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BESTWAY, INC. FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-8568
BESTWAY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 81-0332743
- ------------------------------- ------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7800 Stemmons Freeway, Suite 320 75247
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(214) 630-6655
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock, $.01 par value, outstanding as of
October 31, 2002, was 1,652,572.
BESTWAY, INC. FORM 10-Q
QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTER ENDED
October 31, 2002
PART I - FINANCIAL INFORMATION PAGE NOS.
---------
ITEM 1. Financial Statements
a) Condensed Consolidated Balance Sheets as of
October 31, 2002 (unaudited) and July 31, 2002 3
b) Condensed Consolidated Statements of Operations
for the Three Months Ended October 31, 2002 and 2001 (unaudited) 4
c) Condensed Consolidated Statements of Cash Flows
for the Three Months Ended October 31, 2002 and 2001 (unaudited) 5
d) Condensed Consolidated Statements of Stockholders' Equity
for the Three Months Ended October 31, 2002 (unaudited) 6
e) Notes to the Condensed Consolidated Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 4. Controls and Procedures 14
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K, Signatures 15
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
OCTOBER 31, JULY 31,
2002 2002
-------------- --------------
ASSETS
Cash and cash equivalents $ 424,125 $ 506,175
Prepaid expenses 283,836 312,925
Taxes receivable 159,585 159,585
Deferred income taxes 567,299 483,075
Other assets 48,799 52,032
-------------- --------------
Rental merchandise, at cost 22,317,679 22,730,226
less accumulated depreciation 8,625,383 9,289,369
-------------- --------------
13,692,296 13,440,857
-------------- --------------
Property and equipment, at cost 9,165,378 9,060,208
less accumulated depreciation 5,578,022 5,393,259
-------------- --------------
3,587,356 3,666,949
-------------- --------------
Employee advance 955,556 988,889
Non-competes, net of amortization 425,674 468,631
Goodwill, net of amortization 1,225,295 1,225,295
-------------- --------------
Total assets $ 21,369,821 $ 21,304,413
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,548,964 $ 671,365
Accrued interest - related parties 20,667 20,667
Other accrued liabilities 1,245,045 1,521,474
Notes payable-related parties 3,000,000 3,000,000
Notes payable-other 7,663,364 7,967,192
Commitments and contingencies
Stockholders' equity:
Preferred stock, $10.00 par value,
1,000,000 authorized, none issued -- --
Common stock, $.01 par value, 5,000,000 authorized,
1,756,917 issued at October 31, 2002 and July 31, 2002,
respectively 17,569 17,569
Paid-in capital 16,156,184 16,151,428
Less treasury stock, at cost, 104,345 at October 31, 2002 and
July 31, 2002 (563,083) (563,083)
Accumulated deficit (7,718,889) (7,482,199)
-------------- --------------
Total stockholders' equity 7,891,781 8,123,715
-------------- --------------
Total liabilities and stockholders' equity $ 21,369,821 $ 21,304,413
============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
3
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
2002 2001
------------ ------------
Revenues:
Rental income $ 7,994,191 $ 8,241,535
Sales of merchandise 278,771 208,970
------------ ------------
8,272,962 8,450,505
------------ ------------
Cost and operating expenses:
Depreciation and amortization:
Rental merchandise 1,620,547 1,715,362
Other 372,537 468,383
Cost of merchandise sold 352,240 204,053
Salaries and wages 2,444,473 2,494,048
Advertising 384,990 415,751
Occupancy 589,060 681,456
Other operating expenses 2,654,078 2,576,425
Interest expense 175,165 247,925
Loss (gain) on sale of property and equipment 786 (5,571)
Gain on sale of assets -- (71,125)
------------ ------------
8,593,876 8,726,707
------------ ------------
Loss before income taxes (320,914) (276,202)
------------ ------------
Income tax benefit (84,224) (84,320)
------------ ------------
Net loss $ (236,690) $ (191,882)
------------ ------------
Basic and diluted net loss per share $ (.14) $ (.11)
============ ============
Weighted average common shares outstanding 1,652,572 1,685,539
============ ============
Diluted weighted average common shares outstanding 1,652,572 1,685,539
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
4
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
2002 2001
------------ ------------
Cash flows from operating activities:
Net loss $ (236,690) $ (191,882)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 1,993,084 2,183,745
Net book value of rental units retired 909,453 745,604
Loss (gain) on sale of property and equipment 786 (5,571)
Gain on sale of assets -- (71,125)
Deferred income taxes (84,224) (84,320)
Non-cash compensation expense 38,089 --
Changes in operating assets and liabilities other than cash:
Prepaid expenses 29,089 (19,574)
Taxes receivable -- (73,110)
Other assets 3,233 (1,079)
Accounts payable 229,104 (37,365)
Other accrued liabilities (276,429) (106,984)
------------ ------------
Net cash flows from operating activities 2,605,495 2,338,339
------------ ------------
Cash flows from investing activities:
Purchase of rental units and equipment (2,132,949) (1,867,437)
Additions to property and equipment (256,505) (100,635)
Proceeds from sale of property and equipment 5,737 30,653
Asset purchase net of cash acquired -- (443,579)
Proceeds from sale of assets -- 330,382
------------ ------------
Net cash flows used in investing activities (2,383,717) (2,050,616)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 200,000 300,000
Repayment of notes payable (503,828) (1,203,514)
Treasury stock purchase -- (2,580)
------------ ------------
Net cash flows used in financing activities (303,828) (906,094)
------------ ------------
Cash and cash equivalents at beginning of period 506,175 1,118,796
------------ ------------
Cash and cash equivalents at end of period $ 424,125 $ 500,425
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
5
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three months ended October 31, 2002
COMMON STOCK TREASURY STOCK TOTAL
-------------------------- PAID-IN --------------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT EQUITY
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at July 31, 2002 1,756,917 $ 17,569 $ 16,151,428 (104,345) $ (563,083) $ (7,482,199) $ 8,123,715
Stock option
compensation expense 4,756 4,756
Net loss for the three months
ended October 31, 2002 -- -- -- -- -- (236,690) (236,690)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at October 31, 2002 1,756,917 $ 17,569 $ 16,156,184 (104,345) $ (563,083) $ (7,718,889) $ 7,891,781
============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
6
BESTWAY, INC. FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. REFERENCE TO PREVIOUS DISCLOSURES
The condensed consolidated financial statements included herein have been
prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Management believes that the disclosures are adequate to
make the information presented not misleading and that all adjustments
deemed necessary for a fair statement of the results for the interim
period have been reflected. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's 2002
Form 10-K, particularly with regard to disclosure relating to significant
accounting policies. The year-end condensed consolidated balance sheet
data was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles.
2. EARNINGS PER COMMON SHARE
Basic net income per common share is based on the weighted average common
shares outstanding during the period. Diluted net income per share
includes common stock equivalents, consisting of stock options, which are
dilutive to net income per share. For the three months ended October 31,
2002 and 2001, 189,590 and 233,565 shares of common stock options were
excluded from the calculation of diluted income per share because their
effect would be antidilutive.
3. RENTAL MERCHANDISE
Rental merchandise rented to customers, or available for rent, is
recorded at cost, net of accumulated depreciation. Merchandise rented to
customers is depreciated on the income-forecast basis over the term of
the rental agreement, generally ranging from 12 to 36 months. Under the
income-forecast basis, merchandise held for rent is not depreciated.
Rental merchandise which is damaged and inoperable, deemed obsolete, or
not returned by the customer after becoming delinquent on payments, is
written-off as such impairment is incurred. For the three months ended
October 31, 2002 and 2001, $471,746 and $371,802, respectively, of such
impairments were incurred and are included in other operating expenses in
the accompanying condensed consolidated statements of income.
4. NOTES PAYABLE
On October 31, 2002, the Company amended and restated its Revolving
Credit Loan Agreement with its lender. In the amendment, the lender
extended the maturity date from October 1, 2003 to May 31, 2004 and
modified the interest rate, minimum tangible net worth provision, and
minimum interest coverage ratio. The amendment adds a minimum year to
date profitability requirement. At August 31 and September 30, the
Company was in violation of the minimum tangible net worth provision of
the Agreement. The Company obtained a waiver of such violations from the
lender.
On December 13, 2002, the Company and the lender amended the subordinated
note payable to a limited partnership and stockholder dated August 18,
1999. The amendment extended the maturity date from November 1, 2003 to
May 31, 2004.
7
BESTWAY, INC. FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. NEW ACCOUNTING STANDARDS
Effective August 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangibles" ("SFAS
142"). SFAS 142 addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other assets
(but not those acquired in a business combination) at acquisition and for
goodwill and other intangibles assets subsequent to their acquisition.
The Company's consolidated balance sheet included goodwill, net of
accumulated amortization, totaling $1,225,295, which is related to its
various store acquisitions. Bestway applied the provisions of SFAS 142 on
August 1, 2002 and discontinued amortization of goodwill.
In accordance with SFAS 142, goodwill is subject to an annual impairment
test at the business segment level. Based on the initial impairment test
conducted as of August 1, 2002, the Company does not believe goodwill is
impaired.
Bestway's adoption of SFAS 142 had no effect on the Company's acquired
identifiable intangible assets that are subject to amortization. During
the three months ended October 31, 2002, the Company recorded total
amortization expense of $42,960.
The following pro forma financial information compares the Company's net
losses for the three months ended October 31, 2002 and 2001 had the
provisions of SFAS 142 been applied on August 1, 2001:
8
BESTWAY, INC. FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2002 2001
------------ ------------
Reported net loss (236,690) (191,882)
Goodwill amortization -- 63,088
------------ ------------
Adjusted net loss (236,690) (128,794)
Basic and diluted earnings per share:
Reported net loss $ (0.14) $ (0.11)
Goodwill amortization -- $ 0.04
------------ ------------
Adjusted net loss $ (0.14) $ (0.07)
Weighted average shares outstanding 1,652,572 1,685,539
In June 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities.
SFAS 146 addresses significant issues relating to the recognition,
measurement, and reporting of costs associated with exit and disposal
activities, including restructuring activities, and nullifies the
guidance in Emerging Issues Task Force Issue No. 94-3 ("EITF 94-3"),
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of this statement are effective for exit
and disposal activities that are initiated after December 31, 2002, with
early application encouraged. The Company does not expect SFAS 146 to
have a material impact on the Company's results of operations or its
financial position.
9
BESTWAY, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report on Form 10-Q and the foregoing Management's Discussion and
analysis of Financial Condition and Results of Operations contains
various "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements represent
the Company's expectations or beliefs concerning future events. Any
forward-looking statements made by or on behalf of the Company are
subject to uncertainties and other factors that could cause actual
results to differ materially from such statements. These uncertainties
and other factors include, but are not limited to, (i) the ability of the
Company to open or acquire additional rental-purchase stores on favorable
terms, (ii) the ability of the Company to improve the performance of such
opened or acquired stores and to integrate such acquired stores into the
Company's operations, and (iii) the impact of state and federal laws
regulating or otherwise affecting rental-purchase transactions, (iv) the
impact of general economic conditions in the United States and (v) the
impact of terrorist activity, threats or terrorist activity and responses
thereto on the economy in general and the rental-purchase industry in
particular. Undue reliance should not be placed on any forward-looking
statements made by or on behalf of the Company as such statements speak
only as of the date made. The Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a
result of new information, the occurrence of future events or otherwise.
10
BESTWAY, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's unaudited Consolidated Statements of Operations,
expressed as a percentage of revenues:
THREE MONTHS ENDED
OCTOBER 31,
-------------------------------
2002 2001
------------ ------------
Revenues:
Rental income 96.6% 97.5%
Sales of merchandise 3.4 2.5
------------ ------------
Total revenues 100.0 100.0
------------ ------------
Cost and operating expenses:
Depreciation and amortization:
Rental merchandise 19.6 20.3
Other 4.5 5.5
Cost of merchandise sold 4.3 2.4
Salaries and wages 29.5 29.5
Advertising 4.7 4.9
Occupancy 7.1 8.1
Other operating expenses 32.1 30.5
Interest expense 2.1 2.9
Loss (gain) on sale of property and equipment -- --
Gain on sale of assets -- (0.8)
------------ ------------
Total cost and operating expenses 103.9 103.3
------------ ------------
Loss before income taxes (3.9) (3.3)
------------ ------------
Income tax benefit (1.0) (1.0)
------------ ------------
Net loss (2.9)% (2.3)%
============ ============
11
BESTWAY, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)
COMPARISON OF THREE MONTHS ENDED OCTOBER 31, 2002 AND 2001
For the three months ended October 31, 2002 compared to the three months
ended October 31, 2001, total revenue decreased $177,543, or 2.1% to
$8,272,962 from $8,450,505. The decrease in total revenue was primarily
due to the consolidation or sale of fourteen store locations in fiscal
year 2002, offset by increased revenues in same stores. Revenue decreased
$939,134, or 529.0% due to the consolidation or sale of stores in fiscal
year 2002. Revenue from same stores increased $761,591 or 10.1% and
accounted for 429.0% of the change in revenue. Same store revenues
represent those revenues earned in stores that were operated by the
Company for the entire three months ended October 31, 2002 and 2001. This
improvement was primarily attributable to an increase in the number of
customers served, the number of agreements on rent, as well as revenue
earned per agreement on rent.
Total costs and operating expenses decreased $132,831, or 1.5% to
$8,593,876 from $8,726,707 and increased .6% as a percentage of total
revenue to 103.9% from 103.3%. In fiscal year 2002, the Company sold, or
consolidated fourteen under-performing stores and implemented a program
to reduce operating expenses at the store and corporate level. In
addition, the Company has implemented strategies to improve
profitability, including reviewing the Company's product offerings and
price value relationships.
Depreciation of rental merchandise decreased $94,815, or 5.5% to
$1,620,547 from $1,715,362 and decreased .7% as a percentage of total
revenue to 19.6% from 20.3%. The decrease as a percentage of revenues was
primarily due to increased rental rates. Other depreciation and
amortization decreased $95,846, or 20.5% to $372,537 from $468,383 and
decreased 1.0% as a percentage of total revenue to 4.5% from 5.5%. Under
SFAS 142, amortization of goodwill ceased effective August 1, 2002.
Cost of merchandise sold increased $148,187, or 72.6% to $352,240 from
$204,053 and increased 1.9% as a percentage of total revenue to 4.3% from
2.4%. The increase was a result of an increase in the number of items
sold in the quarter ending October 31, 2002 compared to the quarter
ending October 31, 2001. The Company undertook a merchandise reduction
sales initiative to dispose of lower margin merchandise. During the
quarter ending October 31, 2002, the Company recorded merchandise sales
of $278,771 with a remaining value of $352,240, or a loss of $73,469.
During the quarter ending October 31, 2001, the Company recorded
merchandise sales of $208,970 with a remaining value of $204,053, or a
margin of $4,917.
Salaries and wages decreased $49,575, or 2.0% to $2,444,473 from
$2,494,048 and remained at 29.5% as a percentage of total revenue. The
decrease was primarily attributable to salaries and wages associated with
the consolidation or sale of fourteen under-performing stores in fiscal
year 2002, offset by increased same store level labor costs.
12
BESTWAY, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)
Advertising expense decreased $30,761, or 7.4% to $384,990 from $415,751
and as a percentage of total revenue decreased .2% to 4.7% from 4.9%. The
decrease is primarily attributable to advertising expense associated with
the consolidation or sale of fourteen under-performing stores in fiscal
year 2002, offset by increased same store level advertising costs.
Occupancy expense decreased $92,396, or 13.6% to $589,060 from $681,456.
The decrease is primarily due to occupancy expense associated with the
consolidation or sale of fourteen under-performing stores in fiscal year
2002. Occupancy expense as a percentage of total revenue decreased 1.0%
to 7.1% from 8.1% primarily due to the increase in same store revenues.
Other operating expenses increased $77,653, or 3.0% to $2,654,078 from
$2,576,425 and as a percentage of total revenue increased 1.6% to 32.1%
from 30.5%. Other operating expenses increased approximately $200,000 due
to increases in rental merchandise write-offs, rental merchandise
repairs, and group medical and dental insurance costs. Other operating
expenses decreased approximately $130,000 in connection with a legal
settlement.
Interest expense decreased $72,760, or 29.3% to $175,165 from $247,925
and as a percentage of total revenue decreased .8% to 2.1% from 2.9%. The
decrease in interest is primarily attributable to decreased indebtedness
and a lower effective interest rate.
For the quarter ended October 31, 2002 compared to the quarter ended
October 31, 2001, loss before income taxes increased $44,712, or 16.2% to
a loss of $320,914 compared to a loss of $276,202. Loss from operations
before income taxes as a percentage of total revenue increased .6% to
3.9% compared to 3.3% primarily attributable to increases in write-offs
of rental merchandise and same store level labor costs.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For the three months ending October 31, 2002, the Company's net cash
flows from operating activities was $2,605,495 as compared to $2,338,339
for the three months ending October 31, 2001. The increase in cash
provided by operations was primarily due to decreased outflow for working
capital commitments.
For the three months ending October 31, 2002, the Company's net cash
flows used in investing activities was $2,383,717 as compared to
$2,050,616 for the three months ending October 31, 2001. The Company's
investing activities reflects a $265,512 increase in the purchase of
rental units and a $155,870 increase in purchases of property and
equipment. The increase in the amount of rental merchandise purchased
during the quarter ending October 31, 2002 is a result of strong consumer
demand. The increase in property and equipment purchased during the
quarter ending October 31, 2002 is a result of purchasing laser printers
and copy machines in all stores, remodeling one store, and relocating one
store.
For the three months ending October 31, 2002, the Company's net cash flow
used in financing activities was $303,828 as compared to $906,094 for the
three months ending October 31, 2001. The decrease in financing
activities principally reflects decreased repayments of the Company's
debt.
13
BESTWAY, INC. FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)
On October 31, 2002, the Company amended and restated its Revolving
Credit Loan Agreement with its lender. In the amendment, the lender
extended the maturity date from October 1, 2003 to May 31, 2004 and
modified the interest rate, minimum tangible net worth provision, and
minimum interest coverage ratio. The amendment adds a minimum year to
date profitability requirement. At August 31 and September 30, the
Company was in violation of the minimum tangible net worth provision of
the Agreement. The Company obtained a waiver of such violations from the
lender.
On December 13, 2002, the Company and the lender amended the subordinated
note payable to a limited partnership and stockholder dated August 18,
1999. The amendment extended the maturity date from November 1, 2003 to
May 31, 2004.
The Company's capital requirements relate primarily to purchasing rental
merchandise and working capital requirements for new and existing stores.
The Company's primary source of liquidity and capital are from operations
and borrowings. For the three months ending October 31, 2002, the Company
has generated sufficient cash flows from operations to meet its operating
and investing needs. Management believes that operating cash flows
combined with available credit of $3,430,617 under the Revolving Credit
Loan Agreement provide adequate resources to meet the Company's future
cash obligations.
INFLATION
Although the Company cannot precisely determine the effects of inflation
on its business, it is management's belief that the effects on revenues
and operating results have not been significant.
RECENTLY ISSUED ACCOUNTING PRINCIPLE
In June 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities.
SFAS 146 addresses significant issues relating to the recognition,
measurement, and reporting of costs associated with exit and disposal
activities, including restructuring activities, and nullifies the
guidance in Emerging Issues Task Force Issue No. 94-3 ("EITF 94-3"),
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of this statement are effective for exit
and disposal activities that are initiated after December 31, 2002, with
early application encouraged. The Company does not expect SFAS 146 to
have a material impact on the Company's results of operations or its
financial position.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period to the filing of this report, an evaluation was
carried out under the supervision and with the participation of the
Company's management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rule 13a-14(c)
under the Securities Exchange Act of 1934). Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that
the design and operation of these disclosure controls and procedures were
effective.
No significant changes were made in our internal controls or in other
factors that could significantly affect these controls subsequent to the
date of their evaluation.
14
BESTWAY, INC. FORM 10-Q
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K, SIGNATURES
(a) Exhibits required by Item 601 of Regulation S-K
10.13* Tenth Amendment to the First Amended and restated Revolving
Credit Loan, dated October 31, 2002, by and between Bestway
and Comerica Bank-Texas, incorporated by reference to
Bestway's Quarterly Report on Form 10-Q for the quarter ended
October 31, 2002.
10.14* Extension Agreement for the First Amended and Restated
Promissory Note, dated December 13, 2002, between O'Donnell
and Masur, L.P. and Bestway, incorporated by reference to
Bestway's Quarterly Report on Form 10-Q for the quarter ended
October 31, 2002.
99.1* Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
99.2* Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
- ----------
*Filed herewith
(b) Report on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended October 31, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BESTWAY, INC.
December 16, 2002
/s/ Beth A. Durrett
------------------------------------------------
Beth A. Durrett
Chief Financial Officer
(Principal Financial Officer and duly authorized
to sign on behalf of the Registrant)
15
BESTWAY, INC. FORM 10-Q
CERTIFICATION
I, David A. Kraemer, Chief Executive Officer of Bestway, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bestway, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Bestway, Inc. as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: December 16, 2002 By: /s/ David A. Kraemer
-------------------------------
Name: David A. Kraemer
Title: Chief Executive Officer
16
BESTWAY, INC. FORM 10-Q
CERTIFICATION
I, Beth A. Durrett, Chief Financial Officer of Bestway, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bestway, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Bestway, Inc. as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: December 16, 2002 By: /s/ Beth A. Durrett
-------------------------------
Name: Beth A. Durrett
Title: Chief Financial Officer
17
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.13* Tenth Amendment to the First Amended and restated Revolving
Credit Loan, dated October 31, 2002, by and between Bestway
and Comerica Bank-Texas, incorporated by reference to
Bestway's Quarterly Report on Form 10-Q for the quarter ended
October 31, 2002.
10.14* Extension Agreement for the First Amended and Restated
Promissory Note, dated December 13, 2002, between O'Donnell
and Masur, L.P. and Bestway incorporated by reference to
Bestway's Quarterly Report on Form 10-Q for the quarter ended
October 31, 2002.
99.1* Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
99.2* Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
- ----------
*Filed herewith