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 2826, ~~2003~~2004

¨	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~~registrant as specified in its charter)

Delaware

13-3873272

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

8100 AMF Drive

Richmond, Virginia 23111

(Address of principal executive offices, including zip code)

(804) 730-4000

(Registrant’s telephone number, including area code)

~~Indicate by check mark whether the Registrant~~ (1)Former ~~has~~name, ~~filed~~former ~~all~~address 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)~~former ~~has~~fiscal ~~been~~year, ~~subject~~if tochanged ~~such~~since ~~filing~~last ~~requirements for the past 90 days~~report. ~~Yes x No ¨~~)

Indicate by check mark whether the ~~Registrant~~registrant is(1) anhas ~~accelerated~~filed ~~filer~~all ~~(as~~reports required ~~defined~~to inbe ~~Rule~~filed ~~12b-2~~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 x ¨

Indicate by check mark whether the ~~Registrant~~registrant ~~has~~is ~~filed all documents and~~an ~~reports~~accelerated ~~required~~filer to(as bedefined ~~filed~~in byRule ~~Section~~12b-2 ~~12, 13 or 15(d)~~ of the ~~Securities~~ Exchange Act ~~of 1934 subsequent to the distribution of securities under a plan confirmed by a court~~). Yes x¨ No ¨x

~~The~~Indicate ~~number~~by ofcheck ~~shares~~mark ofwhether the ~~Registrant’s~~registrant ~~common~~has ~~stock~~filed ~~issued~~all documents and ~~outstanding~~reports required to be filed by Section 12, 13 or ~~issuable~~15(d) ~~under~~of the ~~Registrant’s Plan~~Securities Exchange Act of ~~Reorganization~~1934 assubsequent to the distribution of ~~October~~securities under ~~31,~~a ~~2003~~plan ~~was~~confirmed ~~10,000,000~~by a court. Yes x No ¨

As of September 26, 2004, there were issued and outstanding 1,000 shares of the registrant’s common stock, $0.01 par value, all of which were held of record by Kingpin Intermediate Corp., a wholly-owned subsidiary of Kingpin Holdings, LLC.

AMF BOWLING WORLDWIDE, INC.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited)	42
	Condensed Consolidated Statements of Operations (unaudited)	53
	Condensed Consolidated Statements of Cash Flows (unaudited)	64
	Notes to Condensed Consolidated Financial Statements (unaudited)	75
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1621
Item 3.	Quantitative and Qualitative ~~Disclosure~~Disclosures About Market Risk	2435
Item 4.	Controls and Procedures	2536
	PART II
Item 1.	Legal Proceedings	2637
Item 6.	Exhibits ~~and Reports on Form 8-K~~	2738
Signatures		2839

PART I

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report contain forward-looking statements, which are statements other than historical information or statements of current condition. Statements set forth in this report or statements incorporated by reference from documents filed with the Securities and Exchange Commission (“SEC”) are or may be forward-looking statements, including possible or assumed future results of the operations of AMF Bowling Worldwide, Inc., a Delaware corporation (“Worldwide” and, together with its subsidiaries, the “Company”), including but not limited to:

• any statements concerning:

• the results of operations of the Company’s businesses;

• the results of the Company’s initiatives to improve its bowling centers operations and its business of selling bowling equipment;

• the amounts of capital expenditures needed to maintain or improve the Company’s bowling centers;

• the Company’s ability to comply with covenants in its financing facilities and generate cash flow to service its indebtedness;

• the continued availability of sufficient borrowing capacity or other financing to supplement cash flow and fund operations; and

• the outcome of existing or future litigation;

• any statements preceded by, followed by or including the words “believes,” “expects,” “predicts,” “anticipates,” “intends,” “estimates,” “should,” “may” or similar expressions; and

• other statements contained or incorporated in this report that are not historical facts.

These forward-looking statements relate to the plans and objectives of the Company or future operations. In light of the risks and uncertainties inherent in all future projections and the Company’s financial position, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company that the objectives, projections or plans of the Company will be achieved. Many factors could cause the Company’s actual results to differ materially from those in any forward-looking statements, including, but not limited to:

• the popularity of bowling;

• the Company’s ability to retain and attract higher quality bowling center managers;

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

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

• competition in the Company’s bowling products business;

• the risk of adverse political acts or developments in the Company’s international markets;

• fluctuations in foreign currency exchange rates;

• the lack of improvement or a decline in general economic conditions;

• adverse judgments in existing, pending or future litigation; and

• changes in interest rates.

The foregoing review should not be construed as exhaustive and should be read in conjunction with other cautionary statements included elsewhere in this report. The Company undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after this date or to reflect the occurrence of unanticipated events.

Item 1. Financial Statements

AMF BOWLING WORLDWIDE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share date)

(unaudited)

	September 28,2003			June 29,2003
Assets
Current assets:
Cash and cash equivalents	$	22,250		$	56,275
Accounts and notes receivable, net of allowance for doubtful accounts of $4,680 and $7,329, respectively		25,922			23,217
Inventories, net		36,353			34,001
Advances and deposits		19,144			19,019
Total current assets		103,669			132,512
Property and equipment, net		562,963			568,609
Leasehold interests, net and other		29,998			30,269
Total assets	$	696,630		$	731,390
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,046		$	17,642
Accrued expenses and other		84,849			84,372
Current portion of long-term debt		17,931			40,901
Total current liabilities		117,826			142,915
Long-term debt, less current portion		378,143			375,587
Liabilities subject to resolution		1,110			1,323
Total liabilities		497,079			519,825
Stockholders’ equity:
Preferred Stock ($.01 par value, 5,000,000 shares authorized, none issued and outstanding)		—			—
Common Stock ($.01 par value, 20,000,000 shares authorized, 9,958,689 issued and outstanding) (a)		100			100
Paid-in capital		212,466			212,361
Accumulated deficit		(24,881	)		(12,209	)
Accumulated other comprehensive income		11,866			11,313
Total stockholders’ equity		199,551			211,565
Total liabilities and stockholders’ equity	$	696,630		$	731,390

PART I

~~(a)~~ITEM ~~There were 9,958,689 shares outstanding on September 28, 2003~~1. OnFINANCIAL September 30, 2003, the Company issued 4,466 shares to trade claimants and the remaining 36,831 shares will be issued as claims are resolved in accordance with the Company’s Second Amended Second Modified Joint Plan of Reorganization (the “Plan”).STATEMENTS


	New Company
*(In thousands, except share and per share data)*	September 26, 2004			June 27, 2004
Assets
Current assets:
Cash	$	16,284		$	12,734
Accounts and notes receivable, net of allowance for doubtful accounts of $3,829 and $4,155, respectively		24,676			25,737
Inventories, net		31,927			30,745
Prepaid expenses and other current assets		13,999			19,231
Assets held for sale (Note 3)		45,320			—

Total current assets		132,206			88,447

Property and equipment, net		314,675			363,956
Other assets		47,591			49,704

Total assets	$	494,472		$	502,107

Liabilities and Stockholder’s Equity
Current liabilities:
Accounts payable	$	14,175		$	21,661
Accrued expenses and other liabilities		80,841			79,979
Current portion of long-term debt		2,311			2,294
Liabilities held for sale (Note 3)		6,531			—

Total current liabilities		103,858			103,934

Long-term debt, less current portion		293,704			286,503
Liabilities, subject to resolution		233			233

Total liabilities		397,795			390,670

Stockholder’s equity:
Common stock ($0.01 par value, 1,000 shares authorized and outstanding)		—			—
Paid-in capital		133,716			133,716
Accumulated deficit		(31,932	)		(18,992	)
Accumulated other comprehensive loss		(5,107	)		(3,287	)

Total stockholder’s equity		96,677			111,437

Total liabilities and stockholder’s equity	$	494,472		$	502,107

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMF BOWLING WORLDWIDE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)


	New Company			Reorganized Predecessor Company
*(In thousands)*	2005 First Quarter			2004 First Quarter
Operating revenue	$	131,382		$	138,680

Operating expenses:
Cost of goods sold		29,274			32,690
Bowling center operating expenses (net of $9,222 gain in 2005, discussed in Note 10)		85,078			84,100
Selling, general and administrative expenses		10,750			10,959
Asset impairment		1,303			—
Depreciation and amortization		12,865			14,385

Total operating expenses		139,270			142,134

Operating loss		(7,888	)		(3,454	)

Non-operating (income) expenses:
Interest expense		6,502			9,187
Interest income		(119	)		(93	)
Other income, net		(4,497	)		(858	)

Total non-operating expenses		1,886			8,236

Loss from continuing operations before income taxes		(9,774	)		(11,690	)
Provision for income taxes		3,407			111

Loss from continuing operations		(13,181	)		(11,801	)

Income (loss) from discontinued operations, net of tax (Note 3)		241			(871	)

Net loss	$	(12,940	)	$	(12,672	)

	Quarter EndedSeptember 28, 2003			Quarter EndedSeptember 29, 2002
Operating revenue	$	148,014		$	150,627
Operating expenses:
Cost of goods sold		33,686			36,058
Bowling center operating expenses		91,566			91,109
Selling, general and administrative expenses		10,959			10,363
Depreciation and amortization		15,673			21,392
Total operating expenses		151,884			158,922
Operating loss		(3,870	)		(8,295	)
Nonoperating expenses (income):
Interest expense		9,187			10,477
Interest income		(96	)		(145	)
Other expense (income), net		(762	)		872
Total nonoperating expenses, net		8,329			11,204
Loss before income taxes		(12,199	)		(19,499	)
Provision for income taxes		473			1,309
Net loss	$	(12,672	)	$	(20,808	)
Net loss per share of common stock:
Basic	$	(1.27	)	$	(2.08	)
Diluted		(1.27	)		(2.08	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMF BOWLING WORLDWIDE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	New Company			Reorganized Predecessor Company
*(In thousands)*	2005 First Quarter			2004 First Quarter
Operating activities:
Net loss	$	(12,940	)	$	(12,672	)
(Income) loss from discontinued operations, net of tax		(241	)		871

Loss from continuing operations		(13,181	)		(11,801	)

Adjustments to reconcile net loss from continuing operations to net cash used in continuing operations:
Stock based compensation		—			105
Depreciation and amortization		12,865			14,385
Gain on the sale of property and equipment, net		(9,222	)		(746	)
Asset impairment		1,303			—
Changes in assets and liabilities:
Accounts and notes receivable, net		806			(287	)
Inventories		(2,013	)		300
Other assets		2,720			(708	)
Accounts payable and accrued expenses		134			(3,789	)
Income taxes payable		1,704			451
Other long-term liabilities		188			(27	)

Net cash used in operating activities from continuing operations		(4,696	)		(2,117	)

Investing activities:
Purchases of property and equipment		(11,705	)		(9,089	)
Proceeds from the sale of property and equipment		14,896			892

Net cash provided by (used in) investing activities from continuing operations		3,191			(8,197	)

Financing activities:
Borrowing under revolving line of credit		8,000			5,000
Payments of long-term debt		(643	)		(25,358	)
Payments under capital lease obligations		(140	)		(56	)

Net cash provided by (used in) financing activities from continuing operations		7,217			(20,414	)

Effect of exchange rates on cash		(2,082	)		(2,223	)
Net cash used in discontinued operations		(80	)		(1,074	)

Net increase (decrease) in cash		3,550			(34,025	)
Cash at beginning of period		12,734			56,275

Cash at end of period	$	16,284		$	22,250

	Quarter EndedSeptember 28, 2003			Quarter EndedSeptember 29, 2002
Cash flows from operating activities:
Net loss	$	(12,672	)	$	(20,808	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		105			—
Depreciation and amortization		15,673			21,392
(Gain) loss on the sale of property and equipment, net		(660	)		85
Changes in assets and liabilities:
Accounts and notes receivables, net		(230	)		(843	)
Inventories		260			1,548
Other assets		184			(1,319	)
Accounts payable and accrued expenses		(4,999	)		(8,554	)
Income taxes payable		715			101
Other long-term liabilities		(27	)		76
Net cash used in operating activities		(1,651	)		(8,322	)
Cash flows from investing activities:
Purchases of property and equipment		(9,250	)		(8,943	)
Proceeds from the sale of property and equipment		892			15
Net cash used in investing activities		(8,358	)		(8,928	)
Cash flows from financing activities:
Borrowing under Revolver		5,000			5,000
Repayment under Term Facility		(25,358	)		—
Repayment under capital lease obligations		(56	)		(51	)
Payments of noncompete obligations		—			(9	)
Net cash (used in) provided by financing activities		(20,414	)		4,940
Effect of exchange rates on cash		(3,602	)		2,652
Net decrease in cash		(34,025	)		(9,658	)
Cash and cash equivalents at beginning of period		56,275			34,167
Cash and cash equivalents at end of period	$	22,250		$	24,509

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

NOTE 1. BUSINESS DESCRIPTION ~~– ORGANIZATION~~

~~The~~Organization ~~Company is engaged in two business segments:~~

AMF Bowling Worldwide, Inc., a Delaware corporation, and its subsidiaries (which may be referred to as Worldwide, the Company, we, us or our), operate in two business segments:

•

the operation of bowling centers in the United States (“U.S. Centers”) and internationally (“International Centers” and collectively with U.S. Centers, “Centers”); and

•

the manufacture and sale of bowling equipment, such as automatic pinspotters, automatic scoring equipment, bowling pins, lanes, ball returns, lane machines, bowling center supplies and the resale of other related products, including bowling bags and shoes (collectively, “Products”).

~~The~~As ~~Company~~of isSeptember ~~the~~26, ~~largest~~2004, ~~operator~~we ofoperated 460 bowling centers worldwide. We operated 368 bowling centers in the ~~world~~U.S. ~~with~~and ~~473~~92 bowling centers in ~~operation~~five asforeign countries. ofOn September 2830, ~~2003~~2004, ~~comprised~~we ofsold ~~376~~our bowling center business that operated 33 bowling centers in the ~~U.S.~~United Kingdom for gross cash proceeds of approximately $71,200 and 97exited bowling center operations in that country. The results of operations for the centers ~~operating~~in the United Kingdom have been reported as discontinued operations for all periods presented and related assets and liabilities are classified as “held for sale” in ~~five~~the ~~foreign~~Condensed ~~countries.~~Consolidated Balance Sheet.

Products is one of the ~~two~~ largest manufacturers of bowling center equipment in the world. Products revenue consists of two major sales categories:

•

New Center Packages (“NCPs”), which is all of the equipment necessary to outfit one lane at a new or existing bowling center; and

•

Modernization and Consumer Products, which is equipment used to upgrade an existing center, spare parts, pins, supplies and consumable products used in the operation of a center, and bowling balls and ancillary products for resale to bowlers.

Products also manufactures and sells its Playmaster, Highland and Renaissance brands of billiard tables.

Worldwide serves as the corporate headquarters of the Company. Its employees provide certain management and administrative services for Centers and Products. Worldwide’s business operations and operating assets are held in subsidiaries. U.S. Centers is primarily operated through AMF Bowling Centers, Inc. (“AMF Centers”), a wholly -owned, indirect subsidiary of Worldwide. International Centers is operated through separate, indirect subsidiaries of Worldwide that operate bowling centers in various countries. Products is primarily operated through AMF Bowling Products, Inc. (“AMF Products”), which is a ~~wholly~~ wholly-owned, indirect subsidiary of Worldwide.

OnMerger July 2, 2001 (the “Petition Date”), Worldwide and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11, Title 11 of the United States Bankruptcy Code (“Chapter 11”). The bankruptcy court (the “Bankruptcy Court”) confirmed the Plan on February 1, 2002 and the Debtors emerged from Chapter 11 on March 8, 2002 (the “Effective Date”). Upon emergence from Chapter 11, the indebtedness that the Company had in place prior to the Effective Date was terminated, discharged or re-instated.

On November 26, 2003, Kingpin Holdings, LLC (“Kingpin Holdings”) and its wholly-owned subsidiary, Kingpin Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger with Worldwide (the “Merger Agreement”). Pursuant to the Merger Agreement, on February 27, 2004, Merger Sub was merged into Worldwide with Worldwide being the surviving corporation (the “Merger”). The Company, ~~has~~as ait ~~retail~~existed ~~calendar~~after ~~with~~the Merger, is sometimes referred to as the “New Company.” Each shareholder of Worldwide received $25.00 in cash for each ~~quarter~~share ~~comprised~~of the common stock of ~~one~~Worldwide ~~five~~that ~~week~~was ~~period~~outstanding prior to the Merger (the “Old Common Stock”) including vested options and ~~two~~warrants, ~~four~~for ~~week~~aggregate ~~periods~~proceeds (including option proceeds) of $258,700. The ~~Company’s~~Old ~~52-53~~Common Stock ~~week~~was ~~year~~canceled ~~ends~~and onthe common stock of Merger Sub became the ~~Sunday~~new ~~nearest~~common tostock ~~June~~of 30Worldwide (the “New Common Stock”). ~~Fiscal~~As ~~year~~part ~~2003~~of ~~contained~~the 52Merger, Kingpin Intermediate Corp., a wholly-owned subsidiary of Kingpin Holdings, became the sole ~~weeks~~shareholder of Worldwide.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

Kingpin Holdings is a Delaware limited liability company formed at the direction of Code Hennessy & Simmons LLC, a Chicago-based private equity firm (“CHS”).

Fiscal Year

We report on a retail calendar year, with each quarter comprised of one 5-week period and two 4-week periods. Fiscal year 2004 had 52 weeks and fiscal year 2005 has 53 weeks, with the extra week being reported in the fourth quarter.

NOTE 2. BASIS OF PRESENTATION

~~The~~Our ~~Company’s~~ interim condensed consolidated financial statements presented in this ~~Form~~report ~~10-Q~~ are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States ~~of America~~ for financial information requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts could differ from these estimates. Certain previously reported amounts have been reclassified to conform to the current year presentation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of ~~only~~ normal recurring accruals and purchase method accounting adjustments, which are necessary to present fairly the consolidated financial position ~~of the Company~~ and the consolidated results of operations and cash flows for all periods presented.

These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in ~~the~~our ~~Company’s~~ Annual Report on Form 10-K for the fiscal year ended June 2927, ~~2003~~2004. ~~The balances presented as of June 29, 2003 are derived from the Company’s audited consolidated financial statements.~~

~~NOTE~~Prior 3to February 27, 2004, we were referred to as the “Reorganized Predecessor Company” and, as we existed on and after February 27, 2004, we are referred to as the “New Company.” ~~EARNINGS~~Our ~~(LOSS)~~financial ~~PER~~results ~~SHARE~~during the three months ended September 26, 2004 and the three months ended September 28, 2003 are not comparable due to the Merger described above.

Basic earnings (loss) per share is computed using the weighted average number of outstanding shares of Common Stock during the period. Diluted earnings per share adjusts the weighted average for the potential dilution that could occur if stock options, warrants or restricted stock were exercised or converted into Common Stock. The computation for basic and diluted earnings (loss) per share is as follows:


Period		Referred to as
Results for the New Company from June 28, 2004 through September 26, 2004		“New Company 2005 First Quarter”

Results for the Reorganized Predecessor Company from June 30, 2003 through September 28, 2003		“Reorganized Predecessor Company 2004 First Quarter”

	Quarter Ended September 28, 2003			Quarter Ended September 29, 2002
Net loss	$	(12,672	)	$	(20,808	)
Weighted average shares of common stock outstanding:
Basic		10,000			10,000
Effect of stock options and warrants		—			—
Diluted		10,000			10,000
Net loss per share:
Basic	$	(1.27	)	$	(2.08	)
Diluted		(1.27	)		(2.08	)

AsTable of September 28, 2003 and September 29, 2002, potentially dilutive common shares of 4,127 and 4,277, respectively, were not included in the computation of diluted earnings per share because their effect is antidilutive. Contents

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except as otherwise noted)

(unaudited)

NOTE 3. DISCONTINUED OPERATIONS

During the New Company 2005 First Quarter, we committed to a plan to sell our bowling center operations in the United Kingdom and we sold such operations on September 30, 2004. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-lived Assets,” the bowling operations of the United Kingdom are reported separately as discontinued operations for all periods presented.

The financial results of the United Kingdom bowling business, included in discontinued operations, were as follows:


	New Company			Reorganized Predecessor Company
	2005 First Quarter			2004 First Quarter
Revenue	$	11,451		$	9,334

Loss before income taxes		(96	)		(509	)
Provision (benefit) for income taxes		(337	)		362

Income (loss) from discontinued operations	$	241		$	(871	)

The assets and liabilities of the United Kingdom bowling business as of September 26, 2004 are classified as “held for sale” and were as follows:


	September 26, 2004
Accounts receivable, net of allowance	$	203
Inventory		813
Prepaid and other current assets		3,570
Property and equipment, net		40,576
Other		158

Assets held for sale	$	45,320

Accounts payable	$	3,718
Accrued expenses		2,813

Liabilities held for sale	$	6,531

NOTE 4. COMPREHENSIVE INCOME (LOSS)

Comprehensive loss was $14,760 for the New Company 2005 First Quarter and $12,119 for the Reorganized Predecessor Company 2004 First Quarter. Accumulated other comprehensive loss of $5,107 at September 26, 2004 and $3,287 at June 27, 2004 is included in stockholder’s equity and consists of the foreign currency translation adjustment.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except as otherwise noted)

(unaudited)

NOTE 5. INVENTORIES, NET

Inventories, net at September 26, 2004 and June 27, 2004 consisted of:


	September 26, 2004		June 27, 2004
Products, at FIFO:
Raw materials	$	6,269	$	6,157
Work in process (a)		3,100		2,281
Finished goods and spare parts		15,383		14,362
Centers, at average cost:
Merchandise and spare parts		7,175		7,945

Total inventories	$	31,927	$	30,745

(a)	Work in process also includes certain inventory shipments in-transit to customers.

NOTE 6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net at September 26, 2004 and June 27, 2004 consisted of:


	September 26, 2004			June 27, 2004
Land	$	36,711		$	44,248
Buildings and improvements		118,347			143,124
Equipment, furniture and fixtures		175,848			186,488
Other		14,379			10,664

		345,285			384,524
Less accumulated depreciation		(30,610	)		(20,568	)

Property and equipment, net	$	314,675		$	363,956

Depreciation expense related to property and equipment was $12,458 in the New Company 2005 First Quarter and $14,218 in the Reorganized Predecessor Company 2004 First Quarter.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

NOTE 47. ~~STOCK-BASED~~SUPPLEMENTAL ~~COMPENSATION~~CASH FLOW INFORMATION

The ~~Company~~table ~~currently~~below ~~uses~~presents ~~the~~supplemental ~~intrinsic~~cash ~~value method of accounting for stock based employee compensation in accordance with~~flow ~~Accounting~~information ~~Principles Board (“APB”) Opinion No. 25 “Accounting~~ for ~~Stock Issued to Employees.” Under APB Opinion No. 25, compensation expense is based upon~~ the ~~difference,~~reporting if any, between the fair value of the Company’s stock and the exercise price on the date of the grant. Options to purchase common stock granted to other than employees as consideration for services rendered are measured at fair value and are recognized as the services are provided. If the Company had elected to recognize compensation expense based on the fair value of all stock awards at grant date as prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation,” the net income (loss) and net income (loss) per basic and diluted share for the quarter ended September 28, 2003 and September 29, 2002 would have been reflected as the pro forma amounts shown belowperiods:

	Quarter EndedSeptember 28, 2003				Quarter EndedSeptember 29, 2002
	NewCompany			ReorganizedPredecessorCompany
Net loss, as reported	$	(12,672	)		$	(20,808	)
	2005 FirstQuarter			2004 FirstQuarter
Stock-based employee compensation under APB 25		105				—
Cash paid during the period for:
Pro forma stock-based employee compensation expense under SFAS No. 123		(780	)			(791	)
Interest	$	9,245		$	15,524
Net loss, pro forma	$	(13,347	)		$	(21,599	)
Income taxes		830			707
Net loss per share, as reported
Basic	$	(1.27	)		$	(2.08	)
Diluted		(1.27	)			(2.08	)
Net loss per share, pro forma
Basic	$	(1.33	)		$	(2.16	)
Diluted		(1.33	)			(2.16	)
Weighted average shares
Basic		10,000				10,000
Diluted		10,000				10,000

NOTE 58. ~~COMPREHENSIVE~~LONG-TERM ~~INCOME (LOSS)~~DEBT

~~Comprehensive~~As ~~loss~~discussed ~~was~~in ~~$12,119~~Note ~~and $20~~1,~~659~~ ~~for~~we completed the ~~quarter~~ ~~ended~~Merger ~~September~~on February 2827, ~~2003~~2004 and ~~September~~substantially ~~29,~~all ~~2002, respectively. Accumulated other comprehensive income~~ of ~~$11,866~~the ~~and~~debt ~~$4,817~~the atReorganized ~~September~~Predecessor ~~28,~~Company ~~2003~~had ~~and September 29, 2002, respectively, is included~~ in ~~stockholders’~~place ~~equity~~prior ~~and~~to ~~consists of~~ the ~~foreign~~Merger ~~currency~~was ~~translation~~paid ~~adjustment~~in full.

Long-Term Debt Summary

Our long-term debt at September 26, 2004 and June 27, 2004 consisted of:


	September 26, 2004			June 27, 2004
Term Loan	$	134,358		$	135,000
Revolver		8,000			—
Subordinated Notes, 10%, due 2010		150,000			150,000
Old Subordinated Notes, 13%, due 2008		5			5
Mortgage note and capitalized leases		3,652			3,792

Total debt		296,015			288,797
Current maturities		(2,311	)		(2,294	)

Total long-term debt	$	293,704		$	286,503

Credit Agreement

We have $134,358 in term loans (the “Term Loan”) under a senior secured credit agreement (the “Credit Agreement”) which also has an aggregate revolving loan commitment of $40,000 (the “Revolver”). In September 2004, we entered into a First Amendment to Credit Agreement (the “Amendment”). The Amendment, among other things, requires us to prepay loans and/or cash collateralize or pay certain letter of credit obligations under the Credit Agreement in an amount equal to 20% of the net cash proceeds from any sale, transfer or other disposition of the assets or stock of certain of our subsidiaries that operate overseas. The Amendment also permits us to redeem, purchase, prepay, retire, defease or otherwise acquire our 10% Senior Subordinated Notes due 2010 for cash consideration in an amount that does not exceed 80% of net cash proceeds from those sales of assets or stock of certain of our subsidiaries that operate overseas within a specified period of time.

At September 26, 2004, $8,000 was outstanding under the Revolver. Outstanding standby letters of credit issued under the Revolver totaled $18,135 leaving $13,865 available for additional borrowings or letters of credit. Our aggregate letter of credit obligations outstanding under the Credit Agreement may not exceed $25,000. The principal amount of the Term Loan must be repaid on a quarterly basis in the amounts and at the times specified in the Credit Agreement, with a final principal payment of $127,608 due on August 27, 2009. Scheduled quarterly

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

~~NOTE~~principal 6payments of $296 are due on the 30th day of the last month of the calendar quarter. ~~RECENTLY~~Repayment ~~ADOPTED~~also ~~ACCOUNTING~~is ~~PRONOUNCEMENTS~~required in amounts specified in the Credit Agreement for certain events including certain asset sale proceeds and equity and debt offering proceeds. The Credit Agreement requires the frequency of interest payments to be not less than quarterly and an annual mandatory prepayment of the Term Loan based on a percentage of free cash flow, ranging from 25-75%, as specified in the Credit Agreement. The obligations under the Credit Agreement are secured by substantially all of our U.S. assets and a 65% pledge of the capital stock of certain first tier foreign subsidiaries. Certain of our U.S. subsidiaries have guaranteed, or are directly obligated on, the Credit Agreement. The Credit Agreement contains certain events of default including cross default provisions.

OnSubordinated ~~June~~Notes 30, 2003, the Company adopted the provisions of SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 requires that certain financial instruments be classified as a liability or an asset in some instances. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement did not have any effect on the Company’s results of operations or financial condition or impact its classification of any financial instruments.

OnWe ~~June~~have 30$150,000 ~~2003,~~of ~~the~~10% Senior ~~Company~~Subordinated ~~adopted~~Notes due 2010 (the ~~provisions~~“Subordinated ofNotes”) ~~the~~with ~~Financial~~interest ~~Accounting~~payable ~~Standards~~semi-annually. ~~Board~~The Subordinated Notes were issued pursuant to an indenture dated February 27, 2004 (the “~~FASB~~Indenture”). ~~Emerging~~The ~~Issues~~Subordinated ~~Task~~Notes ~~Force~~are ~~(“EITF”)~~expressly ~~00-21~~subordinated ~~“Revenue~~to ~~Arrangements~~the ~~with~~payment ~~Multiple~~of ~~Deliverables.”~~the ~~EITF~~Credit ~~00-21~~Agreement ~~addresses~~and any other senior indebtedness; contain affirmative and negative covenants that are customary to high yield instruments and generally no more restrictive than those contained in the Credit Agreement; contain certain ~~aspects~~events of ~~the~~default ~~accounting~~including bycross adefault ~~vendor~~provisions; ~~for~~are ~~arrangements~~unsecured; ~~under~~and ~~which~~have itthe ~~will~~benefit ~~perform~~of ~~multiple~~guarantees ~~revenue-generating~~of ~~activities~~certain of the U.S. subsidiaries. Subject to certain exceptions, the Subordinated Notes may not be redeemed ~~Specifically~~at our option before March 1, ~~EITF~~2007. ~~00-21~~Thereafter, ~~addresses~~the ~~how~~Subordinated Notes are redeemable in the manner provided in the Indenture at redemption prices equal to ~~determine~~105.00% ~~whether~~during anthe ~~arrangement~~12 ~~involving~~month ~~multiple~~period ~~deliverables~~beginning ~~contains~~March ~~more~~1, ~~than~~2007, ~~one~~102.50% ~~unit~~during ofthe ~~accounting~~12 month period beginning March 1, 2008 and 100.00% ~~The~~beginning ~~guidance~~on inMarch ~~this~~1, ~~EITF~~2009 isand ~~effective~~thereafter. ~~for~~Upon ~~revenue~~the ~~arrangements~~occurrence ~~entered~~of ~~into~~a change of control (as defined in ~~periods~~the ~~beginning after~~Indenture), ~~June~~we 15are required to offer to purchase the Subordinated Notes at 101.00% of their principal amount, ~~2003~~plus accrued interest. ~~The~~Subject ~~adoption~~to certain restrictions and conditions, the Indenture permits the payment of ~~this~~a ~~statement~~dividend ~~did~~or ~~not~~distribution ~~have~~to ~~any~~Kingpin ~~effect~~Intermediate onCorp. or the ~~Company’s~~repurchase ~~results~~or redemption of ~~operations~~shares of Worldwide or ~~financial~~any ~~condition~~parent of Worldwide of up to 35% of the Net Cash Proceeds (as defined in the Indenture) from the sale of International Operations (as defined in the Indenture).

NOTE 79. ~~INVENTORIES,~~LIABILITIES ~~NET~~SUBJECT TO RESOLUTION

~~Inventories,~~Liabilities ~~net~~subject to resolution in the Chapter 11 proceeding were $233 at September 2826, ~~2003~~2004 and June 2927, ~~2003~~2004. These balances consist primarily of: real and personal property taxes expected to be paid upon settlement of the claim or over a six year period.

	September 28, 2003		June 29, 2003
Products, at FIFO:
Raw materials	$	6,159	$	4,117
Work in progress		5,867		4,929
Finished goods and spare parts		16,365		17,283
Centers, at average cost:
Merchandise and spare parts		7,962		7,672
	$	36,353	$	34,001

NOTE 10. COMMITMENTS AND CONTINGENCIES

~~NOTE~~Equipment 8.Warranties ~~PROPERTY AND EQUIPMENT, NET~~

~~Property~~The ~~and~~following ~~equipment,~~table provides ~~net~~a atroll-forward ~~September~~from 28June 27, ~~2003~~2004 ~~and June~~of ~~29,~~our ~~2003~~estimated ~~consist~~exposure ofrelated to equipment warranties for the period ended September 26, 2004:

	September 28, 2003			June 29, 2003
Balance, June 27, 2004	$	1,136
Land	$	117,230		$	117,267
Provision		66
Buildings		308,292			303,955
Payments		(60	)
Equipment, furniture and fixtures		241,449			237,830
Exchange rate effect		(1	)
Other		6,161			4,087
Balance, September 26, 2004	$	1,141
		673,132			663,139
Less: accumulated depreciation		(110,169	)		(94,530	)
	$	562,963		$	568,609

~~Depreciation~~The ~~expense~~warranty reserve ~~related~~is toevaluated ~~property~~on ~~and~~a ~~equipment~~regular ~~was~~basis ~~$15,501~~to ~~and~~determine ~~$21,302~~its ~~for~~adequacy. ~~the~~The ~~quarter~~reserve ~~ended~~is ~~September~~based ~~28,~~upon ~~2003~~prior experience and ~~September~~management’s ~~29, 2002, respectively~~estimates.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

~~NOTE~~Asset 9.Sales ~~LONG-TERM DEBT~~

~~Credit~~From ~~Agreement~~time to time, we will sell real estate on which a bowling center is operated, either in connection with the closing of a bowling center or in response to an attractive offer to buy such real estate. In addition, we will, from time to time, sell excess real estate.

AsThe offollowing ~~February~~table ~~28,~~shows ~~2002,~~our ~~the~~asset ~~Company~~sales ~~entered~~for ~~into a senior secured credit agreement (~~the ~~“Credit~~New Agreement”) that consisted of a $290,000 term facility (the “Term Facility”) maturing in February 2008 and a $60,000 revolving credit facility (the “Revolver”) maturing in February 2007. On December 19, 2002, after reviewing the Company’s ~~future~~2005 ~~liquidity requirements,~~First ~~the~~Quarter: ~~Company voluntarily and permanently reduced the Revolver as provided in the Credit Agreement, from $60,000 to $45,000. This reduction will result in lower commitment fees in future periods.~~

Outstanding borrowings under the Term Facility bear interest equal to either the adjusted Eurodollar rate (as defined in the Credit Agreement) plus the applicable margin (4.00% to 4.50%) or the Base Rate (as defined in the Credit Agreement) plus the applicable margin (3.00% to 3.50%), at the Company’s option depending on certain financial ratios. The interest rate in effect at September 28, 2003 was 5.45%. Outstanding borrowings under the Revolver bear interest equal to the adjusted Eurodollar rate plus the applicable margin (3.25% to 4.00%) or the Base Rate plus the applicable margin (2.25% to 3.00%), at the Company’s option depending on certain financial ratios. The Company pays a commitment fee of 0.50% on the unused portion of the Revolver. Drawings under the Revolver are subject to the fulfillment of certain conditions. The Credit Agreement contains certain restrictive covenants, including the achievement of certain financial covenants and maximum levels of capital expenditures. As of September 28, 2003, $5,000 was outstanding under the Revolver. On October 2, 2003, the Company repaid the $5,000 borrowing under the Revolver, which is not reflected in the condensed consolidated balance sheet at September 28, 2003. Outstanding standby letters of credit issued under the Revolver, as of September 28, 2003, totaled $9,550, leaving $30,450 available for additional borrowings or letters of credit. The principal amount of the Term Facility must be repaid on a quarterly basis in the amounts and at the times specified in the Credit Agreement, with a final principal payment of $130,371 due on February 28, 2008. Scheduled quarterly principal payments for fiscal year 2004 will range from $1,900 to $7,300 and $2,400 to $9,800 for the quarters thereafter. All payments are due on the last day of the calendar quarter. The Company made a principal payment of $1,910 on September 30, 2003 which is not reflected in the condensed consolidated balance sheet at September 28, 2003. Repayment also is required in amounts specified in the Credit Agreement for certain events including unreinvested asset sale proceeds and equity and debt offering proceeds. The Credit Agreement requires the frequency of interest payments not to be less than quarterly and an annual mandatory prepayment of the Term Facility based on a percentage of free cash flow, ranging from 25-75%, as specified in the Credit Agreement. The obligations of Worldwide under the Credit Agreement are secured by substantially all of the Company’s U.S. assets and a 66% pledge of the capital stock of certain first tier foreign subsidiaries. Certain of the Company’s U.S. subsidiaries have guaranteed, or are directly obligated on, the Credit Agreement. The Credit Agreement contains certain events of default including cross default provisions.


	Proceeds		Gain/ (loss), net
U.S. Centers:
Excess property	$	1,515	$	528

International Centers (a):
Bowling centers (b)		13,381		9,473

Total asset sales	$	14,896	$	10,001

~~Pursuant to the Credit Agreement, the Company was required to calculate the amount of~~ (a) ~~mandatory~~See ~~prepayment~~Note of13 ~~the Term Facility based on consolidated excess cash flow, as defined in the Credit Agreement,~~ for ~~the~~information ~~transition~~regarding ~~period from January 1, 2002 through June 30, 2002. The Company deposited $11,720 on October 18, 2002 into an account held by~~ the ~~Administrative~~sale ~~Agent, which applied the prepayment to the Term Facility on November 7, 2002 upon expiration~~ of aour ~~Eurodollar~~bowling ~~loan~~center ~~contract.~~operations ~~For~~in the ~~fiscal~~ ~~year~~United ~~ended~~Kingdom ~~June 29, 2003, the Company calculated a mandatory prepayment of $24,372 based on consolidated excess cash flow, $23,260 of which was paid~~ and ~~applied to the Term Facility on August 28, 2003~~Australia. ~~The remaining $1,112 was paid on October 8, 2003 upon expiration of a Eurodollar loan contract. The prepayments reduced the remaining scheduled principal payments on a pro rata basis.~~

(b)	Includes three bowling centers in Australia which were sold in connection with sale-leaseback agreements for proceeds of $12,806 and gains of $9,928.

Net gains on sale of property and equipment are $9,222, and include the asset sales above. Centers net gains are included in bowling center operating expenses and Products net gains are included in selling, general and administrative expense on the Condensed Consolidated Statements of Operations.

Litigation and Claims

We currently and from time to time are subject to claims and actions arising in the ordinary course of our business, including general liability, workers’ compensation, employee compensation and environmental claims. In some actions, plaintiffs request punitive or other damages that may not be covered by insurance. In management’s opinion, the claims and actions in which we are involved are not expected to have a material adverse impact on our financial position or results of operations. In addition, we are a defendant in certain actions alleging violations of federal legislation involving unsolicited communications. These actions were brought by plaintiffs who allegedly received unsolicited communications from us or from an agent on our behalf. The plaintiffs in these actions seek statutory damages and have requested geographically-limited class certifications. In one of these actions, which was brought in Georgia state court, the court recently approved a settlement of the class action. It is not possible at this time to predict the outcome of the remaining action. From time to time, we resolve claims alleging similar violations in order to avoid litigation.

Effects of Threatened European Community Tariff Increases

The Commission of the European Community increased tariffs this year on certain U.S. exports to the countries comprising the European Community (the “EC”) in response to benefits for U.S. exporters under the U.S. Foreign Sales Corporation/Extraterritorial Income Exclusion tax regimes, which were declared in violation of U.S. obligations by the World Trade Organization (the “WTO”). A substantial portion of our bowling products imported into the EC is subject to the additional duty. The additional duty was 5% ad valorem in March 2004 and increases 1% each month thereafter up to a maximum of 14%. The U.S. Congress recently enacted legislation which was intended to address the issues raised by the EC. Until the EC or the WTO responds to this action, there can be no assurance that the additional duty will be removed or the sanctions will not have an adverse impact on our sales in the EC or margin.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

~~Subordinated~~NOTE ~~Notes~~11. BUSINESS SEGMENTS

AsWe ofoperate ~~the~~in ~~Effective~~two ~~Date~~business ~~and~~segments: ~~pursuant~~operation ~~to the Plan, the Company issued $150,000 aggregate principal amount~~ of ~~13.00%~~bowling ~~Senior~~centers Subordinated Notes due September 2008 (the “Subordinated Notes”) with interest payable semi-annually. The Subordinated Notes were issued pursuant to an indenture dated as of March 8, 2002 (the “Indenture”). The Subordinated Notes are expressly subordinated to the payment of the Credit Agreement and ~~any other senior indebtedness of the Company; contain affirmative and negative covenants generally no more restrictive than those contained in the Credit Agreement; contain certain events of~~ ~~default~~manufacture ~~including cross default provisions; are unsecured;~~ and ~~have~~sale ~~the benefit~~ of ~~guarantees~~bowling of certain of the U.S. subsidiaries of the Company. Subject to certain exceptions, the Subordinated Notes may not be redeemed at the Company’s option before March 1, 2005. Thereafter, the Subordinated Notes are redeemable in the manner provided in the Indenture at redemption prices equal to 106.50% during the 12 month period beginning March 1, 2005, 103.25% during the 12 month period beginning March 1, 2006 and ~~100.00%~~related ~~beginning on March 1, 2007 and thereafter~~products. ~~Upon~~Information ~~the~~concerning ~~occurrence~~these ofoperations ~~both~~from acontinuing ~~change~~operations ~~of control of the Company (as defined in the Indenture) and a ratings decline (as defined in the Indenture), the Company~~ is ~~required~~presented tobelow: offer to purchase the Subordinated Notes at 101.00% of their principal amount, plus accrued interest, and has the option to redeem the Subordinated Notes at 110.00% of their principal amount, plus accrued interest.

Long-Term Debt Summary


	New Company 2005 First Quarter
*(In millions)*	Revenue from unaffiliated customers		Intersegment sales			Operating income (loss)			Total assets		Depreciation and amortization			Capital expenditures
Centers:
U.S.	$	85.5	$	—		$	(10.5	)	$	252.0	$	8.8		$	10.1
International		18.7		—			7.4			116.9		1.9			0.1

Subtotal		104.2		—			(3.1	)		368.9		10.7			10.2

Products:
U.S.		17.2		6.9			(1.2	)		83.0		1.7			0.7
International		10.0		1.0			2.1			23.4		0.1			—

Subtotal		27.2		7.9			0.9			106.4		1.8			0.7

Corporate		—		—			(5.7	)		11.7		0.4			0.8
Eliminations		—		(7.9	)		—			7.5		—			—

Total	$	131.4	$	—		$	(7.9	)	$	494.5	$	12.9		$	11.7


	Reorganized Predecessor Company 2004 First Quarter
*(In millions)*	Revenue from unaffiliated customers		Intersegment sales			Operating income (loss)			Total assets		Depreciation and amortization			Capital expenditures
Centers:
U.S.	$	89.5	$	—		$	(1.2	)	$	468.0	$	10.5		$	7.7
International		18.1		—			1.8			91.5		1.9			0.6

Subtotal		107.6		—			0.6			559.5		12.4			8.3

Products:
U.S.		18.0		4.2			1.7			86.6		1.4			0.3
International		13.1		1.1			(0.5	)		30.2		0.1			—

Subtotal		31.1		5.3			1.2			116.8		1.5			0.3

Corporate		—		—			(5.4	)		13.2		0.7			0.5
Eliminations		—		(5.3	)		0.1			7.1		(0.2	)		—

Total	$	138.7	$	—		$	(3.5	)	$	696.6	$	14.4		$	9.1

The Company’s long-term debt at September 28, 2003 and June 29, 2003 consists of:

	September 28, 2003			June 29, 2003
Term Facility	$	236,874		$	262,232
Revolver (a)		5,000			—
Subordinated Notes		150,000			150,000
Mortgage note and capitalized leases (b)		4,200			4,256
Total debt		396,074			416,488
Current maturities		(17,931	)		(40,901	)
Total long-term debt	$	378,143		$	375,587

(a) As of September 28, 2003, there was $30,450 available for borrowing under the Revolver, with $5,000 outstanding and $9,550 of issued but undrawn standby letters of credit.

(b) As of September 28, 2003, represents debt under one mortgage note and three capitalized equipment leases.

NOTE 10. LIABILITIES SUBJECT TO RESOLUTION

Liabilities subject to resolution in the Chapter 11 proceeding at September 28, 2003 and June 29, 2003 were $1,110 and $1,323, respectively. These balances consist primarily of real and personal property taxes expected to be paid upon settlement of the claims or over a six year period.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

NOTE 1112. ~~COMMITMENTS~~CONDENSED ~~AND~~CONSOLIDATING ~~CONTINGENCIES~~FINANCIAL STATEMENTS

~~Equipment~~The ~~Warranties~~Subordinated Notes are jointly and severally guaranteed on a full and unconditional basis by our direct and indirect, wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”). Our foreign and non wholly-owned subsidiaries (the “Non-Guarantor Subsidiaries”) do not provide guarantees. Based on this distinction, the following information presents the condensed consolidating balance sheets as of September 26, 2004 and June 27, 2004, condensed consolidating statements of operations for the New Company 2005 First Quarter and Reorganized Predecessor Company 2004 First Quarter and the condensed consolidating statements of cash flows for the New Company 2005 First Quarter and the Reorganized Predecessor Company 2004 First Quarter. The elimination entries presented are necessary to combine the entities.

The following table provides a roll-forward from June 29, 2003 of the Company’s exposure related to equipment warranties for the period ended September 28, 2003:

June 29, 2003 Balance	$	1,521
Provision		59
Payments		(57	)
September 28, 2003 Balance	$	1,523

Equipment Sale Repurchase Agreements and Operating Lease Guarantees

Effective January 1, 2003, the Company adopted the provisions of FASB Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which require the Company to record the fair value of any equipment sale repurchase agreement executed or modified after December 31, 2002. The Company entered into one repurchase agreement during the quarter ended September 28, 2003, which did not have a material impact.

In connection with certain equipment sales, AMF Products offers to certain lenders and leasing companies outside of the U.S. an equipment repurchase agreement. The repurchase price under such agreements is calculated to equal a portion of the debt incurred by customers to finance the purchase of the equipment. The Company’s aggregate amount of exposure related to equipment repurchase agreements is approximately $15,706 at September 28, 2003 of which $10,942 relates to equipment repurchase agreements entered into prior to the Petition Date. If a customer defaults under an equipment loan or lease, AMF Products may be requested to repurchase the equipment from the lender or leasing company and would be at risk for the difference of the repurchase price paid to the lender or leasing company and the amount AMF Products could realize in re-selling the equipment.

The obligations under the repurchase agreements that were incurred prior to the Petition Date were impaired under the Plan. Management has taken the position that the beneficiaries of such agreements are only entitled to their distributions as unsecured creditors of the Company under the Plan.

The Company’s exposure under equipment repurchase agreements entered into after the Petition Date is approximately $4,764. This amount includes 17 equipment repurchase agreements that have been entered into as of September 28, 2003. The Company believes it can realize approximately $3,202 upon the sale of equipment if it was required to perform under such agreements, leaving the Company with a net exposure of approximately $1,561. While there can be no assurance as to the timing, such equipment sales would occur in the normal course of business.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

~~Asset~~Condensed ~~Sales~~Consolidating Financial Statements

~~From~~AMF ~~time~~Bowling ~~to time~~Worldwide, ~~the Company will sell real estate on which a bowling center is operated, either in connection with the closing of a bowling center or in response to an attractive offer to buy such real estate~~Inc. ~~In addition, the Company will, from time to time, sell excess real estate.~~

~~During~~Condensed ~~the~~Consolidating ~~quarter~~Balance ~~ended~~Sheet ~~September 28, 2003, the Company sold excess property in the United States for net proceeds of $781.~~

Litigation and Claims


	September 26, 2004
	Worldwide			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Assets
Current assets:
Cash and cash equivalents	$	3,993		$	7,647		$	4,644		$	—		$	16,284
Accounts and notes receivable, net		—			20,726			3,950			—			24,676
Accounts and notes receivable - intercompany		20,753			148,429			8,361			(177,543	)		—
Inventories, net		—			29,395			5,927			(3,395	)		31,927
Prepaid expenses and other current assets		(7,383	)		19,766			1,616			—			13,999
Assets held for sale		—			—			45,320			—			45,320

Total current assets		17,363			225,963			69,818			(180,938	)		132,206

Notes receivable – intercompany		42,851			—			5,663			(48,514	)		—
Property and equipment, net		7,639			299,903			4,777			2,356			314,675
Investment in subsidiaries		465,612			—			5			(465,617	)		—
Other assets		28,994			97,051			(554	)		(77,900	)		47,591

Total assets	$	562,459		$	622,917		$	79,709		$	(770,613	)	$	494,472

Liabilities and Stockholder’s Equity
Current liabilities:
Accounts payable	$	17		$	12,937		$	1,221		$	—		$	14,175
Accrued expenses and other liabilities		9,365			66,570			4,906			—			80,841
Current portion of long-term debt		1,688			544			79			—			2,311
Accounts and notes payable - intercompany		135,871			13,361			28,311			(177,543	)		—
Liabilities held for sale		—			—			6,531			—			6,531

Total current liabilities		146,941			93,412			41,048			(177,543	)		103,858

Long-term debt, less current portion		290,674			2,699			331			—			293,704
Liabilities, subject to resolution		—			233			—			—			233
Other long-term liabilities		21,569			56,164			167			(77,900	)		—
Notes payable-intercompany		5,559			—			42,955			(48,514	)		—

Total liabilities		464,743			152,508			84,501			(303,957	)		397,795

Stockholder’s equity:
Common stock		—			—			—			—			—
Paid-in capital		133,716			649,280			44,623			(693,903	)		133,716
Accumulated deficit		(30,893	)		(182,481	)		(39,078	)		220,520			(31,932	)
Accumulated other comprehensive income (loss)		(5,107	)		3,610			(10,337	)		6,727			(5,107	)

Total stockholder’s equity		97,716			470,409			(4,792	)		(466,656	)		96,677

Total liabilities and stockholder’s equity	$	562,459		$	622,917		$	79,709		$	(770,613	)	$	494,472

The Company emerged from Chapter 11 on March 8, 2002. However, under the Plan, the Bankruptcy Court retained jurisdiction over certain matters, including matters relating to claim objections and specific matters relating to the implementation and consummation of the Plan. In management’s opinion, the matters over which the Bankruptcy Court has retained jurisdiction are not expected to have a material adverse impact on the Company’s financial position or results of operations.

The Company currently and from time to time is subject to claims and actions arising in the ordinary course of its business, including general liability, workers’ compensation and environmental claims. In some actions, plaintiffs request punitive and other damages that may not be covered by insurance. In management’s opinion, the ordinary course claims and actions in which the Company is involved are not expected to have a material adverse impact on its financial position or results of operations. In addition, AMF Centers is a defendant in certain actions alleging violations of the federal legislation for transmission of unsolicited communications. The plaintiffs in these actions seek statutory damages and have requested geographically-limited class certifications. It is not possible at this time to predict the outcome of such actions. AMF Centers also, from time to time, resolves claims alleging similar violations in order to avoid litigation.

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in thousands, except ~~share~~as ~~data~~otherwise ~~and Note 12~~noted)

(unaudited)

~~NOTE~~Condensed ~~12.~~Consolidating Financial ~~BUSINESS~~Statements ~~SEGMENTS~~

~~The~~AMF ~~Company~~Bowling ~~operates~~Worldwide, ~~in two business segments: operation of bowling centers and manufacture and sale of bowling and related products~~Inc. ~~Information concerning these operations is presented below (in millions):~~

	Quarter ended September 28, 2003
	Centers								Products
	U.S.			Inter- national		Sub- total			U.S.		Inter- national			Sub- total		Corporate			Elim- inations			Total
Revenue from unaffiliated customers	$	89.5		$	27.4	$	116.9		$	18.0	$	13.1		$	31.1	$	—		$	—		$	148.0
Intersegment sales		—			—		—			4.2		1.1			5.3		—			(5.3	)		—
Operating income (loss)		(1.2	)		1.4		0.2			1.7		(0.5	)		1.2		(5.4	)		0.1			(3.9	)
Total assets		468.0			91.5		559.5			86.6		30.2			116.8		13.2			7.1			696.6
Depreciation and amortization		10.5			3.2		13.7			1.4		0.1			1.5		0.7			(0.2	)		15.7
Capital expenditures		7.7			0.8		8.5			0.3		—			0.3		0.5			—			9.3
	Quarter ended September 29, 2002
	Centers								Products
	U.S.			Inter- national		Sub- total			U.S.		Inter- national			Sub- total		Corporate			Elim- inations			Total
Revenue from unaffiliated customers	$	92.3		$	26.4	$	118.7		$	19.8	$	12.1		$	31.9	$	—		$	—		$	150.6
Intersegment sales		—			—		—			4.1		0.7			4.8		—			(4.8	)		—
Operating income (loss)		(6.1	)		1.9		(4.2	)		1.6		(0.5	)		1.1		(5.4	)		0.2			(8.3	)
Total assets		500.7			88.6		589.3			95.5		28.5			124.0		12.3			6.6			732.2
Depreciation and amortization		17.0			3.1		20.1			1.0		0.1			1.1		0.4			(0.2	)		21.4
Capital expenditures		7.1			0.9		8.0			0.3		0.1			0.4		0.5			—			8.9

Condensed Consolidating Balance Sheet


	June 27, 2004
	Worldwide			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Assets
Current assets:
Cash and cash equivalents	$	3,379		$	6,484		$	2,871		$	—		$	12,734
Accounts and notes receivable, net		—			21,333			4,404			—			25,737
Accounts and notes receivable - intercompany		16,288			150,135			20,146			(186,569	)		—
Inventories, net		—			27,430			6,039			(2,724	)		30,745
Prepaid expenses and other current assets		(7,137	)		19,444			6,924			—			19,231

Total current assets		12,530			224,826			40,384			(189,293	)		88,447

Notes receivable – intercompany		47,330			—			5,663			(52,993	)		—
Property and equipment, net		7,256			315,007			41,627			66			363,956
Investment in subsidiaries		477,829			—			5			(477,834	)		—
Other assets		30,003			98,258			(392	)		(78,165	)		49,704

Total assets	$	574,948		$	638,091		$	87,287		$	(798,219	)	$	502,107

Liabilities and Stockholder’s Equity
Current liabilities:
Accounts payable	$	496		$	14,719		$	6,446		$	—		$	21,661
Accrued expenses and other liabilities		13,533			60,189			6,257			—			79,979
Current portion of long-term debt		1,688			530			76			—			2,294
Accounts and notes payable - intercompany		130,212			13,576			42,781			(186,569	)		—

Total current liabilities		145,929			89,014			55,560			(186,569	)		103,934

Long-term debt, less current portion		283,317			2,837			349			—			286,503
Liabilities, subject to resolution		—			233			—			—			233
Other long-term liabilities		21,569			56,422			174			(78,165	)		—
Notes payable-intercompany		10,038			—			42,955			(52,993	)		—

Total liabilities		460,853			148,506			99,038			(317,727	)		390,670

Stockholder’s equity:
Common stock		—			—			—			—			—
Paid-in capital		133,716			504,566			(10,975	)		(493,591	)		133,716
Accumulated (deficit) earnings		(16,334	)		(9,965	)		(886	)		8,193			(18,992	)
Accumulated other comprehensive income (loss)		(3,287	)		(5,016	)		110			4,906			(3,287	)

Total stockholder’s equity		114,095			489,585			(11,751	)		(480,492	)		111,437

Total liabilities and stockholder’s equity	$	574,948		$	638,091		$	87,287		$	(798,219	)	$	502,107

~~ITEM~~AMF 2.BOWLING ~~MANAGEMENT’S~~WORLDWIDE, ~~DISCUSSION~~INC. ~~AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Chapter~~NOTES 11TO ~~and~~CONDENSED ~~Emergence~~CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~On July 2, 2001~~ (~~the~~in ~~“Petition Date”)~~thousands, ~~AMF~~except ~~Bowling~~as ~~Worldwide,~~otherwise ~~Inc., a Delaware corporation (“Worldwide” and together with its subsidiaries, the “Company”~~noted) and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 (“Chapter 11”), Title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the “Bankruptcy Court”).

~~On February 1, 2002, the Bankruptcy Court confirmed the Second Amended Second Modified Joint Plan of Reorganization~~ (~~the “Plan”~~unaudited) of the Debtors. The Plan became effective March 8, 2002 (the “Effective Date”), which is the date on which the Debtors formally emerged from Chapter 11. As part of the Plan, Worldwide entered into a senior secured credit agreement with Deutsche Bank Trust Company Americas (formerly Bankers Trust Company), as Administrative Agent, and certain other lenders dated as of February 28, 2002 (the “Credit Agreement”). Worldwide also entered into an indenture dated as of March 8, 2002 (the “Indenture”), providing for the issuance of $150.0 million aggregate principal amount of 13.00% Senior Subordinated Notes due 2008 (the “Subordinated Notes”).

~~Background~~Condensed Consolidating Financial Statements

ToAMF ~~facilitate~~Bowling ~~a meaningful comparison~~Worldwide, ~~certain portions of this Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss results of bowling center operations in the United States (“U~~Inc.S. ~~Centers”) and internationally (“International Centers” and collectively with U.S. Centers, “Centers”) and bowling products operations (“Products”) separately.~~

~~The~~Condensed ~~results~~Consolidating ofStatements ~~operations~~ of ~~Centers,~~Operations Products and the consolidated group of companies are set forth below. The business segment results presented below are before intersegment eliminations since the Company’s management believes this provides a more accurate comparison of performance by segment. The intersegment eliminations are included in the consolidated results and are not material. The comparative results of Centers for the quarter ended September 28, 2003 versus the quarter ended September 29, 2002 reflect the closing of 18 centers.

The following discussion should be read in conjunction with the unaudited interim condensed consolidated financial statements of the Company and the notes thereto set forth in this Quarterly Report on Form 10-Q. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Certain totals may be affected by rounding. Unless the context otherwise indicates, dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in millions.


	New Company 2005 First Quarter
	Worldwide			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Operating revenue	$	—		$	125,517		$	9,590		$	(3,725	)	$	131,382

Operating expenses:
Cost of goods sold		—			27,516			5,273			(3,515	)		29,274
Bowling center operating expenses		—			80,533			4,755			(210	)		85,078
Selling, general and administrative expenses		5,318			4,809			623			—			10,750
Asset impairment		—			1,303			—			—			1,303
Depreciation and amortization		430			12,307			137			(9	)		12,865

Total operating expenses		5,748			126,468			10,788			(3,734	)		139,270

Operating income (loss)		(5,748	)		(951	)		(1,198	)		9			(7,888	)

Non-operating (income) expenses:
Interest expense		6,429			73			—			—			6,502
Interest income		—			(111	)		(8	)		—			(119	)
Other expense (income)		(7,481	)		6,315			(3,331	)		—			(4,497	)

Total non-operating expenses		(1,052	)		6,277			(3,339	)		—			1,886

Income (loss) from continuing operations before income taxes and equity in income (loss) of subsidiaries		(4,696	)		(7,228	)		2,141			9			(9,774	)

Provision for income taxes		122			2,240			1,045			—			3,407

Income (loss) from continuing operations		(4,818	)		(9,468	)		1,096			9			(13,181	)

Income from discontinued operations, net of tax		—			—			241			—			241

Equity in income (loss) of subsidiaries		(8,122	)		—			—			8,122			—

Net income (loss)	$	(12,940	)	$	(9,468	)	$	1,337		$	8,131		$	(12,940	)

As required under the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission (the “SEC”) issued final rules on January 22, 2002 to address the disclosure of certain financial information that is calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (“GAAP”). In response to the SEC’s ruling, the Company’s discussion of its results of operations and financial condition is presented in terms of GAAP measurements, such as net income, cash flow from operating activities and operating income.

	Quarter EndedSeptember 28, 2003			Quarter EndedSeptember 29, 2002
Consolidated
Operating revenue	$	148.0		$	150.6
Cost of goods sold		33.7			36.0
Bowling center operating expenses		91.6			91.1
Selling, general and administrative expenses		10.9			10.4
Depreciation and amortization		15.7			21.4
Operating loss		(3.9	)		(8.3	)
Interest expense, gross		9.2			10.5
Other expense (income), net		(0.9	)		0.7
Loss before provision for income taxes		(12.2	)		(19.5	)
Provision for income taxes		0.5			1.3
Net loss	$	(12.7	)	$	(20.8	)

AMF BOWLING WORLDWIDE, INC.

~~Consolidated~~NOTES ~~revenue for~~TO ~~the~~CONDENSED ~~quarter~~CONSOLIDATED ~~ended~~FINANCIAL ~~September~~STATEMENTS ~~28,~~(continued) 2003 was $148.0 million, a decrease of $2.6 million, or 1.7%, compared with the quarter ended September 29, 2002. This decrease was attributable to the decrease in Centers revenue due to a decrease in lineage, food and beverage, and ancillary revenue. In addition, closed centers represent a $2.8 million negative variance compared with the prior year period. These losses were partially offset by gains in foreign exchange rate changes.

~~Depreciation~~(in ~~and~~thousands, ~~Amortization~~except as otherwise noted)

~~Depreciation~~(unaudited) and amortization decreased $5.7 million, or 26.8%, in the quarter ended September 28, 2003 compared with the quarter ended September 29, 2002. This change was primarily attributable to decreased Centers depreciation as a result of 1996 acquisition assets with seven year lives becoming fully depreciated. In addition, due to center closures, there are 18 less centers when compared with the prior year period.

~~Interest~~Condensed ~~Expense~~Consolidating Financial Statements

~~Gross interest~~AMF ~~expense~~Bowling ~~decreased $1.3 million~~Worldwide, ~~or 12~~Inc.~~4%,~~ in the quarter ended September 28, 2003 compared with the quarter ended September 29, 2002. This decrease is primarily attributable to decreased debt levels as well as lower interest rates on the variable rate debt.

~~Provision~~Condensed ~~for~~Consolidating ~~Income~~Statements ~~Taxes~~ of Operations

As of September 28, 2003, the Company had net operating loss carryforwards of approximately $67.7 million. The net operating loss carryforwards will begin to expire in 2022. The Company recorded a valuation allowance, as of June 29, 2003, totaling $218.1 million related to net operating losses and other deferred tax assets that management believes do not meet the “more likely than not” realization criteria of SFAS No. 109 “Accounting for Income Taxes.” Due to net operating losses and the valuation allowance, no federal income tax expense or benefit was recorded for either September 28, 2003 or September 29, 2002. The tax provision recorded for the quarters ended September 28, 2003 and September 29, 2002 primarily relates to certain state, local and foreign income taxes. Income tax expense decreased to $0.5 million for the quarter ended September 28, 2003 from $1.3 million for the quarter ended September 29, 2002. The decrease is a result of the taxation of individual subsidiaries by separate state, local and foreign jurisdictions. AMF Bowling Centers, Inc. (“AMF Centers”), a wholly owned subsidiary, recorded a state tax benefit of $0.3 million for the quarter ended September 28, 2003 based on a 6% effective state tax rate. Various foreign subsidiaries and branches recorded a combined tax expense of $0.8 million for the quarter ended September 28, 2003 based on various foreign tax rates.


	Reorganized Predecessor Company 2004 First Quarter
	Worldwide			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Operating revenue	$	—		$	132,265		$	9,389		$	(2,974	)	$	138,680

Operating expenses:
Cost of goods sold		—			31,040			4,458			(2,808	)		32,690
Bowling center operating expenses		—			80,624			3,642			(166	)		84,100
Selling, general and administrative expenses		4,729			5,314			916			—			10,959
Depreciation and amortization		666			13,513			206			—			14,385

Total operating expenses		5,395			130,491			9,222			(2,974	)		142,134

Operating income (loss)		(5,395	)		1,774			167			—			(3,454	)

Non-operating (income) expenses:
Interest expense		9,125			62			—			—			9,187
Interest income		(8	)		(81	)		(4	)		—			(93	)
Other expense (income)		(7,436	)		5,984			594			—			(858	)

Total non-operating expenses		1,681			5,965			590			—			8,236


Loss from continuing operations before income taxes and equity in income (loss) of subsidiaries		(7,076	)		(4,191	)		(423	)		—			(11,690	)
Provision (benefit) for income taxes		—			(75	)		186			—			111

Loss from continuing operations		(7,076	)		(4,116	)		(609	)		—			(11,801	)

Loss from discontinued operations, net of tax		—			—			(871	)		—			(871	)

Equity in income (loss) of subsidiaries		(5,596	)		—			—			5,596			—

Net loss	$	(12,672	)	$	(4,116	)	$	(1,480	)	$	5,596		$	(12,672	)

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except as otherwise noted)

(unaudited)

Condensed Consolidating Financial Statements

AMF Bowling Worldwide, Inc.

Condensed Consolidating Statement of Cash Flows


	New Company 2005 First Quarter
	Worldwide			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net cash provided by (used in) operating activities from continuing operations	$	(5,961	)	$	(2,755	)	$	1,938		$	2,082		$	(4,696	)

Cash flows from investing activities:
Purchases of property and equipment		(782	)		(10,838	)		(85	)		—			(11,705	)
Proceeds from the sale of property and equipment		—			14,896			—			—			14,896

Net cash provided by (used in) investing activities		(782	)		4,058			(85	)		—			3,191

Cash flows from financing activities:
Borrowings under revolving line of credit		8,000			—			—			—			8,000
Repayments under long-term debt		(643	)		—			—			—			(643	)
Repayment under capital lease obligations		—			(140	)		—			—			(140	)

Net cash provided by (used in) financing activities		7,357			(140	)		—			—			7,217

Effect of exchange rates on cash		—			—			—			(2,082	)		(2,082	)
Net cash used in discontinued operations		—			—			(80	)		—			(80	)

Net increase in cash		614			1,163			1,773			—			3,550
Cash at beginning of period		3,379			6,484			2,871			—			12,734

Cash at end of period	$	3,993		$	7,647		$	4,644		$	—		$	16,284

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except as otherwise noted)

(unaudited)

Condensed Consolidating Financial Statements

AMF Bowling Worldwide, Inc.

Condensed Consolidating Statement of Cash Flows


	Reorganized Predecessor Company 2004 First Quarter
	Worldwide			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net cash provided by (used in) operating activities from continuing operations	$	(14,393	)	$	7,571		$	2,482		$	2,223		$	(2,117	)
Cash flows from investing activities:
Purchases of property and equipment		(491	)		(8,415	)		(183	)		—			(9,089	)
Proceeds from the sale of property and equipment		—			892			—			—			892

Net cash used in investing activities		(491	)		(7,523	)		(183	)		—			(8,197	)

Cash flows from financing activities:
Borrowing under revolving line of credit		5,000			—			—			—			5,000
Payments on long-term debt		(25,358	)		—			—			—			(25,358	)
Repayment under capital lease obligations		—			(56	)		—			—			(56	)

Net cash used in financing activities		(20,358	)		(56	)		—			—			(20,414	)

Effect of exchange rates on cash		—			—			—			(2,223	)		(2,223	)
Net cash used by discontinued operations		—			—			(1,074	)		—			(1,074	)

Net increase (decrease) in cash		(35,242	)		(8	)		1,225			—			(34,025	)

Cash at beginning of period		48,123			5,440			2,712			—			56,275

Cash at end of period	$	12,881		$	5,432		$	3,937		$	—		$	22,250

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(in thousands, except as otherwise noted)

(unaudited)

NOTE 13. SUBSEQUENT EVENTS

On September 30, 2004, we sold our bowling center business that operated 33 bowling centers in the United Kingdom for gross cash proceeds of approximately $71,200.

On October 19, 2004, we signed a definitive agreement to sell our 45 operating bowling centers in Australia for approximately $49,300, subject to certain adjustments to be made at closing. The sale will also include the real estate associated with one closed bowling center. The transaction is expected to close by the end of November 2004, subject to certain closing conditions. Following consummation of the sale, we will have exited all bowling center operations in Australia.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

AMF Bowling Worldwide, Inc., a Delaware Corporation, and its subsidiaries (which may be referred to as Worldwide, the Company, we, us or our) operate in two business segments: bowling center operations (“Centers”) and bowling products operations (“Products”). At September 26, 2004, Centers, the largest segment, represented 79.3% of consolidated revenue. In reviewing Centers, management focuses on revenue, operating expenses and capital expenditures. In reviewing Products, management focuses on working capital as well as revenue, operating expenses and gross profit margin.

To facilitate a meaningful comparison, certain portions of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) discuss the results of Centers and Products separately.

The MD&A discussion should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes to the condensed consolidated financial statements. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Certain totals may be affected by rounding. Unless the context otherwise indicates, dollar amounts in this MD&A are in millions.

Our Centers segment includes the operation of the U.S. and international facilities, which together operated 460 centers as of September 26, 2004. On September 30, 2004, we sold 33 centers in the United Kingdom for gross cash proceeds of approximately $71.2 million and exited bowling center operations in that country. The results of operations for the centers in the United Kingdom are reported as discontinued operations for all periods presented.

Our Products segment includes the manufacture of bowling equipment such as automatic pinspotters, automatic scoring equipment, bowling pins, lanes, ball returns, lane machines, bowling center supplies and the resale of other related products, including bowling bags and shoes.

Merger

On November 26, 2003, Kingpin Holdings, LLC (“Kingpin Holdings”) and its wholly-owned subsidiary, Kingpin Merger Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger with Worldwide (the “Merger Agreement”). Pursuant to the Merger Agreement, on February 27, 2004, Merger Sub was merged into Worldwide with Worldwide being the surviving corporation (the “Merger”). The Company, as it existed after the Merger, is sometimes referred to as the “New Company.” Each shareholder of Worldwide received $25.00 in cash for each share of the common stock of Worldwide that was outstanding prior to the Merger (the “Old Common Stock”) including vested options and warrants, for aggregate proceeds (including option proceeds) of $258.7 million. The Old Common Stock was canceled and the common stock of Merger Sub became the new common stock of Worldwide (the “New Common Stock”). As part of the Merger, Kingpin Intermediate Corp., a wholly-owned subsidiary of Kingpin Holdings, became the sole shareholder of Worldwide.

Kingpin Holdings is a Delaware limited liability company formed at the direction of Code Hennessy & Simmons LLC, a Chicago-based private equity firm (“CHS”).

Consolidated Results

The results of operations of the consolidated group of companies, Centers and Products are discussed below. The business segment results are presented before intersegment eliminations since we believe this provides a more accurate comparison of performance by segment. The intersegment eliminations are included in the consolidated results and are not material.

Prior to February 27, 2004, we were referred to as the “Reorganized Predecessor Company” and, as we existed on and after February 27, 2004, are referred to as the “New Company.” As a result of the Merger, our financial results during the three months ended September 26, 2004 and the three months ended September 28, 2003 are not comparable due to the Merger described above.


Period		Referred to as
Results for the New Company from June 28, 2004 through September 26, 2004		“New Company 2005 First Quarter”

Results for the Reorganized Predecessor Company from June 30, 2003 through September 28, 2003		“Reorganized Predecessor Company 2004 First Quarter”

Consolidated Results


	New Company			Reorganized Predecessor Company
*(In millions)*	2005 First Quarter			2004 First Quarter
Operating revenue	$	131.4		$	138.7

Cost of goods sold		29.3			32.7
Bowling center operating expenses		85.1			84.1
Selling, general and administrative expenses		10.7			11.0
Asset impairment		1.3			—
Depreciation and amortization		12.9			14.4

Operating loss		(7.9	)		(3.5	)

Interest expense, net		6.4			9.1
Other income, net		(4.5	)		(0.9	)

Loss from continuing operations before income taxes		(9.8	)		(11.7	)
Provision for income taxes		3.4			0.1

Loss from continuing operations		(13.2	)		(11.8	)

Income (loss) from discontinued operations, net of tax		0.3			(0.9	)

Net loss	$	(12.9	)	$	(12.7	)

2005 First Quarter compared with 2004 First Quarter

Revenue

Consolidated operating revenue was $131.4 million in the New Company 2005 First Quarter, a decrease of $7.3 million, or 5.3%, compared with the Reorganized Predecessor Company 2004 First Quarter. This decrease was partially attributable to a $2.6 million decrease in U.S. constant center revenue due primarily to a decrease in league lineage (number of games bowled per lane per day). In addition, closed centers represent a $1.9 million negative variance compared with the prior year period. Products revenue decreased $1.3 million, or 3.6%. These decreases were partially offset by an increase in international constant center revenue as a result of favorable foreign exchange rates.

Depreciation and Amortization

Depreciation and amortization decreased $1.5 million, or 10.4%, in the New Company 2005 First Quarter compared with the Reorganized Predecessor Company 2004 First Quarter. This decrease was primarily attributable to a $1.8 million decrease in depreciation as a result of the sale-leaseback agreements that were entered into in conjunction with the Merger (the “Sale-Leaseback Agreements”). Additionally, Centers depreciation decreased as a result of machinery and equipment acquired in 1996 becoming fully depreciated. These decreases were partially offset by an increase in depreciation primarily attributable to adjustments made as a result of the application of purchase method accounting related to the Merger of $2.0 million and $0.3 million for U.S. Centers and Products, respectively.

Asset Impairment

In the New Company 2005 First Quarter we recorded $1.3 million related to asset impairment charges representing the difference between the fair market value and carrying value of impaired assets in the U.S.

Interest Expense, net

Interest expense, net decreased $2.7 million, or 29.7%, in the New Company 2005 First Quarter compared with the Reorganized Predecessor Company 2004 First Quarter, primarily the result of lower principal amounts and interest rates under our senior secured credit agreement (the “Credit Agreement”).

Provision for Income Taxes

Total income tax expense increased to $3.4 million in the New Company 2005 First Quarter from $0.1 million in the Reorganized Predecessor Company 2004 First Quarter, primarily due to the estimated gain on the sale of certain Australian bowling center properties.

Net Loss

Net loss for the ~~quarter~~New ~~ended~~Company ~~September~~2005 ~~28,~~First ~~2003~~Quarter totaled $12.79 million compared with a net loss of $2012.87 million in the Reorganized ~~prior~~Predecessor ~~year~~Company ~~quarter~~2004 First Quarter. This change was primarily attributable to the decreases in revenue discussed above as well as charges incurred in the New Company 2005 First Quarter of $0.5 million related to certain senior management severance obligations which are recorded in selling, general and administrative expenses and bowling center operating expenses and $0.3 million related to costs incurred in conjunction with the Merger. These items are partially offset by the decrease in depreciation and amortization ~~mentioned~~as discussed above. ~~Additionally,~~as well as a decrease in ~~the~~cost ~~quarter~~of ~~ended~~sales ~~September~~and ~~28,~~operating ~~2003,~~expenses. In the New Company 2005 First Quarter, we recognized $0.5 million in gains related to the disposal of $0two Products branches and a 4.72 million gain related to ~~fixed~~an ~~asset~~arbitration ~~disposals~~settlement regarding one of our leases in France. Additionally, the loss contributed from our discontinued operations decreased by $1.1 million.

Comprehensive Loss

Comprehensive loss for the New Company 2005 First Quarter totaled $14.8 million compared with $12.1 million in the Reorganized Predecessor Company 2004 First Quarter. The decrease in the loss was primarily attributable to the decrease in revenue as discussed above as well as an increase in the foreign currency translation adjustment.

Centers

Centers results reflect operations in our U.S. bowling centers (“U.S. Centers”) and our international bowling centers (“International Centers”). The results of operations for the centers in the United Kingdom have been reported as discontinued operations for all periods presented and are not included in the tables or discussion below.


	New Company			Reorganized Predecessor Company
	2005 First Quarter			2004 First Quarter
Operating revenue (a)	$	104.2		$	107.6

Cost of goods sold		9.9			10.1
Bowling center operating expenses		85.4			84.5
Asset impairment		1.3			—
Depreciation and amortization		10.7			12.4

Operating income (loss)		(3.1	)		0.6

(a)	Before intersegment eliminations.

To facilitate a meaningful comparison, the constant center results discussed below reflect the results of 426 centers (367 U.S. Centers and 59 International Centers) that have been in operation one full fiscal year as of June 27, 2004.

The three principal sources of revenue and the percentage of each to total revenue is presented below:


	New Company		Reorganized Predecessor Company
	2005 First Quarter		2004 First Quarter
Revenue:
Bowling	57.1	%	57.9	%
Food and beverage	26.3	%	26.1	%
Ancillary sources	16.6	%	16.0	%

Bowling revenue, the largest component of a center’s revenue, is derived from league play and recreational play, each representing approximately 50% of annual bowling revenue in U.S. Centers. League lineage (number of games bowled per lane per day) has been declining for a number of years. Recreational play includes managed, or scheduled play (such as birthday or corporate parties), and open, or unscheduled play. The decline in U.S. Centers revenue that could be expected from the decline in lineage has been generally offset with price increases.

International Centers, which currently operates in four different countries, has an average bowling lineage mix of approximately 61% recreational lineage and 39% league lineage. Lineage has been declining for a number of years. Australia has experienced the most significant decline in lineage, particularly in league play. With the exception of Australia, the impact on revenue from the decline in International Centers lineage has also been generally offset with price increases. Price increases have generally paralleled local country inflation rates.

On September 30, 2004, we sold our bowling center business that operated 33 bowling centers in the United Kingdom for gross cash proceeds of approximately $71.2 million and exited bowling center operations in that country.

On October 19, 2004, we entered into a definitive agreement to sell our 45 operating bowling centers in Australia for approximately $49.3 million, subject to certain adjustments to be made at closing. The sale will also include the real estate associated with one closed bowling center. The transaction is expected to close by the end of November 2004, subject to certain closing conditions. Following the consummation of the sale, we will have exited our bowling center operations in Australia.

2005 First Quarter compared with 2004 First Quarter

Centers operating revenue for the New Company 2005 First Quarter decreased $3.4 million, or 3.2%, as compared to the Reorganized Predecessor Company 2004 First Quarter. U.S. constant center revenue decreased $2.6 million, or 2.9%, primarily the result of a decrease in league lineage. Revenue was negatively impacted in the New Company 2005 First Quarter by hurricanes and tropical storms in Florida and in the southern and mid-Atlantic regions of the U.S. and a delay in the start of the league season due to the timing of Labor Day in September 2004 versus September 2003. Also contributing to this decrease is a decline in revenue of $1.9 million attributable to the closure of 16 bowling centers since June 29, 2003. These decreases were partially offset by an increase in international constant center revenue of $1.0 million, or 5.8%, primarily attributable to a favorable foreign exchange rate variance of $1.0 million. Additionally, new center revenue increased $0.1 million.

Bowling center operating expenses increased $0.9 million, or 1.1%. This increase was primarily due to increases in U.S. constant center operating expenses of $8.2 million, or 12.3%, of which $7.3 million is attributable to an increase in rent as a result of the Sale-Leaseback Agreements. Excluding the impact of the increase in rent expense, U.S. constant center operating expenses increased approximately 1.0%. International center operating expenses increased $2.2 million, or 17.3%, partially attributable to an unfavorable foreign exchange rate variance of $0.6 million. Additionally, U.S. Centers incurred charges of $0.2 million related to certain senior management severance obligations. This increase was partially offset by an $8.7 million gain recognized in International Centers related to gains on disposals of fixed assets while U.S. Centers recognized $0.5 million related to gains on disposals of assets. Additionally, operating expenses decreased $1.1 million due to closed bowling centers. As a percentage of revenue, Centers operating expenses were 82.1% for the New Company 2005 First Quarter and 78.5% for the Reorganized Predecessor Company 2004 First Quarter.

Depreciation and amortization decreased $1.7 million, or 13.7%, primarily attributable to a $1.8 million decrease as a result of the Sale-Leaseback Agreements. Additionally, U.S. Centers depreciation decreased as a result of machinery and equipment acquired in 1996 becoming fully depreciated. These decreases were partially offset by an increase in depreciation of $2.0 million primarily attributable to adjustments made as a result of the application of purchase method accounting related to the Merger.

Operating loss was $3.1 million in the New Company 2005 First Quarter versus operating income of $0.6 million in the Reorganized Predecessor Company 2004 First Quarter primarily due to the decrease in revenue partially offset by the decreases in operating expenses and depreciation and amortization as discussed above. Additionally, Centers recorded charges related to asset impairment resulting from center closures of $1.3 million in the New Company 2005 First Quarter.

Products


	New Company 2005 First Quarter			Reorganized Predecessor Company 2004 First Quarter
Products (a):
Operating revenue	$	35.1		$	36.4
Cost of goods sold		27.0			27.5

Gross profit		8.1			8.9

Selling, general and administrative expenses		5.4			6.2
Depreciation and amortization		1.8			1.5

Operating income	$	0.9		$	1.2

Selected data:
Gross profit margin		23.1	%		24.5	%

(a)	Before intersegment eliminations.

2005 First Quarter compared with 2004 First Quarter

Products operating revenue decreased $1.3 million, or 3.6%, primarily attributable to decreased revenue in Europe and Japan of $2.2 million and $1.2 million, respectively. These decreases were partially offset by an increase in revenue in the U.S. of $1.8 million.

Gross profit decreased $0.8 million, or 9.0%. The gross profit margin was 23.1% in the New Company 2005 First Quarter compared with 24.5% in the Reorganized Predecessor Company 2004 First Quarter. The decreased margin percentage was primarily attributable to the decrease in revenue as well as increased material expenses.

Products selling, general and administrative expenses decreased $0.8 million, or 12.9%, compared with the prior year quarter. The decrease in expenses is primarily attributable to the recognition of $0.7 million in gains on the disposal of two Products branches. This decrease was partially offset by increases in advertising and promotion as well as payroll expense.

Depreciation and amortization increased $0.3 million, or 20.0%, primarily due to adjustments made as a result of the application of purchase method accounting related to the Merger.

Operating income was $0.9 million in the New Company 2005 First Quarter, a decrease of $0.3 million, or 25.0%, when compared with the Reorganized Predecessor Company 2004 First Quarter. The decrease in operating income is primarily due to the decrease in revenue in the international markets partially offset by the gains on disposal as discussed above.

Liquidity - Capital Resources – Asset Sales – Capital Expenditures

General

~~The~~We ~~Company~~have ~~generally relies on cash flow from operations and borrowings under its~~ $45134.04 million ~~revolving~~in ~~credit~~term ~~facility~~loans (the “~~Revolver~~Term Loan”) tounder ~~fund~~our ~~its~~Credit ~~liquidity~~Agreement ~~and capital expenditure needs. The Company’s ability to repay its indebtedness will depend on its future performance,~~ which isalso ~~subject~~has toan ~~general~~aggregate ~~economic,~~revolving ~~financial,~~loan ~~competitive,~~commitment ~~legislative,~~of ~~regulatory and other factors~~$40.0 ~~Management~~million ~~believes that available cash flow from operations and borrowings under~~ (the “Revolver ~~will be sufficient to fund its liquidity and capital expenditure needs~~”).

AsWe ofgenerally ~~February~~rely ~~28,~~on ~~2002,~~cash ~~the~~flow ~~Company~~from ~~entered~~operations ~~into~~and ~~the~~borrowings ~~Credit Agreement.~~under ~~The~~the ~~Credit~~Revolver ~~Agreement~~to ~~provides~~fund ~~for~~our aliquidity ~~$290.0~~and ~~million~~capital ~~term~~expenditure ~~facility~~needs. ~~(the~~Our ~~“Term~~ability ~~Facility”)~~to ~~maturing~~repay inour ~~February~~indebtedness ~~2008~~will ~~and~~depend ~~the~~on ~~Revolver~~future ~~maturing~~performance, inwhich ~~February~~is ~~2007.~~subject Onto ~~December~~general economic, 19financial, ~~2002~~competitive, ~~after reviewing the Company’s future liquidity requirements~~legislative, ~~the~~regulatory ~~Company voluntarily~~ and ~~permanently~~other ~~reduced~~factors. ~~the~~Management ~~Revolver~~believes asthat ~~provided~~available incash ~~the~~flow ~~Credit~~from ~~Agreement,~~operations ~~from~~and ~~$60.0~~borrowings ~~million~~available toor ~~$45.0~~capacity ~~million.~~under ~~This~~the ~~reduction~~Revolver will ~~result~~be insufficient ~~lower~~to ~~commitment~~fund ~~fees~~its inliquidity ~~future~~and ~~periods~~capital expenditure needs.

As of October 31, 2003, there were no outstanding borrowings under the Revolver and outstanding standby letters of credit issued under the Revolver totaled approximately $10.1 million, leaving approximately $34.9 million available for additional borrowings or letters of credit. The Revolver continues to be available for the Company’s working capital and general corporate needs, subject to customary borrowing conditions.

Both the Credit Agreement and the Indenture contain certain restrictive covenants, including the achievement of certain financial covenants and maximum levels of capital expenditures.

Liquidity

As of September 2826, ~~2003~~2004, working capital ~~deficit~~ was $1428.23 million compared with a working capital deficit of $1015.45 million at June 2927, ~~2003~~2004. Excluding assets and liabilities held for sale, working capital was a ~~decrease~~deficit of $310.84 million at September 26, 2004. This ~~decrease~~change iswas primarily attributable to a decrease in ~~cash~~accounts payable of $7.5 million as awell ~~result~~as ofan ~~payments~~increase in cash and inventory of $3.6 million and $1.2 million, respectively. Partially offsetting these increases was a decrease in prepaid expenses and other current ~~maturities~~assets of ~~long~~$5.2 ~~term~~million, ~~debt~~a ~~and~~decrease ~~funding~~in accounts receivable of ~~operations~~$1.1 million and is ~~comprised~~a of$0.9 ~~the~~million ~~following:~~increase in accrued liabilities.

	Increase (Decrease)
	(in millions)
Cash	$	(34.0	)
Accounts and notes receivable, net		2.7
Inventory		2.3
Other current assets		0.1
Accounts payable		2.6
Accrued expenses		(0.5	)
Current maturities of long-term debt		23.0
	$	(3.8	)

Operating Cash Flow

Net cash used in operating activities was $1.7 million for the quarter ended September 28, 2003 compared with net cash used in operating activities of $8.3 million in the quarter ended September 29, 2002, as the effect of the decreased operating loss was offset by an increase in cash used for working capital needs.


	New Company			Reorganized Predecessor Company
	2005 First Quarter			2004 First Quarter
Cash flows from operating activities:
Before changes in assets and liabilities	$	(8.0	)	$	1.1
Working capital		28.3			(14.2	)
Other changes		(24.7	)		10.1
Discontinued operations		(0.3	)		0.9

Total	$	(4.7	)	$	(2.1	)

18Net cash used in operating activities was $4.7 million in the New Company 2005 First Quarter compared with $2.1 million in the Reorganized Predecessor Company 2004 First Quarter, an increase of $2.6 million. The increase in net cash used in operating activities is primarily the result of an $8.5 million gain on the sale of property and equipment as well as an increase in cash used by working capital.

Investing


	New Company			Reorganized Predecessor Company
	2005 First Quarter			2004 First Quarter
Cash flows from investing activities:
Purchases of property and equipment	$	(11.7	)	$	(9.1	)
Proceeds from the sale of property and equipment		14.9			0.9

Total	$	3.2		$	(8.2	)

Net cash ~~used~~provided inby investing activities was $83.42 million ~~for~~in the ~~quarter~~New ~~ended~~Company ~~September~~2005 ~~28,~~First ~~2003~~Quarter compared with net cash used in investing activities of $8.92 million in the ~~quarter~~Reorganized ~~ended~~Predecessor ~~September~~Company ~~29,~~2004 ~~2002,~~First aQuarter. ~~decrease~~In ofthe ~~$0.5~~New ~~million.~~Company ~~This~~2005 ~~decrease~~First isQuarter ~~primarily~~we ~~due~~received toproceeds ~~increased~~of ~~proceeds~~$13.4 ~~from~~million related to the sale of property and equipment ofin Australia. Additionally, we received $01.95 million in proceeds related to excess property in the U.S. ~~The~~This ~~decrease~~increase in cash flow was partially offset by an increase in ~~Centers~~ capital expenditures, primarily related to Centers capital improvements ~~and an increase in company-wide information systems expenditures~~.

~~Net~~Financing cash used in financing activities was $20.4 million for the quarter ended September 28, 2003 compared with cash provided by financing activities of $4.9 million in the quarter ended September 29, 2002, a decrease of $25.3 million. This decrease is primarily the result of the excess cash flow payment on the Term Facility of $24.4 million in the quarter ended September 28, 2003.

As a result of the aforementioned, cash decreased by $34.0 million during the quarter ended September 28, 2003 compared with a decrease of $9.7 million during the quarter ended September 29, 2002.


	New Company			Reorganized Predecessor Company
	2005 First Quarter			2004 First Quarter
Cash flows from financing activities:
Borrowings (repayments) of debt, net	$	7.3		$	(20.3	)
Payments under capital lease obligations		(0.1	)		(0.1	)

Total	$	7.2		$	(20.4	)

Net cash provided by financing activities was $7.2 million in the New Company 2005 First Quarter compared with net cash used in financing activities of $20.4 million in the Reorganized Predecessor Company 2004 First Quarter. In the New Company 2005 First Quarter we borrowed $8.0 million on our revolving line of credit and made payments of approximately $0.6 million on the Term Loan.

Capital Resources

The ~~Company’s~~following table shows our debt balances at September 2826, ~~2003~~2004 and June 2927, ~~2003~~2004 ~~consisted of the following:~~

	September 28, 2003		June 29, 2003
	September 26,2004		June 27,2004
Term Facility	$	236.9	$	262.2
Term Loan	$	134.4	$	135.0
Subordinated Notes		150.0		150.0
Subordinated Notes, 10%, due 2010		150.0		150.0
Revolver		58.0		—
Mortgage note and capitalized leases		43.26		4.3.8
	$	396.1	$	416.5
Total debt	$	296.0	$	288.8

AsIn of September 282004, we ~~2003,~~entered ~~the~~into ~~Company~~a ~~had~~First ~~approximately~~Amendment ~~$30~~to Credit Agreement (the “Amendment”).5 ~~million~~The ~~available~~Amendment, ~~for~~among ~~borrowing~~other things, requires us to prepay loans and/or cash collateralize or pay certain letter of credit obligations under the ~~Revolver,~~Credit ~~with~~Agreement ~~$5.0~~in ~~million~~an amount ~~outstanding~~equal ~~and~~to ~~approximately~~20% ~~$9.5~~of ~~million~~the net cash proceeds from any sale, transfer or other disposition of ~~issued~~the ~~but~~assets ~~undrawn~~or ~~standby~~stock ~~letters~~of certain of ~~credit~~our subsidiaries that operate overseas. AsThe ofAmendment ~~June~~also 29permits us to redeem, ~~2003~~purchase, ~~the~~prepay, ~~Company~~retire, ~~had~~defease ~~$35.8~~or ~~million~~otherwise ~~available~~acquire our 10% Senior Subordinated Notes due 2010 for ~~borrowing~~cash orconsideration ~~letters~~that does not exceed 80% of ~~credit~~net ~~under~~cash ~~the~~proceeds ~~Revolver,~~from ~~with~~those nosales ~~amounts~~of ~~outstanding~~assets ~~and~~or ~~$9.2~~stock ~~million~~of certain of ~~issued~~our ~~but~~subsidiaries ~~undrawn~~that ~~standby~~operate ~~letters~~overseas ofwithin ~~credit~~a specified period of time.

~~During~~At ~~the quarter ended~~ September 2826, ~~2003~~2004, ~~the~~$8.0 ~~Company~~million ~~funded~~was ~~its obligations primarily through cash flows from operations~~outstanding ~~and borrowings~~ under the Revolver. ~~The~~Outstanding ~~Company~~standby ~~made~~letters ~~cash interest payments~~ of ~~$15.5~~credit ~~million~~issued ~~during~~under the ~~quarter~~Revolver ~~ended~~totaled ~~September 28, 2003. For the fiscal year ended June 29, 2003, the Company calculated a mandatory Term Facility prepayment of~~ $2418.~~4 million~~1 ~~based on consolidated excess cash flow, $23.3~~ million ofleaving ~~which was paid and applied to the Term Facility on August 28, 2003. The remaining~~ $113.19 million ~~was~~available ~~paid~~for onadditional ~~October~~borrowings 8,or ~~2003~~letters ~~upon expiration~~ of ~~a Eurodollar loan contract~~credit. The ~~prepayments~~ ~~reduced~~Revolver ~~the~~continues ~~remaining~~to ~~scheduled~~be ~~principal~~available ~~payments~~for onour aworking ~~pro~~capital and ~~rata~~general ~~basis.~~corporate ~~Additionally~~needs, onsubject ~~September~~to ~~30,~~customary ~~2003,~~borrowing ~~the~~conditions. ~~Company~~We made a $10.93 million ~~principal payment under the Term Facility and on October 2~~repayment, ~~2003,~~required ~~the~~due ~~Company~~to ~~repaid~~certain ~~the~~asset ~~$5.0 million~~sale ~~borrowing~~proceeds ~~under~~during the ~~Revolver.~~New ~~The~~Company ~~payments~~2005 ~~made~~First ~~after September 28, 2003 are not reflected in the condensed consolidated balance sheet at September 28, 2003~~Quarter.

Both the Credit Agreement and the Indenture contain certain restrictive covenants, including the achievement of certain financial covenants and maximum levels of capital expenditures. We are in compliance with the covenants as of September 26, 2004.

On October 8, 2004, we repaid the $8.0 million outstanding on the Revolver. Additionally, on October 14, 2004, we made a required repayment under our Credit Agreement of approximately $16.1 million due to the sale of our bowling center operations in the United Kingdom, property sales in Australia and a lease termination in France. These repayments are not reflected in the Condensed Consolidated Balance Sheet at September 26, 2004. Non-scheduled prepayments under the Credit Agreement are applied ratably to the remaining scheduled principal payments.

Asset Sales

From time to time, ~~the~~we ~~Company~~ will sell real estate on which a bowling center is or was operated, either in connection with the closing of a bowling center or in response to an attractive offer to buy ~~such real estate. In addition,~~ the ~~Company will, from time to time, sell excess real estate~~property.

~~During~~The ~~the~~following ~~quarter~~table ~~ended~~shows ~~September~~our ~~28,~~asset ~~2003,~~sales ~~the~~for ~~Company sold excess property in~~ the ~~United~~New ~~States~~Company ~~for~~2005 ~~net~~First ~~proceeds~~Quarter: ~~of $0.8 million.~~


	Net Proceeds		Gain/ (loss), net
U.S. Centers:
Excess property	$	1.5	$	0.5

International Centers:
Bowling centers		13.4		9.5

Total asset sales	$	14.9	$	10.0

On September 30, 2004, we sold 33 bowling centers in the United Kingdom for gross cash proceeds of approximately $71.2 million and exited bowling center operations in that country.

On October 19, 2004, we signed a definitive agreement to sell our 45 operating bowling centers in Australia for approximately $49.3 million, subject to certain adjustment to be made at closing. The sale will also include the real estate associated with one closed bowling center. The transaction is expected to close by the end of November 2004, subject to certain closing conditions. Following consummation of the sale, we will have exited all bowling center operations in Australia.

Capital Expenditures

The Company’s capital expenditures were $9.3 million in the quarter ended September 28, 2003 compared with $8.9 million in the quarter ended September 29, 2002, an increase of $0.4 million. This increase is primarily due to increased Centers expenditures, primarily related to capital improvements and an increase in company-wide information systems expenditures.


	New Company		Reorganized Predecessor Company
	2005 First Quarter		2004 First Quarter
Centers	$	10.2	$	8.3
Products		0.7		0.3
Corporate		0.8		0.5

Total	$	11.7	$	9.1

Capital expenditures increased $2.6 million in the New Company 2005 First Quarter compared to the Reorganized Predecessor Company 2004 First Quarter primarily due to increased Centers expenditures. Capital expenditures are primarily funded from cash generated from operations.

Seasonality and Market Development Cycles

~~The~~ Centers business is seasonal, primarily due to the bowling league season that begins in late summer and ends in mid spring. Cash flow from operations typically peaks in the winter and is lower in the summer.

Products sales are also seasonal, most notably in Modernization and Consumer Products sales in the U.S. While U.S. bowling center operators purchase spare parts, supplies and consumer products throughout the year, they often place larger orders during the late spring and early summer in preparation for the start of league play in the late summer. Summer is also generally the peak period for installation of modernization equipment in the U.S. Operators in the U.S. typically sign purchase orders for modernization equipment during the spring, which is then shipped and installed during the summer when U.S. bowling centers generally have fewer bowlers.

International Operations

~~The~~Our ~~Company’s~~ international operations are subject to the usual risks inherent in operating internationally, including, but not limited to, currency exchange rate fluctuations, economic and political instability, other disruption of markets, restrictive laws, tariffs and other actions by foreign governments (such as ~~restrictions~~ restrictions on transfer of funds, import and export duties and quotas, foreign customs, tariffs and value added taxes and unexpected changes in regulatory environments), difficulty in obtaining distribution and support for products, the risk of nationalization, the laws and policies of the U.S. affecting trade, international investment and loans, and foreign tax law changes. As is the case of other U.S.-based manufacturers with export sales, local currency ~~devaluations~~devaluation ~~increase~~increases the cost of Products bowling equipment. In addition, local currency devaluation negatively impacts the translation of operating results from International Centers.

Foreign currency exchange rates also impact the translation of operating results from International Centers and Products. International Centers represented ~~$27~~14.42% ~~million~~and ~~of the $148~~13.0% ~~million~~of consolidated revenue ~~and~~for ~~$1.4 million of~~ the ~~$(3.9)~~New ~~million~~Company ~~consolidated~~2005 ~~operating~~First ~~loss~~Quarter ~~for~~and the ~~quarter~~Reorganized ~~ended~~Predecessor ~~September~~Company 282004 First Quarter, ~~2003~~respectively. For the ~~quarter~~New ~~ended~~Company ~~September~~2005 ~~29,~~First ~~2002~~Quarter International Centers represented $267.4 million in operating income of the $~~150~~7.69 million consolidated ~~revenue~~operating loss and in the 2004 First Quarter International Centers represented $1.98 million in operating income of the $~~(8.~~3).5 million consolidated operating loss.

~~Revenue~~Products ~~and~~international ~~operating~~operations ~~income of International Products~~ represented 8.94% and 1210.82% of consolidated revenue ~~and~~for ~~operating~~the ~~loss,~~New ~~respectively,~~Company ~~for~~2005 First Quarter and the ~~quarter~~ ~~ended~~Reorganized ~~September~~Predecessor 28Company 2004 First Quarter, ~~2003~~respectively. ~~Revenue~~For ~~and~~the ~~operating~~New ~~income~~Company of2005 ~~International~~First Quarter Products international operations represented 8$2.0%1 ~~and~~million ~~6.0%~~in operating income of the $7.9 million consolidated ~~revenue~~operating loss and in the Reorganized Predecessor Company 2004 First Quarter Products international operations represented $0.5 million in operating loss, ~~respectively,~~of ~~for~~ the ~~quarter~~$3.5 ~~ended~~million ~~September~~consolidated ~~29,~~operating ~~2002~~loss.

Impact of Inflation

~~The~~We ~~Company~~ historically ~~offsets~~offset the impact of inflation through price increases. Periods of high inflation could have a material adverse impact on ~~the~~us ~~Company~~ to the extent that increased borrowing costs for floating rate debt may not be offset by increases in cash flow. There was no significant impact on ~~the~~our ~~Company’s~~ operations as a result of inflation ~~for~~during the ~~quarters~~ ~~ended~~New ~~September~~Company ~~28,~~2005 ~~2003~~First ~~and~~Quarter ~~September~~or ~~29,~~the ~~2002,~~Reorganized ~~respectively~~Predecessor Company 2004 First Quarter.

Critical Accounting Policies

In preparing the ~~condensed~~ consolidated financial statements, GAAP requires management to select and apply accounting policies that involve estimates and judgment. The following accounting policies may require a higher degree of judgment or involve amounts that could have a material impact on the ~~condensed~~ consolidated financial statements. The ~~development and selection of the~~ critical accounting policies, ~~and~~disclosed ~~the related disclosure~~ below have been reviewed with the Audit Committee of ~~the~~our ~~Board~~parent ~~of Directors~~company.

Allowance for Doubtful Accounts

Products maintains an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make payment. Management determines the allowance based upon an evaluation of individual accounts, aging of the portfolio, issues raised by customers that may suggest non payment, historical experience and/or the current economic environment. A substantial portion of the allowance relates to the sale of ~~new~~NCP ~~center~~ packages to international customers. If the financial condition of individual customers or countries in which Products operates or the general worldwide economy were to vary materially from the assumptions made by management, the allowance may require adjustment in the future. Products evaluates the adequacy of the allowance on a regular basis, modifying, as necessary, its assumptions, updating its record of historical experience and adjusting reserves as appropriate.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable. Factors that are considered in deciding when to perform an impairment review include significant under-performance of a center or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. As a result, we have closed certain individual center locations with some regularity. Recoverability of assets that will continue to be used in operations is measured by comparing the carrying amount of the asset to the related total future net cash flows. If an asset’s carrying value is not recoverable through those cash flows, the asset is considered to be impaired. The impairment is measured by the difference between the asset’s carrying amount and its fair value, based on the best information available, including market prices or a discounted cash flow analysis.

Inventory Obsolescence

As we monitor working capital (defined as current assets minus current liabilities), net inventory represents approximately 37% of our current assets (excluding discontinued operations). Products evaluates the levels, composition and salability of its inventory on a regular basis. The evaluations include assumptions regarding potential sales of such inventory, estimated time periods over which such sales might take place and assessment of the potential usability of such inventory in future production. Products modifies, as necessary, its assumptions, updates its record of historical experience and adjusts its reserves as appropriate.

Equipment Warranties

Warranty expense is an indicator of product quality and handling. Products sells capital equipment where warranty and after sale service are very important to the customer. Products generally warrants all new products for one year and ~~charges~~maintains ~~to expense~~ an estimated ~~amount~~reserve for future warranty obligations. The reserve is ~~determined~~ determined based on prior warranty experience. If future warranty experience were to vary materially, management would review the reserve and make any appropriate adjustment. Products evaluates the adequacy of the reserve on a regular basis, modifying as necessary, its assumptions, updating its record of historical experience and adjusting its reserves as appropriate.

Self Insurance, Litigation and Claims

~~The~~We ~~Company~~ self-~~insures~~insure certain risks up to established limits, including general and product liability exposures, workers compensation, health care coverage, and property damage. Other risks, such as litigation and claims relating to contractual disputes and employment issues, may not be covered by insurance. The reserves related to such self-insurance programs and to such other risks are determined based on estimates of future settlements and costs of known and anticipated claims as well as on forces impacting the current economic environment. In the case of matters in litigation or involving threatened litigation, legal advice on ~~the~~ ~~Company’s~~our potential liability and the potential for the award of damages is considered in making any estimate. ~~The~~We ~~Company~~maintain ~~maintains~~ systems to track and monitor these risks. If actual results were to vary materially from the assumptions, management would review the reserve and make any appropriate adjustment. ~~The~~We ~~Company~~evaluate ~~evaluates~~ the adequacy of these reserves on a regular basis, modifying, as necessary, ~~its~~our assumptions, updating ~~its~~our records of historical experience and ~~adjusting~~ ~~its~~adjusting reserves as appropriate.

Deferred Tax Assets

AsManagement ofperiodically ~~September~~reviews ~~28,~~our ~~2003, the Company had approximately $218.1 million of~~ gross deferred tax assets ~~on its consolidated balance sheet. Management periodically reviews its deferred tax positions~~ to determine if it is more likely than not that such assets will be realized. Such periodic reviews include, among other things, the nature and amount of the tax income and expense items, the expected timing when certain assets will be used or liabilities will be required to be reported, available tax planning strategies, and the reliability of ~~historical~~ profitability projections of businesses expected to provide future earnings. If after conducting such a review, management determines that the realization of the tax asset does not meet the “more likely than not” criteria of SFAS No.109, an offsetting valuation ~~reserve~~allowance is recorded, thereby reducing net earnings and the deferred tax asset in that period. Due to ~~the~~our ~~Company’s~~ historical and expected future earnings from operations, management concluded that itwe is “more likely than not” ~~that the Company~~ will not realize the benefit of ~~its~~a majority of our deferred tax assets. If expectations for future performance, the timing of deductibility of expenses, or tax statutes change in the future, we could decide to adjust the valuation allowance, which may increase or decrease income tax expense.

2132

~~deferred~~DISCLOSURE ~~tax~~REGARDING ~~assets.~~FORWARD-LOOKING ~~Therefore,~~STATEMENTS a valuation reserve has been set up for the entire amount of the deferred tax asset. If expectations for future performance, the timing of deductibility of expenses, or tax statutes change in the future, the Company could decide to adjust the valuation allowance, which may increase or decrease income tax expense.

~~Centers~~Certain matters discussed in this report contain forward-looking statements, which are statements other than historical information or statements of current condition. Statements set forth in this report or statements incorporated by reference from documents filed with the Securities and Exchange Commission are or may be forward-looking statements, including possible or assumed future results of our operations, including but not limited to:

~~Centers~~• ~~results~~any ~~reflect~~statements both U.S. and International Centers operations. To facilitate a meaningful comparison, the constant center results discussed below reflect the results of 472 centers (376 U.S. Centers and 96 International Centers) that have been in operation twelve months as of June 29, 2003. Centers derives its revenue from three principal sourcesconcerning:

• ~~bowling~~the results of operations of our businesses;

• ~~food~~the results of our initiatives to improve our bowling centers operations and ~~beverage~~our ~~sales;~~business of manufacturing and selling bowling equipment;

• ~~ancillary~~the ~~sources.~~amounts of capital expenditures needed to maintain or improve our bowling centers;

	Quarter EndedSeptember 28, 2003		Quarter EndedSeptember 29, 2002
Centers (before intersegment eliminations)
Operating revenue	$	116.9	$	118.7
Cost of goods sold		11.1		11.5
Bowling center operating expenses		91.9		91.3
Depreciation and amortization		13.7		20.1
Operating income (loss)	$	0.2	$	(4.2	)

•

our ability to comply with the financial covenants in our financing facilities and generate cash flow to service our indebtedness;

~~For~~• the ~~quarter~~continued ~~ended September~~availability ~~28, 2003, bowling, food and beverage and ancillary sources represented 57.6%, 26.5% and 15.9%~~ of ~~total~~sufficient ~~Centers~~borrowing ~~revenue,~~capacity ~~respectively.~~or ~~For~~other ~~the~~financing ~~quarter~~to ~~ended~~supplement ~~September~~cash ~~29,~~flow ~~2002, bowling, food~~ and ~~beverage~~fund ~~and~~operations; ~~ancillary sources represented 57.3%, 26.5%~~ and ~~16.2% of total Centers revenue, respectively.~~

~~Bowling~~• ~~revenue,~~ the ~~largest~~outcome ~~component~~ of aexisting center’s revenue, is derived from league play and recreational play, each representing approximately 50% of annual bowling revenue in U.S. Centers. League lineage (number of games bowled per lane per day) has been declining for a number of years. Recreational play includes managed, or ~~scheduled~~future ~~play (such as birthday or corporate parties), and open, or unscheduled play.~~ litigation;

~~The~~• ~~decline~~any instatements ~~revenue~~preceded ~~that~~by, ~~could~~followed beby ~~expected~~or ~~from~~including the ~~decline~~words in“believes,” ~~lineage~~“expects,” ~~has~~“predicts,” ~~been generally offset with price increases. International Centers~~“anticipates,” ~~which operates in five different countries~~“intends,” has a bowling lineage mix of approximately 66% recreational lineage and 34% league lineage. Lineage has been declining for a number of years. Australia has experienced the most significant decline in lineage“estimates,” ~~particularly in league play. With the exception of Australia~~“should,” ~~the~~“may” ~~impact~~or onsimilar ~~revenue~~expressions; ~~from the decline in International Centers lineage has also been generally offset with price increases. Price increases have generally paralleled local country inflation rates.~~ and

~~Quarter~~• ~~ended~~other ~~September~~statements ~~28,~~contained ~~2003 compared~~or ~~with~~incorporated ~~the~~in ~~quarter~~this ~~ended~~report ~~September~~that ~~29,~~are ~~2002~~not historical facts.

~~Centers~~These ~~operating~~forward-looking ~~revenue~~statements ~~was~~relate ~~down~~to ~~$1.8~~our ~~million,~~plans orand ~~1.5%,~~objectives ~~for~~or ~~the~~future ~~quarter~~operations. ~~ended~~In ~~September~~light ~~28,~~of ~~2003 compared with~~ the ~~prior~~risks ~~year~~and uncertainties ~~quarter,~~inherent ofin ~~which~~all ~~$2.8~~future ~~million~~projections ~~was~~and ~~attributable~~our tofinancial position, the ~~closure~~inclusion of 18forward-looking ~~centers~~statements ~~since~~in ~~September~~this ~~29,~~report ~~2002.~~should ~~The decrease~~not inbe ~~revenue~~regarded as a ~~result~~representation ~~of closed centers was offset~~ by anus ~~increase~~that inthe ~~international~~objectives, ~~constant~~projections ~~center~~or ~~revenue.~~plans ~~International~~will ~~constant~~be ~~center revenue increased $2~~achieved.1 ~~million,~~Many factors orcould ~~8.5%,~~cause ~~primarily~~our ~~attributable~~actual results to adiffer ~~favorable~~materially ~~foreign~~from ~~exchange~~those ~~rate variance~~in ofany ~~$2.4~~forward-looking ~~million~~statements, ~~partially~~including, ~~offset~~but bynot alimited ~~decline~~to: ~~in lineage. U.S. constant center~~

22• the popularity of bowling;

•

our ability to renew real estate leases;

•

risks related to our foreign operations;

•

our ability to retain and attract key employees;

•

our ability to successfully implement our business initiatives;

•

our ability to generate the cash flow required to service our indebtedness and real estate leases;

•

the continued decline in lineage and our difficulty in increasing lineage;

•

the seasonality and effect of unusual weather on bowling center operations;

•

the continued price pressure from the growth of lower cost, lower quality bowling products and readily available, low cost used equipment;

~~revenue~~• ~~decreased~~the ~~$1.5~~potential ~~million,~~adverse orimpact ~~1.7%,~~from ~~primarily~~changes asin agovernmental ~~result of decreased food and beverage and ancillary revenue.~~ regulations;

~~Bowling~~• ~~center~~the ~~operating~~impact ~~expenses increased $0.6 million, or 0.6%,~~ of ~~which $2.7~~environmental ~~million~~laws ~~was~~and aregulations ~~result~~relating ~~of an increase in constant center expenses. U.S. constant center operating expenses increased $0.8 million, or 1.3%, primarily attributable~~ to ~~increased~~hazardous ~~payroll~~materials ~~and~~used insurance expenses, partially offset by savings within advertising and maintenance expenses. Severance for the former U.S. Centers chief operating officer totaling approximately $0.3 million is included in the current quarter within payroll. Additionally, U.S. Centers’ current quarter also includes a charge totaling $0.3 million related to one action alleging violations of federal legislation involving unsolicited communications. International constant center operating expenses increased $1.8 million, or ~~12.2%,~~resulting ~~primarily~~from ~~attributable~~our to an unfavorable foreign exchange rate of $1.5 million. The increase in constant center expenses was partially offset by a decrease in expenses as a result of closed centers. As a percentage of revenue, Centers operating expenses were 78.6% for the quarter ended September 28, 2003 compared with 76.9% for the prior year quarter. operations;

~~Depreciation~~• ~~and~~the ~~amortization~~impact ~~decreased $6.4 million, or 31.9%, primarily attributable to a decrease in depreciation expense as a result~~ of ~~U.S.~~anti-smoking ~~Centers’~~legislation ~~1996~~on ~~acquisition~~bowling ~~assets with seven year lives becoming assets becoming fully depreciated. In addition, due to~~ center ~~closures, there are 18 less centers when compared with the prior year.~~ operations;

~~Operating~~• ~~income increased $4.4 million versus~~ the ~~prior~~interests ~~year~~of ~~quarter~~controlling ~~primarily~~shareholders ~~due~~may toconflict with the ~~decrease~~interests inof ~~depreciation~~holders ~~and~~of ~~amortization as discussed above.~~ indebtedness;

~~Products~~• competition from other leisure activities with our bowling center business;

	Quarter EndedSeptember 28, 2003		Quarter EndedSeptember 29, 2002
Products (before intersegment eliminations)
Operating revenue	$	36.4	$	36.7
Cost of goods sold		27.5		29.1
Gross profit		8.9		7.6
Selling, general and administrative expenses		6.2		5.4
Depreciation and amortization		1.5		1.1
Operating income	$	1.2	$	1.1

•

fluctuations in foreign currency exchange rates;

~~Quarter~~• ~~ended~~the ~~September~~impact ~~28,~~of ~~2003 compared~~potential ~~with~~retaliatory ~~the~~duties ~~quarter~~imposed ~~ended~~on ~~September~~our ~~29,~~products ~~2002~~business by other countries;

~~Products~~• ~~operating~~the ~~revenue~~effect ~~decreased~~of ~~$0.3~~our ~~million,~~prior ~~or 0.8%.~~ bankruptcy;

~~Gross~~• ~~profit~~the ~~increased~~lack ~~$1.3~~of ~~million,~~improvement or ~~17.1%.~~a ~~The~~decline ~~gross profit margin was 24.5% for the quarter ended September 28, 2003 compared with 20.7%~~ in ~~the~~general ~~prior~~economic ~~year quarter. The improved margin percentage was primarily attributable to efficiencies in labor and reductions in warranty expense.~~ conditions;

~~Products~~• ~~selling,~~adverse ~~general~~judgments ~~and~~in ~~administrative expenses increased $0.8 million~~existing, pending or ~~14.8%,~~future ~~compared~~litigation; ~~with the prior year quarter. The increase in expenses is primarily attributable to increased payroll expenses.~~ and

~~Depreciation~~• ~~and~~changes ~~amortization increased $0.4 million, or 36.4%, primarily attributable to the addition of assets~~ in ~~fiscal~~interest ~~year 2003~~rates.

~~Operating~~The ~~income~~foregoing ~~for~~review ~~the~~should ~~quarter~~not ~~ended~~be ~~September~~construed ~~28,~~as ~~2003~~exhaustive ~~was~~and ~~$1.2~~should ~~million,~~be anread ~~increase~~in ofconjunction ~~$0.1~~with ~~million,~~other orcautionary 9statements included elsewhere in this report.~~1%,~~ ~~when~~We ~~compared~~undertake ~~with~~no obligation to release publicly the ~~prior~~results ~~year~~of ~~quarter~~any ~~primarily~~future ~~attributable~~revisions it may make to ~~the~~forward-looking ~~increase~~statements into reflect events or circumstances after this date or to reflect the ~~gross~~occurrence ~~profit~~of ~~margin~~unanticipated events.

2334

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~The~~We ~~Company~~are is exposed to market risk from changes in foreign currency exchange rates and interest rates that could impact ~~its~~our results of operations and ~~financial~~ financial condition. ~~The~~We ~~Company~~manage ~~manages~~our ~~its~~ exposure to these risks through ~~its~~ normal operating and financing activities and through the use of interest rate cap agreements. At September 28 26, ~~2003~~2004, ~~one~~no interest rate cap ~~agreement~~agreements ~~was~~ were outstanding. There ~~were~~are no other derivative instruments outstanding ~~during any of the periods presented~~. Management periodically reviews its exposure to changes in interest rates and may enter into an interest rate cap ~~agreements~~agreement as it deems appropriate.

As with other U.S.-based exporters, local currency devaluations increase the cost of ~~the~~our ~~Company’s~~ bowling equipment in that market. As a result, a strengthening U.S. dollar exchange rate may adversely impact sales volume and profit margins. Foreign currency exchange rates also impact the translation of operating results from the international bowling centers.

~~The~~From ~~Company~~time ~~has~~to ~~not~~time ~~hedged~~we ~~against~~use ~~fluctuations~~interest rate cap agreements to mitigate the effect of changes in ~~its~~interest ~~investment~~rates on variable rate borrowings under the Credit Agreement. While we are exposed to credit risk in ~~foreign~~the ~~operations~~event of non-performance by the counterparties to the interest rate swap agreements, in all cases such counterparties are highly-rated financial institutions and we do not anticipate non-performance. We do not hold or issue derivative financial instruments for trading purposes.

The ~~Company~~following ~~uses~~table ~~interest~~provides ~~rate~~information ~~cap~~about ~~agreements~~our tofixed ~~mitigate~~and ~~the effect of changes in interest rates on~~ variable -rate ~~borrowings~~debt ~~under~~at ~~the~~September ~~Credit~~26, ~~Agreement. While~~2004, ~~the~~weighted ~~Company~~average ~~is exposed to credit risk in the event of non-performance by the counterparties to the~~ interest ~~rate~~rates ~~swap agreements, in all cases such counterparties are highly-rated financial institutions~~ and ~~the Company does not anticipate~~respective ~~non-performance.~~maturity ~~The Company does not hold or issue derivative financial instruments for trading purposes~~dates.

The following table provides information about the Company’s fixed and variable-rate debt at September 28, 2003, weighted average interest rates and respective maturity dates (dollar amounts in millions).


Maturity Date	Fixed Rate Debt		Weighted Average Interest Rate		Variable Rate Debt		Weighted Average Interest Rate
September 1, 2010	$	150.0	10.00	%		—	—
August 27, 2009		—	—		$	134.4	4.45	%

Maturity	Fixed Rate Debt		WeightedAverageInterest Rate		VariableRate Debt		WeightedAverageInterest Rate
September 1, 2008		$150.0	13.00	%		—	—
February 28, 2008		—	—		$	236.9	5.54	%
February 28, 2007		—	—		$	5.0	4.94	%

The fair value of the Term Loan and the Subordinated Notes at September 26, 2004 was approximately $134.4 million and $158.2 million, respectively.

~~The~~35 fair value of the Term Facility and the Subordinated Notes at September 28, 2003 was approximately $236.9 million and $166.1 million, respectively. The fair value of the outstanding borrowings on the Revolver at September 28, 2003 was $5.0 million.

On June 6, 2003, the Company entered into an interest rate cap agreement with Bank of America to reduce the interest rate risk of certain amounts borrowed under the Credit Agreement. The table below summarizes the interest rate cap agreement at September 28, 2003:

Expiration Date		Notional Amount		Cap Rate (a)
June 6, 2004		$100.0		3.0%

(a) The cap rate is the 3 month U.S. Dollar-London Interbank Offer Rate (“USD-LIBOR”) quoted by Bank of America.

The Company paid a nominal fixed fee for the interest rate cap. The Company will receive quarterly payments from Bank of America if the quoted three month USD-LIBOR on the quarterly floating rate reset dates is above the cap rate.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, ~~the~~we ~~Company~~ performed an evaluation under the supervision and with the participation of ~~the~~our ~~Company’s~~ management including the ~~Chief~~chief ~~Executive~~executive ~~Officer~~officer and the ~~Chief~~chief ~~Financial~~financial ~~Officer~~officer, of the effectiveness of our ~~the Company’s~~ disclosure controls and procedures. Based on that evaluation, ~~the~~our ~~Company’s~~ management, including the ~~Chief~~chief ~~Executive~~executive ~~Officer~~officer and ~~Chief~~chief ~~Financial~~financial ~~Officer~~officer, concluded that ~~the~~our ~~Company’s~~ disclosure controls and procedures were effective. There have been no ~~significant~~ changes in internal control over financial reporting ~~for~~during the period covered by this report that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

2536

PART II

~~Item~~ITEM 1. ~~Legal~~LEGAL ~~Proceedings~~PROCEEDINGS

~~The~~We ~~Company~~currently ~~emerged~~and from ~~Chapter~~time 11to ontime ~~March~~are 8,subject ~~2002.~~to ~~However,~~claims ~~under~~and ~~the~~actions ~~Plan,~~arising in the ~~Bankruptcy~~ordinary ~~Court~~course ~~retained~~of ~~jurisdiction~~our ~~over certain matters~~business, including ~~matters~~general ~~relating~~liability, toworkers’ ~~claim~~compensation, ~~objections~~employee compensation and ~~specific~~environmental ~~matters~~claims. ~~relating~~In tosome ~~the~~actions, ~~implementation and~~plaintiffs ~~consummation~~request ofpunitive ~~the~~or ~~Plan~~other damages that may not be covered by insurance. In management’s opinion, the ~~matters~~claims ~~over~~and ~~which~~actions ~~the~~in ~~Bankruptcy~~which ~~Court~~we ~~has~~are ~~retained~~involved ~~jurisdiction~~ are not expected to have a material adverse impact on ~~the~~our ~~Company’s~~ financial position or results of operations. In addition, we are a defendant in certain actions alleging violations of federal legislation involving unsolicited communications. These actions were brought by plaintiffs who allegedly received unsolicited communications from us or from an agent on our behalf. The plaintiffs in these actions seek statutory damages and have requested geographically-limited class certifications. In one of these actions, which was brought in Georgia state court, the court recently approved a settlement of the class action. It is not possible at this time to predict the outcome of the remaining action. From time to time, we resolve claims alleging similar violations in order to avoid litigation.

~~The~~Effects ~~Company currently and from time to time is subject to claims and actions arising in the ordinary course~~ of ~~its~~Threatened ~~business,~~European ~~including~~Community ~~general~~Tariff ~~liability,~~Increases workers’ compensation and environmental claims. In some actions, plaintiffs request punitive and other damages that may not be covered by insurance. In management’s opinion, the ordinary course claims and actions in which the Company is involved are not expected to have a material adverse impact on its financial position or results of operations. In addition, AMF Centers is a defendant in certain actions alleging violations of the federal legislation for transmission of unsolicited communications. The plaintiffs in these actions seek statutory damages and have requested geographically-limited class certifications. It is not possible at this time to predict the outcome of such actions. AMF Centers also, from time to time, resolves claims alleging similar violations in order to avoid litigation.

Regulatory Matters

~~There are no unique regulations applicable to bowling center operations or bowling equipment manufacturing.~~ State and local governments require bowling centers to hold permits to sell alcoholic beverages, and, although regulations vary from state to state, once permits are issued, they generally remain in place indefinitely (except for routine renewals). There are no unique regulations applicable to bowling center operations or bowling equipment manufacturing. Currently, and from time to time, we are subject to claims relating to the violations of such regulations.

~~Environmental~~Our ~~Matters~~operations are also 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~~Currently ~~Company’s~~and ~~operations~~from ~~are~~time ~~subject~~ to ~~federal~~time, ~~state,~~we ~~local~~are ~~and~~subject ~~foreign~~to environmental ~~laws~~ and ~~regulations~~other ~~that impose~~regulatory ~~limitations~~claims. onIn management’s opinion, the ~~discharge~~various ~~of,~~claims ~~and~~in ~~establish~~respect ~~standards~~of ~~for~~which ~~the~~we ~~handling,~~are ~~generation,~~currently ~~emission~~involved, ~~release,~~is ~~discharge,~~not ~~treatment,~~likely ~~storage~~to ~~and~~have ~~disposal~~a material ~~of,~~adverse ~~certain~~impact ~~materials,~~on ~~substances~~our ~~and~~financial ~~wastes~~position or results of operations.

~~The~~We ~~Company~~cannot ~~currently~~predict ~~and~~with ~~from~~any ~~time~~certainty towhether ~~time~~existing isconditions ~~subject~~or future events, such as changes in existing laws and regulations, may give rise to ~~environmental claims~~additional costs. InFurthermore, ~~management’s~~actions ~~opinion~~by federal, ~~the~~state, ~~various~~local ~~claims~~and foreign ingovernments ~~which~~could ~~the~~result ~~Company~~in ~~currently~~laws isor ~~involved~~regulations ~~are~~that ~~not~~could ~~likely~~increase tothe ~~have~~cost aof ~~material~~producing ~~adverse~~our ~~impact~~products, onor ~~its~~providing ~~financial~~our ~~position~~services, or ~~results~~otherwise ofadversely ~~operations~~affect the demand for our products or services.

~~The~~37 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.

~~Item~~ITEM 6. ~~Exhibits~~EXHIBITS ~~and Reports on Form 8-K~~

(a)

Exhibits

31.1		Certification by the Company’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by the Company’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

3.1

Amended and Restated Certificate of Incorporation of AMF Bowling Worldwide, Inc. (incorporated herein by reference to the Company’s Current Report on Form 8-K dated March 8, 2002 (File No. 001-12131)).

3.2 Amended and Restated By-Laws of AMF Bowling Worldwide, Inc. (b)incorporated ~~Reports~~herein by reference to the Company’s Current Report on Form 8-K: dated March 8, 2002 (File No. 001-12131)).

~~None~~10.1 Employment Letter, dated as of October 27, 2004, between AMF Bowling Worldwide, Inc. and Anthony J. Ponsiglione II (filed herewith).*

2712.1 Statement re: Computation of Ratios (filed herewith).

31.1

Certification by the Company’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2

Certification by the Company’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1

Certification by the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2

Certification by the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

*	Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMF Bowling Worldwide, Inc.


AMF Bowling Worldwide, Inc.
(registrant)

/s/ Christopher F. Caesar		November 8, 2004
Christopher F. Caesar
Senior Vice President, Chief Financial Officer and Treasurer
(Duly authorized officer of the registrant and principal financial officer)

~~(Registrant)~~ 39

/s/ Christopher F. Caesar November 12, 2003 Christopher F. Caesar Senior Vice President, Chief Financial Officer and Treasurer (Duly authorized officer of the registrant and principal financial officer)

Table of Contents

Table of Contents

AsTable of September 28, 2003 and September 29, 2002, potentially dilutive common shares of 4,127 and 4,277, respectively, were not included in the computation of diluted earnings per share because their effect is antidilutive. Contents

Table of Contents

Filing Compare · AMF BOWLING WORLDWIDE INC