Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-4877
AMF BOWLING WORLDWIDE, INC.
Supplement No. 1 to Prospectus dated November 7, 1997.
The date of this Supplement No. 1 is November 17, 1997.
On November 14, 1997, AMF Bowling Worldwide, Inc. file the attached Quarterly
Report on Form 10-Q.
<PAGE>
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 30, 1997
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 13-3873272
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)
--------------------
AMF GROUP INC.
(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last
Report)
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 .
----- ------
At November 1, 1997, 100 shares of common stock, par value $.01 per share, of
the Registrant were outstanding.
<PAGE>
<TABLE>
PART I
Item 1. Financial Statements
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
<S> <C>
September 30, December 31,
1997 1996
-------------------- --------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 31,937 $ 43,568
Accounts and notes receivable, net of allowance for
doubtful accounts of $4,376 and $4,492, respectively 81,419 42,625
Inventories 59,816 41,001
Deferred taxes and other 14,449 11,178
-------------------- --------------------
Total current assets 187,621 138,372
Property and equipment, net 797,654 630,796
Deferred financing costs, net 38,476 40,595
Goodwill, net 770,012 771,146
Other assets 25,485 12,964
==================== ====================
Total assets $ 1,819,248 $ 1,593,873
==================== ====================
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 36,625 $ 31,563
Accrued expenses 53,590 54,357
Income taxes payable 6,306 2,220
Note payable 47,500 -
Long-term debt, current portion 45,500 42,376
-------------------- --------------------
Total current liabilities 189,521 130,516
Long-term debt 1,207,978 1,048,877
Other long-term liabilities 4,312 1,851
Deferred income taxes 3,816 3,895
-------------------- --------------------
Total liabilities 1,405,627 1,185,139
-------------------- --------------------
Commitments and contingencies
Stockholder's equity:
Common stock (par value $.01 per share, 100 shares
issued and outstanding) - -
Paid-in capital 465,050 429,450
Retained deficit (42,026) (19,565)
Equity adjustment from foreign
currency translation (9,403) (1,151)
-------------------- --------------------
Total stockholder's equity 413,621 408,734
-------------------- --------------------
Total liabilities and stockholder's equity $ 1,819,248 $ 1,593,873
==================== ====================
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
2
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands)
<CAPTION>
Predecessor
AMF Group Holdings Inc. Company
----------------------------------------------------------- ---------------
Three Months Ended Nine Months Ended Four Months
September 30, September 30, Ended
----------------------------- -----------------------------
1997 1996 1997 1996 * April 30, 1996
---- ---- ---- ------ --------------
Operating revenue $ 187,526 $ 131,760 $ 505,594 $ 205,183 $ 164,944
-------------- -------------- ----------------------------- --------------
Operating expenses:
Cost of goods sold 64,396 44,998 150,480 68,511 43,118
Bowling center operating expenses 65,123 42,047 181,161 68,836 80,156
Selling, general, and administrative expenses 17,054 12,503 47,226 19,875 35,557
Depreciation and amortization 23,387 17,882 66,811 29,636 15,097
-------------- -------------- ----------------------------- --------------
Total operating expenses 169,960 117,430 445,678 186,858 173,928
-------------- -------------- ----------------------------- --------------
Operating income (loss) 17,566 14,330 59,916 18,325 (8,984)
Nonoperating expenses (income):
Interest expense 31,727 26,284 89,181 50,157 4,504
Other expenses, net 1,244 759 3,564 1,082 721
Interest income (401) (383) (1,456) (4,135) (611)
-------------- -------------- ----------------------------- --------------
Total nonoperating expenses 32,570 26,660 91,289 47,104 4,614
-------------- -------------- ----------------------------- --------------
Loss before income taxes (15,004) (12,330) (31,373) (28,779) (13,598)
Benefit for income taxes (4,721) (7,076) (8,912) (11,281) (1,731)
-------------- -------------- --------------- ----------- ---------------
Net loss $ (10,283) $ (5,254) $ (22,461) $ (17,498) $ (11,867)
============== ============== =============== =========== ===============
* For the period from the inception date of January 12, 1996 through
September 30, 1996 which includes results of operations of the acquired
business from May 1, 1996 through September 30, 1996.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<CAPTION>
Predecessor
Company
AMF Group Holdings Inc. Four Months
Nine Months Ended September 30, Ended
-------------------------------------
1997 1996 * April 30, 1996
---- ------ --------------
Cash flows from operating activities:
Net loss $ (22,461) $ (17,498) $ (11,867)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 66,811 29,636 15,097
Deferred income taxes (2,912) (5,527) 414
Amortization of bond discount 25,507 16,866 -
Loss (gain) on the sale of property and equipment, net 96 (25) -
Changes in assets and liabilities:
Accounts and notes receivable, net (35,326) (17,281) 6,319
Inventories (19,857) (2,488) (3,631)
Other assets (18,141) (51,905) (1,068)
Accounts payable and accrued expenses 4,992 8,133 8,713
Income taxes payable 4,253 1,754 (5,745)
Other long-term liabilities (1,506) 397 (1,605)
-------------- ---------------------- ---------------
Net cash provided by (used in) operating activities 1,456 (37,938) 6,627
-------------- ---------------------- ---------------
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired (192,395) (1,331,982) -
Purchases of property and equipment (42,589) (7,886) (6,874)
Proceeds from the sale of property and equipment 3,644 849 2,989
-------------- ---------------------- ---------------
Net cash used in investing activities (231,340) (1,339,019) (3,885)
-------------- ---------------------- ---------------
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs 210,000 1,034,930 -
Payment on long-term debt (25,782) (9,550) (3,812)
Payments on notes payable - stockholders, net - - 24,668
Capital contributions 35,600 380,250 24,805
Dividend to Parent (500) - -
Distributions to stockholders - - (36,721)
Noncompete obligations (478) (575) (36)
-------------- ---------------------- ---------------
Net cash provided by financing activities 218,840 1,405,055 8,904
-------------- ---------------------- ---------------
Effect of exchange rates on cash (587) (854) 535
-------------- ---------------------- ---------------
Net (decrease) increase in cash (11,631) 27,244 12,181
Cash and cash equivalents at beginning of period 43,568 - 9,732
-------------- ---------------------- ---------------
Cash and cash equivalents at end of period $ 31,937 $ 27,244 $ 21,913
============== ====================== ===============
</TABLE>
* For the period from the inception date of January 12, 1996 through
September 30, 1996 which includes cash flows of the acquired business
from May 1, 1996 through September 30, 1996.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization
The accompanying unaudited condensed consolidated financial statements reflect
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the results of
operations and financial position for the interim periods. The interim financial
information and notes thereto should be read in conjunction with the April 30,
1996, and December 31, 1995 audited combined financial statements of AMF Bowling
Group (the "Predecessor Company") and the December 31, 1996 audited consolidated
financial statements of AMF Group Holdings Inc. and subsidiaries ("Holdings")
presented in the Form 10-K Annual Report of AMF Bowling Worldwide, Inc.
(formerly AMF Group Inc.) filed with the U.S. Securities and Exchange Commission
on March 28, 1997. The results of operations for the three months and nine
months ended September 30, 1997, respectively, are not necessarily indicative of
results to be expected for the entire year.
AMF Bowling Worldwide, Inc. (the "Company") changed its name from AMF Group Inc.
in October 1997. The Company is principally engaged in two business segments:
(i) the ownership and operation of bowling centers, consisting of 352 U.S.
bowling centers and 87 international bowling centers ("Bowling Centers") as of
September 30, 1997, and (ii) the manufacture and distribution of bowling
equipment such as automatic pinspotters, automatic scoring equipment, bowling
pins, lanes, ball returns, certain spare and replacement parts, and the resale
of allied products such as bowling balls, bags, shoes, and certain other spare
and replacement parts ("Bowling Products"). The principal markets for bowling
equipment are U.S. and international bowling center operators.
The Company is a wholly owned subsidiary of Holdings. Holdings is a wholly owned
subsidiary of AMF Bowling, Inc. (the "Parent") which changed its name from AMF
Holdings Inc. in August 1997. Holdings and the Company are Delaware corporations
organized by GS Capital Partners II, L.P., and certain other investment funds
(collectively, "GSCP") affiliated with Goldman, Sachs & Co. ("Goldman Sachs") to
effect the Acquisition (defined below). Holdings and the Parent are holding
companies only. The primary assets in each are comprised of investments in
direct and/or indirect subsidiaries.
Pursuant to a Stock Purchase Agreement dated February 16, 1996, between Holdings
and the stockholders (the "Sellers") of the Predecessor Company, on May 1, 1996
(the "Closing Date"), Holdings acquired the Predecessor Company through a stock
purchase by Holdings' subsidiaries of all the outstanding stock of the separate
domestic and foreign corporations that constituted substantially all of the
Predecessor Company and through the purchase of certain of the assets of the
Predecessor Company's bowling center operations in Spain and Switzerland (the
"Acquisition"). Holdings did not acquire the assets of two bowling centers
located in Madrid, Spain and Geneva, Switzerland (both of which were retained by
the Sellers).
The purchase price for the Acquisition was approximately $1.37 billion, less
approximately $2.0 million representing debt of the Predecessor Company which
remained in place following the closing of the Acquisition. The Acquisition was
accounted for by the purchase method of accounting, pursuant to which the
purchase price was allocated among the acquired assets and liabilities in
accordance with estimates of fair market value on the date of acquisition.
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Significant Accounting Policies
Basis of Presentation
The condensed consolidated results of operations of Holdings have been presented
for the three months and nine months ended September 30, 1997, respectively, the
three months ended September 30, 1996, and the period from the inception date of
January 12, 1996 through September 30, 1996. Additionally, the combined results
of operations of the Predecessor Company for the four months ended April 30,
1996, have been presented. All significant intercompany balances and
transactions have been eliminated in the accompanying condensed consolidated
financial statements. All dollar amounts are in thousands, except where
otherwise indicated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
estimates made by management include allowances for obsolete inventory and
uncollectible accounts receivable, realization of goodwill and other deferred
assets, litigation and claims, product warranty costs, and self-insurance costs.
Actual results could differ from those estimates.
Goodwill
As a result of the Acquisition and subsequent purchases of bowling centers
discussed in "Note 10. Acquisitions", and in accordance with the purchase method
of accounting for the Acquisition, Holdings recorded goodwill representing the
excess of the purchase price over the allocation among the acquired assets and
liabilities in accordance with estimates of fair market value on the dates of
acquisition. Goodwill is being amortized over 40 years. Amortization expense was
$4,958 and $14,818 for the three months and nine months ended September 30,
1997, and $4,944 and $8,197 for the three months and period ended September 30,
1996, respectively. Accumulated amortization at September 30, 1997 was $27,888.
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Pro Forma Results of Operations (unaudited) (in millions)
Pro forma statements of income for Holdings are presented on the following pages
for the nine months ended September 30, 1996, as if the acquisition of the
Predecessor Company had occurred on January 1, 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 months ended April
30, 1996, Holdings' statement of income for the period from the inception date
of January 12, 1996 through September 30, 1996 and adjustments giving effect to
the Acquisition under the purchase method of accounting as described in the
notes below. The pro forma results are for illustrative purposes only and do not
purport to be indicative of the actual results which occurred, nor are they
indicative of future results of operations.
<TABLE>
<CAPTION>
<S> <C>
Pro Forma
Predecessor AMF Group
AMF Group Company Holdings Inc.
Holdings Inc. Four Months Nine Months
Period Ended Ended Pro Forma Ended
September 30, 1996 (a) April 30, 1996 Adjustments September 30, 1996
---------------------- -------------- ----------- ------------------
Operating revenue: $ 205.2 $ 164.9 $ (0.8)(b) $ 369.3
----------------------- -------------------- --------------- -------------------
Operating expenses:
Cost of goods sold 68.6 43.1 (0.2)(b) 111.5
Bowling center operating expenses 68.8 80.2 (24.4)(b)(c) 124.6
Selling, general, and administrative expenses 19.9 35.5 (20.2)(b)(c) 35.2
Depreciation and amortization 29.6 15.1 8.0 (d) 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(e) 78.5
Other expenses, net 1.1 0.7 - 1.8
Interest income (4.1) (0.6) - (4.7)
----------------------- -------------------- --------------- -------------------
Income (loss) before income taxes (28.8) (13.6) 12.1 (30.3)
Provision (benefit) for income taxes (11.3) (1.7) 1.5(f) (11.5)
----------------------- -------------------- --------------- -------------------
Net income (loss) $ (17.5) $ (11.9) $ 10.6 $ (18.8)
======================= ==================== =============== ===================
</TABLE>
(a) For the period from the inception date of January 12, 1996 through
September 30, 1996, which includes the results of operations of the
acquired business from May 1, 1996 through September 30, 1996.
(b) To reflect the impact of Holdings not acquiring the operations of one
bowling center in Switzerland and one bowling center in Spain.
(c) To eliminate a one-time charge of $44.0 million for special bonuses and
payments made by the Sellers in April 1996.
(d) To reflect the increase in depreciation and amortization expense from the
allocation of the purchase price to fixed assets and goodwill and a change
in the method of depreciation of fixed assets. The Predecessor Company
principally 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
amortized over 40 years.
(e) To reflect the incremental interest expense associated with the issuance of
debt which partially funded the Acquisition.
(f) To give effect to the change in status of the U.S. and international
subsidiaries of Holdings from S corporations to taxable corporations under
the Internal Revenue Code upon consummation of the Acquisition.
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Inventories
Inventories at September 30, 1997, and December 31, 1996 consist of the
following:
September 30, December 31,
1997 1996
----------------- ---------------
(unaudited)
Bowling Products, at FIFO:
Raw materials $ 14,986 $ 11,683
Work in progress 3,111 2,335
Finished goods and spare parts 36,551 23,195
Bowling Centers, at average cost:
Merchandise inventory 5,168 3,788
----------------- ---------------
$ 59,816 $ 41,001
================= ===============
Note 5. Property and Equipment
Property and equipment at September 30, 1997, and December 31, 1996, consists of
the following:
September 30, December 31,
1997 1996
--------------- --------------
(unaudited)
Land $ 111,400 $ 90,512
Buildings and improvements 330,074 265,461
Equipment, furniture, and fixtures 426,376 304,067
Other 8,495 2,631
---------------- -------------
876,345 662,671
Less: accumulated depreciation and amortization (78,691) (31,875)
---------------- -------------
$ 797,654 $ 630,796
================ =============
Depreciation and amortization expense related to property and equipment was
$46,816 and $19,309 for the nine months ended September 30, 1997 and 1996,
respectively.
Note 6. Long-Term Debt
Long-term debt at September 30, 1997, and December 31, 1996 consists of the
following:
September 30, December 31,
1997 1996
--------------- ----------------
(unaudited)
Bank debt $ 748,843 $ 564,625
Exchange senior subordinated notes 250,000 250,000
Exchange senior subordinated discount notes 300,168 274,663
Mortgage and equipment notes 1,967 1,965
--------------- ----------------
Total debt 1,300,978 1,091,253
Current maturities (93,000) (42,376)
--------------- ----------------
Total long-term debt $ 1,207,978 $ 1,048,877
=============== ================
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In connection with the Offering (as hereinafter defined) discussed in "Note 7.
Stockholder's Equity", the credit agreement which underlies the bank debt (the
"Credit Agreement") was amended and restated, effective November 7, 1997, to
increase the flexibility and borrowing capacity of the Company's ongoing
acquisition program. The amendment and restatement, among other things, (i)
converted the Acquisition Facilities and a portion of the Term Facilities under
the Credit Agreement into a non-amortizing Working Capital Facility and
increased the aggregate size of the resulting facility to $355.0 million, (ii)
extended the final maturity of the Working Capital Facility and certain of the
Term Facilities, (iii) reduced the interest rates under the Credit Agreement,
(iv) amended certain covenants contained in the Credit Agreement to provide the
Company and its subsidiaries with additional operating flexibility and (v)
permitted a portion of the proceeds of the Offering to be applied to repayment
of the exchange senior subordinated discount notes ("Senior Subordinated
Discount Notes") and/or exchange senior subordinated notes (the "Senior
Subordinated Notes" and, together with the Senior Subordinated Discount Notes,
the "Notes").
The Company will incur after-tax extraordinary charges totaling $22.7 million in
the fourth quarter of 1997 arising from the amendment and restatement of the
Credit Agreement and the resulting write-off of costs previously incurred to
obtain bank financing for the Acquisition, the premium associated with the
portion of the Senior Subordinated Discount Notes expected to be redeemed with
the proceeds of the Offering and the write-off of the portion of deferred
financing costs attributable to the Discount Notes expected to be so redeemed.
See "Note 7. Stockholder's Equity".
Deferred Financing Costs
Costs incurred to obtain bank financing and issue bond financing for the
Acquisition are amortized over the lives of the various types of debt. Bank
financing costs are amortized over eight years and bond financing costs are
amortized over ten years using the effective interest rate method. An interest
rate cap agreement included in deferred financing costs is amortized over the
term of the agreement beginning November 1, 1996, and ending October 31, 1998.
Amortization expense for financing costs was $1,222 and $3,752 for the three
months and nine months ended September 30, 1997, and $1,126 and $2,078 for the
three months and period ended September 30, 1996, respectively. Interest expense
for the interest rate cap agreement was $455 and $1,366 for the three months and
nine months ended September 30, 1997, respectively.
In July 1997, the Company entered into an interest rate cap agreement to reduce
the interest rate risk of its Senior Debt. The notional amount of this cap is
$100.0 million. Under the terms of this agreement, the Company receives payment
if the three-month LIBOR rises above 7.00 percent through March 31, 1998.
Note 7. Stockholder's Equity
In September 1997, the Parent's institutional stockholders purchased an
aggregate of 1,780,000 shares of its common stock for $20.00 per share. The
aggregate proceeds of $35.6 million were used in part to fund acquisitions and
for other corporate purposes.
On August 21, 1997, the Parent filed a registration statement with the
Securities and Exchange Commission for an initial public offering (the
"Offering") of common stock. On November 7, 1997, the Parent issued 15,525,000
shares of its common stock at $19.50 per share pursuant to the Offering. The net
proceeds of the Offering, estimated to be approximately $281.4 million after
deducting the underwriting discount and expenses payable by the Parent, will be
used to repay indebtedness under the Credit Agreement of the Company and,
subject to market conditions, may also be used to redeem a portion of the Notes
of the Company.
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8. Commitments and Contingencies
Litigation and Claims
The Company is involved in certain lawsuits arising out of normal business
operations. The majority of these relate to accidents at bowling centers.
Management believes that the ultimate resolution of such matters will not have a
material adverse effect on Holdings' results of operations or financial
position. While the ultimate outcome of the litigation and claims against the
Company cannot presently be determined, management believes the Company has made
adequate provision for possible losses.
Note 9. Employee Benefit Plans
The total number of options to purchase shares of Parent common stock ("Stock
Options") currently reserved and available for grant under the 1996 Stock
Incentive Plan (the "Stock Incentive Plan") is 1,767,151. The number of Stock
Options outstanding to senior management, other employees, and directors at
September 30, 1997, after giving effect to forfeited Stock Options, total
1,668,000 at an exercise price of $10.00 per share. In addition to Stock Options
outstanding under the Stock Incentive Plan, 130,000 Stock Options granted to
Douglas J. Stanard on May 1, 1996 were outstanding at September 30, 1997.
Note 10. Acquisitions
Between January 1, 1997 and September 30, 1997, the Company purchased an
aggregate of 94 centers in the United States, seven centers in the United
Kingdom, two centers in Australia, and certain related assets and liabilities
from several unrelated sellers. The total purchase price was approximately
$192.4 million, including certain adjustments and transaction costs, and was
funded with $162.5 million from available borrowings under the Credit Agreement
and the remainder from internally generated cash. As a result of the
acquisitions, and after giving effect to the closing of six centers in 1997, the
Company operated 352 U.S. centers and 87 international centers as of September
30, 1997.
Commencing October 31, 1997, the Company is leasing and operating a chain of
eight bowling centers (the "Pin Boys Centers") for a period ending January 6,
1998, at which time the Company will purchase the personal property of the eight
centers and real estate relating to six of such centers for approximately $18.8
million. The Company will continue to lease and operate the two centers with
respect to which real property is not acquired.
The Company has signed letters of intent and/or entered into purchase agreements
regarding the acquisition of eighteen additional U.S. centers, including the Pin
Boys Centers, from several unrelated sellers. The aggregate purchase price is
expected to be approximately $38.5 million and is expected to be funded with
available borrowings under the Working Capital Facility under the amended and
restated Credit Agreement, and with internally generated cash.
In August 1997, the Company entered into a joint venture arrangement with
Playcenter S.A., a Sao Paulo, Brazil-based amusement and entertainment company
("Playcenter"). Pursuant to the arrangement, the joint venture, owned 50% by the
Company and 50% by Playcenter, is expected to build or assume ownership of, and
operate, up to 39 bowling centers, in Brazil and Argentina during the next four
years. The Company will be the exclusive equipment supplier to the joint venture
and expects its total investment in the joint venture to be approximately $14
million.
On October 20, 1997, AMF Bowling Centers, Inc. acquired Michael Jordan Golf
Company, Inc., a company formed to build and operate golf practice ranges in
select U.S. locations. In addition, Michael Jordan agreed to become a
spokesperson for and endorser of AMF bowling centers and bowling products under
a personal services contract which grants the Company rights to use Mr. Jordan's
image and name in advertising and marketing campaigns.
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11. Business Segments
The Company operates in two major lines of business: operating bowling centers
and manufacturing of bowling and related products. Information concerning
operations in these businesses for the three months ended September 30, 1997 and
1996, respectively, is presented below (in millions):
<TABLE>
<CAPTION>
<S> <C>
AMF Group Holdings Inc.
----------------------------------------------------------------------------------------------
Three Months Ended September 30, 1997
Bowling Centers Bowling Products
------------------------------- ----------------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 69.4 $ 27.4 $ 96.8 $ 34.4 $ 56.3 $ 90.7 $ - $ - $ 187.5
Intersegment sales - - - 1.8 1.7 3.5 - - 3.5
Operating income (loss) (1.3) 3.3 2.0 13.8 5.3 19.1 (3.6) - 17.5
Depreciation and amortization 14.2 4.8 19.0 4.5 0.2 4.7 - (0.3) 23.4
Capital expenditures 11.9 1.7 13.6 2.2 (0.4) 1.8 1.8 (0.2) 17.0
Research and development expense - - - 0.3 - 0.3 - - 0.3
AMF Group Holdings Inc.
----------------------------------------------------------------------------------------------
Three Months Ended September 30, 1996
Bowling Centers Bowling Products
------------------------------- ----------------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 39.4 $ 26.0 $ 65.4 $ 31.2 $ 35.2 $ 66.4 $ - $ - $ 131.8
Intersegment sales - - - 1.0 1.4 2.4 - - 2.4
Operating income (loss) (1.3) 3.1 1.8 11.7 2.7 14.4 (2.1) 0.2 14.3
Depreciation and amortization 8.9 4.7 13.6 4.5 0.2 4.7 - (0.4) 17.9
Capital expenditures 2.6 1.5 4.1 0.2 0.4 0.6 0.1 (0.2) 4.6
Research and development expense - - - 1.1 - 1.1 - - 1.1
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Information concerning operation of bowling centers and manufacturing of bowling
and related products for the nine months ended September 30, 1997 and the period
ended September 30, 1996, respectively, is presented below (in millions):
<CAPTION>
AMF Group Holdings Inc.
---------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1997
Bowling Centers Bowling Products
------------------------------- ----------------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 218.1 $ 79.8 $ 297.9 $ 82.1 $ 125.6 $ 207.7 $ - $ - $ 505.6
Intersegment sales - - - 7.1 4.1 11.2 - - 11.2
Operating income (loss) 21.5 9.2 30.7 29.9 10.6 40.5 (12.0) 0.7 59.9
Identifiable assets 795.0 307.0 1,102.0 646.2 52.8 699.0 17.4 0.8 1,819.2
Depreciation and amortization 39.3 14.0 53.3 13.8 0.8 14.6 - (1.1) 66.8
Capital expenditures 30.9 4.7 35.6 4.1 - 4.1 3.3 (0.4) 42.6
Research and development expense - - - 1.0 - 1.0 - - 1.0
AMF Group Holdings Inc.
---------------------------------------------------------------------------------------------
Period Ended September 30, 1996
Bowling Centers Bowling Products
------------------------------- ----------------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 62.8 $ 42.2 $ 105.0 $ 46.8 $ 53.4 $ 100.2 $ - $ - $ 205.2
Intersegment sales - - - 1.7 2.7 4.4 - - 4.4
Operating income (loss) (4.5) 5.4 0.9 17.3 3.9 21.2 (3.8) - 18.3
Depreciation and amortization 15.0 7.3 22.3 7.6 0.3 7.9 - (0.6) 29.6
Capital expenditures 4.1 3.2 7.3 0.4 0.6 1.0 0.1 (0.5) 7.9
Research and development expense - - - 2.2 - 2.2 - - 2.2
Predecessor Company
---------------------------------------------------------------------------------------------
Four Months Ended April 30, 1996
Bowling Centers Bowling Products
------------------------------- ----------------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 75.0 $ 33.5 $ 108.5 $ 27.7 $ 28.7 $ 56.4 $ - $ - $ 164.9
Intersegment sales - - - 3.4 1.2 4.6 - - 4.6
Operating income (loss) 4.8 (2.5) 2.3 (5.3) (3.1) (8.4) (2.4) (0.5) (9.0)
Depreciation and amortization 11.8 2.5 14.3 1.0 0.2 1.2 - (0.4) 15.1
Capital expenditures 5.1 2.3 7.4 0.4 - 0.4 - (0.9) 6.9
Research and development expense - - - 0.8 - 0.8 - - 0.8
</TABLE>
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 12. Recent Accounting Pronouncements
Effective for the fiscal year ended December 31, 1997, Holdings is required to
adopt Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" and SFAS No. 129 "Disclosure of Information About Capital Structure."
Effective for the fiscal year ended December 31, 1998, Holdings is required to
adopt SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information." Holdings
does not expect that adoption of these standards will have a material impact on
Holdings' financial position or results of operations. The adoption of SFAS No.
130 by Holdings will require reporting comprehensive income, which includes the
foreign currency translation adjustment, in an alternative format prescribed by
the standard.
Note 13. Consolidating Financial Statements
The following consolidating financial information presents:
o Consolidating balance sheet as of September 30, 1997, and
consolidating statements of income and cash flows for the nine
months ended September 30, 1997.
o Elimination entries necessary to combine the entities comprising
Holdings.
The Exchange Notes are jointly and severally guaranteed on a full and
unconditional basis by Holdings and by the first- and second-tier subsidiaries
of the Company. Third-tier subsidiaries of the Company have not provided
guarantees.
<PAGE>
<TABLE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
As of September 30, 1997
(unaudited)
(in thousands)
<CAPTION>
<S> <C>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
--------- --------- ------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 30,439 $ 1,498 $ - $ 31,937
Accounts and notes receivable, net
of allowance for doubtful accounts 79,918 1,501 - 81,419
Accounts receivable - intercompany 3,748 4,854 (8,602) -
Inventories 57,454 2,362 - 59,816
Deferred taxes and other 12,281 2,168 - 14,449
------------------ ----------------- ------------------ -------------------
Total current assets 183,840 12,383 (8,602) 187,621
Notes receivable - intercompany 14,673 10,663 (25,336) -
Property and equipment, net 758,779 37,905 970 797,654
Investment in subsidiaries 23,200 - (23,200) -
Goodwill and other assets 827,694 6,279 - 833,973
----------------- ----------------- ------------------ -------------------
Total assets $ 1,808,186 $ 67,230 $ (56,168) $ 1,819,248
================== ================= ================== ===================
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 33,604 $ 3,021 $ - $ 36,625
Accounts payable - intercompany 862 7,740 (8,602) -
Accrued expenses 48,596 4,994 - 53,590
Income taxes payable 4,298 2,008 - 6,306
Note payable 47,500 - - 47,500
Long-term debt, current portion 45,500 - - 45,500
------------------ ----------------- ------------------ -------------------
Total current liabilities 180,360 17,763 (8,602) 189,521
Long-term debt 1,207,978 - - 1,207,978
Notes payable - intercompany - 25,336 (25,336) -
Other long-term liabilities 4,312 - - 4,312
Deferred income taxes 2,796 1,020 - 3,816
------------------ ----------------- ------------------ -------------------
Total liabilities 1,395,446 44,119 (33,938) 1,405,627
------------------ ----------------- ------------------ -------------------
Commitments and contingencies
Stockholder's equity:
Common stock - 4,028 (4,028) -
Paid-in capital 463,132 24,522 (22,604) 465,050
Retained earnings (deficit) (40,937) 2,631 (3,720) (42,026)
Equity adjustment from foreign
currency translation (9,455) (8,070) 8,122 (9,403)
------------------ ----------------- ------------------ -------------------
Total stockholder's equity 412,740 23,111 (22,230) 413,621
------------------ ----------------- ------------------ -------------------
Total liabilities and stockholder's equity $ 1,808,186 $ 67,230 $ (56,168) $ 1,819,248
================== ================= ================== ===================
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
For the Nine Months Ended September 30, 1997
(unaudited)
(in thousands)
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
------------ ------------- --------------- ---------------
Operating revenue $ 476,602 $ 30,523 $ (1,531) $ 505,594
------------- ------------- --------------- ---------------
Operating expenses:
Cost of goods sold 147,291 4,213 (1,024) 150,480
Bowling center operating expenses 165,009 16,518 (366) 181,161
Selling, general, and administrative expenses 44,957 2,269 - 47,226
Depreciation and amortization 62,428 4,543 (160) 66,811
------------- ------------- --------------- ---------------
Total operating expenses 419,685 27,543 (1,550) 445,678
------------- ------------- --------------- ---------------
Operating income 56,917 2,980 19 59,916
Nonoperating expenses (income):
Interest expense 88,714 467 - 89,181
Other expense, net 703 1,534 1,327 3,564
Interest income (1,316) (140) - (1,456)
Equity in earnings of subsidiaries 784 - (784) -
------------- ------------- --------------- ---------------
Total nonoperating expenses 88,885 1,861 543 91,289
------------- ------------- --------------- ---------------
Income (loss) before income taxes (31,968) 1,119 (524) (31,373)
Provision (benefit) for income taxes (10,815) 1,903 - (8,912)
------------- ------------- --------------- ---------------
Net loss $ (21,153) $ (784) $ (524) $ (22,461)
============= ============= =============== ===============
<PAGE>
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
AMF GROUP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1997
(unaudited)
(in thousands)
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
--------- --------- ------------ ------------
Cash flows from operating activities:
Net loss $ (21,153) $ (784) $ (524) $ (22,461)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 62,461 4,543 (193) 66,811
Deferred income taxes (2,912) - - (2,912)
Amortization of bond discount 25,507 - - 25,507
Equity in earnings of subsidiaries (784) - 784 -
Loss on the sale of property and equipment, net 96 - - 96
Changes in assets and liabilities:
Accounts and notes receivable (35,108) (218) - (35,326)
Receivables and payables - affiliates (14,422) 14,422 - -
Inventories (19,326) (531) - (19,857)
Other assets (15,632) (1,003) (1,506) (18,141)
Accounts payable and accrued expenses 3,484 1,508 - 4,992
Income taxes payable 3,127 1,126 - 4,253
Other long-term liabilities (1,506) - - (1,506)
---------------- -------------- ----------------- --------------
Net cash provided by (used in) operating activities (16,168) 19,063 (1,439) 1,456
---------------- -------------- ----------------- --------------
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired (175,674) (16,721) - (192,395)
Purchases of property and equipment (40,564) (2,137) 112 (42,589)
Proceeds from sale of property and equipment 3,644 - - 3,644
---------------- -------------- ----------------- --------------
Net cash provided by (used in) investing activities (212,594) (18,858) 112 (231,340)
---------------- -------------- ----------------- --------------
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs 210,000 - 210,000
Payment on long-term debt (25,782) - - (25,782)
Capital Contribution 35,512 88 - 35,600
Dividend to Parent (500) (1,327) 1,327 (500)
Noncompete obligations (478) - - (478)
---------------- -------------- ----------------- --------------
Net cash provided by financing activities 218,752 (1,239) 1,327 218,840
---------------- -------------- ----------------- --------------
Effect of exchange rates on cash 772 (1,359) - (587)
---------------- -------------- ----------------- --------------
Net decrease in cash (9,238) (2,393) - (11,631)
Cash and cash equivalents at beginning of period 39,677 3,891 - 43,568
---------------- -------------- ----------------- --------------
Cash and cash equivalents at end of period $ 30,439 $ 1,498 $ - $ 31,937
================ ============== ================= ==============
</TABLE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Information in this report contains certain forward-looking statements, which
are statements other than historical information or statements of current
condition. Some forward-looking statements may be identified by use of terms
such as "believes", "anticipates", "intends", or "expects". The forward-looking
statements contained in this report are generally located in the material set
forth under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Legal Proceedings". These
forward-looking statements relate to the plans and objectives of the Company for
future operations. In light of the risks and uncertainties inherent in all
future projections, the inclusion of forward-looking statements in this report
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will actually be achieved. Many
factors could cause the Company's actual results to differ materially from those
in the forward-looking statements, including, among other things: (i) the
Company's ability to identify and successfully execute acquisition opportunities
and to integrate acquired operations into its business, (ii) the continued
development and growth of new bowling markets and the Company's ability to
continue to identify those markets and to generate sales of products in those
markets before market saturation, (iii) the risk of adverse political acts or
developments in the Company's existing or proposed markets for its products or
in which it operates its bowling centers, (iv) the Company's ability to retain
experienced senior management, (v) the ability of the Company and its
subsidiaries to generate sufficient cash flow in a timely manner to satisfy
principal and interest payments on their indebtedness, and (vi) the popularity
of bowling as an activity in the United States and abroad. In addition, actual
results may also differ materially from forward-looking statements in this
report as a result of factors generally applicable to companies in similar
businesses, among other things: (i) a decline in general economic conditions,
(ii) an adverse judgment in pending or future litigation, and (iii) increased
competitive pressure from current competitors and future market entrants. The
foregoing review of important factors should not be construed as exhaustive and
should be read in conjunction with other cautionary statements that are included
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 the date hereof or to reflect the
occurrence of unanticipated events.
Background
This discussion should be read in conjunction with the "Selected Financial Data"
and the Condensed Consolidated Financial Statements (unaudited) and Notes
thereto included elsewhere within this report.
Management believes that a comparison of the results of operations for the nine
months ended September 30, 1997 and 1996, on a pro forma basis, is more
meaningful than a comparison on an historical basis. This is due primarily to
significant changes in depreciation and amortization that result from the
application of the purchase method of accounting for the Acquisition, and from
the increased interest expense due to the debt incurred related to the
Acquisition. Accordingly, the following discussion of the results of operations
includes comparisons of the three and nine months ended September 30, 1997, on
an historical basis, with actual results for the three months ended September
30, 1996, and pro forma results for the nine months ended September 30, 1996.
See "Note 3. Pro Forma Results of Operations" in the Notes to the Condensed
Consolidated Financial Statements.
The financial information presented below includes the Company's operating
results expressed in terms of EBITDA, which represents earnings before net
interest expense, income taxes, depreciation and amortization, and other net
income or net expenses. EBITDA margin represents EBITDA as a percentage of
revenue. EBITDA information is included because the Company understands that
such information is used by certain investors as one measure of an issuer's
historical ability to service debt. EBITDA is not intended to represent and
should not be considered more meaningful than, or an alternative to, other
measures of performance determined in accordance with generally accepted
accounting principles.
General
The Company is principally engaged in two business segments: (i) the ownership
or operation of 352 U.S. centers and 87 international centers ("Bowling
Centers") as of September 30, 1997; and (ii) the design, manufacture and sale of
<PAGE>
bowling center equipment, including automatic pinspotters, automatic scoring
equipment, bowling pins, lanes, ball returns, and certain spare and replacement
parts, and the resale of allied products such as bowling balls, bags, shoes, and
certain other spare and replacement parts ("Bowling Products").
To facilitate a meaningful comparison, in addition to discussing the
consolidated results of Holdings, certain portions of this Management's
Discussion and Analysis of Financial Condition and Results of Operations discuss
certain results of Bowling Centers and Bowling Products separately.
The results of Bowling Centers, Bowling Products and the consolidated group are
set forth below. The two European centers that were not acquired by the Company
as part of the Acquisition, as discussed in "Note 1. Organization" in the Notes
to the Condensed Consolidated Financial Statements, are included in the 1996
actual Predecessor Company results and excluded from 1996 pro forma results. The
two centers have no material impact on Holdings' financial statements or on the
information presented in this section.
The business segment results presented below are before intersegment
eliminations, since the Company's management believes that this will provide a
more accurate comparison of performance by segment from year to year. The
intersegment eliminations are not material. Interest expense is presented on a
gross basis.
Recent Acquisitions
The Company is prepared to acquire or build additional centers as appropriate
opportunities arise. The Company is engaged in ongoing evaluations of and
discussions with third parties regarding possible acquisitions. Management's
plans to expand the bowling center operations are subject to the continuation of
favorable economic and financial conditions, which are generally not within the
Company's control.
Between January 1, 1997 and September 30, 1997, the Company acquired an
aggregate of 94 centers in the United States, seven centers in the United
Kingdom, and two centers in Australia from several unrelated sellers. In August
1997, the Company entered into a joint venture arrangement with Playcenter,
S.A., a Sao Paulo, Brazil-based based amusement and entertainment company. In
October 1997, AMF Bowling Centers, Inc. acquired Michael Jordan Golf Company,
Inc. In addition, Michael Jordan agreed to become a spokesperson for and
endorser of AMF bowling centers and bowling products under a personal services
contract which grants the Company rights to use Mr. Jordan's image and name in
advertising and marketing campaigns. See "Note 10. Acquisitions" in the Notes to
Condensed Consolidated Financial Statements for a discussion of these
transactions.
<PAGE>
AMF GROUP HOLDINGS INC.
Selected Financial Data
(unaudited)
(in millions of dollars)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------------- -----------------------------
AMF Group Holdings Inc. AMF Group Holdings Inc.
--------------------------------- -----------------------------
Pro Forma
---------------
1997 1996 1997 1996
---- ----- ---- ----
<S> <C>
Bowling Centers (before intersegment eliminations)
Operating revenue $ 96.8 $ 65.4 $ 297.9 $ 212.6
------ ------ ------ ------
Cost of goods sold 8.9 5.7 27.2 18.3
Bowling center operating expenses 65.5 42.6 182.1 125.9
Selling, general, and administrative expenses 1.4 1.7 4.6 4.7
Depreciation and amortization 19.0 13.6 53.3 38.9
------ ------ ------ ------
Operating income $ 2.0 $ 1.8 $ 30.7 $ 24.8
====== ====== ====== ======
Bowling Products (before intersegment eliminations)
Operating revenue $ 94.2 $ 68.8 $ 218.9 $ 165.6
Cost of goods sold 58.4 41.1 133.1 99.3
------ ------ ------ ------
Gross profit 35.8 27.7 85.8 66.3
Selling, general, and administrative expenses 12.0 8.6 30.7 24.3
Depreciation and amortization 4.7 4.7 14.6 13.9
------ ------ ------ ------
Operating income $ 19.1 $ 14.4 $ 40.5 $ 28.1
====== ====== ====== ======
Consolidated
Operating revenue $ 187.5 $ 131.8 $ 505.6 $ 369.3
------ ------ ------ ------
Cost of goods sold 64.4 45.0 150.5 111.5
Bowling center operating expenses 65.1 42.1 181.2 124.6
Selling, general, and administrative expenses 17.1 12.5 47.2 35.2
Depreciation and amortization 23.4 17.9 66.8 52.7
------ ------ ------ ------
Operating income 17.5 14.3 59.9 45.3
Interest expense, gross 31.7 26.3 89.2 78.5
Other (income) expense, net 0.8 0.4 2.1 (2.9)
------ ------ ------ ------
Loss before income taxes (15.0) (12.4) (31.4) (30.3)
Provision for income taxes (4.7) (7.1) (8.9) (11.5)
------- ------- ------- -------
Net loss $ (10.3) $ (5.3) $ (22.5) $ (18.8)
====== ====== ====== ======
Selected Data:
EBITDA
Bowling Centers $ 21.0 $ 15.4 $ 84.0 $ 63.7
Bowling Products $ 23.8 $ 19.1 $ 55.1 $ 42.0
EBITDA margin
Bowling Centers 21.7% 23.5% 28.2% 30.0%
Bowling Products 25.3% 27.8% 25.2% 25.4%
</TABLE>
<PAGE>
Bowling Centers
Quarter Ended September 30, 1997 Compared to Quarter Ended September 30, 1996
Bowling Centers operating revenue increased $31.4 million, or 48.0%. An increase
of $33.2 million was attributable to new centers, of which $30.5 million was
from U.S. centers, and $2.7 million was from international centers. Constant
centers (defined as centers in operation for at least one full fiscal year)
operating revenue decreased $1.0 million, or 1.5%, primarily as a result of
lower lineage (defined as games per lane per day) and average price per game in
both U.S. and international centers. Hot, dry weather in the U.S., the U.K., and
Southern Europe, along with Japan's stagnant economy, has affected constant
center lineage. Pricing specials intended to overcome weather-impacted traffic
in the centers resulted in lower average price per game. An offsetting decrease
in total Bowling Centers operating revenue of $0.8 million was primarily
attributable to seven U.S. centers which were closed in May 1996, and February
and May 1997, respectively.
Cost of goods sold increased $3.2 million, or 56.1%, primarily as a result of
new centers.
The $22.9 million, or 53.8%, increase in Bowling Centers operating expenses, was
primarily attributable to new centers. Of this amount, new U.S. and
international centers accounted for approximately $21.2 million and $1.7
million, respectively. As a percentage of its revenue, Bowling Centers operating
expenses were 65.1% for the quarter ended September 30, 1996, versus 67.7% for
the quarter ended September 30, 1997.
A decrease of $0.3 million, or 17.6%, in selling, general, and administrative
expenses was attributable to savings associated with international constant
centers which implemented cost controls in response to lower lineage discussed
above.
An increase of $5.6 million, or 36.4%, in EBITDA was attributable to new
centers. EBITDA margin decreased from 23.5% for the quarter ended September 30,
1996, to 21.7% for the quarter ended September 30, 1997. EBITDA margin for the
third quarter was affected, as expected, by the increasing proportion of U.S.
centers purchased. U.S. centers typically have lower margins in the third
quarter compared to international centers and compared to U.S. margins in the
first and fourth quarters of the year, primarily because league seasons
typically do not begin until the end of the third quarter.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Bowling Centers operating revenue increased $85.3 million, or 40.1%. An increase
of $85.6 million was attributable to new centers, of which $79.3 million was
from U.S. centers, and $6.3 million was from international centers. An increase
of $1.8 million, or 0.9%, in constant centers revenue was primarily a result of
an increase in revenue in the Northeast region of the U.S., a region in which
the Company has a large number of centers and in which revenue was depressed due
to severe weather conditions during the first quarter of 1996. However, the hot,
dry weather and pricing specials discussed above partially offset improvements
achieved earlier in the year. The increase in constant centers revenue in the
first nine months of 1997 compared to the same period in 1996 was net of $1.0
million additional revenue in 1996 due to leap year, and a $2.1 million decrease
in revenue from the Japanese centers in 1997, which was primarily caused by
recent poor economic conditions in Japan. A decrease in operating revenue of
$2.1 million was primarily attributable to seven U.S. centers which were closed
in May 1996, and February and May, 1997, respectively.
Cost of goods sold increased $8.9 million, or 48.6%, primarily as a result of
new centers, partially offset by savings associated with closed centers.
Of the increase of $56.2 million, or 44.6%, in operating expenses, approximately
$54.4 million was attributable to new centers, of which $50.8 million was
attributable to U.S. centers and $3.6 million was attributable to international
centers. As a percentage of its revenue, Bowling Centers operating expenses were
59.2% for the nine months ended September 30, 1996, on a pro forma basis, versus
61.1% for the nine months ended September 30, 1997.
A decrease of $0.1 million, or 2.1%, in selling, general, and administrative
expenses was attributable to savings associated with international constant
centers which implemented cost controls in response to the effects of lower
lineage discussed above, partially offset by additional expenses associated with
new centers.
The increase of $20.3 million, or 31.9%, in EBITDA was primarily attributable to
new centers. EBITDA margin decreased from 30.0% for the nine months ended
September 30, 1996, on a pro forma basis, to 28.2% for the nine months ended
September 30, 1997. EBITDA margin for the nine month period ended September 30,
1997 was affected, as expected, by the increasing proportion of U.S. centers
purchased. U.S. centers typically have lower margins in the second and third
quarters compared to international centers and compared to U.S. margins in the
first and fourth quarters of the year, primarily because league seasons
typically end early in the second quarter and resume late in the third quarter
of the year.
Bowling Products
The Bowling Products business consists of two categories: (i) New Center
Packages (all of the equipment necessary to outfit a new bowling center or
expand an existing bowling center, or "NCPs"); and (ii) Modernization and
Consumer Products (which includes modernization equipment which upgrades an
existing center, spare parts, supplies and consumable products).
Quarter Ended September 30, 1997 Compared to Quarter Ended September 30, 1996
Bowling Products operating revenue increased by $25.4 million, or 36.9%. An
increase of $27.2 million, or 109.2%, in NCP revenue was offset by a decrease of
$2.2 million, or 5.0%, in Modernization and Consumer Products revenue. The
increase in NCP revenue was due to an overall increase in NCP sales of 464 units
which occurred primarily in Asia/Pacific and Europe. The decrease in
Modernization and Consumer Products revenue was primarily attributable to
decreased sales to Japanese proprietors who, due to the decline in national
lineage compared to the same period in 1996, have not been modernizing their
centers at the same rate in 1997 compared to 1996. See "--Seasonality and Market
Development Cycles".
Total gross profit from Bowling Products increased by $8.1 million, or 29.2%,
primarily as a result of increased NCP sales. Gross profit margin decreased from
40.3% in 1996 to 38.0% in 1997 due to competitive pricing pressure in certain
markets and higher cost of sales.
Bowling Products selling, general and administrative expenses increased by $3.4
million, or 39.5%, as a result of an increase of $2.1 million primarily
attributable to increased payroll and facilities expenses relating to the
staffing of the Company's international sales and service offices and an
increase of $1.3 million attributable to increased advertising and promotion
expenses in the U.S. locations.
EBITDA margin decreased from 27.8% in 1996 to 25.3% in 1997 due to lower margins
and increased expenses in the third quarter discussed above.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Bowling Products operating revenue increased by $53.3 million, or 32.2%,
primarily due to an increase of $52.3 million, or 83.5%, in NCP revenue.
Modernization and Consumer Products revenue remained flat as compared to the
same period in 1996. The increase in NCP revenue was due to an overall increase
in NCP sales of 1,245 units which occurred primarily in Asia/Pacific, Europe,
South America, and the Middle East. See "--Seasonality and Market Development
Cycles".
Total gross profit from Bowling Products increased by $19.5 million, or 29.4%,
primarily as a result of increased NCP sales. Gross profit margin was 40.0% and
39.2% for the nine months ended September 30, 1996 and 1997, respectively.
Competitive pricing pressure in certain markets and higher cost of sales, both
experienced in the third quarter, resulted in lower year-to-date margins in
1997.
Bowling Products selling, general and administrative expenses increased by $6.4
million, or 26.3%, primarily as a result of a $4.5 million increase attributable
to payroll and facilities expenses related to staffing the Company's
international sales and service offices, and an increase of $2.8 million
attributable to advertising and promotion expenses in the U.S. locations. These
increases were offset by a decrease of $0.9 million in payroll, facilities and
related expenses at U.S. locations.
EBITDA margin decreased from 25.4% to 25.2% primarily due to lower margins and
increased expenses discussed above, offset in part by the increased NCP revenue.
Consolidated Items
Depreciation and Amortization
Depreciation and amortization increased by $5.5 million, or 30.7%, in the third
quarter, and $14.1 million, or 26.8%, in the nine months ended September 30,
1997 over the comparable periods in the prior year. The increases for the third
quarter and the nine months were attributable to Bowling Centers and were
primarily due to depreciation of property and equipment of centers acquired
since May 1996 and incremental depreciation expense incurred as a result of
capital expenditures.
Interest Expense
Gross interest expense increased by $5.4 million, or 20.5%, in the third
quarter, and $10.7 million, or 13.6%, in the nine months ended September 30,
1997 over the comparable periods in the prior year. The increases for the
quarter and the nine months were both primarily due to interest on increased
levels of bank debt as a result of the acquisitions described above. See
"--Liquidity" and "--Capital Resources" for further discussion of bank debt.
Non-cash bond interest amortization totaled $8.7 million and $25.5 million for
the quarter and nine months ended September 30, 1997, respectively, compared to
$8.0 million and $16.9 million for the quarter and nine months ended September
30, 1996.
Net Loss
Net loss increased $5.0 million, or 94.3%, in the third quarter, and $3.7
million, or 19.7%, in the nine months ended September 30, 1997 primarily as a
result of increases in depreciation and interest expense and the current tax
provision for Holdings, partially offset by the increases in revenue and EBITDA
discussed above on a segment basis.
Income Taxes
Prior to the Acquisition, certain of the companies within the Predecessor
Company elected S corporation status under the Internal Revenue Code of 1986, as
amended (the "Code"). Upon consummation of the Acquisition, those companies
became taxable corporations under the Code.
Pursuant to the Stock Purchase Agreement as discussed in "Note 1. Organization"
in the Notes to Condensed Consolidated Financial Statements, the two principal
companies within the affiliated group elected, under Section 338 (h) (10) of the
Code, to treat the stock purchase as a deemed asset acquisition for the purposes
of U.S. income taxes. These elections permitted both of the affiliated companies
to revalue their assets to fair market value and to treat any amortizable
goodwill as tax deductible over fifteen years.
As of September 30, 1997, Holdings had net operating losses of approximately
$62.2 million and foreign tax credits of $12.5 million which will carry over to
future years to offset U.S. taxes. The foreign tax credits will begin to expire
in the year 2001 and the net operating losses will begin to expire in the year
2010. Holdings has not booked a valuation reserve as of September 30, 1997
because Holdings expects to utilize these net operating losses and foreign tax
credits prior to expiration.
<PAGE>
Liquidity
The following discussion of liquidity and capital resources compares Holdings'
results for the nine months ended September 30, 1997 with the nine months ended
September 30, 1996, on an historical basis.
Holdings' primary source of liquidity is cash provided by operations and credit
facilities as described below. Working capital on December 31, 1996 was $7.9
million compared to a negative $1.9 million as of September 30, 1997, a decrease
of $9.8 million. Cash decreased $11.6 million primarily as a result of payments
on bank debt and internal funding of certain bowling center acquisitions, and
the note payable under the Credit Agreement increased $47.5 million as a result
of drawing down available borrowings under the Working Capital Facility under
the Credit Agreement to fund increases in working capital. Accounts receivable
increased $38.8 million primarily as a result of increased NCP revenues, and
inventory increased $18.8 million in advance of future shipments. Accounts
payable increased $5.1 million as a result of increased production and related
materials purchases which support the increased backlog as of September 30,
1997. See "--Backlog: Recent NCP Sales". In addition to the above increases and
decreases in working capital, a decrease of $3.2 million was caused by changes
in other current assets and liabilities.
Net cash flows used in operating activities were $37.9 million for the nine
months ended September 30, 1996 compared to net cash provided of $1.5 million
for the nine months ended September 30, 1997, a difference of $39.4 million. Net
cash provided resulted from an increase of $37.2 million in depreciation and
amortization primarily as a result of application of the purchase method of
accounting for the Acquisition and subsequent acquisitions of bowling centers,
an increase of $8.6 million in amortization of the discount related to bonds
used to partially fund the Acquisition, a net loss of $0.1 million on the sale
of property and equipment, a net change of $5.1 million in deferred taxes and
income taxes payable, and a change of $33.8 million in other assets and
liabilities. Net cash used resulted from an increase of $5.0 million in net
loss, an increase of $18.0 million in accounts receivable primarily resulting
from the increased levels of NCP sales compared to the same period in 1996, and
an increase of $17.4 million in inventory primarily reflecting the increased
backlog of NCP orders to be shipped after September 30, 1997.
Net cash flows used in investing activities were $1,339.0 million for the nine
months ended September 30, 1996 compared to net cash flows used of $231.3
million for the nine months ended September 30, 1997. During the nine months
ended September 30, 1996, cash flows used for the Acquisition totaled $1,332.0
million, capital spending was $7.9 million and other investing cash flows
provided were $0.9 million. During the nine months ended September 30, 1997,
acquisitions of centers totaled $192.4 million, capital spending was $42.6
million, and other cash flows provided by investing activities were $3.6
million. See "Note 10. Acquisitions" in the Notes to Condensed Consolidated
Financial Statements and "--Capital Expenditures" for additional discussion of
these investing activities.
Net cash provided by financing activities was $1,405.1 million for the nine
months ended September 30, 1996 compared to net cash provided of $218.8 million
for the nine months ended September 30, 1997. During the nine months ended
September 30, 1996, cash flows were primarily provided by $1,034.9 million of
proceeds of long term debt and $380.3 million from a capital contribution, both
of which were used to fund the Acquisition. During 1996, funds were used
primarily for the payment of long term debt totaling $9.6 million. During the
nine months ended September 30, 1997, cash flows were provided by drawing down
$162.5 million and $47.5 million from available borrowings under the Acquisition
Facility and the Working Capital Facility, respectively, under the Credit
Agreement to fund the acquisitions of bowling centers discussed above, and to
fund increases in working capital. Additionally, $35.6 million was provided as a
capital contribution by the Parent's institutional stockholders to be used in
part to fund acquisitions and for other corporate purposes. During 1997, funds
were used primarily for the payment of long term debt totaling $25.8 million,
and a dividend of $0.5 million to the Parent on February 28, 1997, for the
repurchase of common stock.
As a result of the aforementioned, cash increased by $27.2 million for the nine
months ended September 30, 1996 compared to a decrease of $11.6 million for the
nine months ended September 30, 1997.
Capital Resources
As a result of the Acquisition, Holdings' total indebtedness increased
substantially. At September 30, 1997, Holdings' debt consisted of Senior Debt of
$750.8 million, senior subordinated notes of $250.0 million and senior
subordinated discount notes of $300.2 million. At September 30, 1997, Holdings
was also capitalized with equity of $413.6 million. Subject to certain
conditions, Holdings had the ability to borrow up to $50.0 million for general
corporate purposes pursuant to a Working Capital Facility and up to $230.0
million for acquisitions pursuant to the Acquisition Facility. At September 30,
1997, $171.0 million and $47.5 million was outstanding under the Acquisition
Facility and the Working Capital Facility, respectively. Between September 30,
1997 and October 31, 1997, there were no additional borrowings under the
Acquisition facility and no additional borrowings under the Working Capital
Facility. However, available borrowings under the Credit Agreement were
increased as of November 7, 1997, pursuant to the amendment and restatement
described below.
Holdings funds its cash needs through cash flow from operations, existing cash
balances and the facilities under the Credit Agreement described below. A
substantial portion of Holdings' available cash will be applied to service the
indebtedness incurred to finance the Acquisition.
The indentures and the Credit Agreement contain financial and operating
covenants and significant restrictions on the ability of the Company to pay
dividends, incur indebtedness, make investments and take certain other corporate
actions.
In July 1997, the Company entered into an interest rate cap agreement to reduce
the interest rate risk of its Senior Debt. The notional amount of this cap is
$100.0 million. See "Note 6. Long-term Debt" in the Notes to Condensed
Consolidated Financial Statements for additional discussion of these agreements.
On August 21, 1997, the Parent filed a registration statement with the
Securities and Exchange Commission for an initial public offering (the
"Offering") of common stock by the Parent. On November 7, 1997, the Parent
issued 15,525,000 shares of its common stock at $19.50 per share pursuant to the
Offering. See "Note 7. Stockholder's Equity" in the Notes to Condensed
Consolidated Financial Statements.
In connection with the Offering, the Company and the lenders under the credit
agreement which underlies the Company's senior bank debt (the "Credit
Agreement") approved an amendment and restatement of the Credit Agreement that
became effective on November 7, 1997. This amendment and restatement increased
the flexibility and borrowing capacity of the Company's ongoing acquisition
program. The Company will incur extraordinary charges of $22.7 million in the
fourth quarter of 1997 arising from the amendment and restatement of the Credit
Agreement, the redemption of Discount Notes, and the write-off of deferred
financing costs previously incurred with respect to the Acquisition and issuance
of the Discount Notes expected to be redeemed. See "Note 6. Long-Term Debt" in
the Notes to Condensed Consolidated Financial Statements.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness depends on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors beyond its control. Based
upon the current level of operations and anticipated growth, management believes
that available cash flow, together with available borrowings under the Credit
Agreement and other sources of liquidity, are adequate to meet the Company's
anticipated future requirements for working capital, capital expenditures,
scheduled payments of principal of, and interest on, its Senior Debt, and
interest on the Notes. There can be no assurance that the Company's business
will generate sufficient cash flow from operations or that future borrowings
will be available in an amount sufficient to enable the Company to service its
indebtedness, including the Exchange Notes, or that any refinancing would be
available on commercially reasonable terms or at all.
Capital Expenditures
For the nine months ended September 30, 1997, the Company's actual capital
expenditures were $42.6 million compared to $14.8 million, on a pro forma basis
(defined as expenditures of the acquired business from January 1 through
September 30), for the nine months ended September 30, 1996. The increase was
primarily due to an ongoing modernization program in Bowling Centers, a new
point-of-sale information system in U.S. centers, new Company wide information
systems, and construction of a new 40 lane, state-of-the-art family
entertainment center in New York City.
The Company funds its capital expenditures from cash generated by operations
and, with respect to the construction and acquisition of new centers, internally
generated cash and the Acquisition Facility. See "Note 10. Acquisitions" in the
Notes to Condensed Consolidated Financial Statements and "--Liquidity" and
"--Capital Resources" for discussions of funding of acquisitions of new centers.
Seasonality and Market Development Cycles
On a consolidated basis, revenue and EBITDA of the Company's businesses are
neither highly seasonal nor highly cyclical. The geographic diversity of the
Company's bowling centers, which operate across different regions of the U.S.
and across nine different countries, along with the bowling industry's historic
insulation to recessions, has provided stability to Holdings' annual cash flows.
Although financial performance of Bowling Centers operations is seasonal in
nature in many countries, with cash flows typically peaking in the winter months
and reaching their lows in the summer months, the geographic diversity of the
Company's bowling centers has helped reduce this seasonality as bowling centers
in certain countries in which the Company operates exhibit different seasonal
sales patterns. As a result of the growing number of U.S. centers attributable
to the Company's acquisition program, the seasonality described above may be
accentuated. In Australia, where the Company has its largest number of
international centers, the reversal of seasons relative to the U.S. helps
mitigate the seasonality in worldwide operations. The Company's cash flows are
further stabilized by the location of many centers in regions where the climates
have high average temperatures and high humidity. In the United States, during
the summer months when league bowling is generally less active, bowling centers
in the southern U.S. continue to show strong performance. Similarly, in regions
with warm summer climates such as Hong Kong and Mexico, where bowling in
air-conditioned centers may be more attractive than outdoor activities, bowling
centers show strong performance. See "Note 11. Business Segments" in the Notes
to Consolidated Financial Statements for geographic information on the Company's
business.
Sales in the Modernization and Consumer Products category of Bowling Products
display significant seasonality. The U.S. market, which is the largest market
for Modernization and Consumer Products, is driven by the beginning of leagues
in the fall of each year. Operators typically sign purchase orders, particularly
for replacement equipment, during the first four months of the year, after they
receive winter league revenue indications. Equipment is shipped and installed
during the summer months, when leagues are generally less active. Sales of
modernization equipment, such as automatic scoring and synthetic lane overlays,
are less predictable and fluctuate more than the replacement equipment because
of the five to ten year cycles of these major products.
The NCP category of Bowling Products experiences significant fluctuations due to
changes in demand for NCPs as certain markets experience high growth followed by
market maturity, at which time sales to that market decline, sometimes rapidly.
Market cycles for individual countries have, in the past, spanned several years,
with periods of high demand for several markets (e.g., Korea and Taiwan) which,
in the Company's experience, last five years or more. These growth patterns do
not seem to be closely tied to general economic cycles.
International Operations
For the nine months ended September 30, 1997, 26.8% of Bowling Centers
operations revenue was generated by international centers. Historically, the
Company has not engaged in any significant currency hedging activities.
For the nine months ended September 30, 1997, 60.5% of Bowling Products sales
were made through international sales offices and distributors. To minimize
credit and international exchange risk, equipment is sold primarily using
letters of credit denominated in U.S. dollars. Letters of credit are usually
received before shipments leave U.S. ports. International sales offices sell
some products in local currency, but adjust pricing, to the extent that market
conditions permit, with changes in exchange rates. This policy enables the
Bowling Products operations generally to avoid any material adverse effect from
exchange rate fluctuations. Management believes that this policy should continue
to protect the Company from material adverse consequences of exchange rate
fluctuation, except in the event of severe international exchange rate
volatility.
Backlog: Recent NCP Sales
The total NCP backlog as of September 30, 1997 was 1,897 units, which is an 8.1%
increase over the September 30, 1996 backlog of 1,755 units, and a 33.0%
increase over the December 31, 1996 backlog of 1,426 units. The increased
backlog was directly attributable to strong NCP orders generated throughout the
world as a result of an aggressive program to increase sales in established
markets and develop bowling in emerging markets. The backlog as of September 30,
1997 reflected a significant number of orders from customers in Asia/Pacific,
North and South America, and Europe.
NCP sales for the first nine months of 1997 totaled $114.9 million, an 83.5%
increase over the same period in 1996. The significant increase was attributable
to the market development and sales programs implemented in the second half of
1996 and in 1997 which are designed to maximize NCP sales activity in a variety
of marketplaces of the world. While Asia/Pacific is a large market for NCP sales
and backlog, other markets such as South America, India, Poland, Russia, and the
Middle East are also represented and being developed as a result of the market
development and sales programs discussed above.
Impact of Inflation
The Company has historically offset the impact of inflation through price
increases and expense reductions. Periods of high inflation could have an
adverse effect on the Company to the extent that increased borrowing costs for
floating rate debt may not be offset by increases in revenue.
Environmental Matters
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of, certain materials, substances and
wastes.
The Company currently and from time to time is subject to environmental claims.
It is the opinion of management that the various asserted claims and litigation
in which the Company currently is involved are not likely to have a material
adverse effect on its financial position or results of operations. However, no
assurance can be given as to the ultimate outcome with respect to such claims
and litigation.
The Company cannot predict with any certainty whether existing conditions or
future events, such as changes in existing laws and regulations, may give rise
to additional environmental costs. Furthermore, actions by federal, state, local
and foreign governments concerning environmental matters could result in laws or
regulations that could increase the cost of producing the Company's products, or
providing its services, or otherwise adversely affect the demand for its
products or services.
<PAGE>
PART II
Item 1. Legal Proceedings
The Company currently and from time to time is subject to claims and suits
arising in the ordinary course of its business, including environmental claims,
employment discrimination claims, workers' compensation claims, and personal
injury claims from customers of Bowling Centers. In certain such actions,
plaintiffs request punitive or other damages that may not be covered by
insurance. In the opinion of management, the various asserted claims and
litigation in which the Company currently is involved will not have a material
adverse effect on its financial position or results of operations. However, no
assurance can be given as to the ultimate outcome with respect to such claims
and litigation.
On March 5, 1996, the defendant in an action entitled Northland Bowl and Sports
Center, Inc. and Recreation Associates, II v. Golden Giant, Inc., d/b/a Golden
Giant Building Systems, Court of Common Pleas, Centre County, Pennsylvania
(Index No. 96-75), asserted a third-party claim against AMF Bowling Products,
Inc. (formerly named AMF Bowling, Inc.)("AMF Bowling Products") and other
parties. Defendant, Golden Giant, Inc. ("Golden Giant"), a construction company,
was originally named as the sole defendant by a bowling center (not owned or
operated by the Company) in connection with the collapse of the center's roof in
early 1994. Golden Giant named AMF Bowling Products as an additional defendant,
charging it with negligence and breach of implied warranty for installing
scoring monitors (four years before the roof collapsed) on a portion of the
building that allegedly could not adequately support the additional weight of
the equipment. The bowling center plaintiff claims total damages in amounts
exceeding $3.5 million, and Golden Giant asserts that, if the plaintiff is
entitled to any recovery, it should be in whole or part against AMF Bowling
Products. On March 25, 1997, an order was entered dismissing AMF Bowling
Products from the lawsuit, which continues against the other defendants. The
plaintiff has appealed the order dismissing Bowling Products, and in October
1997, the appellate court denied the plaintiff permission to appeal. This matter
has previously been reported by the Company in its Form 10-Q quarterly reports
for the periods ended March 31, 1997, and June 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Third Amended and Restated Credit Agreement dated as
of November 3, 1997 (incorporated herein by reference
to Exhibit 10.2 to the Parent's Registration
Statement on Form S-1 (File No. 333-34099)).
12.1 Statement re computation of ratios. (SEC filing only)
27 Financial Data Schedule for the nine months
ended September 30, 1997. (SEC filing only)
99 Third quarter, 1997, earnings release dated October
24, 1997. (SEC filing only)
(b) Reports on Form 8-K: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMF Bowling Worldwide, Inc.
(Registrant)
/s/ Stephen E. Hare November 14, 1997
- ----------------------------------
Stephen E. Hare
Executive Vice President,
Chief Financial Officer
(Duly Authorized Officer)
/s/ Michael P. Bardaro November 14, 1997
- ---------------------------------
Michael P. Bardaro
Vice President, Secretary and
Corporate Controller
(Chief Accounting Officer)
