AMF BOWLING WORLDWIDE INC - 10-Q Quarterly Report

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 December 29, 2002

or

o	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		13-3873272
(State or other jurisdiction of incorporation or organization)		(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 o

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 o

The number of shares of the Registrant’s common stock issued and outstanding or issuable under the Registrant’s Plan of Reorganization as of February 1, 2003 was 10,000,000 (excluding stock purchase warrants, restricted stock and stock options).

AMF BOWLING WORLDWIDE, INC.

TABLE OF CONTENTS

		Page

PART I

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (unaudited)	5

	Condensed Consolidated Statements of Operations (unaudited)	6

	Condensed Consolidated Statements of Cash Flows (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	29

Item 4.	Controls and Procedures	30

PART II

Item 1.	Legal Proceedings	31

Item 6.	Exhibits and Reports on Form 8-K	32

Signatures		33

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;


	•	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.

Item 1. Financial Statements

AMF BOWLING WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

			December 29, 2002			June 30, 2002

Assets
Current assets:
	Cash and cash equivalents		$	29,947		$	34,167
	Accounts and notes receivable, net of allowance for doubtful accounts of $9,342 and $8,748, respectively			25,410			26,268
	Inventories, net			34,758			38,901
	Advances and deposits			17,662			19,411

		Total current assets		107,777			118,747
Property and equipment, net				579,344			605,174
Leasehold interests and other				33,141			31,603

		Total assets	$	720,262		$	755,524

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	12,161		$	17,938
	Accrued expenses and other			88,956			91,219
	Current portion of long-term debt			16,719			16,961

		Total current liabilities		117,836			126,118
Long-term debt, less current portion				411,875			424,109
Liabilities subject to resolution				2,404			3,556
Other long-term liabilities				203			809

		Total liabilities		532,318			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, 9,958,465 issued and outstanding) (a)			100			100
	Paid-in capital			212,151			211,800
	Accumulated deficit			(29,201	)		(15,636	)
	Accumulated other comprehensive income			4,894			4,668

		Total stockholders' equity		187,944			200,932

		Total liabilities and stockholders' equity	$	720,262		$	755,524

(a)	There were 9,958,465 shares outstanding on December 29, 2002. 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.

AMF BOWLING WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)

			Reorganized Company			Predecessor Company			Reorganized Company			Predecessor Company

			Three Months Ended December 29, 2002			Three Months Ended December 31, 2001			Six Months Ended December 29, 2002			Six Months Ended December 31, 2001

Operating revenue			$	176,572		$	181,560		$	327,199		$	337,759

Operating expenses:
	Cost of goods sold			35,606			38,493			71,664			77,357
	Bowling center operating expenses			92,359			90,813			183,468			185,155
	Selling, general and administrative expenses			9,410			14,835			19,773			34,147
	Restructuring, refinancing and other charges			—			1,341			—			5,044
	Depreciation and amortization			20,844			30,966			42,236			63,436

		Total operating expenses		158,219			176,448			317,141			365,139

		Operating income (loss)		18,353			5,112			10,058			(27,380	)

Nonoperating expenses (income):
	Interest expense (a)			10,188			15,410			20,665			32,331
	Interest income			(95	)		—			(240	)		—
	Other expense (income), net			(315	)		2,232			557			451

		Total nonoperating expenses, net		9,778			17,642			20,982			32,782

		Income (loss) before reorganization items and income taxes		8,575			(12,530	)		(10,924	)		(60,162	)
Reorganization items, net				—			40,536			—			56,731

		Income (loss) before income taxes		8,575			(53,066	)		(10,924	)		(116,893	)
Provision for income taxes				1,332			1,443			2,641			1,687

		Net income (loss)	$	7,243		$	(54,509	)	$	(13,565	)	$	(118,580	)

(a)	For the three and six months ended December 31, 2001, the Company did not accrue approximately $15,260 and $30,560, respectively, 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.

AMF BOWLING WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

		Reorganized Company			Predecessor Company

		Six Months Ended December 29, 2002			Six Months Ended December 31, 2001

Cash flows from operating activities:
	Net loss	$	(13,565	)	$	(118,580	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
	Stock based compensation		351			—

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