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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 29, 2002
 
or
 
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                          to                         
 
Commission file number 001-12131
 
 
AMF BOWLING WORLDWIDE, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of
incorporation or organization)
  
13-3873272
(I.R.S. Employer
Identification No.)
 
8100 AMF Drive
Richmond, Virginia 23111
(Address of principal executive offices, including zip code)
 
 
(804) 730-4000
(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 ¨
 
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨
 
The number of shares of the Registrant’s common stock issued and outstanding or issuable under the Registrant’s Plan of Reorganization as of November 1, 2002 was 10,000,000 (excluding stock purchase warrants, restricted stock and stock options).

Table of Contents
 
AMF BOWLING WORLDWIDE, INC.
 
TABLE OF CONTENTS
 
PART I
 
         
Page
Item 1.
   
Financial Statements
     
       
4  
       
5  
       
6  
       
7  
Item 2.
      
16
Item 3.
      
25
Item 4.
      
26
           
    
PART II
     
           
Item 1.
      
27
Item 6.
      
28
  
29
 

Table of Contents
 
PART I
 
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
Certain matters discussed in this report contain forward-looking statements, which are statements other than historical information or statements of current condition. Statements set forth in this report or statements incorporated by reference from documents filed with the Securities and Exchange Commission (“SEC”) are or may be forward-looking statements, including possible or assumed future results of the operations of AMF Bowling Worldwide, Inc., a Delaware corporation (“Worldwide” and, together with its subsidiaries, the “Company”), including but not limited to:
 
 
•
 
any statements concerning:
 
 
•
 
the results of operations of the Company’s businesses;
 
 
•
 
the results of the Company’s initiatives to improve its bowling centers operations and its business of selling bowling equipment;
 
 
•
 
the amounts of capital expenditures needed to maintain or improve the Company’s bowling centers;
 
 
•
 
the Company’s ability to comply with covenants in its financing facilities and generate cash flow to service its indebtedness;
 
 
•
 
the continued availability of sufficient borrowing capacity or other financing to supplement cash flow and fund operations; and
 
 
•
 
the outcome of existing or future litigation;
 
 
•
 
any statements preceded by, followed by or including the words “believes,” “expects,” “predicts,” “anticipates,” “intends,” “estimates,” “should,” “may” or similar expressions; and
 
 
•
 
other statements contained or incorporated in this report that are not historical facts.
 
These forward-looking statements relate to the plans and objectives of the Company or future operations. In light of the risks and uncertainties inherent in all future projections and the Company’s financial position, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company that the objectives, projections or plans of the Company will be achieved. Many factors could cause the Company’s actual results to differ materially from those in any forward-looking statements, including, but not limited to:
 
 
•
 
the popularity of bowling;
 
 
•
 
the Company’s ability to retain and attract higher quality bowling center managers;
 
 
•
 
the Company’s ability to implement successfully initiatives designed to maintain bowling customer traffic in its bowling centers and improve performance;
 
 
•
 
the Company’s ability to implement successfully the Company’s business initiatives;
 
 
•
 
competition in the Company’s bowling products business;
 
 
•
 
the success of the Company’s ongoing restructuring efforts in its bowling products business;
 
 
•
 
the risk of adverse political acts or developments in the Company’s international markets;

2

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•
 
fluctuations in foreign currency exchange rates;
 
 
•
 
the lack of improvement or a decline in general economic conditions;
 
 
•
 
adverse judgments in pending or future litigation; and
 
 
•
 
changes in interest rates.
 
The foregoing review should not be construed as exhaustive and should be read in conjunction with other cautionary statements included elsewhere in this report. The Company undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after this date or to reflect the occurrence of unanticipated events.

3

Table of Contents
 
Item 1.    Financial Statements
 
AMF BOWLING WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
 
      
September 29, 2002
       
June 30, 2002
  
Assets
                      
Current assets:
                      
Cash and cash equivalents
     
$
24,509
 
     
$
34,167
 
Accounts and notes receivable, net of allowance for
doubtful accounts of $8,815 and $8,748, respectively
     
 
28,073
 
     
 
26,268
 
Inventories, net
     
 
37,935
 
     
 
38,901
 
Advances and deposits
     
 
18,539
 
     
 
19,411
 
Net assets held for sale
                      
      
    
Total current assets
     
 
109,056
 
     
 
118,747
 
Property and equipment, net
     
 
592,098
 
     
 
605,174
 
Leasehold interests and other
     
 
31,031
 
     
 
31,603
 
      
    
Total assets
     
$
732,185
 
     
$
755,524
 
      
    
Liabilities and Stockholders’ Equity
                      
Current liabilities:
                      
Accounts payable
     
$
11,439
 
     
$
17,938
 
Accrued expenses and other
     
 
90,688
 
     
 
91,219
 
Current portion of long-term debt
     
 
28,082
 
     
 
16,961
 
      
    
Total current liabilities
     
 
130,209
 
     
 
126,118
 
Long-term debt, less current portion
     
 
417,937
 
     
 
424,109
 
Liabilities subject to resolution
     
 
3,442
 
     
 
3,556
 
Other long-term liabilities
     
 
324
 
     
 
809
 
      
    
Total liabilities
     
 
551,912
 
     
 
554,592
 
      
    
Stockholders’ equity:
                      
Preferred Stock ($.01 par value, 5,000,000 shares
authorized, none issued and outstanding)
     
 
—  
 
     
 
—  
 
Common Stock ($.01 par value, 20,000,000 shares
authorized, 9,955,593 issued and outstanding)(a)
     
 
100
 
     
 
100
 
Paid-in capital
     
 
211,800
 
     
 
211,800
 
Accumulated deficit
     
 
(36,444
)
     
 
(15,636
)
Accumulated other comprehensive income
     
 
4,817
 
     
 
4,668
 
      
    
Total stockholders’ equity
     
 
180,273
 
     
 
200,932
 
      
    
Total liabilities and stockholders’ equity
     
$
732,185
 
     
$
755,524
 
      
    
 
 
(a)
 
There are 9,955,593 shares outstanding on September 29, 2002. On September 30, 2002 an additional 2,872 shares were distributed to former unsecured creditors. The remaining 41,522 shares will be issued as claims are resolved in accordance with the Company’s Second Amended Second Modified Joint Plan of Reorganization (the “Plan”).
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMF BOWLING WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
 
      
Reorganized Company
       
Predecessor Company
  
      
Three Months Ended September 29, 2002
       
Three Months Ended September 30, 2001
  
Operating revenue
     
$
150,627
 
     
$
156,199
 
      
    
Operating expenses:
                      
Cost of goods sold
     
 
36,058
 
     
 
38,864
 
Bowling center operating expenses
     
 
91,109
 
     
 
94,342
 
Selling, general and administrative expenses
     
 
10,363
 
     
 
19,312
 
Restructuring, refinancing and other charges
     
 
—  
 
     
 
3,703
 
Depreciation and amortization
     
 
21,392
 
     
 
32,470
 
      
    
Total operating expenses
     
 
158,922
 
     
 
188,691
 
      
    
Operating loss
     
 
(8,295
)
     
 
(32,492
)
      
    
Nonoperating expenses (income):
                      
Interest expense (a)
     
 
10,477
 
     
 
17,175
 
Interest income
     
 
(145
)
     
 
(254
)
Other expense (income), net
     
 
872
 
     
 
(1,781
)
      
    
Total nonoperating expenses, net
     
 
11,204
 
     
 
15,140
 
      
    
Loss before reorganization items and income taxes
     
 
(19,499
)
     
 
(47,632
)
Reorganization items, net
     
 
—  
 
     
 
16,195
 
      
    
Loss before income taxes
     
 
(19,499
)
     
 
(63,827
)
Provision for income taxes
     
 
1,309
 
     
 
244
 
      
    
Net loss
     
 
(20,808
)
     
 
(64,071
)
      
    
Basic and diluted loss per share:
                      
Net loss
     
$
(2.08
)
           
      
          
 
 
(a)
 
For the three months ended September 30, 2001, the Company did not accrue approximately $15,300 of interest on its pre-petition subordinated debt. The debt was materially impaired or discharged in the Company’s Chapter 11 proceeding.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMF BOWLING WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
      
Reorganized Company
       
Predecessor Company
  
      
Three Months Ended September 29, 2002
       
Three Months Ended September 30, 2001
  
Cash flows from operating activities:
                      
Net loss
     
$
(20,808
)
     
$
(64,071
)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
                      
Depreciation and amortization
     
 
21,392
 
     
 
32,470
 
Reorganization items, net
     
 
—  
 
     
 
16,195
 
Gain (loss) on the sale of property and equipment, net
     
 
85
 
     
 
(373
)
Changes in assets and liabilities:
                      
Accounts and notes receivables, net
     
 
(843
)
     
 
7,787
 
Inventories
     
 
1,548
 
     
 
4,867
 
Other assets
     
 
(1,319
)
     
 
34
 
Accounts payable and accrued expenses
     
 
(8,554
)
     
 
15,760
 
Income taxes payable
     
 
101
 
     
 
504
 
Other long-term liabilities
     
 
76
 
     
 
4,345
 
      
    
Net cash provided by (used in) operating activities
     
 
(8,322
)
     
 
17,518
 
      
    
Cash flows from investing activities:
                      
Purchases of property and equipment
     
 
(8,943
)
     
 
(15,652
)
Proceeds from the sale of property and equipment
     
 
15
 
     
 
163
 
      
    
Net cash used in investing activities
     
 
(8,928
)
     
 
(15,489
)
      
    
Cash flows from financing activities:
                      
Proceeds from DIP Loan
     
 
—  
 
     
 
5,000
 
Payments on DIP Loan
     
 
—  
 
     
 
(5,000
)
Borrowing under revolver
     
 
5,000
 
     
 
—  
 
Repayment under capital lease obligation
     
 
(51
)
     
 
—  
 
Payments of noncompete obligations
     
 
(9
)
     
 
(8
)
      
    
Net cash provided by (used in) financing activities
     
 
4,940
 
     
 
(8
)