SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
October 10, 1996
AMF GROUP INC.
(Exact name of registrant as specified in charter)
Delaware
(State or other jurisdiction
of incorporation)
001-12131 13-3873272
(Commission File No.) (IRS employer
identification no.)
8100 AMF Drive, Mechanicsville, Virginia 23111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(804) 730-4000<PAGE>
Amendment to File Acquisition Financial Statements
On October 24, 1996, AMF Group Inc. (the "Regis-
trant"), a Delaware corporation, filed a report on Form 8-K
(the "Form 8-K") with respect to the acquisition by AMF Bowling
Centers, Inc., a Virginia corporation and an indirect, wholly
owned subsidiary of the Registrant, of 50 bowling centers and
certain related assets and liabilities from Charan Industries,
Inc., a Delaware corporation. At the time of such filing, it
was impracticable to provide the financial statements and pro
forma financial information required to be filed. By this
Amendment No. 1, the Registrant is amending Item 7 of the Form
8-K to include such required financial statements and pro forma
financial information. <PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of BCA & Affiliates
Year ended August 31, 1996
Report of Independent Auditors
Balance Sheet - As of August 31, 1996
Statement of Income - For the year ended August
31, 1996
Statement of Cash Flows - For the year ended
August 31, 1996
Notes to Financial Statements
(b) Pro Forma Financial Statements of AMF Group
Holdings Inc.
Pro Forma Consolidated Balance Sheet - As of
September 30, 1996
Pro Forma Consolidated Statement of Income - For
the Nine Months ended September 30, 1996
Pro Forma Consolidated Statement of Income - For
the Year ended December 31, 1995
Notes to Pro Forma Consolidated Financial State-
ments
-2-<PAGE>
Report of Independent Auditors
Board of Directors
BCA & Affiliates
We have audited the accompanying balance sheet of BCA & Affili-
ates as of August 31, 1996, and the related statement of income
and cash flows for the year then ended. These financial state-
ments 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 in accordance with generally accepted
auditing standards. Those standards 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. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial posi-
tion of BCA & Affiliates as of August 31, 1996, and the results
of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting prin-
ciples.
Todres & Sheiffer
Westbury, New York
December 4, 1996
-3-<PAGE>
<TABLE>
<CAPTION>
BCA & AFFILIATES
BALANCE SHEET
August 31, 1996
Assets
<S> <C>
Current assets:
Cash and cash equivalents $ 598,000
Accounts receivable 203,000
Inventories 642,000
Prepaid expenses 509,000
---------
Total current assets 1,952,000
Property, plant and equipment - net
(Notes 1 and 2) 42,892,000
Other assets (Note 8) 613,000
----------
$45,457,000
==========
Liabilities and Excess of Assets Over Liabilities
Liabilities:
Current liabilities:
Accounts payable and accrued expenses $ 2,156,000
Current portion of long-term debt (Note 3) 17,901,000
Bank line of credit (Note 4) 4,677,000
Capital lease obligation (Note 5) 811,000
----------
Total current liabilities 25,545,000
Long-term liabilities:
Long-term debt (Note 3) -
----------
Total liabilities 25,545,000
Contingencies (Note 6) -
Excess of assets over liabilities 19,912,000
----------
$45,457,000
==========
</TABLE>
- See notes to financial statements -
-4-<PAGE>
<TABLE>
<CAPTION>
BCA & AFFILIATES
STATEMENT OF INCOME
Year ended August 31, 1996
<S> <C>
Revenues:
Bowling $63,818,000
Other 178,000
----------
Total revenues 63,996,000
Cost of sales 7,219,000
----------
Gross profit 56,777,000
----------
Operating expenses:
Payroll and related costs 17,522,000
Parts and supplies 4,270,000
Repairs and maintenance 1,301,000
Occupancy costs 7,239,000
Promotional and marketing 4,531,000
Insurance and other costs 3,215,000
General and administrative - home office 6,146,000
Interest 2,003,000
----------
Total operating expenses 46,227,000
----------
Income before depreciation expense 10,550,000
Depreciation expense 7,093,000
---------
Net income $ 3,457,000
=========
</TABLE>
- See notes to financial statements -
-5-<PAGE>
<TABLE>
<CAPTION>
BCA & AFFILIATES
STATEMENT OF CASH FLOWS
Year ended August 31, 1996
<S> <C>
Cash Flows from Operating Activities:
Net income $ 3,457,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,093,000
(Increase) decrease in:
Accounts receivable 75,000
Inventories (19,000)
Prepaid expenses (51,000)
Other 55,000
Increase (decrease) in:
Accounts payable and accrued expenses (554,000)
----------
Net cash from operating activities 10,056,000
----------
Cash Flows for Investing Activities:
Additions to property, plant and equipment, net (4,997,000)
---------
Net cash used for investing activities (4,997,000)
---------
Cash flows for financing activities:
Principal payments on long-term debt (1,661,000)
Transfers to home office (3,075,000)
---------
Net cash used for financing activities (4,736,000)
---------
Net increase in cash and cash equivalents 323,000
Cash and cash equivalents at beginning of year 275,000
-------
Cash and cash equivalents at end of year $ 598,000
=======
Supplemental Schedule of Cash Flow Information:
Cash paid during the year for:
Interest $ 2,003,000
=========
Income taxes $ 183,000
=========
</TABLE>
- See notes to financial statements -
-6-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
Description of the Business
Organization
The financial statements of BCA and Affiliates (the "Company")
consists of the operations of 50 bowling centers, one golf
course, and certain related recreational activities. BCA is a
division of Charan Industries, Inc. The affiliates of BCA in-
clude two partnerships which are owned primarily by the princi-
pal shareholders of Charan Industries, Inc.
Note 1 - Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers cash in the operating bank accounts,
overnight investments, and money market accounts to be cash and
cash equivalents.
Inventories
Inventories consists of food, liquor, and various bowling
equipment at the lower of cost (first-in, first-out method) or
market.
Property, Plant and Equipment
Depreciation for financial reporting is computed using the
straight-line method over the estimated useful life of the as-
set beginning in the year of acquisition. Accelerated methods
are used for income tax reporting. When assets are disposed
of, the related costs and accumulated depreciation are removed
from the accounts and any gain or loss is reflected in income
for the period. The installment sales method for reporting
gains is used where applicable.
-7-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS (Continued)
August 31, 1996
Note 1 - Summary of Significant Accounting Policies (Continued)
Leases
Leases which meet certain criteria are classified as capital
leases, and assets and liabilities are recorded at amounts
equal to the lesser of the present value of the minimum lease
payments or the fair value of the leased properties at the be-
ginning of the lease term. Such assets are amortized evenly
over the related lease terms or their economic lives. Interest
expense relating to the lease liabilities is recorded to effect
constant rates of interest over the terms of the leases.
Leases which do not meet such criteria are classified as oper-
ating leases and the related rentals are charged to expense as
incurred.
Income Taxes
On September 1, 1988 the Charan Industries, Inc. elected to be
taxed under the provisions of Subchapter "S" of the Internal
Revenue Code. Under those provisions, Charan Industries, Inc
is not subject to federal corporate income taxes, other than on
certain types of transactions. The stockholders are liable for
individual federal and state income taxes on their proportion-
ate shares of Charan's income. Accordingly, there is no pro-
vision for income taxes for BCA & Affiliates.
Allocation of General and Administrative Expenses
General and administrative expenses of Charan Industries, Inc.
(consisting primarily of home office payroll costs, rent, pro-
fessional fees, and general insurance) are allocated to the
company on the basis of revenues, which approximate 90% of the
total amount, unless the expenses are specifically related to
either bowling or non-bowling activities. Interest expense for
the term loan is allocated to the Company on the basis of the
proportional values of the collateralized assets between non-
bowling and bowling assets. All other interest expense is spe-
cific to the bowling operation.
-8-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS (Continued)
August 31, 1996
Note 1 - Summary of Significant Accounting Policies (Continued)
Excess of Assets over Liabilities
The excess of assets over liabilities represents the net asset
value of BCA and Affiliates. Charan Industries, Inc. and two
partnerships primarily owned by the shareholders of Charan In-
dustries, Inc., own the equity interests in BCA and affiliates.
NOTE 2 - Property, Plant and Equipment
The estimated useful lives of the various classes of fixed as-
sets are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings and building improvements 31.5 years
Bowling lanes and equipment 7 years
Pinspotter equipment 7 years
Restaurant and bar equipment 7 years
Furniture, fixtures and other equipment 3-7 years
Leasehold improvements 31.5 years
</TABLE>
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Land $ 5,072,000
Buildings 33,533,000
Bowling lanes/pinspotters 23,574,000
Other equipment 43,187,000
-----------
105,366,000
Less: Accumulated depreciation (62,474,000)
----------
$ 42,892,000
==========
</TABLE>
-9-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS (Continued)
August 31, 1996
NOTE 2 - Property, Plant and Equipment (Continued)
Leased property under capital leases included in property,
plant and equipment is as follows:
<TABLE>
<CAPTION>
<S> <C>
Land and buildings - bowling properties $ 815,000
Less: accumulated amortization 268,000
-------
$ 547,000
=======
</TABLE>
NOTE 3 - Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Bowling properties:
various 7% - 10% debt instruments requiring
monthly payments of interest and principal
maturing at various dates through 2007 $ 4,324,000
(A) Term loans:
Two term loans with independent banks.
Bank prime rate requiring quarterly
payments through May, 2000. 13,577,000
----------
17,901,000
Less: Current portion of long-term debt 17,901,000
----------
Total $ 0
==========
</TABLE>
The total long-term principal balance of $17,901,000 is classi-
fied as a current liability since all debt attributable to
bowling was repaid in October 1996. See Note 9 in connection
with the sale of the Company.
-10-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS (Continued)
August 31, 1996
NOTE 3 - Long-Term Debt (Continued)
(A) On May 27, 1993 Charan Industries, Inc. borrowed
$35,500,000, the proceeds of which were used for the refinanc-
ing of existing debt in the amount of $28,675,000, with the
balance used for working capital. The borrowing consisted of
two separate term loan agreements executed simultaneously with
two independent banking institutions. The principal amount of
each term loan was $23,000,000 and $12,500,000. The term notes
require twenty-eight quarterly principal payments the first of
which was paid on August 31, 1993 with succeeding quarterly
installments due on the last day of each succeeding November,
February, and May thereafter until May 31, 2000 when the prin-
cipal amount of $14,200,000 shall be due and payable together
with any remaining interest. Interest is payable monthly at
each bank's prime rate. The term notes are secured by first
mortgages upon certain assets. The loan agreements contain
covenants, that the Company maintain certain minimum require-
ments of net worth, debt to equity ratio and certain other
earnings and cash flow ratios. At August 31, 1996 the balance
of $29,349,000 was allocated to BCA & Affiliates on the basis
of the collateralized assets pledged resulting in a balance
outstanding to the Company totaling $13,577,000.
NOTE 4 - Bank Line of Credit
On May 27, 1993, Charan Industries, Inc. entered into a three-
year revolving credit agreement which enables the Company to
borrow up to $5,000,000 through October 1996. Interest is pay-
able monthly at the bank prime rate. The note is secured by
first mortgages on certain assets. The loan agreement contains
covenants requiring the Company to satisfy certain minimum re-
quirements of net worth, debt to equity, earnings and cash flow
rates.
This facility was utilized to the extent of $4,677,000 for the
year ended August 31, 1996.
-11-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS (Continued)
August 31, 1996
NOTE 5 - Leases
The Company is committed under a number of long-term leases
expiring at various dates through the year 2058. Certain oper-
ating leases contain provisions for a percentage of gross sales
to be paid as rent, should sales exceed an agreed amount, oth-
erwise base rents are to be paid. The agreements generally
require the payment of utilities, real estate taxes, insurance
and repairs. The following is a schedule of future minimum
lease payments for all noncancellable leases together with the
present value of the net minimum lease payments for capital
leases.
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Capital Operating
Year Leases Leases
1997 ............................. $ 98,000 $ 1,220,000
1998 ............................. 98,000 1,193,000
1999 ............................. 98,000 1,138,000
2000 ............................. 98,000 984,000
2001 ............................. 98,000 444,000
2002 and thereafter .............. 3,990,000 4,949,000
--------- ---------
Total minimum lease payments ..... 4,480,000 $ 9,928,000
Less imputed interest ............ 3,669,000 =========
Present value of minimum lease ---------
payments ........................ $ 811,000
=========
</TABLE>
Total rent expense for the years ended August 31, 1996 amounted
to $1,785,000.
-12-<PAGE>
BCA & AFFILIATES
NOTES TO FINANCIAL STATEMENTS (Continued)
August 31, 1996
NOTE 6 - Contingencies
The Company is involved in litigation on a number of matters
and is subject to certain claims which arise in the normal
course of business, none of which, in the opinion of manage-
ment, is expected to have a materially adverse effect on the
Company's financial position.
NOTE 7 - 401(K) Retirement/Profit Sharing Plan
In January 1991, Charan Industries, Inc. established a 401(K)
Retirement Profit Sharing Plan. The Board of Directors estab-
lished a matching contribution equal to a maximum of 50% of the
first 2% of the employee contribution. The profit sharing plan
contribution is subject to annual determination and is not man-
datory.
NOTE 8 - Other Assets
Other assets are as follows:
<TABLE>
<CAPTION>
<S> <C>
Non-compete agreements (net) $ 485,000
Mortgage acquisition costs (net) 53,000
Other 75,000
-------
$ 613,000
=======
</TABLE>
Non-compete agreements and mortgage acquisition costs are shown
net of amortization.
NOTE 9 - Subsequent Events
All of the assets of the Company were sold to AMF Bowling Cen-
ters Inc. on October 9, 1996, under the provisions of an asset
purchase agreement dated September 10, 1996. A portion of the
proceeds of the sale were used by the Company to satisfy its
outstanding debt.
-13-<PAGE>
<TABLE>
<CAPTION>
AMF GROUP HOLDINGS INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(unaudited)
(in millions of dollars)
Historical Pro Forma
AMF Group BCA & Affiliates Adjustments Pro Forma
Holdings Inc. (Note 1) (Note 2)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 27.2 $ 0.6 -- $ 27.8
Accounts and notes receivable,
net of allowance for doubtful
accounts of $3.0 50.3 0.2 -- 50.5
Inventories 45.6 0.7 -- 46.3
Prepaid expenses and other 15.2 1.0 -- 16.2
----- ---- ---- -----
Total current assets 138.3 2.5 -- 140.8
----- ---- ---- -----
Notes receivable 0.6 -- -- 0.6
Property and equipment, net 531.5 45.0 $ 62.2 (a) 638.7
Deferred financing costs 41.2 -- -- 41.2
Goodwill 762.0 -- -- 762.0
Other assets 38.7 0.5 -- 39.2
------- ---- ---- -------
Total assets $1,512.3 $ 48.0 $ 62.2 $1,622.5
======= ==== ==== =======
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 32.4 $ 1.4 -- $ 33.8
Accrued expenses 39.7 1.1 -- 40.8
Income taxes payable 3.1 0.3 -- 3.4
Note payable to bank 15.0 -- -- 15.0
Long-term debt, current 39.5 23.5 $ (22.6) (b) 40.4
----- ---- ---- -----
Total current liabilities 129.7 26.3 (22.6) 133.4
Long-term debt 989.7 -- 66.5 (c) 1,056.2
Other long-term liabilities 1.8 -- -- 1.8
Deferred income taxes 20.8 -- -- 20.8
------- ---- ---- -------
Total liabilities 1,142.0 26.3 43.9 1,212.2
------- ---- ---- -------
Commitments and contingencies
Stockholder's equity:
Common stock (par value
$.01, 100 shares issued
and outstanding at
September 30, 1996) -- 0.4 (0.4) (d) --
Paid-in capital 389.1 3.4 36.6 (d) 429.1
Retained earnings (deficit) (17.5) 18.7 (18.7) (d) (17.5)
Equity adjustment from foreign
currency translation (1.3) -- -- (1.3)
Treasury stock -- (0.8) 0.8 (d) --
----- ---- ---- -----
Total stockholder's equity 370.3 21.7 18.3 410.3
----- ---- ---- -----
Total liabilities and
stockholder's equity $1,512.3 $ 48.0 $62.2 $1,622.5
======= ==== ==== =======
See Notes to Pro Forma Consolidated Financial Statements
</TABLE>
-14-<PAGE>
<TABLE>
<CAPTION>
AMF GROUP HOLDINGS INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(unaudited)
(in millions of dollars)
Pro Forma
AMF Group Historical
Holdings Inc. BCA & Affiliates
Nine Months Nine Months Pro Forma
Ended 09/30/96 Ended 09/30/96 Adjustments Pro Forma
(Note 4) (Note 1) (Note 3)
<S> <C> <C> <C> <C>
Operating revenues $ 369.3 $ 46.6 $ -- $ 415.9
----- ---- --- -----
Operating expenses:
Cost of goods sold 111.5 4.5 -- 116.0
Bowling center
operating expenses 125.1 30.0 (3.5) (e) 151.6
Selling, general and
administrative expenses 34.7 4.7 (3.5) (f) 35.9
Depreciation and
amortization 52.7 -- 6.3 (g) 59.0
----- ---- --- -----
Total operating expenses 324.0 39.2 (0.7) 362.5
----- ---- --- -----
Operating income 45.3 7.4 0.7 53.4
Nonoperating expenses:
Interest expense 78.5 -- 4.5 (h) 83.0
Other expenses, net 1.4 -- -- 1.4
Interest income (4.7) -- -- (4.7)
Foreign currency
transaction loss 0.4 -- -- 0.4
--- --- --- ---
Income (loss) before
income taxes (30.3) 7.4 (3.8) (26.7)
Provision (benefit) for
income taxes (9.7) -- 1.5 (i) (8.2)
---- --- --- ----
Net income (loss) $ (20.6) $ 7.4 $ (5.3) $ (18.5)
==== === === ====
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements
-15-<PAGE>
<TABLE>
<CAPTION>
AMF GROUP HOLDINGS INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(unaudited)
(in millions of dollars)
Pro Forma
AMF Group Historical
Holdings Inc. BCA & Affiliates
Twelve Months Twelve Months Pro Forma
Ended 12/31/95 Ended 12/31/95 Adjustments Pro Forma
(Note 4) (Note 1) (Note 3)
<S> <C> <C> <C> <C>
Operating revenues $ 562.6 $ 60.1 $ -- $ 622.7
----- ---- --- -----
Operating expenses:
Cost of goods sold 183.6 5.9 -- 189.5
Bowling center
operating expenses 169.1 40.0 (4.6) (e) 204.5
Selling, general and
administrative expenses 46.6 6.2 (4.7) (f) 48.1
Depreciation and amortization 67.0 -- 8.4 (g) 75.4
----- ---- --- -----
Total operating expenses 466.3 52.1 (0.9) 517.5
----- ---- --- -----
Operating income 96.3 8.0 0.9 105.2
Nonoperating expenses:
Interest expense 102.1 -- 6.0 (h) 108.1
Other expenses, net 2.0 -- -- 2.0
Interest income -- -- -- --
Foreign currency transaction
loss -- -- -- --
--- --- --- ---
Income (loss) before income taxes (7.8) 8.0 (5.1) (4.9)
Provision for income taxes 10.0 -- 1.2 (i) 11.2
---- --- --- ----
Net income (loss) $ (17.8) $ 8.0 $ (6.3) $ (16.1)
==== === === ====
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements
-16-<PAGE>
AMF GROUP HOLDINGS INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF REPORTING
The unaudited Pro Forma Consolidated Financial State-
ments of AMF Group Holdings Inc. (the "Company") are provided
to give effect to the acquisition on October 10, 1996, of 50
bowling centers and certain related assets and liabilities (the
"BCA Acquisition") of BCA & Affiliates ("BCA").
The purchase price of $106.5 million was funded with
$40 million from the sale of equity by AMF Holdings Inc. to its
institutional stockholders and one of its directors and $66.5
million borrowed under the Company's existing Acquisition Fa-
cility.
The Company is a wholly owned subsidiary of AMF Group
Holdings Inc. ("Holdings"). The historical financial informa-
tion of the Company has been adjusted (Note 4) to give effect
to a Stock Purchase Agreement dated February 16, 1996 between
Holdings and the stockholders (the "Sellers") of AMF Bowling
Group (the "Predecessor Company"). In accordance with this
agreement, Holdings acquired the Predecessor Company ("Holdings
Acquisition") on May 1, 1996 through a stock purchase by Hold-
ings' subsidiaries of all the outstanding stock of the separate
domestic and foreign corporations that constituted substan-
tially all of the Predecessor Company and through the purchase
of certain assets of the Predecessor Company's bowling center
operations in Spain and Switzerland. Holdings did not acquire
the assets of two bowling centers located in Madrid, Spain and
Geneva, Switzerland (both of which were retained by the Sell-
ers). Accordingly, as a result of the Holdings Acquisition,
the Company owned or operated 208 U.S. bowling centers and 78
international bowling centers as of September 30, 1996. As a
result of the BCA Acquisition, the Company owns or operates 258
U.S. bowling centers and 78 international bowling centers as of
October 10, 1996.
Holdings' pro forma statement of income for the nine
months ended September 30, 1996 is based on the Predecessor
Company's statement of income for the four month period ending
April 30, 1996 and Holdings' statement of income for the nine
month period ended September 30, 1996 and is adjusted as
described in Note 4 of this report. Holdings' pro forma
statement of income for the twelve months ended December 31,
-17-<PAGE>
1995 is based on the Predecessor Company's results of opera-
tions and adjustments giving effect to the Holdings Acquisition
under the purchase method of accounting as described in Note 4
of this report.
The consolidated pro forma income statement informa-
tion is based on the pro forma financial information of
Holdings (see Note 4) and the historical financial information
of BCA giving effect to the BCA Acquisition under the purchase
method of accounting.
The pro forma combined balance sheet as of September
30, 1996 presents the financial position of Holdings assuming
the BCA Acquisition had been completed as of that date. The
pro forma combined statements of income for the year ended
December 31, 1995 and for the nine months ended September 30,
1996 present the results of operations of the combined entities
assuming that the BCA Acquisition had been completed as of the
beginning of the respective periods.
The Pro Forma Consolidated Financial Statements
should be read in conjunction with Holdings' unaudited fi-
nancial statements for the nine months ended September 30,
1996, and the accompanying historical financial statements and
notes of BCA & Affiliates for the year ended August 31, 1996.
(2) CONSOLIDATED BALANCE SHEET PRO FORMA ADJUSTMENTS
The Pro Forma Consolidated Balance Sheet gives effect
to the adjustments described below:
(a) To adjust the carrying value of property, plant
and equipment to fair market value in accordance
with the purchase method of accounting.
(b) To eliminate BCA debt not acquired by Holdings.
(c) To record the $66.5 million portion of the pur-
chase price borrowed under the Company's exist-
ing Acquisition Facility.
(d) To eliminate the equity of BCA and record the
$40.0 million of equity funded by the Company's
institutional stockholders and one of its direc-
tors.
-18-<PAGE>
(3) CONSOLIDATED STATEMENTS OF INCOME PRO FORMA ADJUSTMENTS
The Pro Forma Consolidated Statements of Income give
effect to the adjustments described below:
(e) To reflect reductions in payroll, advertising,
and insurance that result from closing BCA head-
quarters and reducing regional staff positions.
(f) To reflect net reductions in corporate and re-
gional office expenses that result from closing
BCA headquarters and reducing regional staff
positions.
(g) To reflect depreciation for the related periods
including expenses associated with the change in
values for property, plant, and equipment as a
result of applying the purchase method of
accounting. The average useful lives used to
compute this adjustment are 39 years for build-
ings and 5 years for machinery and equipment.
(h) To record the interest cost related to the $66.5
million portion of the purchase price borrowed
under the Company's existing Acquisition Facil-
ity. The weighted average interest rate is 9.0%
for the year ended December 31, 1995 and the
nine months ended September 30, 1996, reflecting
the Company's borrowing rates during those
periods.
(i) To record the tax effect of the combined his-
torical BCA and pro forma adjustments at the
statutory rate of 41.0%.
-19-<PAGE>
(4) AMF GROUP HOLDINGS INC. STATEMENTS OF INCOME PRO
FORMA ADJUSTMENTS
The following Pro Forma Company Statement of Income
give effect to the adjustments described below each:
<TABLE>
<CAPTION>
AMF GROUP HOLDINGS INC.
PRO FORMA COMPANY STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(unaudited)
(in millions of dollars)
Historical Pro Forma
AMF Group Predecessor AMF Group
Holdings Inc. Company Holdings Inc.
Nine Months Four Months Pro Forma Nine Months
Ended 09/30/96* Ended 04/30/96 Adjustments Ended 09/30/96
(Note 1) (Note 1) (Note 4)
<S> <C> <C> <C> <C>
Operating revenues $ 205.2 $ 164.9 $ (0.8)(j) $ 369.3
----- ----- --- ------
Operating expenses:
Cost of goods sold 68.5 43.1 (0.1)(j) 111.5
Bowling center operating
expenses 69.4 80.2 (24.5)(j)(k) 125.1
Selling, general and
administrative expenses 19.4 35.5 (20.2)(j)(k) 34.7
Depreciation and
amortization 29.6 15.1 8.0(l) 52.7
----- ----- ---- -----
Total operating expenses 186.9 173.9 (36.8) 324.0
----- ----- ---- -----
Operating income (loss) 18.3 (9.0) 36.0 45.3
Nonoperating expenses:
Interest expense 50.1 4.5 23.9(m) 78.5
Other expenses, net 0.7 0.7 -- 1.4
Interest income (4.1) (0.6) -- (4.7)
Foreign currency
transaction loss 0.4 -- -- 0.4
---- ---- ---- ----
Income (loss) before
income taxes (28.8) (13.6) 12.1 (30.3)
Provision (benefit) for
income taxes (11.3) (1.7) 3.3(n) (9.7)
---- ---- --- ----
Net income (loss) $ (17.5) $ (11.9) $ 8.8 $ (20.6)
==== ==== === ====
* Includes the results of operations from May 1, 1996 (date of the
Acquisition) through September 30, 1996.
</TABLE>
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(j) To reflect the impact of Holdings not acquiring
the operations of one bowling center in Switzer-
land and one bowling center in Spain.
(k) The elimination of a one time charge of $44.0
million for special bonuses and payments made by
the Sellers in April, 1996.
(l) To reflect an increase in depreciation and amor-
tization expense resulting from the allocation
of the purchase price to fixed assets and good-
will and a change in the method of depreciation
of fixed assets. The Predecessor Company prin-
cipally used the double declining balance
method. The amount of the pro forma adjustment
for depreciation was determined using the
straight-line method over the estimated lives of
the assets acquired. Goodwill is being amor-
tized over 40 years.
(m) To reflect the incremental interest expense
associated with the issuance of debt which par-
tially funded the Holdings Acquisition.
(n) To give effect to the change in status of the
U.S. and international subsidiaries of Holdings
from S corporations to taxable corporations un-
der the Internal Revenue Code upon consummation
of the Holdings Acquisition.
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<TABLE>
<CAPTION>
AMF GROUP HOLDINGS INC.
PRO FORMA COMPANY STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(unaudited)
(in millions of dollars)
Historical Pro Forma
AMF AMF Group
Bowling Group Holdings Inc.
Twelve Months Pro Forma Twelve Months
Ended 12/31/95 Adjustments Ended 12/31/95
(Note 1) (Note 4)
<S> <C> <C> <C>
Operating revenues $ 564.9 $ (2.3)(o) $ 562.6
----- --- -----
Operating expenses:
Cost of goods sold 183.9 (0.3)(o) 183.6
Bowling center operating expenses 170.6 (1.5)(o) 169.1
Selling, general and
administrative expenses 46.9 (0.3)(p) 46.6
Depreciation and amortization 39.1 27.9(q) 67.0
----- ---- -----
Total operating expenses 440.5 25.8 466.3
----- ---- -----
Operating income (loss) 124.4 (28.1) 96.3
Nonoperating expenses:
Interest expense 13.5 88.6(r) 102.1
Other expenses, net 2.0 -- 2.0
Interest income -- -- --
Foreign currency transaction
loss -- -- --
----- ----- ---
Income (loss) before income taxes 108.9 (116.7) (7.8)
Pro Forma Provision (benefit)
for income taxes 40.6 (30.6)(s) 10.0
---- ---- ----
Net income (loss) $ 68.3 $ (86.1) $ (17.8)
==== ==== ====
</TABLE>
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(o) To reflect the net reduction in revenues and
expenses related to the following:
(i) Certain assets of the Predecessor Company
not purchased by Holdings.
(ii) Impact of Holdings not acquiring the op-
erations of one bowling center in Swit-
zerland and one bowling center in Spain.
(iii) Concurrent with the Holdings Acquisition,
amounts due from and payable to share-
holders and other related parties were
canceled.
(p) To reflect the reduction in management fees
charged to Holdings by an affiliate of the prior
owners of the Predecessor Company.
(q) To reflect an increase in depreciation and amor-
tization expense resulting from the allocation
of the purchase price to fixed assets and good-
will and a change in the method of depreciation
of fixed assets. The Predecessor Company prin-
cipally used the double declining balance
method. The amount of the pro forma adjustment
for depreciation was determined using the
straight-line method over the estimated lives of
the assets acquired. Goodwill is being amor-
tized over 40 years.
(r) To reflect the incremental interest expense as-
sociated with the issuance of debt which par-
tially funded the Holdings Acquisition.
(s) To reflect the tax provision associated with the
pro forma adjustments.
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Signatures
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
AMF GROUP INC.
(Registrant)
/s/ Stephen E. Hare
Stephen E. Hare
Executive Vice President,
Chief Financial Officer
(Duly Authorized Officer and
Chief Accounting Officer)
Date: December 20, 1996
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