31, 2001 the Company paid approximately $55 in
rent for the lease of a facility to a member of the Company's Board of
Directors. 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 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 options expire 10 years from the date of
grant.

F-17

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

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 2003, 2002 and 2001, respectively: dividend
yield of 0% for all years; expected volatility of 76%, 73% and 77%;
risk-free interest rate of 4.1%, 5.1% and 5.5%; and expected lives of an
average of 10 years for all years. The weighted average fair value of
options granted during 2003, 2002 and 2001 was $3.13, $1.86 and $1.40,
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, 2003:

12. EMPLOYEES' DEFINED CONTRIBUTION PLAN

The Company sponsors a defined contribution 401K 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, 2003, 2002 and
2001.

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,
2003, 2002 and 2001:

F-20

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

15. QUARTERLY DATA (UNAUDITED)

Summarized quarterly financial data for 2003 and 2002 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 a tax reorganization of the
Company's Canadian operations.

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.

E-1

(5) 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.

(6) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended July 31, 2002, and incorporated herein by reference.

(7) Filed as an exhibit to the registrant's quarterly report on Form 10-Q for
the quarterly period ended January 31, 2003, and incorporated herein by
reference.

(8) Filed as an exhibit to the registrant's quarterly report on Form 10-Q for
the quarterly period ended April 30, 2003, and incorporated herein by
reference.

E-2