<PAGE> 1
BESTWAY, INC. FORM 10-Q
--------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
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
April 30, 2000, was 1,705,412
<PAGE> 2
BESTWAY, INC. FORM 10-Q
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QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTER ENDED
APRIL 30, 2000
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NOS.
---------
<S> <C> <C>
ITEM 1. Condensed Consolidated Unaudited Financial Statements 3-8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-12
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K, Signatures 13
</TABLE>
2
<PAGE> 3
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
APRIL 30, JULY 31,
ASSETS 2000 1999
------------- -------------
<S> <C> <C>
Cash $ 689,742 $ 812,179
Prepaid expenses 134,237 172,226
Deferred income taxes 633,294 871,152
Other assets 85,095 63,202
Rental merchandise, at cost 25,678,577 20,164,761
less accumulated depreciation 8,365,714 7,339,287
------------- -------------
17,312,863 12,825,474
------------- -------------
Property and equipment, at cost 8,612,062 7,247,516
less accumulated depreciation 4,003,242 3,398,724
------------- -------------
4,608,820 3,848,792
------------- -------------
Non-competes, net of amortization 271,609 262,783
Goodwill, net of amortization 2,173,342 2,362,604
------------- -------------
Total assets $ 25,909,002 $ 21,218,412
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,514,257 $ 1,384,696
Book overdraft 238,248 --
Accrued interest - related parties 20,000 20,667
Income taxes payable 54,619 56,406
Other accrued liabilities 1,528,267 1,541,001
Notes payable-related parties 3,000,000 3,000,000
Notes payable-other 10,448,063 6,244,012
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 April 30, 2000 and
July 31, 1999, respectively 17,569 17,569
Paid-in capital 16,124,578 16,124,578
Less treasury stock, at cost, 51,505 at April 30, 2000
and 11,200 at July 31, 1999, respectively (324,616) (66,241)
Accumulated deficit (6,711,983) (7,104,276)
------------- -------------
Total stockholders' equity 9,105,548 8,971,630
------------- -------------
Total liabilities and stockholders' equity $ 25,909,002 $ 21,218,412
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE> 4
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
APRIL 30, APRIL 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 9,168,246 $ 7,582,359 $ 25,444,442 $ 21,222,966
Sales of merchandise 132,392 112,012 316,779 231,674
------------ ------------ ------------ ------------
9,300,638 7,694,371 25,761,221 21,454,640
------------ ------------ ------------ ------------
Cost and operating expenses:
Depreciation and amortization:
Rental merchandise 2,037,814 1,631,210 5,638,193 4,607,019
Other 408,895 347,362 1,167,510 1,024,054
Cost of merchandise sold 121,291 103,421 303,742 218,939
Salaries and wages 2,474,019 2,081,809 7,143,604 5,833,057
Advertising 442,492 375,530 1,333,413 989,785
Occupancy 590,738 479,293 1,688,654 1,334,521
Other operating expenses 2,415,290 2,114,445 6,971,949 6,082,879
Interest expense 323,374 203,841 837,727 576,383
(Gain) loss on sale of property
and equipment (3,920) (31,393) (20,869) (31,393)
Gain on sale of assets (32,201) (136) (32,521) 4,358
------------ ------------ ------------ ------------
8,777,792 7,305,382 25,031,402 20,639,602
------------ ------------ ------------ ------------
Income from operations before
income tax provision 522,846 388,989 729,819 815,038
------------ ------------ ------------ ------------
Income tax expense 229,016 172,750 337,526 363,875
------------ ------------ ------------ ------------
Net income $ 293,830 $ 216,239 $ 392,293 $ 451,163
============ ============ ============ ============
Basic and diluted net income per share $ .17 $ .12 $ .23 $ .26
============ ============ ============ ============
Weighted average common
shares outstanding 1,717,229 1,744,700 1,729,942 1,748,195
============ ============ ============ ============
Diluted weighted average common
shares outstanding 1,731,117 1,843,630 1,747,650 1,799,505
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE> 5
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
For the nine months ended April 30, 2000
<TABLE>
<CAPTION>
(UNAUDITED)
--------------------------------------------------------------------------------------
COMMON STOCK TREASURY STOCK
------------------------- PAID-IN --------------------------- ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT
----------- ------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1999 1,756,917 $ 17,569 $ 16,124,578 (11,200) $ (66,241) $ (7,104,276)
Treasury stock purchases -- -- -- (40,305) (258,375) --
Net income for the nine months
ended April 30, 2000 -- -- -- -- -- 392,293
----------- ------------ ------------ ------------ ----------- ------------
Balance at April 30, 2000 1,756,917 $ 17,569 $ 16,124,578 (51,505) $ (324,616) $ (6,711,983)
=========== ============ ============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE> 6
BESTWAY, INC. FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
----------------------------
APRIL 30,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 392,293 $ 451,163
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,805,703 5,631,073
Net book value of rental units retired 1,772,293 1,771,337
(Gain) loss on sale of property and equipment (20,869) 4,358
Deferred income taxes 237,858 303,407
Gain on sale of assets (32,521) (31,393)
Changes in operating assets and liabilities other than cash:
Prepaid expenses 37,989 (26,915)
Other assets (21,893) (93,118)
Accounts payable (84,230) (343,102)
Income taxes payable (1,787) (139,128)
Accrued interest payable (667) 4,500
Other accrued liabilities (12,734) 46,494
------------ ------------
Total adjustments (83,322) (551,269)
------------ ------------
Net cash flows from operating activities 9,071,435 7,578,676
------------ ------------
Cash flows from investing activities:
Purchase of rental units and equipment (11,749,927) (6,909,929)
Additions to property and equipment (1,712,595) (1,715,955)
Proceeds from sale of property and equipment 37,897 45,036
Asset purchase net of cash acquired (172,797) (523,896)
Proceeds from sale of assets 219,626 90,000
------------ ------------
Net cash flows used in investing activities (13,377,796) (9,014,744)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 4,212,999 2,425,000
Repayment of notes payable (8,948) (1,008,179)
Treasury stock purchase (258,375) (66,241)
Book overdraft 238,248 --
Stock issuance -- 26,625
------------ ------------
Net cash flows provided by financing activities 4,183,924 1,377,205
------------ ------------
Cash at beginning of period 812,179 501,119
------------ ------------
Cash at end of period $ 689,742 $ 442,256
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE> 7
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
condensed consolidated financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's
1999 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. INCOME PER SHARE
Basic and diluted income per share is calculated based on the weighted
average common shares outstanding during the period. Common stock
equivalents (stock options) are not included in the calculation of
diluted income per share if their effect would be antidilutive. For the
three and nine months ended April 30, 2000, 120,213 and 77,474 shares,
respectively of stock options were excluded from the calculation of
diluted income per share.
3. ACQUISITIONS AND DISPOSITIONS
On October 7, 1999, the Company signed an asset purchase agreement with
Panco Electronics and Appliances, Inc. to acquire all rental contracts
associated with a single store location in Mississippi for approximately
$93,000 in cash.
On April 20, 2000, the Company entered into an asset purchase agreement
with BHC, Inc. to acquire all rental contracts associated with a single
store located in Mississippi for approximately $80,219 in cash.
The acquisitions have been accounted for under the purchase method and,
accordingly, the operating results from the acquired stores are included
in the accompanying consolidated statements of income from the date of
acquisitions.
On January 7, 2000, the Company entered into an asset purchase agreement
with Rent-A-Center, Inc. to sell all the assets of one store location in
Mississippi. The Company received $109,747 in cash for all the assets
involved in the daily operation of the store including all rental
inventory being rented by customers. Idle inventory was transferred to
the Company's existing store locations.
On February 2, 2000, the Company entered into an asset purchase agreement
with MATCAM, Inc. to sell all the assets of one store location in
Georgia. The Company received $110,000 in cash for all the assets
involved in the daily operation of the store including all rental
inventory being rented by customers. Idle inventory was transferred to
the Company's existing store locations.
The Company did not recognize a significant gain or loss on the
dispositions.
4. 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
7
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BESTWAY, INC. FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
basis over the term of the rental agreement ranging from 12 to 24 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 and nine months
ended April 30, 2000 and 1999, $338,980 and $831,292, respectively, and
$231,147 and $744,616, respectively, of such impairments were incurred
and are included in other operating expenses in the accompanying
condensed consolidated statements of income.
5. COMMON STOCK
During the nine months ending April 30, 2000, the Company repurchased
40,305 shares of its common stock in the open market at a cost of
$258,375.
6. NOTES PAYABLE
On November 30, 1999, the Company amended its November 18, 1997 Third
Amendment to First Amended and Restated Revolving Credit Loan Agreement
(the "Agreement") with its senior collateralized lender. In the
amendment, the Company extended the maturity date from November 30, 1999
to February 29, 2000 and increased the maximum amount of revolving credit
under such loan agreement from $8,500,000 to $9,000,000. On December 28,
1999, the Company further amended the Agreement. In the amendment, the
Company revised certain covenants, increased the maximum amount of
revolving credit under such agreement from $9,000,000 to $17,500,000 and
extended the maturity date from February 29, 2000 to February 28, 2002.
On December 23, 1999, the Company amended its subordinated note payable
to O'Donnell & Masur, LP dated August 18, 1999. In the amendment, the
Company extended the maturity date from August 19, 2001 to February 28,
2002.
7. SUBSEQUENT EVENTS
On May 10, 2000, the Company signed an asset purchase argument with Cato
TV and Appliance to acquire all rental contracts associated with a single
store location in Tennessee for approximately $150,000.
On May 19, 2000, the Company signed an asset purchase agreement with
Rent-A-Center, Inc. to acquire all rental contracts associated with a
single store location in Tennessee for approximately $173,695.
On May 19, 2000, the Company entered into an asset purchase agreement
with Rent-A-Center, Inc. to sell all the assets of one store location in
Tennessee. The Company received $153,930 in cash for all the assets
involved in the daily operation of the store including all rental
inventory being rented by customers. Idle inventory was transferred to
the Company's existing store locations.
8
<PAGE> 9
BESTWAY, INC. FORM 10-Q
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report on Form 10-Q 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 acquire additional
rental-purchase stores on favorable terms, (ii) the ability of the
Company to improve the performance of such 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
the rental-purchase transaction. Undo 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 under takes
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.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's unaudited Condensed Consolidated Statements of Income,
expressed as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ------------------------
APRIL 30, APRIL 30,
2000 1999 2000 1999
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental income 98.6% 98.5% 98.8% 98.9%
Sales of merchandise 1.4 1.5 1.2 1.1
--------- ---------- ---------- ----------
Total revenues 100.0 100.0 100.0 100.0
--------- ---------- ---------- ----------
Cost and operating expenses:
Depreciation and amortization:
Rental merchandise 21.9 21.2 21.9 21.5
Other 4.4 4.5 4.5 4.8
Cost of merchandise sold 1.3 1.3 1.2 1.0
Salaries and wages 26.6 27.1 27.7 27.2
Advertising 4.7 4.9 5.2 4.6
Occupancy 6.3 6.2 6.6 6.2
Other operating expenses 26.0 27.5 27.0 28.3
Interest expense 3.5 2.6 3.3 2.7
Gain on sale of property and equipment -- (0.4) (0.1) (0.1)
Gain on sale of assets (0.3) -- (0.1) --
--------- ---------- ---------- ----------
Total cost and operating expenses 94.4 94.9 97.2 96.2
--------- ---------- ---------- ----------
Income from operations before income tax provision 5.6 5.1 2.8 3.8
--------- ---------- ---------- ----------
Income tax expense 2.5 2.3 1.3 1.7
--------- ---------- ---------- ----------
Net income 3.1% 2.8% 1.5% 2.1%
========= ========== ========== ==========
</TABLE>
9
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BESTWAY, INC. FORM 10-Q
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CON'T.
Comparison of Three Months Ended April 30, 2000 and 1999
For the three months ended April 30, 2000 compared to the three months
ended April 30, 1999, total revenue increased $1,606,267 or 20.9% to
$9,300,638 from $7,694,371. The increase in total revenue was primarily
attributable to the inclusion of stores acquired and new store openings
in fiscal year 1999, inclusion of nine new store openings in fiscal year
2000, and improved same store revenues. Revenue from same stores
increased $539,158 or 7.5% and accounted for 33.6% of the increase. Same
store revenues represent those revenues earned in stores that were
operated by the Company for the entire quarter ending April 30, 2000 and
1999. The improvement was primarily attributable to an increase in both
the number of items on rent and in revenue earned per item. Revenue from
the stores opened in fiscal year 1999 accounted for $645,647, or 40.2% of
the increase. Revenue from the nine new store openings in fiscal year
2000 accounted for $922,296, or 57.4% of the increase. Revenue decreased
$500,834, or 31.2% due to closing and merging five store locations in
fiscal year 1999 and selling three stores in fiscal year 1999,
respectively.
Total costs and operating expenses increased $1,472,410, or 20.2% to
$8,777,792 from $7,305,382 and decreased .5% as a percentage of total
revenues to 94.4% from 94.9%. The increase was primarily the result of
expenses associated with acquired and new store openings in fiscal year
1999, and nine new stores opened in fiscal year 2000.
Depreciation of rental merchandise increased $406,604, or 24.9% to
$2,037,814 from $1,631,210. Depreciation of rental merchandise expressed
as a percent of total revenue increased .7% to 21.9% from 21.2%. Other
depreciation and amortization increased $61,533, or 17.7% to $408,895
from $347,362 and as a percentage of total revenue decreased .1% to 4.4%
from 4.5%.
Salaries and wages increased $392,210, or 18.8% to $2,474,019 from
$2,081,809 and as a percentage of total store revenue decreased .5% to
26.6% from 27.1%. Salaries and wages increased $106,304, or 27.1% of the
total increase was due to the stores opened in fiscal year 1999.
Additional personnel for the nine new internal stores opened in fiscal
year 2000 increased salaries and wages by $229,077 or 58.4% of the total
increase. Advertising expense increased $66,962, or 17.8% to $442,492
from $375,530. Advertising expense expressed as a percent of total store
revenue decreased .2% to 4.7% from 4.9% primarily due to the stores
acquired and opened in fiscal year 1999 and the nine new stores opened in
fiscal year 2000, respectively. Occupancy expense increased $111,445, or
23.3% to $590,738 from $479,293 and as a percentage of total revenues
increased .1% to 6.3% from 6.2% primarily due to stores opened in fiscal
year 1999 and fiscal year 2000. Other operating expenses increased
$300,845, or 14.2% to $2,415,290 from $2,114,445 and as a percentage of
total revenues decreased 1.5% to 26.0% from 27.5%. The increase was
primarily attributable to the stores opened in fiscal year 1999 and
fiscal year 2000.
10
<PAGE> 11
BESTWAY, INC. FORM 10-Q
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CON'T.
For the quarter ended April 30, 2000 compared to the quarter ended April
30, 1999, income from operations before income tax provision increased
$133,857, or 34.4% to $522,846 from $388,989 and as a percentage of total
revenues increased .5% to 5.6% from 5.1%. The increase was primarily due
to operating profits of $86,067 from the nine new stores opened in fiscal
year 2000.
Comparison of Nine Months Ended April 30, 2000 and 1999
For the nine months ended April 30, 2000 compared to the nine months
ended April 30, 1999, total revenue increased $4,306,581, or 20.1% to
$25,761,221 from $21,454,640. The increase in total revenue was primarily
attributable to the inclusion of stores acquired and new store openings
in fiscal year 1999, inclusion of nine new store openings in fiscal year
2000, and improved same store revenues. Revenue from same stores
increased $1,470,432 or 7.8% and accounted for 34.1% of the increase.
Same store revenues represent those revenues earned in stores that were
operated by the Company for the nine months ending April 30, 2000 and
1999. The improvement was primarily attributable to an increase in both
the number of items on rent and in revenue earned per item. Revenue from
the stores acquired and opened in fiscal year 1999 accounted for
$3,004,059, or 69.8% of the increase. Revenue from the nine new store
openings in fiscal year 2000 accounted for $1,564,636, or 36.3% of the
increase. Revenue decreased $1,732,546, or 40.2% for the nine-month
period due to closing and merging five store locations in fiscal year
1999 and selling three stores in fiscal year 1999, respectively.
Total costs and operating expenses increased $4,391,800, or 21.3% to
$25,031,402 from $20,639,602 and increased 1.0% as a percentage of total
revenues to 97.2% from 96.2%. The increase was primarily the result of
expenses associated with acquired and new store openings in fiscal year
1999, and nine new stores opened during the nine months ended April 30,
2000.
Depreciation of rental merchandise increased $1,031,174, or 22.4% to
$5,638,193 from $4,607,019. Depreciation of rental merchandise expressed
as a percent of total revenue increased .4% to 21.9% from 21.5%. Other
depreciation and amortization increased $143,456, or 14.0% to $1,167,510
from $1,024,054 and as a percentage of total revenue decreased .3% to
4.5% from 4.8%.
Salaries and wages increased $1,310,547, or 22.5% to $7,143,604 from
$5,833,057 and as a percentage of total store revenue increased .5% to
27.7% from 27.2%. Salaries and wages increased $602,844, or 46.0% of the
total increase due to the stores acquired and opened in fiscal year 1999.
Additional personnel for the nine new internal stores opened in fiscal
year 2000 increased salaries and wages by $597,100, or 45.6% of the total
increase. Advertising expense increased $343,628, or 34.7% to $1,333,413
from $989,785. Advertising expense expressed as a percent of total store
revenue increased .6% to 5.2% from 4.6% primarily due to the stores
acquired and opened in fiscal year 1999 and the nine new stores opened in
the nine months ending April 30, 2000, respectively. Occupancy expense
increased $354,133, or 26.5% to $1,688,654 from $1,334,521 and as a
percentage of total revenues increased .4% to 6.6% from 6.2% primarily
due to stores opened in fiscal year 1999 and fiscal year 2000. Other
operating expenses increases $889,070, or 14.6% to $6,971,949 from
$6,082,879 and as a percentage of total revenues decreased 1.3% to 27.0%
from 28.3%. The increase was primarily attributable to the stores opened
in fiscal year 1999 and the nine new stores opened during the nine months
ended April 30, 2000.
11
<PAGE> 12
BESTWAY, INC. FORM 10-Q
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CON'T.
For the nine months ended April 30, 2000 compared to the nine months
ended April 30, 1999, income from operations before income tax provision
decreased $85,219, or 10.5% to $729,819 from $815,038 and as a percentage
of total revenues decreased 1.0% to 2.8% from 3.8%. The decrease was
primarily due to operating losses of $365,362 from the nine new stores
opened in the nine months ending April 30, 2000. The new stores operated
at a lower average revenue per store as compared to the Company's
existing stores and, therefore, had higher salaries and wages,
advertising and occupancy expenses as a percentage of total revenues.
Financial Condition, Liquidity and Capital Resources
For the nine months ended April 30, 2000, the Company's net cash flows
from operating activities was $9,071,435 as compared to $7,578,676 for
the nine months ending April 30, 1999. The increase was primarily due to
increased cash flow from the stores acquired and opened in fiscal years
1999 and 2000 along with decreased outflow for working capital
commitments.
For the nine months ended April 30, 2000, the Company's net cash flows
used in investing activities was $13,377,796 as compared to $9,014,744
for the nine months ended April 30, 1999. The Company's investing
activities reflects a $4,839,998 increase in the purchase of rental units
and equipment for the nine internal store openings during the nine
months.
For the nine months ended April 30, 2000, the Company's net cash flows
provided by financing activities was $4,183,924 as compared to $1,377,205
for the nine months ended April 30, 1999. The increase in financing
activities principally reflects increased borrowings on the Company's
debt to finance the purchase of rental units and equipment for the nine
internal store openings during the nine months.
On November 30, 1999, the Company amended its November 18, 1997 Third
Amendment to First Amended and Restated Revolving Credit Loan Agreement
(the "Agreement") with its senior collateralized lender. In the
amendment, the Company extended the maturity date from November 30, 1999
to February 29, 2000 and increased the maximum amount of revolving credit
under such loan agreement from $8,500,000 to $9,000,000. On December 28,
1999, the Company further amended the Agreement. In the amendment, the
Company revised certain covenants, increased the maximum amount of
revolving credit under such agreement from $9,000,000 to $17,500,000 and
extended the maturity date from February 29, 2000 to February 28, 2002.
On December 23, 1999, the Company amended its subordinated note payable
to O'Donnell & Masur, LP dated August 18, 1999. In the amendment, the
Company extended the maturity date from August 19, 2001 to February 28,
2002.
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.
12
<PAGE> 13
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
27 Financial Data Schedule
Filed electronically only, not attached to printed reports
(b) Reports on Form 8-k
(1) On January 13, 2000, the Company filed a Current Report on
Form 8-k disclosing its amended and restated revolving credit
loan agreement with its senior secured lender.
(2) On January 13, 2000, the Company filed a Current Report on
Form 8-k disclosing its amended subordinated note agreement.
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.
June 14, 2000
/s/ Beth A. Durrett
-------------------------
Beth A. Durrett
Chief Financial Officer
(Principal Financial Officer and duly authorized
to sign on behalf of the Registrant)
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
------- ----------------------------------------
<S> <C>
27 Financial Data Schedule
Filed electronically only, not attached to printed reports.
</TABLE>
