Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-4877
AMF BOWLING WORLDWIDE, INC.
Supplement No. 2 to Prospectus dated November 7, 1997, as supplemented by
Supplement No. 1 dated November 17, 1997
The date of this supplement No. 2 is February 23, 1998
AMF Bowling Worldwide, Inc. ("AMF Bowling Worldwide" or the "Company") reported
revenue of $713.7 million for the year ended December 31, 1997, an increase of
30.0% compared to last year's $548.9 million. EBITDA (defined as a measure of
operating cash flow which represents operating income before interest, taxes,
depreciation, amortization and non-operating expenses) was $185.4 million for
the year, an improvement of 27.4% from $145.5 million reported in 1996. EBITDA
margin declined slightly in 1997 to 26.0% from 26.5% in 1996.
EBITDA increased 23.6% to $58.7 million on a 15.9% increase in revenue to $208.1
million. EBITDA and revenue for the same quarter of 1996 were $47.5 million and
$179.6 million, respectively. EBITDA margin was 28.2% compared to 26.4% in the
same quarter last year.
Bowling Centers Operating Results
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For 1997, Bowling Centers revenue was $429.1 million, an increase of 39.6% over
revenue of $307.3 million in 1996. EBITDA was $130.4 million, up 36.4% from
$95.6 million reported in the prior year. Operating results were favorably
impacted during the year by the inclusion of 122 bowling centers acquired and
one new center built during 1997.
EBITDA margins for 1997 were 30.4% compared to 31.1% in 1996.
Fourth quarter revenue increased 38.5% to $131.2 million compared to $94.7
million in the same quarter of 1996. EBITDA was $46.4 million, up 45.5% from
$31.9 million in the fourth quarter of 1996. EBITDA margins were 35.4% compared
to 33.7% last year. These favorable operating results were achieved despite the
negative impact of weaker business environments in Australia, Hong Kong and
Japan. In addition, the strong U.S. dollar resulted in a lower translation of
profits from international bowling center operations.
Bowling Products Operating Results
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For 1997, Bowling Products revenue was $299.3 million, an increase of 18.7% from
$252.1 million in 1996. EBITDA was $70.8 million compared to $62.6 million in
1996, an increase of 13.1%. EBITDA margins declined from 24.8% in 1996 to 23.7%
in 1997. The improvement in 1997 results was primarily driven by an increase in
sales of New Center Packages (NCPs). A total of 4,576 NCPs were sold in 1997
compared to 3,029 in 1996, a unit increase of 51.1%.
Fourth quarter revenue was $80.4 million, a decline of 7.1% from the $86.5
million in the same quarter of 1996. EBITDA was $15.7 million, a decline of
23.8% from the $20.6 million achieved last year. EBITDA margins were 19.5%
compared to 23.8% in 1996. During the fourth quarter of 1997, the Company
experienced a slowdown in NCP shipments from several of its Asia Pacific markets
resulting from both the weakened economies and the strong U.S. dollar. Quarterly
comparisons were also affected by unusually high NCP revenue in 1996 as a result
of customers in China accelerating deliveries in anticipation of a change in
import duty policy. Margin pressures on international equipment sales also
resulted from the strong U.S. dollar. Management believes that its Asia Pacific
customers are delaying purchases of NCP and Modernization equipment as they
await economic stability in their regions. The current NCP backlog of 1,548 is
7.1% lower than at this time in 1997.
<PAGE>
Consolidated Operating Results
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During the fourth quarter of 1997, AMF Bowling Worldwide refinanced its bank
debt and redeemed $119 million of Senior Subordinated Discount Notes, to
increase financial flexibility and to reduce interest expense. The Company
incurred after-tax extraordinary charges totaling $23.4 million related to this
refinancing including write-off of costs previously incurred to obtain bank
financing, the premium associated with the Senior Subordinated Discount Notes
redemption, and the write-off of the portion of deferred financing costs
attributable to the Senior Subordinated Discount Notes redeemed.
Net loss before extraordinary items was $32.2 million for 1997 compared to a pro
forma net loss of $21.6 million for 1996. For the fourth quarter of 1997, net
loss before extraordinary items was $9.8 million, compared to net loss of $2.8
million, for the same quarter of 1996. Net income was adversely impacted during
the fourth quarter of 1997 by non-cash charges related to the closing of certain
bowling centers, incremental amortization expense related to a reclassification
of fixed assets, foreign currency transaction losses and equity in loss of joint
ventures primarily from start-up expenses and the elimination of profit on
equipment sales to the joint ventures.
Bowling Centers Growth Strategies
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o Acquisition Program. The Company continued its successful bowling center
acquisition and consolidation strategy, acquiring 19 bowling centers in the
fourth quarter of 1997. A total of 122 centers were acquired in 1997 - 113 in
the U.S., 7 in the United Kingdom and 2 in Australia. At year-end, AMF
Bowling Worldwide operated 470 bowling centers worldwide - 370 in the U.S.
and 100 international centers, including 14 centers in international joint
ventures.
On February 13, 1998, the Company purchased Active West, a chain of 15
bowling centers, which strengthens the Company's presence in California. In
addition, 4 single centers have been acquired since January 1, 1998 - 2 in
the U.S. and 2 in the United Kingdom.
o Investment in Building a Nationally Branded Bowling Center Chain. AMF
Bowling Worldwide continues to make investments in its bowling center
business in conjunction with its strategy to build a national chain of
branded bowling centers. In the fourth quarter of 1997, management rolled out
a comprehensive customer service program, AMF CARES!, designed to enhance
customer service and reward employee participation. The AMF CARES! program
will focus on five key areas: customer focused operating standards, employee
awards and recognition, loyalty driven marketing programs, an enhanced food
and beverage program, and a strong brand identity.
o Modernization of Centers. AMF Bowling Worldwide currently expects to spend
$27 million in 1998 to upgrade its existing U.S. centers, including $5
million for major modernization of five bowling centers in key U.S. markets.
o Chelsea Piers and Marina City. In September 1997, the Company opened the
first new bowling center in Manhattan in more than 30 years. Chelsea Piers is
a 40 lane state-of-the-art family entertainment facility with enhanced
amenities including upgraded food and beverage offerings and innovative
customer service. The center has attracted leagues and recreational bowlers
in addition to a strong corporate party business. Chelsea Piers currently has
the highest weekly sales volume of the Company's bowling centers.
In January, AMF Bowling Worldwide announced plans to build a showcase bowling
center in Chicago's landmark Marina City development. The center will cost $5
<PAGE>
million and be similar to Chelsea Piers, with the newest Bowling Products
equipment and amenities including an arcade room, billiards room, cafe and
AMF Legends Bar & Grill, the Company's new sports bar concept. Marina City is
expected to open in late summer of 1998.
International Joint Ventures
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In 1997, the Company successfully completed two joint ventures with Hong Leong
Corporation Ltd. in Singapore and Playcenter S.A. in Brazil. The Hong Leong
joint venture was created to build and operate bowling centers in the Asia
Pacific region. The first of these bowling centers opened in November 1997 in
Tianjin, China. The Playcenter joint venture opened 7 centers during 1997 to
bring its total to 13 centers in Brazil and Argentina.
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FORWARD-LOOKING STATEMENTS
Information in this prospectus supplement contains 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". 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
prospectus supplement should not be regarded as a representation by AMF Bowling
Worldwide or any other person that the objectives or plans of the Company will
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 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 AMF Bowling
Worldwide 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 prospectus supplement as a result of factors generally
applicable to companies in similar businesses, including, 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 elsewhere in this
prospectus supplement. AMF Bowling Worldwide 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.
<PAGE>
<TABLE>
AMF BOWLING WORLDWIDE, INC. AND SUBSIDIARIES(1)
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in millions, except per share data)
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
---------------------- ------------------------
1997 1996 1997 1996 (2)
---- ---- ---- ----
<S> <C>
Operating revenue $208.1 $179.6 $713.7 $548.9
Operating expenses (3) 149.4 132.1 528.3 403.4
Depreciation and amortization 35.7 20.8 102.5 73.5
------ ------ ------ ------
Operating income 23.0 26.7 82.9 72.0
Interest expense 29.2 27.7 118.4 106.2
Other non-operating expenses 6.1 (0.7) 8.2 (3.6)
------ ------ ------ ------
Loss before income taxes (12.3) (0.3) (43.7) (30.6)
Provision (benefit) for income taxes (3.9) 2.5 (12.9) (9.0)
------ ------ ------ ------
Net income(loss) before joint ventures/extraordinary items (8.4) (2.8) (30.8) (21.6)
Equity in loss of joint ventures, net of tax (1.4) - (1.4) -
------ ------ ------ ------
Net income(loss) before extraordinary items (9.8) (2.8) (32.2) (21.6)
Extraordinary items, net of tax (23.4) - (23.4) -
------ ------ ------ ------
Net income(loss) $(33.2) $(2.8) $(55.6) $(21.6)
====== ====== ====== ======
Selected Data:
EBITDA (4) $58.7 $47.5 $185.4 $145.5
EBITDA margin 28.2% 26.4% 26.0% 26.5%
(1) AMF Bowling Worldwide, Inc. ("AMF Bowling Worldwide" or the "Company") is
principally engaged in two business segments (i) operation of bowling
centers and (ii) manufacturing and marketing of bowling products.
(2) A pro forma income statement has been presented for the year ended December
31, 1996, to provide a more meaningful comparison with 1997. The pro forma
results include operations for the Predecessor Company ("AMF Bowling
Group") through April 30, 1996 and for the Company since May 1, 1996 (the
closing date of the "Acquisition"). The pro forma statement of income has
been presented as if the Acquisition of the Predecessor Company had
occurred on January 1, 1996.
(3) Operating expenses represent costs of goods sold, bowling center operating
expenses and selling, general, and administrative expenses.
(4) Represents a measure of operating cash flow defined as operating income
before interest, taxes, depreciation, amortization, and non-operating
expenses.
<PAGE>
AMF BOWLING WORLDWIDE, INC. AND SUBSIDIARIES (1)
SEGMENT INFORMATION (unaudited)
(in millions)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -------
1997 Revenue
Bowling Centers $108.5 $92.6 $96.8 $131.2 $429.1
Bowling Products 52.0 72.7 94.2 80.4 299.3
Intersegment Elimination (2.9) (4.8) (3.5) (3.5) (14.7)
------- ------- ------- ------- -------
TOTAL $157.6 $160.5 $187.5 $208.1 $713.7
1996 Revenue (2)
Bowling Centers $82.5 $64.7 $65.4 $94.7 $307.3
Bowling Products 43.0 53.8 68.8 86.5 252.1
Intersegment Elimination (2.8) (3.7) (2.4) (1.6) (10.5)
------- ------- ------- ------- -------
TOTAL $122.7 $114.8 $131.8 $179.6 $548.9
1997 EBITDA (4)
Bowling Centers $41.9 $21.1 $21.0 $46.4 $130.4
Bowling Products 12.0 19.3 23.8 15.7 70.8
Corporate (3.6) (4.7) (3.7) (3.4) (15.4)
Intersegment Elimination (0.1) (0.1) (0.2) (0.0) (0.4)
------- ------- ------- ------- -------
TOTAL $50.2 $35.6 $40.9 $58.7 $185.4
1996 EBITDA (2) (4)
Bowling Centers $32.6 $15.7 $15.4 $31.9 $95.6
Bowling Products 9.4 13.5 19.1 20.6 62.6
Corporate (2.5) (1.4) (2.3) (4.8) (11.0)
Intersegment Elimination (0.6) (0.9) 0.0 (0.2) (1.7)
------- ------- ------- ------- -------
TOTAL $38.9 $26.9 $32.2 $47.5 $145.5
</TABLE>
See notes (1-4) to Consolidated Statements of Income.
