Daily Trouble |
|
Related Items |
|
<DAILY TROUBLE>
Friday, September 10, 1999
AMF Bowling Inc.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PIN)") else Response.Write("(NYSE: PIN)") end if %>
Phone: 804-559-8643
Website: www.amf.com
Price (9/9/99): $4 1/4
HOW DID IT FIND TROUBLE?
Deadwood, Lane 11! With all the grace of a gutter ball, AMF Bowling has rolled out of favor with investors. Bowl on over to AMF's website and the introductory line rings hollow:
"Bowling is a great sport and a great business!"
Unfortunately, that has proven to be as elusive as landing a 7-10 split -- in a mile long lane -- with a marble. When an investment group led by Goldman Sachs bought the privately held company in 1996 the plan made sense. Bowling centers were part of a highly fragmented sector where consolidation was a natural. AMF, a household brand on league night, would scoop up the mom and pop alley shops.
A year later, Goldman Sachs took the buyout-happy company public. Hoping to strike (pun intended, of course) it rich, investors snapped up shares of the company. With a credible underwriter and visions of a revitalized leisure niche, the stock spent its first eight months never falling below $20.
However, as the losses mounted and the executives shuffled, enthusiasm grew so muted you could hear a pin drop -- and PIN did drop.
BUSINESS DESCRIPTION
Incorporated in 1900, AMF is the world's largest owner and operator of bowling centers. The company runs 418 alleys stateside and another 123 centers around the globe.
AMF also sells bowling products. In 1946 the company produced the first automatic pinspotter. In 1976 the company pioneered automatic scoring with its MagicSC.
Beyond ten-frame life AMF also manufactures billiard tables under the Renaissance, Highland, and PlayMaster names. Three years ago the company purchased the Michael Jordan Golf Company -- with the intention of building state-of-the-art golf practice and teaching ranges.
FINANCIAL FACTS
Income Statement
12-month sales: $752.0 million
12-month income: ($162.3 million)
12-month EPS: ($2.72)
Profit Margin: N/A
Market Cap: $253.3 million
Balance Sheet
Cash: $15.2 million
Current Assets: $199.8 million
Current Liabilities: $136.3 million
Long-term Debt: $1330.7 million
Ratios
Price-to-earnings: N/A
Price-to-sales: 0.3
HOW COULD YOU HAVE SEEN IT COMING?
If you've ever donned the always fashionable rented bowling shoes and hooked your 15 pounder down polished hardwood you would probably argue that bowling is not dead. Well, it isn't. Unfortunately for investors, it isn't really growing either.
When AMF opened up Chelsea Piers Bowl in Manhattan back in 1997, it was the first bowling center in New York City in 30 years. Is the industry saturated? Probably. But that was why AMF went on an acquisition spree. The chain has doubled in size since Goldman Sachs first came on board, yet the bowling sector still remains segmented. AMF controls just 7% of the domestic market. The four largest players after AMF, in concert, claim just 3% of the pie.
AMF could have commanded a comfortable living buying up retiring centers on the cheap. It still might. However, like a perfect 300 game, every quarter has consistently delivered one strike after another. Since going public AMF has yet to land a profitable quarter. The losses are expected to continue.
Despite attempts to widen its audience, from bumper bowling for toddlers to after-hours glow-in-the-dark frames for teens, the industry as a whole -- and AMF by proxy -- has fallen short of the "great business" billing.
WHERE TO FROM HERE?
The automatic pinsetter has been spitting out CEOs for AMF. Over the past year the company has had three different anchors. The latest helmsman, Roland Smith, looks like a keeper. His professional life heading up consumer brands like Arby's and KFC, where marketing matters, should provide a welcome approach to increasing bowlership.
It's a good thing, too, because excuses were beginning to wear thin over at AMF. Last year it blamed the shortfall on the Asian currency crisis. But, with the world economies improving this year, AMF still reported a 24% decrease in bowling product sales this past quarter. Competition becomes the new scapegoat but, in reality, the company needs a shot of introspection.
Smith has the qualifications to turn the company around, but the road ahead is not as smooth as a freshly waxed lane. Over the summer the company issued more stock directly to shareholders through a rights offering and began to buy back some zero coupon bonds. Raising money and paying down debt are crucial to a company carrying more than $1.3 billion in long-term debt. However, raising interest in a sport that has remained stagnant while its more ESPN-friendly peers have evolved is equally critical.
In baseball, three strikes make an out. In bowling, three strikes in a row make a turkey. Here's hoping the shareholders don't meet a similar fate come Thanksgiving.
-Rick Aristotle Munarriz
([email protected])
|
||||||||||||||||
<% if request.querystring("source") = "yhoolnk" then referer = Request.ServerVariables("HTTP_REFERER") if referer = "" then referer = "http://finance.yahoo.com/" response.write " " end if %> <% function YahooWelcome if gsCookieUsername = "" and request.querystring("source") = "yhoolnk" then %> |
Welcome, Fool! |
|
Be a Fool and get free, unlimited access to our site.
What we offer: |
© Copyright 1995-2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. The Motley Fool is a registered trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us |