BESTWAY INC - 10-Q Quarterly Report

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BESTWAY, INC. FORM 10-Q
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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 January 31, 2003

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.
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(Exact name of registrant as specified in its charter)

Delaware 81-0332743
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

7800 Stemmons Freeway, Suite 320 75247
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(Address of principal executive offices) (Zip Code)

(214) 630-6655
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(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
January 31, 2003, was 1,677,572.

BESTWAY, INC. FORM 10-Q
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QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTER ENDED
January 31, 2003

BESTWAY, INC. FORM 10-Q

CONDENSED CONSOLIDATED BALANCE SHEETS
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The accompanying notes are an integral part of these consolidated
financial statements.

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BESTWAY, INC. FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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The accompanying notes are an integral part of these consolidated
financial statements.

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BESTWAY, INC. FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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The accompanying notes are an integral part of these consolidated
financial statements.

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BESTWAY, INC. FORM 10-Q

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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For the six months ended January 31, 2003 (Unaudited)

The accompanying notes are an integral part of these consolidated
financial statements.

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BESTWAY, INC. FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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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 six months ended January 31,
2003 and for the three and six months ended January 31, 2002, 265,595 and
235,193 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 six months ended
January 31, 2003 and 2002, $887,347 and $941,306, respectively, of such
impairments were incurred and are included in other operating expenses in
the accompanying condensed consolidated statements of operations.

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, 2002 and September 30, 2002
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 and has been in compliance thereafter.

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BESTWAY, INC. FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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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.

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 intangible 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
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. Based on the initial impairment test conducted as of August 1,
2002, the Company does not believe goodwill is impaired.

The Company's adoption of SFAS 142 had no effect on the Company's
acquired identifiable intangible assets that are subject to amortization.
During the three and six months ended January 31, 2003, the Company
recorded total amortization expense of $42,960 and $85,919, respectively.

The following pro forma financial information compares the Company's net
income (loss) for the three and six months ended January 31, 2003 and
2002 had the provisions of SFAS 142 been applied on August 1, 2001:

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BESTWAY, INC. FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities
("SFAS 146"). 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.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 addresses the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees and also clarifies the
requirements related to the recognition of a liability by a guarantor at
the inception of a guarantee for the obligations the guarantor has
undertaken in issuing that guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements in FIN 45 are effective for financial statements of interim
or annual periods ending after December 15, 2002. The Company does not
expect FIN 45 to have a material impact on its consolidated financial
statements.

In December 2002, the FASB issued Statement of Financial Accounting
Standard No. 148, Accounting for Stock Based Compensation - Transition
and Disclosure - an amendment of FASB Statement No. 123" ("SFAS 148").
This statement amends SFAS No. 123, Accounting for Stock Based
Compensation ("SFAS 123") to provide alternative methods of voluntarily
transitioning to the fair value based method of accounting for
stock-based employee compensation. SFAS 148 also amends the disclosure
requirements of SFAS 123 to require disclosure of the method used to
account for stock based employee compensation and the effect of the
method on reported results in both year-end and interim financial
statements. The annual disclosure provisions will be effective for fiscal
years ending after December 15, 2002. The interim disclosure provisions
are effective for financials reports containing financial statements for
interim periods beginning after December 15, 2002. The Company intends to
adopt the disclosure-only provisions of SFAS 148 for the interim period
ending April 30, 2003. At the present time the Company does not intend to
adopt the fair value based method.

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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.

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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:

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BESTWAY, INC. FORM 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)

On July 8, 2002, the Company announced the appointment of a new President
and Chief Executive Officer who, among other things, implemented a change
in the Company's operating philosophy to eliminate lower margin product
lines, focus on higher revenue merchandise, and increase the Company's
investment in store personnel and advertising. As a result, the Company
experienced increased same store revenues and improved product margins in
the quarter and six-month period.

COMPARISON OF THREE MONTHS ENDED JANUARY 31, 2003 AND 2002

For the three months ended January 31, 2003 compared to the three months
ended January 31, 2002, total revenue increased $400,410, or 4.7% to
$8,894,260 from $8,493,850. The increase in total revenue was due to
increased revenues in same stores, offset by the consolidation or sale of
fourteen store locations in fiscal year 2002. Revenue from same stores
increased $1,170,142 or 15.1% and accounted for 292.2% 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
January 31, 2003 and 2002. The 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. Revenue
decreased $769,732, or 192.2% due to the consolidation or sale of stores
in fiscal year 2002.

Total costs and operating expenses increased $308,391, or 3.6% to
$8,884,355 from $8,575,964 and decreased 1.1% as a percentage of total
revenue to 99.9% from 101.0%. In fiscal year 2002, the Company sold or
consolidated fourteen under-performing stores. 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 increased $21,964, or 1.3% to
$1,728,322 for the three months ended January 31, 2003 from $1,706,358 in
2002. Depreciation of rental merchandise expressed as a percentage of
rental income excluding fees decreased .7% to 24.6% from 25.3% in 2002.
This decrease is primarily attributable to improved product margins due
to enhanced rental rates and turns. Other depreciation and amortization
decreased $85,221, or 18.3% to $379,407 from $464,628 and decreased 1.2%
as a percentage of total revenue to 4.3% from 5.5%. Under SFAS 142,
amortization of goodwill ceased effective August 1, 2002.

Cost of merchandise sold increased $269,816, or 171.0% to $427,584 from
$157,768 and increased 2.9% as a percentage of total revenue to 4.8% from
1.9%. The increase was a result of an increase in the number of items
sold in the quarter ending January 31, 2003 compared to the quarter
ending January 31, 2002. The Company undertook a merchandise reduction
sales initiative to dispose of lower margin merchandise. During the
quarter ending January 31, 2003, the Company recorded merchandise sales
of $391,591 with a remaining value of $427,584, or a loss of $35,993.
During the quarter ending January 31, 2002, the Company recorded
merchandise sales of $179,888 with a remaining value of $157,768, or a
margin of $22,120.

Salaries and wages increased $217,895, or 8.9% to $2,662,915 from
$2,445,020 and increased 1.1% as a percentage of total revenue to 29.9%
from 28.8%. The increase was primarily attributable to increased same
store level labor costs of approximately $377,000, offset by salaries and
wages associated with the consolidation or sale of fourteen stores in
fiscal year 2002.

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BESTWAY, INC. FORM 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)

Advertising expense increased $43,152, or 11.2% to $427,932 from $384,780
and as a percentage of total revenue increased .3% to 4.8% from 4.5%. The
increase is primarily attributable to increased same store level
advertising costs of approximately $122,000, offset by the consolidation
or sale of fourteen stores in fiscal year 2002.

Occupancy expense decreased $57,314, or 8.8% to $593,122 from $650,436.
The decrease is primarily due to occupancy expense associated with the
consolidation or sale of fourteen stores in fiscal year 2002. Occupancy
expense as a percentage of total revenue decreased 1.0% to 6.7% from 7.7%
primarily due to the increase in same store revenue.

Other operating expenses decreased $52,335, or 2.1% to $2,499,317 from
$2,551,652 and as a percentage of total revenue decreased 1.9% to 28.1%
from 30.0%. The decrease was primarily attributable to other operating
expenses associated with the consolidation or sale of fourteen stores in
fiscal year 2002, offset by increased same store other operating expenses
of approximately $232,000.

Interest expense decreased $24,024, or 12.1% to $175,103 from $199,127
and as a percentage of total revenue decreased .3% to 2.0% from 2.3%. The
decrease in interest is primarily attributable to decreased indebtedness
and a lower effective interest rate.

Income before income taxes increased by $92,019, or 112.1% to income of
$9,905 for the three months ended January 31, 2003 compared to a loss of
$82,114 in 2002. Income before income taxes as a percentage of total
revenue increased to .1% for the three months ended January 31, 2003,
from a loss of 1.0% in 2002. This increase is attributable to the
increase in same store revenues in 2003 as compared to 2002 coupled with
the realization of our margin enhancement initiatives, and the reduction
of intangible amortization expense as discussed above.

COMPARISON OF SIX MONTH ENDED JANUARY 31, 2003 AND 2002

For the six months ended January 31, 2003 compared to the six months
ended January 31, 2002, total revenue increased $222,867, or 1.3% to
$17,167,222 from $16,944,355. The increase in total revenue was due to
increased revenues in same stores, offset by the consolidation or sale of
fourteen store locations in fiscal year 2002. Revenue from same stores
increased $1,931,734 or 12.7% and accounted for 866.7% of the change in
revenue. Same store revenues represent those revenues earned in stores
that were operated by the Company for the entire six months ended January
31, 2003 and 2002. The 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. Revenue decreased
$1,708,867, or 766.7% due to the consolidation or sale of stores in
fiscal year 2002.

Total costs and operating expenses increased $175,561, or 1.0% to
$17,478,232 from $17,302,671 and decreased .3% as a percentage of total
revenue to 101.8% from 102.1%. In fiscal year 2002, the Company sold or
consolidated fourteen under-performing stores. In addition, the Company
has implemented strategies to improve profitability, including reviewing
the Company's product offerings and price value relationships.

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BESTWAY, INC. FORM 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)

Depreciation of rental merchandise decreased $72,851, or 2.1% to
$3,348,869 for the six months ended January 31, 2003 from $3,431,720 in
2002. Depreciation of rental merchandise expressed as a percentage of
rental income excluding fees decreased .6% to 24.7% from 25.3% in 2002.
This decrease is primarily attributable to improved product margins due
to enhanced rental rates and turns. Other depreciation and amortization
decreased $181,067, or 19.4% to $751,944 from $933,011 and decreased 1.1%
as a percentage of total revenue to 4.4% from 5.5%. Under SFAS 142,
amortization of goodwill ceased effective August 1, 2002.

Cost of merchandise sold increased $418,003, or 115.5% to $779,824 from
$361,821 and increased 2.4% as a percentage of total revenue to 4.5% from
2.1%. The increase was a result of an increase in the number of items
sold in the six months ending January 31, 2003 compared to the six months
ending January 31, 2002. The Company undertook a merchandise reduction
sales initiative to dispose of lower margin merchandise. During the six
months ending January 31, 2003, the Company recorded merchandise sales of
$670,362 with a remaining value of $779,824, or a loss of $109,462.
During the six months ending January 31, 2002, the Company recorded
merchandise sales of $388,858 with a remaining value of $361,821, or a
margin of $27,037.

Salaries and wages increased $168,320, or 3.4% to $5,107,388 from
$4,939,068 and increased .7% as a percentage of total revenue to 29.8%
from 29.1%. The increase was primarily attributable to increased same
store level labor costs of approximately $619,000, offset by salaries and
wages associated with the consolidation or sale of fourteen stores in
fiscal year 2002.

Advertising expense increased $12,392, or 1.5% to $812,923 from $800,531
and as a percentage of total revenue remained constant at 4.7%. The
increase is primarily attributable to increased same store level
advertising costs of approximately $183,000, offset by the consolidation
or sale of fourteen stores in fiscal year 2002.

Occupancy expense decreased $149,710, or 11.2% to $1,182,182 from
$1,331,892. The decrease is primarily due to occupancy expense associated
with the consolidation or sale of fourteen stores in fiscal year 2002.
Occupancy expense as a percentage of total revenue decreased 1.0% to 6.9%
from 7.9% primarily due to the increase in same store revenue.

Other operating expenses increased $25,318, or .5% to $5,153,395 from
$5,128,077 and as a percentage of total revenue decreased .3% to 30.0%
from 30.3%. Other operating expenses increased approximately $693,000 due
to increased other operating expenses in same stores, offset by the
consolidation or sale of fourteen store locations in fiscal year 2002.

Interest expense decreased $96,784, or 21.6% to $350,268 from $447,052
and as a percentage of total revenue decreased .6% to 2.0% from 2.6%. The
decrease in interest is primarily attributable to decreased indebtedness
and a lower effective interest rate.

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BESTWAY, INC. FORM 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)

Loss before income taxes decreased by $47,306 to a loss of $311,010 for
the six months ended January 31, 2003 compared to loss of $358,316 in
2002. Loss before income taxes as a percentage of total revenue decreased
to 1.8% for the six months ended January 31, 2003, from a loss of 2.1% in
2002. This decrease is attributable to the increase in same store
revenues in 2003 as compared to 2002 coupled with the realization of our
margin enhancement initiatives, and reduction of intangible amortization
expense as discussed above.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

For the six months ending January 31, 2003, the Company's net cash flows
from operating activities was $5,418,494 as compared to $4,911,599 for
the six months ending January 31, 2002. The increase in cash provided by
operations was primarily due to increased revenues and decreased outflow
for working capital commitments.

For the six months ending January 31, 2003, the Company's net cash flows
used in investing activities was $5,694,642 as compared to $4,403,927 for
the six months ending January 31, 2002. The Company's investing
activities reflects a $961,356 increase in the purchase of rental units
and a $169,791 increase in purchases of property and equipment. The
increase in the amount of rental merchandise purchased during the six
months ending January 31, 2003 is a result of strong consumer demand. The
increase in property and equipment purchased during the six months ending
January 31, 2003 is a result of purchasing laser printers and copy
machines in all stores, remodeling two stores, and relocating one store.

For the six months ending January 31, 2003, the Company's net cash flow
provided by financing activities was $231,597 as compared to net cash
flows used in financing activities of $1,060,963 for the six months
ending January 31, 2002. The decrease in financing activities principally
reflects decreased repayments of the Company's debt.

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, 2002 and September 30, 2002
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 and has been in compliance thereafter.

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 six months ending January 31, 2003, 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 $3,500,000 under the Revolving Credit
Loan Agreement provide adequate resources to meet the Company's future
cash obligations.

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BESTWAY, INC. FORM 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CON'T.)

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 PRINCIPLES

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("SFAS 146"). 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.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 addresses the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees and also clarifies the
requirements related to the recognition of a liability by a guarantor at
the inception of a guarantee for the obligations the guarantor has
undertaken in issuing that guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements in FIN 45 are effective for financial statements of interim
or annual periods ending after December 15, 2002. The Company does not
expect FIN 45 to have a material impact on its consolidated financial
statements.

In December 2002, the FASB issued Statement of Financial Accounting
Standard No. 148, Accounting for Stock Based Compensation - Transition
and Disclosure - an amendment of FASB Statement No. 123" ("SFAS 148").
This statement amends SFAS No. 123, Accounting for Stock Based
Compensation ("SFAS 123") to provide alternative methods of voluntarily
transitioning to the fair value based method of accounting for
stock-based employee compensation. SFAS 148 also amends the disclosure
requirements of SFAS 123 to require disclosure of the method used to
account for stock based employee compensation and the effect of the
method on reported results in both annual and interim financial
statements. The annual disclosure provisions will be effective for fiscal
years ending after December 15, 2002. The interim disclosure provisions
are effective for financial reports containing financial statements for
interim periods beginning after December 15, 2002. The Company intends to
adopt the disclosure-only provisions of SFAS 148 for the interim period
ending April 30, 2003. The Company does not believe that SFAS 148 will
have a material impact on its consolidated financial statements.

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BESTWAY, INC. FORM 10-Q

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.

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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

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 January 31, 2003.

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.

March 17, 2003

/s/ Beth A. Durrett
Beth A. Durrett
Chief Financial Officer
(Principal Financial Officer and duly authorized
to sign on behalf of the Registrant)

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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: March 17, 2003 By: /s/ David A. Kraemer
--------------------------------------
Name: David A. Kraemer
Title: Chief Executive Officer

19

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: March 17, 2003 By: /s/ Beth A. Durrett
-------------------------------------------
Name: Beth A. Durrett
Title: Chief Financial Officer

20

INDEX TO EXHIBITS

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*Filed herewith