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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended June 27, 2004

OR

Commission File Number 001-12131

AMF BOWLING WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

8100 AMF Drive

Richmond, Virginia 23111

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:

(804) 730-4000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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 a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the 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 aggregate market value of voting common stock held by non-affiliates of the registrant as of June 27, 2004 was zero.

As of June 27, 2004, there were issued and outstanding 1,000 shares of the registrant’s common stock, $0.01 par value, all of which were held of record by Kingpin Intermediate Corp., a wholly-owned subsidiary of Kingpin Holdings, LLC.

DOCUMENTS INCORPORATED BY REFERENCE: None.

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AMF BOWLING WORLDWIDE, INC.

Annual Report on Form 10-K

June 27, 2004

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PART I

ITEM 1. BUSINESS

General Business

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

Centers is the largest operator of bowling centers in the world with 465 centers in operation as of June 27, 2004, comprised of 370 centers in the U.S. and 95 bowling centers operating in five foreign countries.

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

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

Worldwide serves as the corporate headquarters of the Company and provides certain management and administrative services for Centers and Products. Our 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.

Merger

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

Kingpin Holdings is a Delaware limited liability company formed at the direction of Code Hennessy & Simmons LLC, a Chicago-based private equity firm (“CHS”). Kingpin Holdings is owned by Code Hennessy & Simmons IV (“CHS IV”), our chief executive officer and other equity investors (collectively, the “Equity Investors”). In connection with the Merger, the following transactions occurred:

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Simultaneously with the Merger, all of the directors of Worldwide resigned and George W. Vieth, Jr. resigned as President and Chief Executive Officer of Worldwide. Frederick R. Hipp was elected as the sole director and the President and Chief Executive Officer of Worldwide.

Change of Fiscal Year

On March 20, 2002, we changed our fiscal year end from December 31 to the Sunday closest to June 30. This results in fiscal years having 52 or 53 weeks. Previously, our fiscal year ran from January 1 through December 31. We also adopted a retail calendar year, with each quarter comprised of one 5-week period and two 4-week periods.

Emergence from Chapter 11

In 1996, an investor group acquired the Company. At the time, the Company operated approximately 200 U.S. and 79 international bowling centers and also owned Products. In 1998, after acquiring approximately 260 bowling centers, Centers revenue and cash flow from operations (as measured on a constant center basis) had generally declined. Rapid growth led to problems in integrating new centers and managing the expanded operations. At the same time, Products revenue and cash flow from operations were declining as demand for NCPs dropped and product quality and order fulfillment problems began to adversely impact sales.

In mid-1999, it became apparent that projected cash flows were insufficient to service long term debt obligations and the filing of a voluntary petition for relief under Chapter 11 (“Chapter 11”), Title 11 of the United States Bankruptcy Code, was the most effective way to restructure the Company’s balance sheet.

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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 with the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the “Bankruptcy Court”). After the Petition Date, AMF Bowling, Inc., our former indirect parent, filed a separate petition for relief under Chapter 11.

On February 1, 2002, the Bankruptcy Court confirmed the Plan of the Debtors. The Plan became effective on March 8, 2002 (the “Effective Date”), which is the date on which the Debtors emerged from Chapter 11. On May 18, 2004, the Bankruptcy Court entered an order closing the Chapter 11 proceeding.

Fresh Start Accounting

In connection with our emergence from Chapter 11, we applied fresh start accounting to our financial statements in accordance with Statement of Position (“SOP”) 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.” Under SOP 90-7, the reorganization value of the Company, which was established for purposes of the Plan, was allocated to our various assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations” and our liabilities were stated at their present values.

Although the Effective Date of the Plan was March 8, 2002, the consummation of the Plan was reflected as of February 28, 2002, the end of our most recent fiscal month prior to the Effective Date. The Company, as it existed prior to the Effective Date, is referred to as the “Predecessor Company” and, as it existed on and after the Effective Date, is referred to as the “Reorganized Predecessor Company.” The operating results and cash flows of the Reorganized Predecessor Company and the Predecessor Company are separately presented as a result of the application of fresh start accounting at February 28, 2002. Our financial statements after the Effective Date are not comparable with the Predecessor Company’s financial statements.

Historical Financial Statements

The accompanying historical consolidated financial statements for periods prior to January 1, 2002 do not reflect the effects resulting from our emergence from the Chapter 11 proceeding, but instead represent the financial position and capital structure as of the dates indicated. As such, among other things, the historical consolidated financial statements do not reflect the effects of the cancellation of indebtedness that resulted from the Chapter 11 proceeding, our post-Plan capital structure or the application of fresh start accounting. The application of fresh start accounting resulted in the revaluation of our long lived assets. This revaluation lowered depreciation and amortization expense in periods subsequent to February 2002. The operating results and cash flows of the New Company and the Reorganized Predecessor Company are separately presented, as the financial statements after the Merger are not comparable with the Reorganized Predecessor Company’s financial statements just as the financial statements of the Reorganized Predecessor Company are not comparable with the Predecessor Company’s financial statements.

In accordance with SFAS No. 142 “Goodwill and Other Intangible Assets,” we wrote off our goodwill at January 1, 2002, significantly reducing amortization expense in periods subsequent to December 31, 2001.

Business Segments

Centers

As of June 27, 2004, we operated 370 bowling centers in 39 states and Puerto Rico and 95 bowling centers in five foreign countries: Australia (46), the United Kingdom (33), Mexico (9), France (4) and Japan (3). Centers contributed approximately 83% of the revenue during Fiscal Year 2004.

Centers derives revenue from three sources:

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In Fiscal Year 2004, bowling, food and beverage sales and Ancillary Sources represented 58%, 28% and 14% 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 U.S. Centers revenue that could be expected from the decline in lineage has been generally offset with price increases.

International Centers has an average bowling lineage mix of approximately 67% recreational lineage and 33% league lineage. Lineage has been declining for a number of years. Similar to U.S. Centers, International Centers management is attempting to offset this decline with increased recreational play by targeting corporate events and birthday parties. The impact on revenue from the decline in International Centers lineage has also been generally offset with inflationary price increases.

Products

Products contributed approximately 17% of our revenue during Fiscal Year 2004 (excluding intersegment sales to Centers). Products revenue is split between NCP and Modernization and Consumer Products. Currently, NCP sales account for approximately 15% of Products revenue and Modernization and Consumer Products sales account for approximately 85%. NCP revenue includes revenue from the sale of Factory Certified Packages, which are combinations of refurbished pinspotters, new automatic scoring systems, lanes, bowler seating and other components.

In Fiscal Year 2004 sales of NCP units was 918 units compared with 877 units in Fiscal Year 2003. The increase in NCP units was mainly concentrated in the North American and Japanese markets. We are seeing increased interest in other markets around the world as well.

Sales of Modernization and Consumer Products to bowling center operators provide a more stable base of recurring annual revenue than NCP sales. Some products in this category, such as bowling pins, are typically replaced annually to maintain a center. Other products, while purchased less frequently, are necessary to modernize a center or to replace worn out equipment.

Products revenue typically includes approximately $15 million to $20 million annually of intersegment sales to Centers. Intersegment sales are eliminated from our consolidated financial results but are reflected in the Products results.

Products also manufactures and sells billiard and game tables, sales of which generate approximately $12 million of annual revenue. The billiards business maintains an independent management team, manufacturing operation and sales force. Sales are primarily to distributors in North America.

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Note 14. Geographic Segments” and “Note 15. Business Segments” in the Notes to Consolidated Financial Statements for additional information regarding business and geographic segments.

Business Strategy

We continue to focus on our core U.S. Centers and Products businesses and will continue to consider strategic opportunities including acquisitions, divestitures and joint ventures as opportunities arise.

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Centers

Focused Marketing and Sales Efforts: We believe that a modest investment in local marketing and sales expertise may add incremental revenue at attractive profit margins. The core aspect of this strategy is to selectively add field marketing professionals who will focus on increasing group events that generate traffic and incremental revenue opportunities, such as corporate outings, birthday parties, school events and new league offerings.

Implement Shared Retail Best Practices Across Bowling Centers: We continue the transition from a collection of independent bowling centers to a retail chain with best practices and centrally established strategies and execution plans. Key elements of the process include pricing discipline, improved food and beverage offerings and better management, training and measurement. We are testing programs to support each of these elements and expect to execute plans upon successful completion of these tests.

Selectively Invest in Facility Improvements: To improve the customer experience, we plan to make selective facility improvements to key centers, such as upgraded food and beverage offerings, new scoring systems, improved lighting and interior decor, larger arcades and modernized restrooms. We are conducting a comprehensive strategic fleet analysis to rank the bowling centers on management’s estimate of their performance potential and will initiate this facility improvement program based upon those results.

Improve Management Information Systems: We recently began upgrading our point-of-sale (POS) system and linking it to our scoring system and believe that this upgrading and integration will enhance information capabilities.

Products

Our Products business is organized into five separate functional operating divisions. The manager of each division is now responsible for the division’s financial performance and balance sheet and is also closer to customers, and therefore better able to provide customer satisfaction and effect innovative product development. We continue to focus on new product introductions, cost reduction opportunities to existing products and better working capital management. We have also taken steps to make our Products business a stand alone business unit that will perform many of the management and administrative services formerly provided by Worldwide.

Seasonality

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 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 later 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 usually have fewer bowlers.

Industry and Competition

Centers

Bowling is both a competitive sport and a recreational entertainment activity and as such, faces competition from numerous other sporting and leisure alternatives. Centers performance and operating results are affected by many factors, including weather, the quality of the customer experience, the availability and affordability of other sports, recreational and entertainment alternatives, the amount of customer leisure time, as well as various other social and economic factors over which we have no control. Centers competes with other bowling centers primarily through customer service, quality of bowling equipment, location and facilities.

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The U.S. bowling center industry is highly fragmented. There are approximately 5,000 bowling centers that are owned by single-center and small-chain operators. Of these, approximately 2,000 have 24 lanes or more. In addition to us, there is only one other large bowling center operator which operates approximately 130 centers worldwide. There are three smaller chains that together operate approximately 55 bowling centers.

The international bowling center industry is also fragmented. Except for the United Kingdom, there are few bowling chain operators in countries in which International Centers operates. International Centers is the second largest operator of centers in the United Kingdom, with two other chains operating approximately 55 and 22 centers, respectively.

Products

We are one of the two full-line manufacturers of bowling equipment and supplies that compete on a global basis. We believe full-line manufacturers have a competitive advantage in the case of equipment packages, such as NCPs, where purchasers often desire to buy all of the bowling equipment necessary to outfit a new center from a single supplier.

Products competes with other manufacturers primarily through price, service and after sale support. Management believes that the abundant supply of lower priced, used bowling equipment and additional competition from overseas manufacturers, which may enjoy a lower cost structure, have adversely impacted our competitive position. In addition, because purchasers of NCPs are often start-up businesses, current political and economic conditions increase the difficulty that purchasers face in obtaining financing to build and equip new bowling centers.

In the sale of Modernization and Consumer Products, we compete with Brunswick Corporation as well as with a large number of smaller companies.

Management expects the trend toward lower cost products and price competition to continue.

International Operations

Our 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 devaluation increases the cost of Products bowling equipment. In addition, local currency devaluation negatively impacts the translation of operating results from International Centers.

Employees

Centers

As of September 1, 2004, Centers had approximately 13,800 full- and part-time employees worldwide, of which approximately 10,900 were employed in the U.S. and approximately 2,900 were employed internationally. The split between full-time and part-time employees is approximately 38% and 62%. We believe our relations with our Centers employees are satisfactory. Substantially all Centers employees are non-union employees.

Products

As of September 1, 2004, Products had 608 full-time employees worldwide, of which 285 were employed in manufacturing and 323 in sales, service, logistics and administration. We believe our relations with our Products employees are satisfactory. None of these employees are union members.

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Corporate

As of September 1, 2004, corporate had 116 full-time employees. We believe our relations with our corporate employees are satisfactory.

Website Access to Securities and Exchange Commission Reports

We file annual, quarterly and current reports, amendments to those reports and other information with the Securities and Exchange Commission’s (the “SEC”). Our website address is www.amf.com. Through a link to the SEC’s internet site on the “Company Information” portion of our website, we make available all of our filings with the SEC. This information is available as soon as the filing is accepted by the SEC.

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ITEM 2. PROPERTIES

Centers

As of June 27, 2004, we operated 370 bowling centers in the U.S. and Puerto Rico and 95 centers in five other countries. The average age of our U.S. bowling centers, including leased centers, is approximately 40 years. A typical bowling center has approximately 1,000 square feet of total space per bowling lane. Our average bowling center in U.S. Centers has approximately 39 lanes while the International Centers average is approximately 25 lanes.

During Fiscal Year 2004, we permanently closed nine bowling centers in the U.S., and reopened one bowling center previously closed due to fire damage.

The following table profiles Centers as of June 27, 2004:

During Fiscal Year 2004, we sold the land and buildings associated with six bowling centers in the U.S. for net proceeds of $3.1 million and losses of $1.4 million, of which $0.8 million was previously reserved. We also sold excess real estate and equipment in the U.S. for net proceeds of $1.3 million and gains of the same amount and the land and building associated with two bowling centers in Australia for net proceeds of $4.0 million and a gain of $2.1 million.

In connection with the Merger, AMF Centers and American Recreation Corporation, both wholly-owned indirect subsidiaries of ours, sold the land and related improvements of 186 owned bowling centers in the U.S. to unrelated third parties for gross proceeds of $254.0 million and AMF Centers simultaneously leased these bowling centers from the purchaser pursuant to two leases, each for an initial lease term of approximately 20 years, with 9 consecutive renewal terms, the first of which being for a term of 10 years and the second through ninth of which being for a term of 5 years each.

Our remaining bowling center leases are subject to periodic renewal. Thirty-four leases for bowling centers in U.S. Centers have leases that expire during the next three years, of which ten have renewal options at fixed rent increases. Eleven leases for bowling centers in International Centers have leases that expire during the next three years, none of which have renewal options at fixed rent increases. Management believes that it will generally be successful in renewing expiring center leases. There can be no assurance, however, that we will be able to renew leases, absent a favorable fixed rent in the option, at rents that would permit us to maintain or increase existing cash flow margins or on terms that are otherwise favorable to us. In addition, in light of the age of our bowling centers, which may require significant capital expenditures for maintenance, we may choose not to renew leases for marginally performing bowling centers. If we are unable to renew leases at rents that allow centers to remain profitable or management chooses not to renew leases, absent acquiring or building additional centers, the number of bowling centers will decrease.

Products and Corporate

As of June 27, 2004, Products owned or leased facilities at three locations in the U.S. Two are used for its bowling equipment business and one is used for its billiards business.

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U.S. FACILITIES

INTERNATIONAL FACILITIES

At June 27, 2004, Products leased all of its international facilities.

For information concerning material liens against our owned real estate, see “Note 7. Long-Term Debt” in the Notes to Consolidated Financial Statements.

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ITEM 3. LEGAL PROCEEDINGS

Currently and from time to time, we are subject to claims and actions arising in the ordinary course of our 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 we are involved are not expected to have a material adverse impact on our 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. In one of the actions, which was brought in Georgia state court, the court recently approved a settlement of the class action. It is not possible at this time to predict the outcome of the remaining action. AMF Centers also, from time to time, resolves claims alleging similar violations in order to avoid litigation.

Effects of Threatened European Community Tariff Increases

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

Regulatory Matters

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

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

Currently and from time to time, we are subject to environmental and other regulatory claims. In management’s opinion, the various claims in respect of which we are currently involved, is not likely to have a material adverse impact on our financial position or results of operations.

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

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

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PART II

ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

As a result of the Merger, we are a wholly-owned indirect subsidiary of Kingpin Holdings. Kingpin Holdings is a limited liability company formed at the direction of CHS. Kingpin Holdings is owned by CHS, our chief executive officer and the Equity Investors. In connection with the Merger, we paid a dividend of $250.3 million to Kingpin Intermediate Corp. As part of the Merger, Kingpin Intermediate Corp., a wholly-owned subsidiary of Kingpin Holdings, became the sole shareholder of our Company.

As a result of the Merger the Old Common Stock was canceled and is no longer publicly traded. All of the New Common Stock is held by Kingpin Intermediate Corp.

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data for the fiscal periods indicated below were derived from our audited consolidated financial statements for the New Company 2004 Four Months, the Reorganized Predecessor Company 2004 Eight Months, Fiscal Year 2003, the Reorganized Predecessor Company 2002 Four Months, the Predecessor Company 2002 Two Months (as defined in “Description of Reporting Periods” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations) and each of the years in the three year period ended December 31, 2001. The data should be read in conjunction with our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that appear elsewhere in this report. The selected financial data for periods prior to December 31, 2001 do not reflect our emergence from Chapter 11 but instead represent our financial position and capital structure prior to the implementation of the Plan. As such, among other things, the data does not reflect the effects of the cancellation of indebtedness resulting from the Chapter 11 proceeding, our post-Plan capital structure or the application of fresh start accounting. Also, in accordance with SFAS No. 142, we wrote off our goodwill as of January 1, 2002.

Our consolidated financial statements for the year ended December 31, 2001 and two month period ended February 28, 2002 were prepared in accordance with SOP 90-7, which provides guidance for financial reporting by entities that reorganize under Chapter 11. Under SOP 90-7, the reporting entity must distinguish between transactions and events directly associated with its Chapter 11 proceeding from those stemming from the operations of its ongoing business. The net cost associated with discontinued or reorganized operations are reported in the statement of operations separately as “reorganization items, net.”

Under SOP 90-7, our reorganization value, which was established for purposes of the Plan, was allocated to our various assets in accordance with SFAS No. 141 and the liabilities were stated at their present values. The application of SOP 90-7 resulted in the write down of certain long lived assets.

In conjunction with the Merger, the fair value of assets acquired and liabilities assumed were estimated in accordance with the purchase method of accounting for the Reorganized Predecessor Company 2004 Eight Months. We have obtained a third-party valuation of certain assets, the results of which are reflected in our preliminary allocation of the purchase price.

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AMF BOWLING WORLDWIDE, INC.

SELECTED FINANCIAL DATA

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AMF BOWLING WORLDWIDE, INC.

SELECTED FINANCIAL DATA

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

AMF Bowling Worldwide, Inc. and subsidiaries (which may be referred to as Worldwide, the Company, we, us or our) operate in two business segments: bowling center operations (“Centers”) and bowling products operations (“Products”). In Fiscal Year 2004, Centers, the largest segment, represented 83% of consolidated revenue. In reviewing Centers, management focuses on Center revenue, operating expenses and capital expenditures. In reviewing Products, management focuses on working capital as well as revenue, operating expenses and gross profit margin. To facilitate a meaningful comparison, certain portions of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) discuss the results of Centers and Products separately.

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

On March 20, 2002, we changed our fiscal year end from December 31 to the Sunday closest to June 30. This results in fiscal years having 52 or 53 weeks. Previously, our fiscal year ran from January 1 through December 31. We also adopted a retail calendar year, with each quarter comprised of one 5-week period and two 4-week periods.

Our Centers segment includes the operation of the U.S. and International facilities, which together operate 465 centers. Our Products segment includes the manufacture of bowling equipment such as automatic pinspotters, automatic scoring equipment, bowling pins, lanes, ball returns, lane machines, bowling center supplies and the resale of other related products, including bowling bags and shoes.

Our operations discussed in this MD&A have been impacted by the following significant events:

Emergence from Chapter 11

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 on March 8, 2002 (the “Effective Date”), which is the date on which the Debtors emerged from Chapter 11. On May 18, 2004, the Bankruptcy Court entered an order closing the Chapter 11 proceeding.

Merger

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

Kingpin Holdings is a Delaware limited liability company formed at the direction of Code Hennessy & Simmons LLC, a Chicago-based private equity firm (“CHS”). Kingpin Holdings is owned by Code Hennessy & Simmons IV, our chief executive officer and other equity investors (collectively, the “Equity Investors”). In connection with the Merger, the following transactions occurred:

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Simultaneously with the Merger, all of the directors resigned and George W. Vieth, Jr. resigned as President and Chief Executive Officer. Frederick R. Hipp was elected as the sole director and the President and Chief Executive Officer.

Outlook

In Fiscal Year 2004, management spent considerable time and effort in selling the Company to our new shareholder. With the Merger, we now have an experienced and permanent chief executive officer. Going forward, management expects to focus on our core U.S. Centers and Products businesses. We will continue to explore strategic opportunities including acquisitions, divestitures and joint ventures as opportunities arise.

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Consolidated Results

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

Description of Reporting Periods

The following table describes the periods presented in the MD&A and in the related notes:

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Consolidated Group

Fiscal Year 2004 compared with Fiscal Year 2003

Consolidated operating revenue was $678.8 million in Fiscal Year 2004, an increase of $11.2 million, or 1.7%, compared with Fiscal Year 2003. This increase was attributable to a $14.0 million increase in Products revenue primarily due to an increase in revenue in the Japanese and U.S. markets. This increase was partially offset by a decrease in Centers revenue of $0.1 million primarily attributable to a decrease in U.S. Centers revenue as a result of a decrease in bowling, food and beverage and Ancillary Sources due to a decrease in lineage.

Operating loss was $0.8 million in Fiscal Year 2004 compared with operating income of $39.3 million in Fiscal Year 2003, a decrease of $40.1 million. This decrease was primarily due to $36.2 million of expenses incurred in connection with the Merger. Additionally, $2.3 million of expenses were incurred in Fiscal Year 2004 related to the exploration of strategic opportunities.

Fiscal Year 2003 compared with Fiscal Year 2002

Consolidated operating revenue was $667.6 million in Fiscal Year 2003 compared with $679.7 million in Fiscal Year 2002, a decrease of $12.1 million, or 1.8%. This decrease was primarily due to a $12.9 million, or 2.2%, decline in Centers operating revenue, primarily due to the closing of 45 centers since June 2001. Constant centers operating revenue increased $4.9 million, or 0.9%. Products revenue increased $0.7 million, or 0.6%.

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Our operating income was $39.3 million in Fiscal Year 2003 compared with a $14.5 million loss in Fiscal Year 2002, an increase of $53.8 million. In addition to the changes in depreciation and amortization, restructuring, refinancing and other charges discussed below, operating income in Fiscal Year 2003 increased primarily due to a $11.0 million decrease in selling, general and administrative expenses primarily attributable to charges in Products recorded in Fiscal Year 2002 of $6.8 million reflecting increased reserves for accounts receivable, the adjustment of the net carrying value of certain other assets and liabilities of $2.5 million, charges of $0.7 million for certain legal matters and reserves, a $8.7 million decrease in bowling center operating expenses primarily attributable to bowling center closings and a $9.3 million decrease in cost of goods sold. Our total decrease in operating expenses of $65.9 million, or 9.5% more than offset the $12.1 million decline in operating revenue, resulting in the $53.8 million improvement in operating income.

Restructuring, Asset Impairment, Refinancing and Special Charges

We recorded approximately $0.8 million in Fiscal Year 2004, $1.1 million in Fiscal Year 2003 and $3.5 million in Fiscal Year 2002 related to asset impairment charges representing the difference between the fair market value and carrying value of impaired assets of closed bowling centers in the U.S. Additionally, in Fiscal Year 2002 we recorded approximately $5.7 million related to restructuring certain operations.

Depreciation and Amortization

For Fiscal Year 2004 depreciation and amortization decreased $18.7 million, or 23.2%, compared with Fiscal Year 2003. This change was primarily attributable to decreased Centers depreciation as a result of certain U.S. assets acquired in 1996 becoming fully depreciated and due to center closures there are 27 fewer centers when compared with the prior year. Additionally, $2.9 million of this decrease was attributable to the impact of the Sale-Leaseback Agreements on depreciation.

For Fiscal Year 2003, depreciation and amortization decreased $28.8 million, or 26.3%, compared with Fiscal Year 2002. This was principally related to the write-off of $718.4 million of goodwill as of January 1, 2002, in accordance with our adoption of SFAS No. 142 “Goodwill and Other Intangible Assets.” In addition, we wrote down long lived assets (including other intangible assets) by approximately $66.0 million in connection with the application of fresh start accounting. Under SOP 90-7, the reorganization value, which was established for purposes of the Plan, was allocated to our various assets in accordance with SFAS No. 141 “Business Combinations” and our liabilities were stated at their present values.

Interest Expense, net

Interest expense, net decreased $7.2 million, or 18.4%, in Fiscal Year 2004 compared with Fiscal Year 2003 primarily the result of lower principal amounts and interest rates under the Credit Agreement.

Interest expense, net decreased $16.2 million, or 29.3%, in Fiscal Year 2003 compared with Fiscal Year 2002. This decrease is primarily attributable to the discharge of debt under the senior secured credit agreement dated May 1, 1996, as amended and restated (the “Pre-petition Credit Agreement”), as well as the 10 ⁷/8% Series B Senior Subordinated Notes due 2006 and the 12 ¹/4% Series B Senior Subordinated Notes due 2006 (the “Pre-petition Subordinated Notes”) in connection with our emergence from Chapter 11, and lower principal amounts and interest rates under the Credit Agreement and the Subordinated Notes. As of the Petition Date, the Predecessor Company did not accrue interest on its pre-petition subordinated debt. If such interest had continued to be accrued, interest expense for Fiscal Year 2002 would have been approximately $42.1 million higher than the reported amount. The indebtedness represented by the Pre-petition Subordinated Notes was materially impaired or discharged in the Chapter 11 proceeding. See “Note 7. Long-Term Debt” in the Notes to the Condensed Consolidated Financial Statements and “Liquidity” and “Capital Resources” for further description of the debt.

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Reorganization Items, Net

Provision for Income Taxes

We had net operating losses of approximately $96.0 million in Fiscal Year 2004, $37.6 million in Fiscal Year 2003 and $30.1 million in Fiscal Year 2002. The net operating losses will begin to expire in 2022. We have a valuation reserve as of June 27, 2004, totaling $216.6 million against the deferred tax asset related to net operating losses and future deductible temporary items on which management believes we will not realize the benefits based on the “more likely than not” criteria of SFAS No. 109 “Accounting for Income Taxes.” The tax provision recorded for Fiscal Year 2004 primarily relates to certain state, local and foreign taxes.

Net Income (Loss)

Net loss in Fiscal Year 2004 was $66.8 million compared with net income of $3.4 million in Fiscal Year 2003. This decrease was primarily attributable to costs totaling $36.2 million incurred in Fiscal Year 2004 related to the Merger, as well as a loss on the extinguishment of debt of $26.5 million in prepayment penalties and the write-off of $8.8 million in deferred financing costs related to the tender of the Old Subordinated Notes. Additionally, we incurred a charge of $0.6 million related to severance for the former chief executive officer. These increases were partially offset by the decrease in depreciation and amortization discussed above.

Net income in Fiscal Year 2003 was $3.4 million compared with a net loss of $153.2 million in Fiscal Year 2002. In Fiscal Year 2002, we incurred certain charges of $15.1 million within Products, which included $6.8 million related to increased reserves for accounts receivable, $5.1 million for increased reserves related to excess inventory, $2.5 million to adjust the net carrying value of certain assets and liabilities, $0.7 million related to legal matters and claims in Germany and an increase in the reserve for expenses involving a former employee. In addition to the changes in operating income (loss) discussed above, charges were recorded in Fiscal Year 2002 as follows:

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Performance by Business Segment

Centers

Centers results reflect worldwide bowling centers operations. To facilitate a meaningful comparison, the constant center results reflect 463 centers (369 U.S. Centers and 94 International Centers) that have been in operation two full fiscal years as of June 27, 2004.

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

Fiscal Year 2004 compared with Fiscal Year 2003

Centers operating revenue decreased $0.1 million compared with the prior year. U.S. constant center revenue decreased $5.1 million, or 1.2%, primarily the result of a decrease in lineage. Also contributing to this decrease is a decline in revenue of $10.9 million attributable to the closure of 27 bowling centers since June 30, 2002. These decreases were partially offset by an increase in international constant center revenue of $15.4 million, or 15.0%, primarily attributable to a favorable foreign exchange rate variance of $13.8 million. In addition, new center revenue increased $0.5 million.

Bowling center operating expenses increased $29.6 million, or 8.0%, of which approximately $13.1 million were costs incurred in connection with the Merger. Additionally, U.S. constant center operating expense increased $17.2 million, or 6.4% primarily attributable to increased payroll and $10.0 million of additional rent expense associated with the Sale-Leaseback Agreements. International constant center expenses increased $11.3 million, or 18.4%, primarily attributable to an unfavorable foreign exchange rate variance of $9.7 million, and increases in payroll expense and marketing efforts. These increases were partially offset by a decrease in operating expenses as

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a result of closed centers of $9.0 million. Additionally, U.S. Centers recognized $1.5 million related to gains on casualty losses and $0.7 million related to gains on disposals of fixed assets, while International Centers recognized $2.2 million related to gains on disposals of fixed assets. Severance for the former U.S. Centers chief operating officer totaling approximately $0.3 million is included within payroll. Additionally, U.S. Centers also includes a charge totaling $0.6 million related to actions alleging violations of federal legislation involving unsolicited communications. As a percentage of revenue, operating expenses were 71.3% in Fiscal Year 2004 and 66.0% in Fiscal Year 2003.

Depreciation and amortization decreased $19.5 million, or 26.2%, primarily attributable to a decrease in U.S. Centers depreciation expense as machinery and equipment acquired in 1996 became fully depreciated and due to center closures there are 27 less centers when compared with the prior fiscal year. Additionally, $2.9 million of the decrease was due to the impact of the Sale-Leaseback Agreements on depreciation.

Operating income decreased $16.2 million, or 26.6%, versus Fiscal Year 2003 primarily due to the increase in operating expenses partially offset by the decrease in depreciation and amortization. In Fiscal Year 2004, Centers incurred a $6.3 million increase in cost of sales in conjunction with the application of purchase method accounting. Additionally, Centers recorded charges related to asset impairment resulting from center closures of $0.8 million and $1.1 million, in Fiscal Year 2004 and 2003, respectively.

Fiscal Year 2003 compared with Fiscal Year 2002

Centers operating revenue decreased $12.9 million, or 2.2%, compared with the prior year, of which $18.9 million was attributable to the closure of 45 bowling centers since June 30, 2001. Constant center revenue was up $4.9 million, or 0.9%. U.S. constant centers revenue decreased $0.9 million, or 0.2%. Decreases in lineage were partially offset by an increase in the U.S. constant centers “average price per game.” International constant centers revenue increased approximately $5.8 million, or 5.9%, primarily attributable to a favorable foreign exchange rate variance of $9.1 million, partially offset by a decline in lineage.

Bowling center operating expenses decreased $8.5 million, or 2.2%, primarily a result of center closings ($16.7 million). Constant centers operating expenses increased $7.4 million, or 2.2%. U.S. constant centers increased $1.6 million, or 0.6%, while international constant centers increased $5.8 million, or 10.3%. The U.S. constant centers increase was attributable to an increase of $2.3 million in insurance, taxes and licenses expense and $1.1 million associated with potential lease closure costs, partially offset by a decrease in advertising and maintenance expenses of $1.1 million and $0.7 million, respectively. U.S. Centers also includes a charge totaling $1.3 million related to one action alleging violations of federal legislation involving unsolicited communications. International constant center operating expenses were impacted by an unfavorable foreign exchange rate variance of $5.4 million and $0.2 million associated with potential lease closure costs. As a percentage of revenue, operating expenses were 66.0% in Fiscal Year 2003 and Fiscal Year 2002.

Depreciation and amortization decreased $19.8 million, or 21.0%, primarily due to the write-off of $268.6 million of goodwill as of January 1, 2002 in accordance with our adoption of SFAS No. 142. In connection with the Chapter 11 proceeding, we wrote down $76.4 million of long lived assets. In addition, center closures contributed to the reduction in deprecation expense.

Operating income increased $21.3 million, or 53.7%, versus Fiscal Year 2002 primarily due to the decrease in operating expenses, depreciation and amortization. In addition to the impact of the changes discussed above, Centers recorded charges related to asset impairment resulting from center closures of $1.1 million and $3.5 million, in Fiscal Year 2003 and 2002, respectively, and $0.6 million related to restructuring in Fiscal Year 2002.

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Products

Fiscal Year 2004 compared with Fiscal Year 2003

Products operating revenue increased $14.0 million, or 11.3%. The increase in the NCP market had a favorable impact on results. During Fiscal Year 2004, Products recorded NCP shipments of 918 units compared with 877 units in Fiscal Year 2003. Revenue in Japan increased $7.4 million as a result of increased demand in the Japanese market. Additionally, revenue increased $4.8 million in the U.S. as a result of stronger demand and a new product introduction. Revenue also increased in Europe by $1.3 million, primarily the result of increased volume as well as favorable exchange rate variances.

Gross profit increased by $0.9 million, or 3.3%. The gross profit margin was 20.2% in Fiscal Year 2004 compared with 21.8% in Fiscal Year 2003. The decreased margin was primarily attributable to a $2.3 million increase in cost of sales in conjunction with the application of purchase method accounting.

Products selling, general and administrative expenses decreased $0.8 million, or 3.5%, compared with Fiscal Year 2003. This decrease is primarily attributable to a decrease in bad debt expenses.