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 March 30, 2003

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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o

No x

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 May 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)	4

	Condensed Consolidated Statements of Operations (unaudited)	5

	Condensed Consolidated Statements of Cash Flows (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	31

Item 4.	Controls and Procedures	32

PART II

Item 1.	Legal Proceedings	33

Item 6.	Exhibits and Reports on Form 8-K	34

Signatures		35

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 successfully implement initiatives designed to maintain bowling customer traffic in its bowling centers and improve performance;

•	the Company’s ability to successfully implement 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)

	March 30, 2003			June 30, 2002

Assets
Current assets:
Cash and cash equivalents	$	62,642		$	34,167
Accounts and notes receivable, net of allowance for doubtful accounts of $7,284 and $8,748, respectively		20,785			26,268
Inventories, net		36,226			38,901
Advances and deposits		18,581			19,411

Total current assets		138,234			118,747
Property and equipment, net		566,427			605,174
Leasehold interests and other		32,846			31,603

Total assets	$	737,507		$	755,524

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,584		$	17,938
Accrued expenses and other		86,653			91,219
Current portion of long-term debt		16,724			16,961

Total current liabilities		117,961			126,118
Long-term debt, less current portion		406,024			424,109
Liabilities subject to resolution		2,432			3,556
Other long-term liabilities		23			809

Total liabilities		526,440			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		212,256			211,800
Accumulated deficit		(8,089	)		(15,636	)
Accumulated other comprehensive income		6,800			4,668

Total stockholders’ equity		211,067			200,932

Total liabilities and stockholders’ equity	$	737,507		$	755,524


(a)	There were 9,958,465 shares outstanding on March 30, 2003. On March 31, 2003, the Company issued 224 shares to trade claimants and the remaining 41,297 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)

				2002 Third Quarter									Nine Months Ended March 31, 2002

	Reorganized Company			Reorganized Company			Predecessor Company			Reorganized Company			Reorganized Company			Predecessor Company

	Three Months Ended March 30, 2003			One Month Ended March 31, 2002			Two Months Ended February 28, 2002			Nine Months Ended March 30, 2003			One Month Ended March 31, 2002			Eight Months Ended February 28, 2002

Operating revenue	$	187,861		$	67,268		$	122,886		$	515,060		$	67,268		$	460,645

Operating expenses:
Cost of goods sold		29,759			10,820			19,991			101,423			10,820			97,348
Bowling center operating expenses		95,230			31,881			62,032			278,698			31,881			247,187
Selling, general and administrative expenses		9,756			5,017			9,389			29,529			5,017			43,536
Restructuring, refinancing and other charges		—			2,797			302			—			2,797			5,346
Depreciation and amortization		20,735			7,780			17,144			62,971			7,780			80,580

Total operating expenses		155,480			58,295			108,858			472,621			58,295			473,997

Operating income (loss)		32,381			8,973			14,028			42,439			8,973			(13,352	)

Nonoperating expenses (income):
Interest expense		9,763			4,051			8,113			30,428			4,051			40,444
Interest income		(209	)		(63	)		—			(449	)		(63	)		—
Other expense (income), net		(844	)		(169	)		907			(287	)		(169	)		1,358

Total nonoperating expenses, net		8,710			3,819			9,020			29,692			3,819			41,802

Income (loss) before reorganization items, gain on debt discharge, and fresh start accounting adjustments		23,671			5,154			5,008			12,747			5,154			(55,154	)
Reorganization items, net		—			—			13,288			—			—			70,019
Gain on debt discharge, net		—			—			(774,803	)		—			—			(774,803	)
Fresh start accounting adjustments		—			—			65,991			—			—			65,991

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