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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(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 28, 2003



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission file number 001-12131



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AMF BOWLING WORLDWIDE, INC.

(Exact name of Registrant as specified in its charter)



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|Delaware                                                       |  | 13-3873272                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



8100 AMF Drive

Richmond, Virginia 23111

(Address of principal executive offices, including zip code)



(804) 730-4000

(Registrants telephone number, including area code)



---



Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x



Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No ̈



The number of shares of the Registrants common stock issued and outstanding or issuable under the Registrants
Plan of Reorganization as of October 31, 2003 was 10,000,000.



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##### Table of Contents

AMF BOWLING WORLDWIDE, INC.



TABLE OF CONTENTS



|           |  |                                                                                       |  | Page
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  | PART I                                                                                |  |     
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  |     
|           |  |                                                                                      
|           |  | Condensed Consolidated Balance Sheets (unaudited)                                     |  | 4   
|           |  |                                                                                      
|           |  | Condensed Consolidated Statements of Operations (unaudited)                           |  | 5   
|           |  |                                                                                      
|           |  | Condensed Consolidated Statements of Cash Flows (unaudited)                           |  | 6   
|           |  |                                                                                      
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                      |  | 7   
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16  
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 24  
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 25  
|           |  |                                                                                      
|           |  | PART II                                                                               |  |     
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 26  
|           |  |                                                                                      
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  | 27  
|           | 
|Signatures |  | 28                                                                                   



1



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##### Table of Contents

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;
| | - | ------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | 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.



3



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##### Table of Contents

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  |   |              | $
|Accounts and notes receivable, net of allowance for doubtful accounts of $4,680 and $7,329, respectively |  |                   | 25,922  |   |              |  
|Inventories, net                                                                                         |  |                   | 36,353  |   |              |  
|Advances and deposits                                                                                    |  |                   | 19,144  |   |              |  
|                                                                                                         |  |                   |         |   |              |  
|Total current assets                                                                                     |  |                   | 103,669 |   |              |  
|Property and equipment, net                                                                              |  |                   | 562,963 |   |              |  
|Leasehold interests, net and other                                                                       |  |                   | 29,998  |   |              |  
|                                                                                                         |  |                   |         |   |              |  
|Total assets                                                                                             |  | $                 | 696,630 |   |              | $
|                                                                                                         |  |                   |         |   |              |  
|Liabilities and Stockholders Equity                                                                     |  |                   |         |   |              |  
|Current liabilities:                                                                                     |  |                   |         |   |              |  
|Accounts payable                                                                                         |  | $                 | 15,046  |   |              | $
|Accrued expenses and other                                                                               |  |                   | 84,849  |   |              |  
|Current portion of long-term debt                                                                        |  |                   | 17,931  |   |              |  
|                                                                                                         |  |                   |         |   |              |  
|Total current liabilities                                                                                |  |                   | 117,826 |   |              |  
|Long-term debt, less current portion                                                                     |  |                   | 378,143 |   |              |  
|Liabilities subject to resolution                                                                        |  |                   | 1,110   |   |              |  
|                                                                                                         |  |                   |         |   |              |  
|Total liabilities                                                                                        |  |                   | 497,079 |   |              |  
|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     |   |              |  
|Paid-in capital                                                                                          |  |                   | 212,466 |   |              |  
|Accumulated deficit                                                                                      |  |                   | (24,881 | ) |              |  
|Accumulated other comprehensive income                                                                   |  |                   | 11,866  |   |              |  
|                                                                                                         |  |                   |         |   |              |  
|Total stockholders equity                                                                               |  |                   | 199,551 |   |              |  
|                                                                                                         |  |                   |         |   |              |  
|Total liabilities and stockholders equity                                                               |  | $                 | 696,630 |   |              | $
|                                                                                                         |  |                   |         |   |              |  

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|(a) | There were 9,958,689 shares outstanding on September 28, 2003. On 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).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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AMF BOWLING WORLDWIDE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except
share and per share data)



|                                             |  | Quarter EndedSeptember 28, 2003 |         |   | Quarter EndedSeptember 29, 2002 |  
|-------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------- | -
|Operating revenue                            |  | $                               | 148,014 |   |                                 | $
|                                             |  |                                 |         |   |                                 |  
|Operating expenses:                          |  |                                 |         |   |                                 |  
|Cost of goods sold                           |  |                                 | 33,686  |   |                                 |  
|Bowling center operating expenses            |  |                                 | 91,566  |   |                                 |  
|Selling, general and administrative expenses |  |                                 | 10,959  |   |                                 |  
|Depreciation and amortization                |  |                                 | 15,673  |   |                                 |  
|                                             |  |                                 |         |   |                                 |  
|Total operating expenses                     |  |                                 | 151,884 |   |                                 |  
|                                             |  |                                 |         |   |                                 |  
|Operating loss                               |  |                                 | (3,870  | ) |                                 |  
|                                             |  |                                 |         |   |                                 |  
|Nonoperating expenses (income):              |  |                                 |         |   |                                 |  
|Interest expense                             |  |                                 | 9,187   |   |                                 |  
|Interest income                              |  |                                 | (96     | ) |                                 |  
|Other expense (income), net                  |  |                                 | (762    | ) |                                 |  
|                                             |  |                                 |         |   |                                 |  
|Total nonoperating expenses, net             |  |                                 | 8,329   |   |                                 |  
|                                             |  |                                 |         |   |                                 |  
|Loss before income taxes                     |  |                                 | (12,199 | ) |                                 |  
|Provision for income taxes                   |  |                                 | 473     |   |                                 |  
|                                             |  |                                 |         |   |                                 |  
|Net loss                                     |  | $                               | (12,672 | ) |                                 | $
|                                             |  |                                 |         |   |                                 |  
|Net loss per share of common stock:          |  |                                 |         |   |                                 |  
|Basic                                        |  | $                               | (1.27   | ) |                                 | $
|Diluted                                      |  |                                 | (1.27   | ) |                                 |  



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



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AMF BOWLING WORLDWIDE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



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



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



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AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data and Note 12)

(unaudited)



NOTE 1. BUSINESS DESCRIPTION 
ORGANIZATION



The Company is engaged 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 Company is the largest operator of bowling centers in the world with 473 centers in operation as of September 28, 2003, comprised of 376 bowling
centers in the U.S. and 97 bowling centers operating in five foreign countries.



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
owned, indirect subsidiary of Worldwide.



On 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.



The Company has a retail calendar with each quarter comprised of one five week period and two four week periods. The Companys 52-53 week year ends on the Sunday nearest to June 30. Fiscal year 2003 contained 52
weeks.



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AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



NOTE 2. BASIS OF PRESENTATION



The Companys interim condensed consolidated financial statements presented in this Form 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, 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 Companys Annual Report on Form 10-K for the fiscal year ended June 29, 2003. The balances presented as of June 29, 2003 are derived from the Companys audited
consolidated financial statements.



NOTE 3. EARNINGS (LOSS) PER SHARE



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:



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



As 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.



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AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



NOTE 4. STOCK-BASED COMPENSATION



The Company currently uses the intrinsic value method of accounting for stock based employee compensation in accordance with
Accounting Principles Board (APB) Opinion No. 25 Accounting for Stock Issued to Employees. Under APB Opinion No. 25, compensation expense is based upon the difference, 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 below:



|                                                                       |  | Quarter EndedSeptember 28, 2003 |         |   | Quarter EndedSeptember 29, 2002 |  
|---------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------- | -
|Net loss, as reported                                                  |  | $                               | (12,672 | ) |                                 | $
|Stock-based employee compensation under APB 25                         |  |                                 | 105     |   |                                 |  
|Pro forma stock-based employee compensation expense under SFAS No. 123 |  |                                 | (780    | ) |                                 |  
|                                                                       |  |                                 |         |   |                                 |  
|Net loss, pro forma                                                    |  | $                               | (13,347 | ) |                                 | $
|                                                                       |  |                                 |         |   |                                 |  
|Net loss per share, as reported                                        |  |                                 |         |   |                                 |  
|Basic                                                                  |  | $                               | (1.27   | ) |                                 | $
|Diluted                                                                |  |                                 | (1.27   | ) |                                 |  
|                                                                       |  |                                
|Net loss per share, pro forma                                          |  |                                 |         |   |                                 |  
|Basic                                                                  |  | $                               | (1.33   | ) |                                 | $
|Diluted                                                                |  |                                 | (1.33   | ) |                                 |  
|                                                                       |  |                                
|Weighted average shares                                                |  |                                 |         |   |                                 |  
|Basic                                                                  |  |                                 | 10,000  |   |                                 |  
|Diluted                                                                |  |                                 | 10,000  |   |                                 |  



NOTE 5. COMPREHENSIVE INCOME (LOSS)



Comprehensive loss was $12,119 and $20,659 for the
quarter ended September 28, 2003 and September 29, 2002, respectively. Accumulated other comprehensive income of $11,866 and $4,817 at September 28, 2003 and September 29, 2002, respectively, is included in stockholders equity and consists of
the foreign currency translation adjustment.



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AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



NOTE 6. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS



On June 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.



On June 30, 2003, the Company adopted the provisions of the Financial Accounting Standards Board (FASB) Emerging Issues Task Force
(EITF) 00-21 Revenue Arrangements with Multiple Deliverables. EITF 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities.
Specifically, EITF 00-21 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. The guidance in this EITF is effective for revenue arrangements entered into in periods 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.



NOTE 7. INVENTORIES, NET



Inventories, net at September 28, 2003 and June 29, 2003 consist of:



|                               |  | September 28, 2003 |        | June 29, 2003
|------------------------------ |  | ------------------ | ------ | -------------
|Products, at FIFO:             |  |                    |        |              
|Raw materials                  |  | $                  | 6,159  |              
|Work in progress               |  |                    | 5,867  |              
|Finished goods and spare parts |  |                    | 16,365 |              
|Centers, at average cost:      |  |                    |        |              
|Merchandise and spare parts    |  |                    | 7,962  |              
|                               |  |                    |        |              
|                               |  | $                  | 36,353 |              
|                               |  |                    |        |              



NOTE 8. PROPERTY AND EQUIPMENT, NET



Property and equipment, net at September 28, 2003 and
June 29, 2003 consist of:



|                                  |  | September 28, 2003 |          |   | June 29, 2003 |  
|--------------------------------- |  | ------------------ | -------- | - | ------------- | -
|Land                              |  | $                  | 117,230  |   |               | $
|Buildings                         |  |                    | 308,292  |   |               |  
|Equipment, furniture and fixtures |  |                    | 241,449  |   |               |  
|Other                             |  |                    | 6,161    |   |               |  
|                                  |  |                    |          |   |               |  
|                                  |  |                    | 673,132  |   |               |  
|Less: accumulated depreciation    |  |                    | (110,169 | ) |               |  
|                                  |  |                    |          |   |               |  
|                                  |  | $                  | 562,963  |   |               | $
|                                  |  |                    |          |   |               |  



Depreciation expense
related to property and equipment was $15,501 and $21,302 for the quarter ended September 28, 2003 and September 29, 2002, respectively.



10



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##### Table of Contents

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



NOTE 9. LONG-TERM DEBT



Credit Agreement



As of February 28, 2002, the Company entered into a senior secured credit agreement (the Credit 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 liquidity requirements,
the 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.



Pursuant
to the Credit Agreement, the Company was required to calculate the amount of a mandatory prepayment of the Term Facility based on consolidated excess cash flow, as defined in the Credit Agreement, for the transition 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 Agent, which applied the prepayment to the Term Facility on November 7, 2002 upon expiration of a Eurodollar loan contract. For the
fiscal year ended 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. 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.



11



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##### Table of Contents

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



Subordinated Notes



As of the Effective Date and pursuant to the Plan, the Company issued $150,000 aggregate principal amount of 13.00% Senior 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 including cross default provisions; are unsecured; and have the benefit of guarantees 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% beginning on March 1, 2007 and thereafter. Upon the occurrence of both a change of control of the Company (as defined in the Indenture) and a ratings decline (as defined in the Indenture), the Company is required to 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



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 |   |               | $
|Revolver (a)                             |  |                    | 5,000   |   |               |  
|Subordinated Notes                       |  |                    | 150,000 |   |               |  
|Mortgage note and capitalized leases (b) |  |                    | 4,200   |   |               |  
|                                         |  |                    |         |   |               |  
|Total debt                               |  |                    | 396,074 |   |               |  
|Current maturities                       |  |                    | (17,931 | ) |               |  
|                                         |  |                    |         |   |               |  
|Total long-term debt                     |  | $                  | 378,143 |   |               | $
|                                         |  |                    |         |   |               |  

---

|(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.



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##### Table of Contents

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



NOTE 11. COMMITMENTS AND CONTINGENCIES



Equipment Warranties



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.



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##### Table of Contents

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



Asset Sales



From time to time, 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. In addition, the Company will, from time to time, sell excess real estate.



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



Litigation and Claims



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.



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##### Table of Contents

AMF BOWLING WORLDWIDE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(in
thousands, except share data and Note 12)

(unaudited)



NOTE 12. BUSINESS SEGMENTS



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



|                                    |  | Quarter ended September 28, 2003 |      
|----------------------------------- |  | -------------------------------- | -----
|                                    |  | Centers                          |      
|                                    |  | U.S.                             |      
|Revenue from unaffiliated customers |  | $                                | 89.5 
|Intersegment sales                  |  |                                  |     
|Operating income (loss)             |  |                                  | (1.2 
|Total assets                        |  |                                  | 468.0
|Depreciation and amortization       |  |                                  | 10.5 
|Capital expenditures                |  |                                  | 7.7  
|                                    | 
|                                    |  | Quarter ended September 29, 2002 |      
|                                    |  | Centers                          |      
|                                    |  | U.S.                             |      
|Revenue from unaffiliated customers |  | $                                | 92.3 
|Intersegment sales                  |  |                                  |     
|Operating income (loss)             |  |                                  | (6.1 
|Total assets                        |  |                                  | 500.7
|Depreciation and amortization       |  |                                  | 17.0 
|Capital expenditures                |  |                                  | 7.1  



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Chapter 11 and Emergence



On July 2, 2001 (the Petition Date), AMF Bowling Worldwide, Inc., a Delaware corporation (Worldwide and together with its
subsidiaries, the Company) 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) 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



To facilitate a meaningful comparison, 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.S. Centers) and internationally (International Centers and collectively with U.S. Centers, Centers) and bowling products operations
(Products) separately.



The results of operations
of Centers, 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.



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.



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##### Table of Contents

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



Consolidated revenue
for the quarter ended September 28, 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 and Amortization



Depreciation 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 Expense



Gross
interest expense decreased $1.3 million, or 12.4%, 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 for Income Taxes



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.



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##### Table of Contents

Net Loss



Net loss for the quarter ended September 28, 2003 totaled $12.7 million compared with a net loss of $20.8 million in the prior year quarter. This
change was primarily attributable to the decrease in depreciation and amortization mentioned above. Additionally, in the quarter ended September 28, 2003, the Company recognized gains of $0.7 million related to fixed asset disposals.



Liquidity - Capital Resources  Asset Sales  Capital Expenditures



General



The Company generally relies on cash flow from operations and borrowings
under its $45.0 million revolving credit facility (the Revolver) to fund its liquidity and capital expenditure needs. The Companys ability to repay its indebtedness will depend on its future performance, which is subject to general
economic, financial, competitive, legislative, regulatory and other factors. Management believes that available cash flow from operations and borrowings under the Revolver will be sufficient to fund its liquidity and capital expenditure needs.



As of February 28, 2002, the Company entered into the Credit
Agreement. The Credit Agreement provides for a $290.0 million term facility (the Term Facility) maturing in February 2008 and the Revolver maturing in February 2007. On December 19, 2002, after reviewing the Companys future
liquidity requirements, the Company voluntarily and permanently reduced the Revolver as provided in the Credit Agreement, from $60.0 million to $45.0 million. This reduction will result in lower commitment fees in future periods.



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 28, 2003, working capital deficit was $14.2 million compared
with working capital deficit of $10.4 million at June 29, 2003, a decrease of $3.8 million. This decrease is primarily attributable to a decrease in cash as a result of payments of current maturities of long term debt and funding of operations and
is comprised of the following:



|                                     |  | 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 
|                                     |  |                     |      



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.



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##### Table of Contents

Net cash used in investing activities was $8.4 million for the quarter ended September 28, 2003 compared
with $8.9 million in the quarter ended September 29, 2002, a decrease of $0.5 million. This decrease is primarily due to increased proceeds from the sale of property and equipment of $0.9 million. The decrease was partially offset by an increase in
Centers expenditures, primarily related to capital improvements and an increase in company-wide information systems expenditures.



Net 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.



Capital Resources



The Companys debt at September 28, 2003 and June 29, 2003 consisted of the following:



|                                     |  | September 28, 2003 |       | June 29, 2003
|------------------------------------ |  | ------------------ | ----- | -------------
|Term Facility                        |  | $                  | 236.9 |              
|Subordinated Notes                   |  |                    | 150.0 |              
|Revolver                             |  |                    | 5.0   |              
|Mortgage note and capitalized leases |  |                    | 4.2   |              
|                                     |  |                    |       |              
|                                     |  | $                  | 396.1 |              
|                                     |  |                    |       |              



As of September 28,
2003, the Company had approximately $30.5 million available for borrowing under the Revolver, with $5.0 million outstanding and approximately $9.5 million of issued but undrawn standby letters of credit. As of June 29, 2003, the Company had $35.8
million available for borrowing or letters of credit under the Revolver, with no amounts outstanding and $9.2 million of issued but undrawn standby letters of credit.



During the quarter ended September 28, 2003, the Company funded its obligations primarily through cash flows from operations
and borrowings under the Revolver. The Company made cash interest payments of $15.5 million during the quarter ended September 28, 2003. For the fiscal year ended June 29, 2003, the Company calculated a mandatory Term Facility prepayment of $24.4
million based on consolidated excess cash flow, $23.3 million of which was paid and applied to the Term Facility on August 28, 2003. The remaining $1.1 million 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. Additionally, on September 30, 2003, the Company made a $1.9 million principal payment under the Term Facility and on October 2, 2003, the Company repaid the $5.0
million borrowing under the Revolver. The payments made after September 28, 2003 are not reflected in the condensed consolidated balance sheet at September 28, 2003.



Asset Sales



From time to time, 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. In addition, the Company will, from time to time, sell excess real estate.



During the quarter ended September 28, 2003, the Company sold excess property in the United States for net proceeds of $0.8 million.



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##### Table of Contents

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.



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 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 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 increase 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 $27.4 million of the $148.0 million consolidated revenue and $1.4 million of the $(3.9) million consolidated operating loss for the quarter ended September 28, 2003. For the quarter ended September 29, 2002 International Centers
represented $26.4 million of the $150.6 million consolidated revenue and $1.9 million of the $(8.3) million consolidated operating loss.



Revenue and operating income of International Products represented 8.9% and 12.8% of consolidated revenue and operating loss, respectively, for the
quarter ended September 28, 2003. Revenue and operating income of International Products represented 8.0% and 6.0% of consolidated revenue and operating loss, respectively, for the quarter ended September 29, 2002.



Impact of Inflation



The Company historically offsets the impact of inflation through price increases. Periods of high inflation could have a
material adverse impact on the 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 Companys operations as a result of inflation for the
quarters ended September 28, 2003 and September 29, 2002, respectively.



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 the related disclosure below have been reviewed with the Audit Committee of the Board of
Directors.



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##### Table of Contents

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 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.



Inventory Obsolescence



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



Products generally warrants all new products for one year and charges to expense an estimated amount for future warranty obligations. The reserve is
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 Company self-insures 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 potential liability and the potential for the award of damages is considered in making any estimate. The Company 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 Company evaluates the adequacy of these reserves on a regular basis, modifying, as necessary, its assumptions, updating its records of historical experience and adjusting
its reserves as appropriate.



Deferred Tax Assets



As of September 28, 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, and the reliability of historical profitability 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, an offsetting valuation reserve is recorded, thereby reducing net earnings and the
deferred tax asset in that period. Due to the Companys historical and expected future earnings from operations, management concluded that it is more likely than not that the Company will not realize the benefit of its



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deferred tax assets. Therefore, 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



Centers results reflect 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 sources:



| |  | bowling;
| | - | --------



| |  | food and beverage sales; and
| | - | ----------------------------



| |  | ancillary sources.
| | - | ------------------



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



For the quarter ended
September 28, 2003, bowling, food and beverage and ancillary sources represented 57.6%, 26.5% and 15.9% of total Centers revenue, respectively. For the quarter ended September 29, 2002, bowling, food and beverage and ancillary sources represented
57.3%, 26.5% and 16.2% of total Centers revenue, respectively.



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 revenue that could be expected from the decline in lineage has been generally offset with price increases.
International Centers, which operates in five different countries, 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, 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.



Quarter ended September 28, 2003
compared with the quarter ended September 29, 2002



Centers operating revenue was down $1.8 million, or 1.5%, for the quarter ended September 28, 2003 compared with the prior year quarter, of which $2.8 million was attributable to the closure of 18 centers since September 29, 2002. The
decrease in revenue as a result of closed centers was offset by an increase in international constant center revenue. International constant center revenue increased $2.1 million, or 8.5%, primarily attributable to a favorable foreign exchange rate
variance of $2.4 million, partially offset by a decline in lineage. U.S. constant center



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revenue decreased $1.5 million, or 1.7%, primarily as a result of decreased food and beverage and ancillary revenue.



Bowling center operating expenses increased $0.6 million, or 0.6%, of which
$2.7 million was a result of an increase in constant center expenses. U.S. constant center operating expenses increased $0.8 million, or 1.3%, primarily attributable to increased payroll and 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%, primarily attributable 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.



Depreciation and amortization decreased $6.4 million, or 31.9%, primarily attributable to a decrease in depreciation expense as a result of U.S. Centers 1996 acquisition 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.



Operating income increased $4.4 million versus the prior year quarter primarily due to the decrease in depreciation and amortization as discussed above.



Products



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



Quarter ended September 28, 2003
compared with the quarter ended September 29, 2002



Products operating revenue decreased $0.3 million, or 0.8%.



Gross profit increased $1.3 million, or 17.1%. The gross profit margin was 24.5% for the quarter ended September 28, 2003 compared with 20.7% in the prior year quarter. The improved margin percentage was primarily attributable to
efficiencies in labor and reductions in warranty expense.



Products selling, general and administrative expenses increased $0.8 million, or 14.8%, compared with the prior year quarter. The increase in expenses is primarily attributable to increased payroll expenses.



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



Operating income for the quarter ended September 28, 2003 was $1.2 million, an increase of $0.1 million, or 9.1%, when compared with the prior year quarter primarily attributable to the increase in the gross profit margin.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates that could impact its results of operations and
financial condition. The Company manages its exposure to these risks through its normal operating and financing activities and through the use of interest rate cap agreements. At September 28, 2003, one interest rate cap agreement was
outstanding. There were 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 interest rate cap agreements as it deems
appropriate.



As with other U.S.-based exporters, local
currency devaluations increase the cost of the 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 Company has not hedged against fluctuations in its investment in foreign operations.



The Company uses interest rate cap agreements to mitigate the effect of changes in interest rates on variable rate borrowings under the Credit Agreement.
While the Company is exposed to credit risk in the event of non-performance by the counterparties to the interest rate swap agreements, in all cases such counterparties are highly-rated financial institutions and the Company does not anticipate
non-performance. The Company does not hold or issue derivative financial instruments for trading purposes.



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          |  | Fixed Rate Debt |        | WeightedAverageInterest Rate |       |   | VariableRate Debt |   | WeightedAverageInterest Rate | 
|----------------- |  | --------------- | ------ | ---------------------------- | ----- | - | ----------------- | - | ---------------------------- | 
|September 1, 2008 |  |                 | $150.0 |                              | 13.00 | % |                   |   |                             | 
|February 28, 2008 |  |                 |       |                              |      |   |                   | $ | 236.9                        | 
|February 28, 2007 |  |                 |       |                              |      |   |                   | $ | 5.0                          | 



The 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.



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ITEM 4. CONTROLS AND PROCEDURES



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



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PART II



Item 1. Legal Proceedings



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.



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).



Environmental Matters



The Companys operations are subject to federal, state, local and foreign environmental laws and regulations that
impose limitations on the discharge of, and establish standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of, certain materials, substances and wastes.



The Company currently and from time to time is subject to environmental
claims. In managements opinion, the various claims in which the Company currently is involved are not likely to have a material adverse impact on its financial position or results of operations.



The Company cannot predict with any certainty whether existing conditions or
future events, such as changes in existing laws and regulations, may give rise to additional environmental costs. Furthermore, actions by federal, state, local and foreign governments concerning environmental matters could result in laws or
regulations that could increase the cost of producing the Companys products, or providing its services, or otherwise adversely affect the demand for its products or services.



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Item 6. 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.



|(b) | Reports on Form 8-K:
|--- | --------------------



None.



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SIGNATURES



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



AMF Bowling Worldwide, Inc.

(Registrant)



|/s/ 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) |  |                  





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