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 28, 2003

¨	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 ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ 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 ¨

The number of shares of the Registrant’s common stock issued and outstanding or issuable under the Registrant’s Plan of Reorganization as of January 30, 2004 was 10,000,000.

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	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

PART II

Item 1.	Legal Proceedings	30

Item 6.	Exhibits and Reports on Form 8-K	31

Signatures		32

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 the financial 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 key managers;

•

the Company’s ability to successfully implement initiatives designed to maintain bowling customer traffic in its bowling centers and improve center operating performance;

•

the Company’s ability to successfully implement the Company’s business initiatives;

•

competition in the Company’s 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 existing, 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 28, 2003			June 29, 2003
Assets
Current assets:
Cash and cash equivalents	$	29,293		$	56,275
Accounts and notes receivable, net of allowance for doubtful accounts of $4,996 and $7,329, respectively		22,930			23,217
Inventories, net		33,999			34,001
Advances and deposits		18,741			19,019

Total current assets		104,963			132,512
Property and equipment, net		568,009			568,609
Leasehold interests, net and other		28,703			30,269

Total assets	$	701,675		$	731,390

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,783		$	17,642
Accrued expenses and other		82,161			84,372
Current portion of long-term debt		18,514			40,901

Total current liabilities		114,458			142,915
Long-term debt, less current portion		369,448			375,587
Liabilities subject to resolution		997			1,323

Total liabilities		484,903			519,825
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, 9,963,251 issued and outstanding) ^(a)		100			100
Paid-in capital		212,571			212,361
Accumulated deficit		(12,387	)		(12,209	)
Accumulated other comprehensive income		16,488			11,313

Total stockholders’ equity		216,772			211,565

Total liabilities and stockholders’ equity	$	701,675		$	731,390

^(a)

There were 9,963,251 shares outstanding on December 28, 2003. On January 14, 2004, the Company issued 8,399 shares of common stock to holders of Class 4 claims (trade creditors). The remaining 28,336 shares of common stock 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)


	Quarter Ended						Six Months Ended
	December 28, 2003			December 29, 2002			December 28, 2003			December 29, 2002
Operating revenue	$	174,189		$	176,572		$	322,203		$	327,199

Operating expenses:
Cost of goods sold		36,250			35,606			69,936			71,664
Bowling center operating expenses		90,880			92,359			181,785			183,468
Selling, general and administrative expenses		12,000			9,410			22,958			19,773
Depreciation and amortization		15,360			20,844			31,033			42,236

Total operating expenses		154,490			158,219			305,712			317,141

Operating income		19,699			18,353			16,491			10,058

Nonoperating expenses (income):
Interest expense		8,925			10,188			18,112			20,665
Interest income		(273	)		(95	)		(369	)		(240	)
Other expense (income), net		(2,690	)		(315	)		(2,790	)		557

Total nonoperating expenses, net		5,962			9,778			14,953			20,982

Income (loss) before income taxes		13,737			8,575			1,538			(10,924	)
Provision for income taxes		1,243			1,332			1,716			2,641

Net income (loss)	$	12,494		$	7,243		$	(178	)	$	(13,565	)

Net income (loss) per share of common stock:
Basic	$	1.25		$	0.72		$	(0.02	)	$	(1.36	)
Diluted		1.21			0.72			(0.02	)		(1.36	)
Weighted average common shares outstanding:
Basic		9,999,986			9,999,986			9,999,986			9,999,986
Diluted		10,358,402			9,999,986			9,999,986			9,999,986

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)


	Six Months Ended
	December 28, 2003			December 29, 2002
Cash flows from operating activities:
Net loss	$	(178	)	$	(13,565	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock based compensation		210			351
Depreciation and amortization		31,033			42,236
(Gain) loss on the sale of property and equipment, net		(1,585	)		657
(Gain) loss on casualty loss		(1,413	)		—
Changes in assets and liabilities:
Accounts and notes receivables, net		411			3,687
Inventories		1,143			5,079
Other assets		(2,614	)		29
Accounts payable and accrued expenses		(6,729	)		(10,222	)
Income taxes payable		570			(522	)
Other long-term liabilities		(29	)		(243	)

Net cash provided by operating activities		20,819			27,487

Cash flows from investing activities:
Purchases of property and equipment		(23,824	)		(18,844	)
Proceeds from the sale of property and equipment		3,677			630
Other		—			137

Net cash used in investing activities		(20,147	)		(18,077	)

Cash flows from financing activities:
Borrowing under Revolver		5,000			15,000
Repayment under Revolver		(5,000	)		(15,000	)
Repayment under Term Facility		(28,380	)		(13,720	)
Repayment under capital lease obligations		(146	)		(102	)
Payments of noncompete obligations		—			(18	)

Net cash used in financing activities		(28,526	)		(13,840<

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