-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EOgzydYw9VSyNkMwF65N61tgdm3IotqF25INuTi8hxkLB2Di5YqHEAmEt5cTFCPk 2aWqj6VrcvNZgVJcBGBaAg== 0000950134-98-008325.txt : 19981029 0000950134-98-008325.hdr.sgml : 19981029 ACCESSION NUMBER: 0000950134-98-008325 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19981028 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BESTWAY INC CENTRAL INDEX KEY: 0000004344 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 810332743 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-08568 FILM NUMBER: 98732219 BUSINESS ADDRESS: STREET 1: 7800 STEMMONS STE 320 CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146306655 MAIL ADDRESS: STREET 1: 7800 STEMMONS FRWY SUITE 320 CITY: DALLAS STATE: TX ZIP: 75217 FORMER COMPANY: FORMER CONFORMED NAME: BESTWAY RENTAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMARCO RESOURCES CORP DATE OF NAME CHANGE: 19880403 10-K 1 FORM 10-K FOR FISCAL YEAR END JULY 31, 1998 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 1998 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) Registrant's telephone number, including area code (214) 630-6655 ---------------------------- Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on Title of each class which registered (None) (None) ------------------- ------------------------
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value - -------------------------------------------------------------------------------- (Title of Class) 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 --- --- The aggregate market value of voting stock held by non affiliates of the registrant as of October 23, 1998 was approximately $4,146,806. The number of shares of Common Stock, $.01 par value, outstanding as of July 31, 1998, was 1,751,592. Registrants Proxy Statement for 1998 is incorporated by reference in Part III, Items 10-13 of this Form 10-K. 1 2 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- PART I - ------ Item 1. Business 3 - 4 Item 2. Properties 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II - ------- Item 5. Market for Registrant's Common Stock and Related Security Holder Matters 5 - 6 Item 6. Selected Financial Data 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 - 12 Item 8. Financial Statements and Supplementary Data 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 12 PART III - -------- Item 10. Directors and Executive Officers of the Registrant 12 Item 11. Executive Compensation 13 Item 12. Security Ownership of Certain Beneficial Owners and Management 13 Item 13. Certain Relationships and Related Transactions 13 PART IV - ------- Item 14. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 INDEX Consolidated Financial Statements F-1
2 3 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS General Bestway, Inc. and its consolidated subsidiaries ("Bestway" or the "Company") has been engaged in the rental-purchase industry since 1987. The Company owns and operates a total of sixty-five stores located in the states of Alabama, Arkansas, Georgia, Mississippi, North Carolina, South Carolina and Tennessee. The stores' operations are controlled and monitored through the Company's management information system networked with its home office in Dallas, Texas. The Company's rental-purchase program offers brand name durable household goods, electronics, appliances and jewelry to customers on a week-to-week or month-to-month basis. These products are furnished to customers under full-service rental agreements which require that the charge for each rental period be paid in advance, but no additional advance payment or security deposit is required. At the end of each rental period, the customer has the option of retaining the product for an additional rental period or returning the product without further obligation. If the product is returned, it is serviced and then offered for rent to another customer. The rental agreements contain options under which customers may own the merchandise under specified terms. The Company's rental agreements typically have a twelve to twenty-four month term with weekly or monthly payment options. The most distinguishing factor of this form of retailing is the cancelability of the rental agreement at any time without further obligation by returning the product to the dealer. The industry primarily serves customers in the low to middle income sector who may have a need for a product, but do not wish or are unable to purchase it for cash or on credit. Products The Company generally purchases products directly from the manufacturers and local distributors. Products offered by the Company include a variety of brands, styles and models of television sets, audio equipment, video cassette recorders, washers and dryers, refrigerators and freezers, microwave ovens, furniture and jewelry. Although the Company presently expects to continue relationships with its existing suppliers, there are numerous sources of products, and the Company does not believe its operations are dependent on any one or more of its present suppliers. Advertising The Company markets its products and services by selecting prominent store locations in retail shopping areas on main traffic thoroughfares near targeted customers' residences or job locations. Additionally, the Company solicits new business by acquainting potential customers with the Company's products and services through mailing lists and local media advertising programs. The Company also has programs which reward existing customers with rental discounts or cash payments for the referral of new customers. Competition The rental-purchase industry is highly competitive. Competition is based primarily on store location, product selection and availability, customer service and rental rates and terms. Several of the Company's competitors are national and regional and some have significantly greater financial and operating resources and name recognition than the Company. In addition, the Company faces competition from sources outside the rental-purchase industry, such as department stores, discount stores and retail outlets. These competitors may offer an installment sales program or may compete with the Company simply on the basis of product and price. There is no assurance that the Company will be able to compete successfully against these competitors. Because capital and other requirements for entry into the rental-purchase industry is relatively low, competition may arise from new sources not currently competing with the Company. Increased competition could have a material adverse effect on the Company's sales and profitability. 3 4 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- Personnel At July 31, 1998, the Company employed approximately 271 full-time employees, of which 13 are located at the corporate office in Dallas, Texas. The Company has various incentive programs for all personnel. None of the Company's employees are represented by a labor union. The Company considers its relations with its employees to be satisfactory. Company Stores The number of stores operated by the Company has increased from 63 as of July 31, 1997 to 65 as of July 31, 1998. The following table shows the number of stores opened, acquired and closed during the year.
Number of Stores ---------- Open at July 31, 1997 63 Opened 1 Acquired 2 Closed -1 ---------- Open at July 31, 1998 65 ==========
Regulation Federal Regulation Although certain proposed federal regulations are under consideration, no federal legislation has been enacted regulating rental-purchase transactions. As of July 31, 1998, four bills have been introduced in Congress that would regulate the rental-purchase industry. Two of the bills are supported by the Association of Progressive Rental Organization ("APRO") and mandate certain disclosures to customers similar to those required by most state legislation. The Company does not believe that these laws, if enacted, will have a material adverse effect upon the Company's operations. The other two bills include certain credit sale requirements and would subject rental-purchase transactions to interest rate, finance charge and fee limitations, as well as the Federal Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. These bills would also require the lessor to make certain disclosures to customers about the terms of the rental-purchase transaction. The Company believes that in the event federal legislation is enacted regulating rental-purchase transactions as credit sales, the Company would be able to adapt to the new laws and remain profitable by repositioning itself as a rent-to-rent business. However, there can be no assurance that the proposed legislation, if enacted, would not have a material adverse effect on the business of the Company. State Regulation With some variations in individual states, most state legislation requires the lessor to make prescribed disclosures to a customer about the rental-purchase agreement and transaction. These laws require certain contractual and advertising disclosures concerning the rental-purchase agreement and the nature of the transaction and also provide varying levels of substantive consumer protection, such as requiring a grace period for late payments and contract reinstatement rights in the event the agreement is terminated for nonpayment of rentals and, in some instances, limits certain fees that may be charged. Some states require written disclosure of all material aspects of the transaction, including the cash price of the merchandise, the purchase option prices during the term of the agreement and the total amount of rentals that must be paid in order to acquire ownership of the merchandise and prohibit confession-of-judgment clauses. 4 5 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 2. PROPERTIES All store locations, with the exception of one, and the home office facility in Dallas, Texas are leased. Store facilities typically are showroom locations of approximately 3,700 square feet in retail centers on heavy traffic thoroughfares near customers' residences or work places. Almost all available rental merchandise is kept in the showroom area which comprises the majority of the available square footage. Store location is considered critical to the success of the store. The Company's store locations by state at July 31, 1998, are as follows:
Number of State Stores ----- --------- Alabama 17 Arkansas 1 Georgia 2 Mississippi 17 North Carolina 6 South Carolina 6 Tennessee 16 -------- Open at July 31, 1998 65 ========
ITEM 3. LEGAL PROCEEDINGS There are no legal proceedings other than ordinary routine litigation incidental to the Company's business to which the Company or any of its subsidiaries is a party or to which any of its property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock began trading on the Nasdaq Small-Cap Market on December 19, 1995 under the symbol "BSTW". Prior thereto, the Company's Common Stock was quoted in the "pink sheets" and was traded on a limited basis. The following table sets forth, for the periods indicated, the high and low sales price per share of the Common Stock as reported on the Nasdaq Small-Cap Market.
Year ended July 31, 1998 Year ended July 31, 1997 --------------------------------- ------------------------------ High Low High Low ---- --- ---- --- First Quarter $ 9 $ 6-1/2 $ 9-1/2 $ 6-1/2 Second Quarter $ 10-1/4 $ 7 $ 9-1/4 $ 6-1/2 Third Quarter $ 8-15/16 $ 6 $ 6-1/2 $ 6 Fourth Quarter $ 8-1/2 $ 6-1/8 $ 8-1/2 $ 6
5 6 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS MATTERS, Continued At July 31, 1998, there were 473 stockholders of record of the Company's Common Stock, calculated based on the number of recordholders. The Company has not paid cash dividends on its Common Stock since its inception and intends to retain earnings for operations. The Company is a party to a loan agreement which prohibits the payment of cash dividends on Common Stock. ITEM 6. SELECTED FINANCIAL DATA
Fiscal Year Ended July 31, ----------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------- ------------ ------------- ------------ ------------ Revenues from continuing operations $ 25,875,934 $ 24,662,812 $ 18,923,852 $ 16,423,262 $ 16,369,149 Income from continuing operations before tax 1,381,813 320,004 902,903 1,072,112 722,902 Current income tax expense 155,064 34,322 49,099 101,047 35,319 Deferred income tax expense (benefit) 433,012 119,622 321,574 (2,013,784) -- Loss from discontinued operations, net of taxes -- -- 394,568 -- -- Net income 793,737 166,060 137,662 2,984,849 687,583 Basic net income per share 0.45 0.10 0.09 1.99 0.46 Cash flows provided by operations 9,478,714 9,895,993 7,365,631 6,542,227 6,370,945 Total assets 18,673,950 18,373,967 18,925,440 13,709,895 11,083,279 Notes payable 8,230,043 8,171,945 9,048,928 6,070,302 6,485,659 Stockholders' equity 8,396,362 7,594,500 7,417,190 6,041,293 3,060,154
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the information set forth under Item 6, "Selected Financial Data," and the financial statements of the Company and the accompanying notes thereto included elsewhere in this Report. The Company currently operates 65 rental-purchase stores located in seven states. The number of stores operated by the Company has increased from 35 as of July 31, 1995 to 65 as of July 31, 1998. During the year ended July 31, 1998, the Company opened one new store location, acquired two stores and closed one store. 6 7 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued Results of Operations for the Fiscal Year Ended July 31, 1998 Compared to 1997 The following table sets forth, for the periods indicated, certain items from the Company's Consolidated Statements of Income, expressed as a percentage of revenues.
Year ended July 31, ----------------------------------- 1998 1997 ---------- --------- Revenues: Rental income 99.0% 98.9% Sales of merchandise 1.0 1.1 ----- ----- Total revenues 100.0 100.0 Cost and operating expenses: Depreciation and amortization: Rental merchandise 21.8 22.0 Other 5.9 6.4 Cost of merchandise sold 1.0 1.1 Salaries and wages 25.6 25.8 Advertising 3.3 3.2 Occupancy 6.1 5.6 Other operating expenses 27.8 29.8 Equity in loss of partnership -- 0.8 Write-off of investment in partnership -- 0.9 Interest expense 3.1 3.1 Loss on sale of property and equipment 0.1 -- ----- ----- Total cost and operating expenses 94.7 98.7 ----- ----- Income before income tax provision 5.3 1.3 ----- ----- Current income tax expense 0.6 0.1 Deferred income tax expense 1.7 0.5 ----- ----- Net income 3.0% 0.7% ===== =====
7 8 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued For the fiscal year ended July 31, 1998 compared to the fiscal year ended July 31, 1997, total revenue increased $1,213,122, or 4.9% to $25,875,934 from $24,662,812. The increase in total revenue was primarily attributable to the inclusion of two stores purchased in the fourth quarter of fiscal year 1998, inclusion of a full year's operating results for two new internal store openings during the fourth quarter of fiscal year 1997 and operating results from a single new internal store opening during the first quarter of fiscal year 1998. Same store revenues increased by $626,069, or 2.6% to $25,007,842 for 1998 from $24,381,773 in 1997. Same store revenues represent those revenues earned in stores that were operated by the Company for the entire year ending July 31, 1998 and 1997. This improvement was primarily attributable to an increase in both the number of items on rent and in revenue earned per item on rent. The Company receives rental revenue from various products including televisions and video cassette recorders, household appliances, as well as home furniture and jewelry. In fiscal year 1998, approximately 18% of the Company's rental revenue was derived from appliances, 25% from home furniture, 29% from electronics, 10% from various other products including jewelry and 18% from various services and charges to rental customers including reinstatement fees, club program and liability waiver fees. Total costs and operating expenses increased $151,313, or 0.6%. Costs and operating expenses associated with the Company's core business increased $574,873, but as a percentage of total store revenue, decreased from 97.0% in 1997 to 94.7% in 1998. This decrease is primarily due to a decrease in depreciation and amortization, salaries and wages and other operating costs offset by increased occupancy and advertising costs. Depreciation of rental merchandise increased by $210,384, or 3.9% to $5,643,299 for 1998 from $5,432,915 for 1997. Depreciation of rental merchandise expressed as a percent of total store rental and fee revenue decreased from 22.0% in 1997 to 21.8% in 1998. The decrease was primarily attributable to higher rental rates on rental merchandise. Salaries and wages increased $269,154, or 4.2% to $6,618,696 for 1998 from $6,349,542 for 1997. Salaries and wages expressed as a percent of total store revenue decreased from 25.8% in 1997 to 25.6% in 1998. New and acquired stores produced additional salaries and wages of $173,826 for the year. Advertising expense increased $67,315, or 8.4% to $867,515 for 1998 from $800,200 in 1997. Advertising expense expressed as a percent of total store revenue increased to 3.3% in 1998 from 3.2% in 1997. Occupancy expense increased $177,059, or 12.7% to $1,568,870 for 1998 from $1,391,811 for 1997. Occupancy expense expressed as a percent of total store revenue increased to 6.1% in 1998 from 5.6% in 1997 primarily due to the increase in number of stores opened and the relocation of certain existing stores to locations that are larger in square footage. Other operating expenses decreased $159,479, or 2.2% to $7,181,563 for 1998 from $7,341,042 for 1997. Other operating expenses expressed as a percent of total store revenue decreased from 29.8% in 1997 to 27.8% in 1998 primarily due to managements' streamlining efforts to focus on profit and growth in l998 which resulted in increased same store revenues and lower operating costs as a percentage of revenue, offset by increased write-offs of rental merchandise. Interest expense increased $38,494, or 5.1% to $795,232 for 1998 from $756,738 for 1997 and as a percentage of total store revenue remained consistent with the prior year at 3.1%. Costs and operating expenses decreased $423,560, or 1.6% as a percentage of total store revenue due to losses incurred during 1997 on the Company's investment in Value Auto Partners, Ltd. (the Partnership). As a result of losses incurred by the Partnership, and based on management's assessment of the recoverability of the carrying amount of the investment, during the second quarter of fiscal year 1997 management concluded that the investment should be written off. The Company's equity in Partnership losses was $193,981, or 0. 8% as a percentage of total store revenue. The write-off of the remaining balance of the investment in the Partnership resulted in a pretax loss of $229,579, or 0.9% as a percentage of total store revenue for 1997 (see Note 11). 8 9 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued For the fiscal year ended July 31, 1998 compared to the fiscal year ended July 31, 1997, net income increased $627,677, or 378% to $793,737 for 1998 from $166,060 for 1997. Net income expressed as a percent of total store revenue increased to 3.0% in 1998 from 0.7% in 1997 due to the factors discussed above. Financial Condition, Liquidity and Capital Resources For the fiscal year ended July 31, 1998 the Company's net cash flows from operating activities was $9,478,714 as compared to $9,895,993 for the fiscal year ended July 31, 1997. The decrease was primarily due to an increase in working capital requirements offset by increased cash flow from the two stores acquired in the fourth quarter of fiscal year 1998, a full year's cash flow from two new internal store openings during the fourth quarter of fiscal year 1997 and cash flow from a single new internal store opening during the first quarter of the fiscal year 1998. For the fiscal year ended July 31, 1998 the Company's net cash flows used in investing activities was $9,398,556 as compared to $9,001,035 for the fiscal year ended July 31, 1997. The Company's investing activities reflects a $379,575 decrease in additions to property and equipment, a $596,310 increase in the purchase of rental units and equipment and a $119,342 increase from restricted cash relating to escrow money deposited in connection with the sale of certain stores in 1994 which was released from escrow in the current year. For the fiscal year ended July 31, 1998 the Company's net cash flows provided by (used in) financing activities was $66,223 as compared to ($865,733) for the fiscal year ended July 31, 1997. The increase in financing activities principally reflects increased borrowings on the Company's debt. On August 18, 1997, the Company amended its August 19, 1993 Second 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 August 19, 1997 to November 18, 1997. On November 18, 1997, the Company further amended the Agreement. Pursuant to the Third Amendment of the Agreement, the Company among other things, increased the maximum amount of revolving credit under such loan Agreement from $7,500,000 to $8,500,000 and extended the maturity date of such Agreement by two years from November 18, 1997 to November 30, 1999. With the Company having available credit of approximately $3,388,000 under the $8,500,000 Agreement, as amended November 18, 1997, management believes the Company has adequate resources to meet its future cash obligations. On August 18, 1997, the Company paid in full a $100,000 subordinated note payable to a director and stockholder. On August 19, 1997, the Company amended its note payable to limited partnership and stockholder dated July 19, 1993. In the amendment, the Company extended the maturity date by two years from August 19, 1997 to August 19, 1999 and increased the interest rate from 4.5% to 6.0% during the first year and 8.0% thereafter. 9 10 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued On May 22, 1998, the Company signed an Asset Purchase Agreement with Ideal Rent-to-Own, Inc. to acquire all the assets of a single store location in North Carolina. The Company paid approximately $140,000 in cash for all the assets involved in the daily operations of the store including all idle rental inventory, all rental contracts, vehicles, store furniture and fixtures, computer and leasehold improvements. Additionally, the Company obtained the seller's former store location by assuming the lease agreement. On May 29, 1998, the Company signed an Asset Purchase Agreement with Grand Rental Station, Inc. to acquire all the assets of a single store location in Tennessee. The Company paid $262,000 in cash for all the assets involved in the daily operations of the store including all idle rental inventory, all rental contracts, vehicles, store furniture and fixtures, computers and leasehold improvements. Additionally, the Company obtained the seller's former store location by assuming the lease agreement. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", both effective for fiscal years beginning after December 15, 1997. Management does not anticipate that these statements will have a significant effect on the Company's consolidated financial statements. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, "Employers Disclosure about Pensions and Other Postretirement Benefits." This statement revises employers' disclosures about pensions and other postretirement benefit plans. It does not change the measurement or recognition of those plans. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. Management does not anticipate that this statement will have a significant effect on the Company's consolidated financial statements. 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. Year 2000 The Company is coordinating the identification, evaluation, and implementation of changes to computer systems and applications necessary to achieve a year 2000 date conversion with no effect on customers or disruption to business operations. These actions are necessary to ensure that the systems and applications will recognize and process the year 2000 and beyond. The Company uses purchased software programs for a variety of functions, including general ledger, accounts payable, and fixed assets packages. As part of the year 2000 readiness process, significant service providers, vendors, suppliers and customers that are believed to be critical to business operations after January 1, 2000, have been identified and steps are underway in an attempt to reasonably ascertain their stage of year 2000 readiness. The failure to correct a material year 2000 problem could result in an interruption in, or a failure of, certain normal business activities and operations, liquidity and financial condition. Due to the general uncertainty inherent in the year 2000 problem, resulting in part from the uncertainty of the year 2000 readiness of third party suppliers, the Company is unable to determine if year 2000 failures will have a material impact on the Company. The total cost of compliance and its effect on the Company's future results of operations is not expected to be material. 10 11 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued Results of Operations for the Fiscal Year Ended July 31, 1997 Compared to 1996 Total revenue increased $5,738,960 or 30.3% to $24,662,812 as compared to $18,923,852 in fiscal year 1996. The increase was due to the inclusion of the operating results for the stores acquired and opened during fiscal year 1996 and operations for two internal new store openings during fiscal year 1997. The stores acquired and opened in 1996 accounted for $5,791,059, internal new store openings, which were opened during the fourth quarter, accounted for $20,376, and the Company's same stores experienced revenue losses of $72,475 for the year. Although many of the acquired stores are operating at revenue levels below that of the Company's existing stores, the majority are profitable. While the additions of these stores has increased the level of other operating expenses as a percentage of revenue due to the relatively fixed nature of these expenses, management expects to realize increased profitability from these stores by implementing certain programs aimed at increasing operating efficiencies including the realignment of its current districts to provide more focus on under performing stores and the additions of key management personnel. The Company receives rental revenues from various products including televisions and video cassette recorders, household appliances, as well as home furniture and jewelry. In fiscal year 1997, approximately 19% of the Company's rental revenue was derived from appliances, 24% from home furniture, 31% from electronics, 10% from various other products including jewelry and 16% from various services and charges to rental customers including reinstatement fees, club program and liability waiver fees. Total costs and operating expenses increased $6,321,859 or 35.1% to $24,342,808 from $18,020,949. Costs and operating expenses associated with the Company's core business increased $5,898,299 and as a percentage of total revenues increased to 97.0% from 95.2%. This increase is primarily the result of other operating and occupancy expenses associated with the stores acquired and opened in 1996 and operating losses from the two new internal stores opened during the fourth quarter. Other operating expenses increased $2,077,171 to $7,341,042 from $5,263,871 and as a percentage of total revenues increased 2.0% to 29.8% from 27.8%. Occupancy expense increased $460,606 to $1,391,811 from $931,205 and as a percentage of total revenues increased .7% to 5.6% from 4.9%. The stores acquired and opened in 1996 operated at a lower average revenue per store and therefore, had higher operating and occupancy costs as a percentage of revenues than the Company's existing stores. Costs and operating expenses increased $423,560 or 1.7% as a percentage of total revenue due to losses incurred on the Company's investment in Value Auto Partners, Ltd. (the "Partnership"). As a result of losses incurred by the Partnership, and based on management's assessment of the recoverability of the carrying amount of the investment, during the second quarter management concluded that the investment should be written off. The Company's equity in Partnership losses was $193,981 or .8% as a percentage of total revenues. The write off of the remaining balance of the investment in the Partnership resulted in a pretax loss of $229,579 or .9% as a percentage of total revenues for the year (see Note 11). Depreciation expense related to rental merchandise increased $980,589 to $5,432,915 from $4,452,326, but decreased by 1.5% as a percentage of total revenues primarily due to higher rental rates on rental merchandise. Other depreciation and amortization increased $455,218 to $1,567,194 from $1,111,976 and as a percentage of total revenues increased .5% to 6.4% from 5.9%. Amortization of intangibles increased $212,474 due to intangible assets created by the stores acquired in 1996 while other depreciation increased $242,744. Salaries and wages increased $1,614,663 to $6,349,542 from $4,734,879 and as a percentage of total revenues increased .8% to 25.8% from 25.0% primarily due to the addition of the stores acquired and opened in 1996, increased same store salaries and wages and the addition of key management personnel. The acquired and new locations produced additional salaries and wages of $1,190,424 for the year. Same store salaries and wages increased $140,394 for the year. The additions of key management personnel in operations, real estate management and human resources produced additional salaries and wages of $283,845 for the year. 11 12 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued Interest expense increased $187,206 to $756,738 from $569,532 and as a percentage of total revenues remained consistent with the prior year at 3.1%. Cautionary Statement This Report on Form 10-K 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. The Company's Annual Report to Shareholders, any Report on Form 10-Q or Form 8-K or any other written or oral statements made by or on behalf of the Company may include forward looking statements. 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 acquired stores and to integrate such opened or 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 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is hereby made to the Consolidated Financial Statements and notes thereto appearing at pages F-1 to F-19 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required will be contained in the Company's Proxy Statement for the Annual Meeting of Shareholders for 1998, and is incorporated herein by reference. 12 13 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION The information required will be contained in the Company's Proxy Statement for the Annual Meeting of Shareholders for 1998, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required will be contained in the Company's Proxy Statement for the Annual Meeting of Shareholders for 1998, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required will be contained in the Company's Proxy Statement for the Annual Meeting of Shareholders for 1998, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K (a) The following are filed as Exhibits to this Annual Report filed as Form 10-K for the year ended July 31, 1998. (b) Exhibits
Exhibit Number Document ------ -------- 21 Subsidiaries 23 Consent of Auditors 27 Financial Data Schedule Filed electronically only, not attached to printed reports
(c) Reports on Form 8-K The Company did not file any reports on Form 8-K during the year ended July 31, 1998. 13 14 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BESTWAY, INC. October 28, 1998 /s/ R. Brooks Reed ---------------------------------------- R. BROOKS REED, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on the 28 day of October 1998. /s/ R. Brooks Reed Chairman of the Board of Directors - ----------------------------------- and Chief Executive Officer R. BROOKS REED /s/ Jack E. Meyer Director - ----------------------------------- JACK E. MEYER /s/ James A. O'Donnell Director - ----------------------------------- JAMES A. O'DONNELL s/ Teresa A. Sheffield President and Chief Operating Officer - ----------------------------------- TERESA A. SHEFFIELD /s/ Beth A. Durrett Senior Vice President - Finance - ----------------------------------- BETH A. DURRETT s/ Joe R. McElroy Vice President - Real Estate - ----------------------------------- JOE R. MCELROY 14 15 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- BESTWAY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No. -------- Report of Independent Accountants F-2 Financial Statements: Consolidated Balance Sheets as of July 31, 1998 and 1997 F-3 Consolidated Statements of Income for the years ended July 31, 1998, 1997 and 1996 F-4 Consolidated Statements of Cash Flows for the years ended July 31, 1998, 1997 and 1996 F-5 Consolidated Statements of Stockholders' Equity for the years ended July 31, 1998, 1997 and 1996 F-6 Notes to Consolidated Financial Statements F-7 - F-19
F-1 16 REPORT OF INDEPENDENT ACCOUNTANTS October 15, 1998 To the Board of Directors of Bestway, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and stockholders' equity present fairly, in all material respects, the financial position of Bestway, Inc. (the "Company") at July 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PRICEWATERHOUSECOOPERS LLP 17 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS
July 31, 1998 July 31, 1997 ------------- ------------- ASSETS Cash and cash equivalents $ 501,119 $ 354,738 Restricted cash -- 119,342 Prepaid expenses 182,118 127,977 Deferred income taxes 1,269,065 1,702,080 Other assets 46,773 68,889 Rental merchandise, at cost 17,723,833 15,962,450 less accumulated depreciation 6,315,080 5,818,763 ------------ ------------ 11,408,753 10,143,687 ------------ ------------ Property and equipment, at cost 5,366,471 5,019,151 less accumulated depreciation 2,816,429 2,287,383 ------------ ------------ 2,550,042 2,731,768 ------------ ------------ Non-competes, net of amortization 393,056 568,841 Goodwill, net of amortization 2,323,024 2,556,645 ------------ ------------ Total assets $ 18,673,950 $ 18,373,967 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 865,162 $ 1,327,216 Accrued interest - related parties 15,500 12,013 Accrued interest - other -- 45,250 Income taxes payable 184,419 52,648 Other accrued liabilities 982,464 1,170,395 Notes payable-related parties 3,000,000 3,100,000 Notes payable-other 5,230,043 5,071,945 Commitments and contingencies (Notes 7 and 12) Stockholders' equity: Preferred stock, $10.00 par value, 1,000,000 authorized, none issued -- -- Common stock, $.01 par value, 5,000,000 authorized, 1,751,592 and 1,749,967 issued and outstanding at July 31, 1998 and July 31, 1997, respectively 17,516 17,500 Paid-in capital 16,098,006 16,089,897 Accumulated deficit (7,719,160) (8,512,897) ------------ ------------ Total stockholders' equity 8,396,362 7,594,500 ------------ ------------ Total liabilities and stockholders' equity $ 18,673,950 $ 18,373,967 ============ ============
The accompanying notes are an integral part of the financial statements. F-3 18 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME
Fiscal Years Ended ----------------------------------------------- July 31, 1998 July 31, 1997 July 31, 1996 --------------- ------------- ------------- Revenues: Rental income $ 25,614,663 $ 24,382,493 $ 18,710,098 Sales of merchandise 261,271 280,319 213,754 ------------ ------------ ------------ 25,875,934 24,662,812 18,923,852 ------------ ------------ ------------ Cost and Operating Expenses: Depreciation and amortization: Rental merchandise 5,643,299 5,432,915 4,452,326 Other 1,519,791 1,567,194 1,111,976 Cost of merchandise sold 253,884 273,898 208,785 Salaries and wages 6,618,696 6,349,542 4,734,879 Advertising 867,515 800,200 709,237 Occupancy 1,568,870 1,391,811 931,205 Other operating expenses 7,181,563 7,341,042 5,263,871 Equity in loss of partnership -- 193,981 -- Write off of investment in partnership -- 229,579 -- Interest expense 795,232 756,738 569,532 Loss on sale of property and equipment 45,271 5,908 39,138 ------------ ------------ ------------ 24,494,121 24,342,808 18,020,949 ------------ ------------ ------------ Income from continuing operations before income tax provision: 1,381,813 320,004 902,903 ------------ ------------ ------------ Current income tax expense 155,064 34,322 49,099 Deferred income tax expense 433,012 119,622 321,574 ------------ ------------ ------------ 588,076 153,944 370,673 ------------ ------------ ------------ Income from continuing operations 793,737 166,060 532,230 ------------ ------------ ------------ Discontinued operations (Note 10): Loss from discontinued business (net of income tax benefit of $78,147) -- -- 156,425 Loss on disposal of business (net of income tax benefit of $68,535) -- -- 238,143 ------------ ------------ ------------ Loss from discontinued operations, net -- -- 394,568 ------------ ------------ ------------ Net income $ 793,737 $ 166,060 $ 137,662 ============ ============ ============ Basic net income per share: Income from continuing operations 0.45 0.10 0.34 ------------ ------------ ------------ Loss from discontinued operations -- -- (0.25) ------------ ------------ ------------ Net income $ 0.45 $ 0.10 $ 0.09 ============ ============ ============ Diluted net income per share: Income from continuing operations 0.44 0.09 0.34 ------------ ------------ ------------ Loss from discontinued operations -- -- (0.25) ------------ ------------ ------------ Net income $ 0.44 $ 0.09 $ 0.09 ============ ============ ============ Weighted average common shares outstanding 1,750,384 1,749,780 1,549,619 ============ ============ ============ Diluted weighted average common shares outstanding 1,795,552 1,793,926 1,597,290 ============ ============ ============
The accompanying notes are an integral part of the financial statements. F-4 19 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended --------------------------------------------------- July 31, 1998 July 31, 1997 July 31, 1996 --------------- --------------- ---------------- Cash flows from operating activities: Net income $ 793,737 $ 166,060 $ 137,662 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,163,090 7,000,109 5,564,300 Net book value of rental units retired 1,635,606 1,765,015 1,237,172 Loss on sale of property and equipment 45,271 5,908 39,138 Loss on discontinued operations -- -- 394,568 Loss on equity investment in partnership -- 193,981 -- Loss on partnership investment -- 229,579 -- Deferred income taxes 433,012 119,622 321,574 Changes in operating assets and liabilities other than cash: Prepaid expenses (54,141) 214,935 (212,911) Other assets 22,116 52,584 75,140 Accounts payable (462,054) 350,347 (147,613) Income taxes payable 131,771 (13,383) (1,841) Other accrued liabilities (229,694) (188,764) (41,558) ----------- ----------- ----------- Total adjustments (592,002) 415,719 (328,783) ----------- ----------- ----------- Net cash flows from operating activities 9,478,714 9,895,993 7,365,631 ----------- ----------- ----------- Cash flows from investing activities: Purchase of rental units and equipment (8,343,193) (7,746,883) (6,609,139) Additions to property and equipment (932,022) (1,311,597) (1,122,102) Proceeds from sale of property and equipment 159,040 57,445 15,278 Proceeds from insurance recovery -- -- 43,254 Proceeds from restricted cash 119,342 -- -- Purchase of investments -- -- (586,541) Asset purchases net of cash acquired (401,723) -- (499,200) ----------- ----------- ----------- Net cash flows used in investing activities (9,398,556) (9,001,035) (8,758,450) ----------- ----------- ----------- Cash flows from financing activities: Proceeds of notes payable 3,483,932 2,325,000 5,025,000 Repayment of notes payable (3,425,834) (3,201,983) (3,636,010) Stock issuance 8,125 11,250 -- ----------- ----------- ----------- Net cash flows provided by (used in) financing activities 66,223 (865,733) 1,388,990 ----------- ----------- ----------- Cash and cash equivalents at the beginning of the year 354,738 325,513 329,342 ----------- ----------- ----------- Cash and cash equivalents at the end of the year $ 501,119 $ 354,738 $ 325,513 =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-5 20 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For years ended July 31, 1998, 1997, and 1996
Common Stock --------------------------- Paid-in Accumulated Shares Amount Capital Deficit ------------ ------------ -------------- -------------- Balance at July 31, 1995 1,500,070 $ 15,001 $ 14,842,911 $ (8,816,619) ------------ ------------ ------------ ------------ Stock issued in acquisitions 247,647 2,476 1,235,759 -- Net income for the year ended July 31, 1996 -- -- -- 137,662 ------------ ------------ ------------ ------------ Balance at July 31, 1996 1,747,717 17,477 16,078,670 (8,678,957) ------------ ------------ ------------ ------------ Stock options exercised 2,250 23 11,227 -- Net income for the year ended July 31, 1997 -- -- -- 166,060 ------------ ------------ ------------ ------------ Balance at July 31, 1997 1,749,967 17,500 16,089,897 (8,512,897) ------------ ------------ ------------ ------------ Stock options exercised 1,625 16 8,109 -- Net income for the year ended July 31, 1998 -- -- -- 793,737 ------------ ------------ ------------ ------------ Balance at July 31, 1998 1,751,592 $ 17,516 $ 16,098,006 $ (7,719,160) ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. F-6 21 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The consolidated financial statements of Bestway, Inc. (the "Company"), include the Company's wholly-owned operating subsidiaries, Bestway Rental, Inc. which operates under the registered trade name "Bestway Rent-To-Own," U.S. Credit-Service Corporation and Westdale Data Service, Inc. Intercompany balances and transactions have been eliminated in the consolidated financial statements. The Company owns and operates a total of sixty-five stores located in various states. The store operations are controlled and monitored through the Company's management information system networked with its home office in Dallas, Texas. The Company's store locations by state as of July 31, 1998, are as follows:
Number of State Stores ----- --------- Alabama 17 Arkansas 1 Georgia 2 Mississippi 17 North Carolina 6 South Carolina 6 Tennessee 16 ----- 65 =====
Rental Merchandise, Related Rental Revenue and Depreciation Rental merchandise is rented to customers pursuant to rental agreements which provide for either weekly or monthly rental terms with nonrefundable rental payments for the first week or month collected in advance. Rental revenue is recognized as collected since at the time of collection the rental merchandise has been placed in service and costs of installation and delivery have been incurred. Rental agreements generally cover a period of 12 to 24 months with a majority of rental agreements specifying 18 months. At the end of each rental period, the customer can renew the rental agreement, return the merchandise with no obligation, or purchase the merchandise by exercising their early purchase option. Amounts received from such sales are included in revenue when received. Past due or stolen merchandise is expensed generally within three months from the due date. The Company receives rental revenue from various products including televisions and video cassette recorders, household appliances, as well as home furniture and jewelry. In fiscal year 1998, approximately 18% of the Company's rental revenue was derived from appliances, 25% from home furniture, 29% from electronics, 10% from various other products such as jewelry and 18% from various services and charges to rental customers including reinstatement fees, club fees and liability waiver fees. In fiscal year 1997, approximately 19% of the Company's rental revenue was derived from appliances, 24% from home furniture, 31% from electronics, 10% from various other products such as jewelry and 16% from various services and charges to rental customers including reinstatement fees and liability waiver fees. Merchandise rented to customers, or available for rent, is recorded at cost net of accumulated depreciation, which equals the carrying amount, and is classified in the consolidated balance sheets as rental merchandise. Merchandise rented to customers is depreciated on the income-forecast basis over the term of the rental agreement ranging from 12 to 24 months. When not on rent, merchandise is not depreciated. F-7 22 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Sales of Merchandise Sales of merchandise includes revenue from cash sales of primarily used merchandise. Property and Equipment Property and equipment are recorded at cost. Major improvements to property and equipment are capitalized. Maintenance and repair expenditures are charged to expense as incurred. As fixed assets are sold or retired, the applicable cost and accumulated depreciation are eliminated from the accounts and any gain or loss is recorded. Depreciation of property and equipment is provided over the estimated useful lives, on the straight-line basis as defined below. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease and renewal period, if applicable.
Lives (years) ------------- Furniture and fixtures 7 Vehicles 5 Computer equipment 3
Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and on deposit, and highly liquid instruments with maturities of three months or less when purchased. The carrying amount of cash and cash equivalents is the estimated fair value at July 31, 1997 and 1998. Restricted Cash Amount represented escrow money deposited in connection with the sale of certain stores in 1994. Disbursements were to be made from this account to satisfy any taxes owed by the Company, any claims of third parties against the assets which were the Company's responsibility, or to satisfy any indemnification rights as specified in the Asset Purchase Agreement. An assessment against the Company was made by the Illinois Department of Revenue relating to alleged unpaid sales tax. The Company received a favorable judgment on June 1, 1998 for approximately $27,000. As a result, the amount has been released from escrow. Intangible Assets Goodwill represents the cost in excess of the fair value of net tangible assets of acquired businesses and is being amortized on a straight-line basis over 15 to 20 years. Accumulated amortization of goodwill was $2,036,464 and $1,802,843 at July 31, 1998 and 1997, respectively. The non-competes represents the allocation of the purchase price from the September 10, 1993 acquisition of 12 stores in Mississippi, the April 12, 1996 acquisition of 15 stores in Georgia, North Carolina and South Carolina, the July 1, 1996 acquisition of 8 stores in Arkansas and Mississippi, the May 22, 1998 acquisition of one store in North Carolina and the May 29, 1998 acquisition of one store in Tennessee and is being amortized on a straight-line basis over periods from 2 to 5 years. Accumulated amortization of the non-competes was $1,313,122 and $952,398 at July 31, 1998 and 1997, respectively. F-8 23 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued The Company continually evaluates the propriety of the carrying amount of goodwill and other intangibles based on the estimated future undiscounted cash flows of the related investment, as well as the amortization period to determine whether current events and circumstances warrant adjustments to carrying value and/or revised estimates of useful lives. At this time, the Company believes that no significant impairment of the goodwill and other intangibles has occurred and that no reduction of the estimated useful lives is warranted. Income Taxes Investment tax credits are accounted for on the "flow-through" method. Earnings Per Common Share Earnings per common share is based on the weighted average of common shares outstanding during the period and the effect of considering common stock equivalents (stock options) under the treasury stock method. In January 1998, the Company adopted SFAS No. 128, "Earnings per Share," resulting in the replacement of primary earnings per share (EPS) with a newly defined basic EPS and modification to the computation of diluted EPS. As a result, all prior period EPS data has been restated to conform to the provisions of this statement. For the fiscal year ended July 31, 1997 and 1996, basic net income per share as restated equals net income per share as reported. For the fiscal year ended July 31, 1998, 1997 and 1996, 45,168, 44,146 and 47,671 shares of common stock options were included in the denominator for the calculation of diluted net income per share. Advertising Costs Advertising costs are expensed as incurred. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets, particularly deferred tax assets, and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenues and expenses. Actual results could differ from those estimates. New Accounting Standards In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", both effective for fiscal years beginning after December 15, 1997. Management does not anticipate that these statements will have a significant effect on the Company's consolidated financial statements. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits." This statement revises employers' disclosures about pensions and other postretirement benefit plans. It does not change the measurement of recognition of those plans. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. Management does not anticipate that this statement will have a significant effect on the Company's consolidated financial statements. Reclassifications Certain reclassifications have been made to the prior years financial statements in order to conform to the current year's presentation. F-9 24 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. ACQUISITIONS: On April 12, 1996, the Company acquired substantially all of the assets and certain liabilities of All Star Rental, Inc. a privately-owned South Carolina corporation ("All Star"). The assets acquired by the Company included the idle inventory, rental contracts, vehicles, store furniture and fixtures, computers and leasehold improvements. In addition, the Company assumed the leases for 15 of All Star's former store locations. The Company delivered to All Star 115,647 non-registered shares of the Company's Common Stock valued at $578,235. The aggregate purchase price in connection with the acquisition was based on a multiple of average monthly revenues less certain assumed liabilities. The acquisition has been accounted for under the purchase method and, accordingly, the operating results of All Star are included in the accompanying consolidated financial statements from the date of acquisition. The acquisition resulted in $1,226,283 of intangible assets. These items are being amortized on a straight-line basis over periods not exceeding 15 years. On July 1, 1996, the Company acquired substantially all of the assets of REJA, Inc., a privately-owned Arkansas corporation ("REJA"). The assets acquired by the Company primarily include the idle inventory, rental contracts, vehicles, store furniture and fixtures, computers and leasehold improvements. In addition, the Company assumed the leases for 8 of REJA's former store locations. The Company delivered to REJA 132,000 non-registered shares of the Company's Common Stock valued at $660,000 and $500,000 cash, as the aggregate purchase price in connection with the acquisition. The acquisition has been accounted for under the purchase method and, accordingly, the operating results of REJA are included in the accompanying consolidated financial statements from the date of acquisition. The acquisition resulted in $314,829 of intangible assets. These items are being amortized on a straight-line basis over periods not exceeding 15 years. The following summary reflects the unaudited condensed pro forma revenues, costs and operating expenses and presents the results of the operations of the Company assuming these acquisitions had been consummated as of the first day of the Company's fiscal year ended July 31, 1996 and are as follows:
July 31, 1996 ------------- (Unaudited) Revenues $ 25,381,168 Costs and operating expenses 24,693,047 ------------ Net income from continuing operations $ 688,121 ============ Basic net income per share from continuing operations $ 0.39 ============
On May 22, 1998, the Company signed an Asset Purchase Agreement with Ideal Rent to Own, Inc. to acquire all the assets of a single store location in North Carolina. The Company paid approximately $140,000 in cash for all assets involved in the daily operations of the store including all idle rental inventory, all rental contracts, vehicles, store furniture and fixtures, computer and leasehold improvements. Additionally, the Company obtained the seller's former store location by assuming the lease agreement. On May 29, 1998, the Company signed an Asset Purchase Agreement with Grand Rental Station, Inc. to acquire all the assets of a single store location in Tennessee. The Company paid $262,000 in cash for all the assets involved in the daily operations of the store including all idle rental inventory, all rental contracts, vehicles, store furniture and fixtures, computers and leasehold improvements. Additionally, the Company obtained the seller's former store location by assuming the lease agreement. F-10 25 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. PROPERTY AND EQUIPMENT: Property and equipment consists of the following:
July 31, 1998 July 31, 1997 --------------- --------------- Building and leaseholds $ 1,875,178 $ 1,760,843 Vehicles 2,263,613 2,045,072 Furniture and fixtures 783,875 680,543 Computer equipment 443,805 532,693 ----------- ----------- 5,366,471 5,019,151 Accumulated depreciation (2,816,429) (2,287,383) ----------- ----------- $ 2,550,042 $ 2,731,768 =========== ===========
4. NOTES PAYABLE: Notes payable consists of the following:
Years Ended --------------------------------------- July 31, 1998 July 31, 1997 ----------------- ----------------- Senior Collateralized Debt Revolving Credit Loan Agreement dated August 19, 1993, amended November 18, 1997, interest payable monthly at prime plus 1.5%; note matures on November 30, 1999; note collateralized by substantially all the Company's assets $ 5,112,001 $ 4,930,027 Subordinated Debt Note payable to limited partnership and stockholder dated July 19, 1993, amended August 19, 1997, interest paid quarterly beginning October 1, 1993; note, as amended, matures on August 19, 1999. 3,000,000 3,000,000 Note payable to director and stockholder dated July 19, 1993, interest payable quarterly beginning October 1, 1993 at 4.5% per annum; note, as amended, was paid in full on August 18, 1997 -- 100,000 Other Notes Payable Note payable to bank dated April 11, 1994, principal payable monthly, interest payable monthly at 9% per annum; note matures on April 15, 2006; note collateralized by associated real estate 118,042 127,880
F-11 26 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. NOTES PAYABLE, Continued
Years Ended ------------------------------------------ July 31, 1998 July 31, 1997 ------------------- -------------------- Notes payable due in monthly installments ranging from $800 to $1,400 including interest at an average of 9% per annum through fiscal year 1998. -- 14,038 ----------- ----------- $ 8,230,043 $ 8,171,945 =========== ===========
At July 31, 1998 and 1997 the prime rate was 8.50%, respectively. On August 18, 1997, the Company amended its August 19, 1993 Second Amendment to First Amended and Restated Revolving Credit Loan Agreement with its senior collateralized lender. In the amendment, the Company extended the maturity date from August 19, 1997 to November 18, 1997. On November 18, 1997, the Company further amended the Agreement. Pursuant to the Third Amendment of the Agreement, the Company revised certain covenants, increased the maximum amount of revolving credit under such loan Agreement from $7,500,000 to $8,500,000 and extended the maturity date of such Agreement by two years from November 18, 1997 to November 30, 1999. The loan agreement includes restrictive covenants, the most restrictive of which prohibits the payment of dividends. At July 31, 1998, the Company had the capacity to borrow $3,387,999 under the $8,500,000 amended line of credit. On August 18, 1997, the $100,000 subordinated note payable dated July 19, 1993 maturing August 19, 1997 was paid in full. On August 19, 1997, the Company amended its subordinated note payable to limited partnership and stockholder dated July 19, 1993. In the amendment, the Company extended the maturity date from August 19, 1997 to August 19, 1999 and increased the interest rate from 4.5% to 6.0% during the first year and 8.0% thereafter. At July 31, 1998, the carrying value of the Company's notes payable approximated fair value, estimated primarily based on the borrowing rates available to the Company for debt with similar terms and average maturities. Following is a summary of maturities of notes payable, as amended, for each of the periods ending July 31: 1999 $ 11,013 2000 8,124,047 2001 14,328 2002 14,520 2003 15,882 Thereafter 50,253 ----------- $ 8,230,043 ===========
F-12 27 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INCOME TAXES: The provisions for income tax on income from continuing operations consists of the following for the years ended July 31:
1998 1997 1996 --------- --------- --------- Current: Federal $ 76,344 $ 15,180 $ 16,848 State 78,720 19,142 32,251 --------- --------- --------- 155,064 34,322 49,099 --------- --------- --------- Deferred: Federal 460,661 131,933 329,081 State (27,649) (12,311) (7,507) --------- --------- --------- 433,012 119,622 321,574 --------- --------- --------- Total income tax provision $ 588,076 $ 153,944 $ 370,673 ========= ========= =========
Significant components of the Company's deferred income tax assets at July 31, 1998 and 1997, respectively, are as follows:
1998 1997 ----------- ----------- Net operating loss carryforward $ 489,290 $ 1,250,741 Investment tax credit carryforward 25,721 36,733 Minimum tax credit carryover 100,496 58,674 Property and equipment 110,919 -- Unrealized loss 145,545 145,545 Intangible assets 422,815 261,655 ----------- ----------- Total deferred tax assets 1,294,786 1,753,348 Property and equipment -- 14,535 ----------- ----------- Total deferred tax liabilities -- 14,535 ----------- ----------- Valuation allowance (25,721) (36,733) ----------- ----------- Net deferred tax asset $ 1,269,065 $ 1,702,080 =========== ===========
Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion of all of the deferred tax assets will not be realized. In fiscal 1998 and 1997, the valuation allowance was reduced $11,012 and $147,231, respectively as a result of the expiration of investment tax credit carryforwards. F-13 28 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. INCOME TAXES, Continued: The following is the reconciliation of the U.S. statutory tax rate to the Company's effective tax rate on income from continuing operations for the years ended July 31:
1998 1997 1996 ---------- ---------- ---------- Federal income tax at statutory rate of 34% $ 469,816 $ 108,801 $ 306,987 Goodwill amortization 58,152 58,152 58,152 State income tax 52,071 (8,413) 13,205 Other 8,037 (4,596) (7,671) ---------- ---------- ---------- Provision for income tax $ 588,076 $ 153,944 $ 370,673 ========== ========== ==========
During 1998 and 1997, the net operating loss carryforwards were reduced by $2,239,563 and $863,144, respectively. At July 31, 1998, the Company has net operating loss carryforwards of approximately $1,439,088 expiring from 2005 to 2006. The Company has investment tax credit carryforwards of approximately $25,721 which expire between 1999 and 2001. 6. RELATED PARTY TRANSACTIONS: The Company has a consulting agreement with a former owner of one of the Company's operating subsidiaries. As of July 31, 1998, $93,000 recorded in other accrued liabilities in the Company's financial statements remains to be paid over 11 years. If, however, the market price of the Company's Common Stock reaches $50.00 per share, the Company has no further obligation under this consulting agreement. Consulting fees paid for each of the years ended July 31, 1998, 1997 and 1996 was $30,000. Interest expense relating to notes payable to affiliates amounted to approximately $182,500 for the years ended July 31, 1998 and $192,000 for the years ended July 31, 1997 and 1996, respectively. F-14 29 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. LEASES: The Company leases all store facilities, with the exception of one, under operating leases with terms ranging from one to ten years. Many leases contain escalation clauses, and some provide for contingent rentals based on percentages of gross revenue or increases in the consumer price index. Minimum lease obligations for the Company at July 31, 1998 by fiscal year are as follows: 1999 $ 1,310,478 2000 1,163,859 2001 947,941 2002 700,993 2003 597,229 Thereafter 1,157,949 ------------ $ 5,878,449 ============
Occupancy expense under operating leases for the years ended July 31, 1998, 1997 and 1996 was $1,568,870, $1,391,811 and $931,205, respectively. 8. SUPPLEMENTAL DATA TO STATEMENT OF CASH FLOWS: Cash interest payments for the years ended July 31, 1998, 1997 and 1996 are $836,995, $760,745 and $542,835, respectively. Cash tax payments for the years ended July 31, 1998, 1997 and 1996 are $23,293, $47,706, and $50,940, respectively. In fiscal year 1996, the Company delivered 247,647 shares of its Common Stock valued at $1,238,235 in connection with the acquisitions of All Star Rental, Inc. and REJA, Inc. Additionally, the Company assumed liabilities totaling $2,733,493 and paid cash, net of cash acquired, of $499,200 in connection with the acquisitions (see Note 2). 9. INCENTIVE PLANS: Stock Option Plan The Company has a stock option plan (the "Plan") for officers and employees of the Company or its affiliates, under which the maximum number of shares which may be granted in the aggregate is 225,000 of the Company's Common Stock. The Plan, which became effective June 30, 1995, provides for the options to be granted, become exercisable, and terminate upon terms established by the Board of Directors (the "Committee"). Shares become exercisable from time to time (but not sooner than six months after the date of grant) over such period and upon such terms as the Committee may determine, but such exercise can not at any time be less than 25 shares unless the remaining shares that have become so purchasable are less than 25 shares. F-15 30 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. INCENTIVE PLANS, Continued: All options granted to the employees have an exercise price no less than the fair market value of the stock at grant date. The options vest under one of the following conditions: (i) one-third each year, beginning on the first anniversary of the date of grant, (ii) one-half each year, beginning on the first anniversary of the date of grant, or (iii) one-fourth each year, beginning on the first anniversary of the date of grant. The Company applies APB Opinion 25 and related Interpretations in accounting for the Plan. In 1995, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") which, if fully adopted by the Company, would change the methods the Company applies in recognizing the cost of the Plan. Adoption of the cost recognition provisions of SFAS No. 123 is optional and the Company has decided not to elect these provisions of SFAS 123. However, pro forma disclosures as if the Company adopted the cost recognition provisions of SFAS 123 in 1995 are required by SFAS 123 and are presented below. In accordance with APB 25, the Company has not recognized any compensation cost for the stock options granted. A summary of the status of the Company's stock options as of July 31, 1998, 1997 and 1996 and the changes during the year ended on those dates is presented below:
Stock Options 1998 1997 1996 ---------------------------- ---------------------------- ---------------------------- Weighted Weighted Weighted # Shares Average # Shares Average # Shares Average Underlying Exercise Underlying Exercise Underlying Exercise Options Prices Options Prices Options Prices ------------- ------------- -------------- ------------- -------------- ------------- Outstanding at beginning of year 184,650 $ 5.47 117,650 $ 5.00 117,650 $ -- Granted 27,750 $ 7.00 72,000 $ 6.19 -- $ -- Exercised 1,625 $ 5.00 2,250 $ 5.00 -- $ -- Forfeited 63,625 $ 6.22 2,750 $ 5.00 -- $ -- Expired -- $ -- -- -- -- $ -- Outstanding at end of year 147,150 $ 5.53 184,650 $ 5.47 117,650 $ 5.00 Exercisable at end of year 80,920 $ 5.14 52,575 $ 5.00 29,413 $ 5.00 Available for grant at end of year 77,850 40,350 107,360 Weighted average fair value of options granted $ 2.71 $ 2.46 --
The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0.00%; risk-free interest rate of 5.71% for 1998 and 6.31% for 1997; the expected life of options is 5 years; and a volatility of 32.37% and 32.06% for options granted in 1998 and 1997, respectively. F-16 31 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. INCENTIVE PLANS, Continued: The following table summarizes information about employee stock options outstanding at July 31, 1998:
Options Outstanding Options Exercisable ------------------------------------------------------------------------------------- Weighted Weighted Average Weighted Average Remaining Average Range of Exercise Number Exercise Contracted Number Exercise Prices Outstanding Price Life Exercisable Price ------------------ ----------- -------- ---------- ----------- --------- $5.00 to $6.00 117,400 $ 5.20 7.31 78,420 $ 5.10 $6.50 to $7.00 29,750 $ 6.83 8.24 2,500 $ 6.50 $5.00 to $7.00 147,150 $ 5.53 7.70 80,920 $ 5.14
Pro Forma Net Income and Net Income Per Common Share Had the compensation cost for the Company's stock-based compensation plan been determined consistent with SFAS No. 123, the Company's net income and net income per common share for 1996, 1997 and 1998 would approximate the pro forma amounts below:
Stock Options -------------------------------------------------------------------------------------------------- As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma 7/31/98 7/31/98 7/31/97 7/31/97 7/31/96 7/31/96 -------------- ------------- ------------- -------------- --------------- --------------- Net income $ 756,117 $ 731,774 $ 166,060 $ 152,201 $ 137,662 $ 137,662 Basic net income per common share $ 0.43 $ 0.42 $ 0.10 $ 0.09 $ 0.09 $ 0.09
The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to awards granted prior to the 1996 fiscal year. 401(K) Plan The Company established a Retirement Savings Plan (the "Savings Plan"), effective as of September 1, 1994, which is intended to qualify under Section 401(K) of the Internal Revenue Code "the Code". Employees who have been employed with the Company for one year or more are eligible for participation in the Savings Plan. Employees may elect to reduce up to 15% of their annual compensation (subject to certain limitations under the Code) by having such amounts contributed to the Savings Plan. The Board intends to conduct a review at the end of each fiscal year to determine whether the Company will make any additional or matching contribution to the Savings Plan. As of July 31, 1998, no additional or matching contributions have been made to the Savings Plan by the Company. All assets of the Savings Plan are held in trust. F-17 32 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. DISCONTINUED OPERATIONS: In fiscal year 1995, the Company formed a new subsidiary, Bestway Auto, Inc., ("Bestway Auto") due to the Company's entry into the retail used car sales and finance business. The Company test marketed the concept through the opening of a single prototype retail sales facility which experienced operating losses for the first six months of fiscal year 1996. In December 1995, management made the decision to dispose of Bestway Auto's assets and in the process create a potential for a future opportunity in an operating used car business. On February 1, 1996 the Company exchanged $137,200 in cash and its capital stock in Bestway Auto for a 49% Common Stock interest in Value Auto, and non-voting, non-dividend paying Preferred Stock in Value Auto. For the period February 1, 1996 through July 31, 1996, Value Auto generated net losses amounting to approximately $136,000 and the Company's equity in such losses amounted to approximately $67,000. As a result of the losses incurred by both Bestway Auto and Value Auto and management's assessment of future operating results for the Company's auto sales business, management concluded that the Company would abandon the auto sales business and its investment in Value Auto would be written off. The operations of Bestway Auto and Value Auto have been accounted for as a discontinued operation and, accordingly, the Company's equity in their operating results and the loss on disposal are segregated and reported as discontinued operations in the accompanying Consolidated Statement of Income. Summarized results of Bestway Auto and Value Auto are as follows:
Value Auto Bestway Auto February 1, 1996 August 1, 1995 July 31, 1996 February 1, 1996 ---------------- ----------------- Revenues $ 3,079,689 $ 207,468 Costs and expenses 3,239,426 351,579 ----------- ----------- Loss before income taxes (159,737) (144,111) Income tax benefit 23,961 54,186 ----------- ----------- Net loss $ (135,776) $ (89,925) =========== ===========
11. INVESTMENT IN PARTNERSHIP On October 19, 1995, the Company became a 50% limited partner in a newly formed partnership, Value Auto Partners, Ltd. (the "Partnership"). The purpose of the Partnership is to engage in the financing of used cars. The Company accounted for its Partnership interest by the equity method. As of January 31, 1997, the Company had contributed $437,500 to the Partnership and had received distributions of approximately $14,000. The Company's equity in Partnership losses was $193,981 for the six months ended January 31, 1997. As a result of losses incurred by the Partnership, and based on management's assessment of the recoverability of the carrying amount of the investment, management concluded that the investment should be written off. Accordingly, during the second quarter the Company recorded a pretax charge of $229,579 which represented the remaining carrying amount of its investment in the Partnership. The charge resulted in a deferred tax benefit of $86,322. Subsequently, there has been no changes in the status of the Partnership which would impact the Company's decision to write off the investment. F-18 33 BESTWAY, INC. FORM 10-K - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. INVESTMENT IN PARTNERSHIP, Continued Shown below is the unaudited summarized financial information related to the Partnership at the time of the write-off: For the period ended January 31, 1997: Revenues $ 51,905 Costs and expenses 439,867 ----------- Net loss $ (387,962) =========== At January 31, 1997: Assets $ 1,516,532 =========== Liabilities 1,301,961 Partners' capital 214,571 ----------- $ 1,516,532 ===========
12. CONTINGENCIES: The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. Management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Company. The Company is coordinating the identification, evaluation, and implementation of changes to computer systems and applications necessary to achieve a year 2000 date conversion with no effect on customers or disruption to business operations. These actions are necessary to ensure that the systems and applications will recognize and process the year 2000 and beyond. The Company uses purchased software programs for a variety of functions, including general ledger, accounts payable, and fixed assets packages. As part of the year 2000 readiness process, significant service providers, vendors, suppliers and customers that are believed to be critical to business operations after January 1, 2000, have been identified and steps are underway in an attempt to reasonably ascertain their stage of year 2000 readiness. The failure to correct a material year 2000 problem could result in an interruption in, or a failure of, certain normal business activities and operations, liquidity and financial condition. Due to the general uncertainty inherent in the year 2000 problem, resulting in part from the uncertainty of the year 2000 readiness of third party suppliers, the Company is unable to determine if year 2000 failures will have a material impact on the Company. The total cost of compliance and its effect on the Company's future results of operations is not expected to be material. F-19 34 INDEX TO EXHIBITS
Exhibit Number Document ------ -------- 21 Subsidiaries 23 Consent of Auditors 27 Financial Data Schedule Filed electronically only, not attached to printed reports
EX-21 2 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 BESTWAY, INC. Subsidiaries July 31, 1998
Subsidiary State of Incorporation ---------- ---------------------- Bestway Rental, Inc. Tennessee U.S. Credit-Service Corporation Missouri Westdale Data Service, Inc. Texas
EX-23 3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Bestway, Inc. on Form S-8 (Registration No. 33-60471) of our report dated October 15, 1998, on our audits of the consolidated financial statements of Bestway, Inc. as of July 31, 1998 and 1997 and for the years ended July 31, 1998, 1997 and 1996, which report is included in this Annual Report on Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP Dallas, Texas October 26, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 YEAR JUL-31-1998 AUG-01-1997 JUL-31-1998 501,119 0 0 0 17,723,833 0 5,366,471 9,131,509 18,673,950 0 8,230,043 0 0 17,516 8,378,846 18,673,950 0 25,875,934 0 5,643,299 18,055,590 0 795,232 1,381,813 588,076 793,737 0 0 0 793,737 .45 .44
-----END PRIVACY-ENHANCED MESSAGE-----