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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



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



For the quarterly period ended September 30, 2005



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 |  | 333-56857
|                       |  |           |  | 333-56857-01
|                       |  |           |  | 333-56857-02



ALLIANCE LAUNDRY
SYSTEMS LLC

ALLIANCE LAUNDRY CORPORATION

ALLIANCE LAUNDRY HOLDINGS LLC

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



|                                                              |  |                                     
|------------------------------------------------------------- |  | ------------------------------------
|DELAWARE DELAWARE DELAWARE                                    |  | 39-1927923 39-1928505 52-2055893    
|(STATE OR OTHER JURISDICTION OFINCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)



P.O. BOX 990

RIPON, WISCONSIN 54971-0990

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)



(920) 748-3121

(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 is a shell company (as defined in Rule 12b-2 of the Exchange Act.):



Yes ̈No  x



The number of shares of Alliance Laundry Corporations common stock outstanding as of November 9, 2005: 1,000 shares.



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##### Table of Contents

Alliance Laundry Holdings LLC

Form 10-Q

For The Periods Ended September 30, 2005

Table of Contents



|           |  |                                                                                                                                                                                                                                                                                                                          |  |         
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------
|           |  |                                                                                                                                                                                                                                                                                                                          |  | Page No.
|           |  |                                                                                                                                                                                                                                                                                                                         
|PART I     |  | Financial Information                                                                                                                                                                                                                                                                                                    |  |         
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 1.    |  | Financial Statements                                                                                                                                                                                                                                                                                                     |  |         
|           |  |                                                                                                                                                                                                                                                                                                                         
|           |  | Condensed Consolidated Balance Sheets as of September 30, 2005 (Successor) and December 31, 2004 (Predecessor)                                                                                                                                                                                                           |  | 3       
|           |  |                                                                                                                                                                                                                                                                                                                         
|           |  | Condensed Consolidated Statements of Income (Loss) for the period January 1, 2005 through January 27, 2005 (Predecessor); the period January 28, 2005 through September 30, 2005 (Successor); the three months ended September 30,
2005 (Successor) and the three and nine months ended September 30, 2004 (Predecessor) |  | 4       
|           |  |                                                                                                                                                                                                                                                                                                                         
|           |  | Condensed Consolidated Statements of Cash Flows for the period January 1, 2005 through January 27, 2005 (Predecessor); the period January 28, 2005 through September 30, 2005 (Successor); and the nine months ended September 30,
2004 (Predecessor)                                                                    |  | 5       
|           |  |                                                                                                                                                                                                                                                                                                                         
|           |  | Condensed Consolidated Statement of Members Equity (Deficit) and Comprehensive Income (Loss) for the period January 1, 2005 through January 27, 2005 (Predecessor); and the period January 28, 2005 through September 30, 2005
(Successor)                                                                              |  | 6       
|           |  |                                                                                                                                                                                                                                                                                                                         
|           |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                                                                                                                                                                                                           |  | 7       
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                                    |  | 23      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                                               |  | 42      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 4.    |  | Controls and Procedures                                                                                                                                                                                                                                                                                                  |  | 42      
|           |  |                                                                                                                                                                                                                                                                                                                         
|PART II    |  | Other Information                                                                                                                                                                                                                                                                                                        |  |         
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 1.    |  | Legal Proceedings                                                                                                                                                                                                                                                                                                        |  | 43      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                                                                                                                                                                                                                                |  | 43      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 3.    |  | Defaults Upon Senior Securities                                                                                                                                                                                                                                                                                          |  | 43      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                      |  | 43      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 5.    |  | Other Information                                                                                                                                                                                                                                                                                                        |  | 43      
|           |  |                                                                                                                                                                                                                                                                                                                         
|Item 6.    |  | Exhibits                                                                                                                                                                                                                                                                                                                 |  | 43      
|           | 
|Signatures |  | 44                                                                                                                                                                                                                                                                                                                      



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PART I FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



ALLIANCE LAUNDRY HOLDINGS LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands)



|                                                        |  |                   |         |  |                  |   |          |  
|------------------------------------------------------- |  | ----------------- | ------- |  | ---------------- | - | -------- | -
|                                                        |  | September 30,2005 |         |  | December 31,2004 |  
|                                                        |  | Successor         |         |  | Predecessor      |  
|Assets                                                  |  |                   |         |  |                  |   |          |  
|Current assets:                                         |  |                   |         |  |                  |   |          |  
|Cash                                                    |  | $                 | 3,579   |  |                  | $ | 11,471   |  
|Accounts receivable, net                                |  |                   | 8,546   |  |                  |   | 5,611    |  
|Inventories, net                                        |  |                   | 28,614  |  |                  |   | 26,761   |  
|Beneficial interests in securitized accounts receivable |  |                   | 21,107  |  |                  |   | 19,479   |  
|Deferred income tax assets                              |  |                   | 2,730   |  |                  |   |         |  
|Prepaid expenses and other                              |  |                   | 3,433   |  |                  |   | 1,088    |  
|                                                        |  |                   |         |  |                  |   |          |  
|Total current assets                                    |  |                   | 68,009  |  |                  |   | 64,410   |  
|Notes receivable, net                                   |  |                   | 4,867   |  |                  |   | 6,742    |  
|Property, plant and equipment, net                      |  |                   | 69,552  |  |                  |   | 30,481   |  
|Goodwill                                                |  |                   | 139,903 |  |                  |   | 55,414   |  
|Beneficial interests in securitized financial assets    |  |                   | 16,717  |  |                  |   | 19,379   |  
|Deferred income tax assets                              |  |                   | 5,964   |  |                  |   |         |  
|Debt issuance costs, net                                |  |                   | 11,740  |  |                  |   | 5,751    |  
|Other intangibles, net                                  |  |                   | 148,087 |  |                  |   | 1,839    |  
|                                                        |  |                   |         |  |                  |   |          |  
|Total assets                                            |  | $                 | 464,839 |  |                  | $ | 184,016  |  
|                                                        |  |                   |         |  |                  |   |          |  
|Liabilities and Members Equity (Deficit)               |  |                   |         |  |                  |   |          |  
|Current liabilities:                                    |  |                   |         |  |                  |   |          |  
|Current portion of long-term debt                       |  | $                 |        |  |                  | $ | 12,036   |  
|Revolving credit facility                               |  |                   |        |  |                  |   |         |  
|Accounts payable                                        |  |                   | 7,575   |  |                  |   | 11,618   |  
|Other current liabilities                               |  |                   | 21,667  |  |                  |   | 24,718   |  
|                                                        |  |                   |         |  |                  |   |          |  
|Total current liabilities                               |  |                   | 29,242  |  |                  |   | 48,372   |  
|Long-term debt:                                         |  |                   |         |  |                  |   |          |  
|Senior credit facility                                  |  |                   | 187,000 |  |                  |   | 118,218  |  
|Senior subordinated notes                               |  |                   | 149,313 |  |                  |   | 110,000  |  
|Junior subordinated note                                |  |                   |        |  |                  |   | 28,776   |  
|Other long-term debt                                    |  |                   |        |  |                  |   | 529      |  
|Other long-term liabilities                             |  |                   | 6,310   |  |                  |   | 7,218    |  
|Mandatorily redeemable preferred interests              |  |                   |        |  |                  |   | 6,000    |  
|                                                        |  |                   |         |  |                  |   |          |  
|Total liabilities                                       |  |                   | 371,865 |  |                  |   | 319,113  |  
|Commitments and contingencies (see Note 9)              |  |                   |         |  |                  |   |          |  
|Members equity (deficit)                               |  |                   | 92,974  |  |                  |   | (135,097 | )
|                                                        |  |                   |         |  |                  |   |          |  
|Total liabilities and members equity (deficit)         |  | $                 | 464,839 |  |                  | $ | 184,016  |  
|                                                        |  |                   |         |  |                  |   |          |  



The accompanying notes
are an integral part of the financial statements.



3



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ALLIANCE LAUNDRY HOLDINGS LLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited)

(in thousands)



|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|-------------------------------------------------- |  | ------------------------------------ | ------ |  | ------------------------------------ | - | ------------------------------------------ |  | - | --------------------------------------- | - |  | ----------------------------------- | ------- | - |  | - | -------
|                                                   |  | Three MonthsEnded September 30, 2005 |        |  | Three MonthsEnded September 30, 2004 |   | January 28,2005 through September 30, 2005 |  |   | January 1,2005 through January 27, 2005 |   |  | Nine MonthsEnded September 30, 2004
|                                                   |  | Successor                            |        |  | Predecessor                          |   | Successor                                  |  |   | Predecessor                             |   |  | Predecessor                        
|Net revenues:                                      |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Commercial and consumer laundry                    |  | $                                    | 68,438 |  |                                      | $ | 55,805                                     |  | $ | 185,767                                 |   |  | $                                   | 17,470  |   |  | $ | 176,023
|Service parts                                      |  |                                      | 9,914  |  |                                      |   | 9,341                                      |  |   | 27,493                                  |   |  |                                     | 3,213   |   |  |   | 28,773 
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|                                                   |  |                                      | 78,352 |  |                                      |   | 65,146                                     |  |   | 213,260                                 |   |  |                                     | 20,683  |   |  |   | 204,796
|Cost of sales                                      |  |                                      | 55,956 |  |                                      |   | 47,001                                     |  |   | 164,374                                 |   |  |                                     | 15,585  |   |  |   | 144,761
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Gross profit                                       |  |                                      | 22,396 |  |                                      |   | 18,145                                     |  |   | 48,886                                  |   |  |                                     | 5,098   |   |  |   | 60,035 
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Selling, general and administrative expense        |  |                                      | 9,815  |  |                                      |   | 8,217                                      |  |   | 26,673                                  |   |  |                                     | 3,829   |   |  |   | 25,995 
|Securitization and other costs                     |  |                                      | 40     |  |                                      |   |                                           |  |   | 8,055                                   |   |  |                                     |        |   |  |   |       
|Transaction costs associated with sale of business |  |                                      |       |  |                                      |   |                                           |  |   |                                        |   |  |                                     | 18,790  |   |  |   |       
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Total operating expenses                           |  |                                      | 9,855  |  |                                      |   | 8,217                                      |  |   | 34,728                                  |   |  |                                     | 22,619  |   |  |   | 25,995 
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Operating income (loss)                            |  |                                      | 12,541 |  |                                      |   | 9,928                                      |  |   | 14,158                                  |   |  |                                     | (17,521 | ) |  |   | 34,040 
|Interest expense                                   |  |                                      | 6,138  |  |                                      |   | 6,849                                      |  |   | 17,439                                  |   |  |                                     | 995     |   |  |   | 19,219 
|Loss from early extinguishment of debt             |  |                                      |       |  |                                      |   |                                           |  |   |                                        |   |  |                                     | 9,867   |   |  |   |       
|Costs related to abandoned public offerings        |  |                                      |       |  |                                      |   | 30                                         |  |   |                                        |   |  |                                     |        |   |  |   | 1,298  
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Income (loss) before taxes                         |  |                                      | 6,403  |  |                                      |   | 3,049                                      |  |   | (3,281                                  | ) |  |                                     | (28,383 | ) |  |   | 13,523 
|Income tax (benefit) provision                     |  |                                      | 3,026  |  |                                      |   | 10                                         |  |   | (995                                    | ) |  |                                     | 9       |   |  |   | 64     
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        
|Net income (loss)                                  |  | $                                    | 3,377  |  |                                      | $ | 3,039                                      |  | $ | (2,286                                  | ) |  | $                                   | (28,392 | ) |  | $ | 13,459 
|                                                   |  |                                      |        |  |                                      |   |                                            |  |   |                                         |   |  |                                     |         |   |  |   |        



The accompanying notes
are an integral part of the financial statements.



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ALLIANCE LAUNDRY HOLDINGS LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | -------- | - | -------------------------------------- | - | ------- | ----------------------------------- |  | - | ------- | -
|                                                                                                   |  | January 28,2005 throughSeptember 30, 2005 |          |   | January 1,2005 throughJanuary 27, 2005 |   |         | Nine MonthsEnded September 30, 2004 | 
|                                                                                                   |  | Successor                                 |          |   | Predecessor                            |   |         | Predecessor                         | 
|Cash flows from operating activities:                                                              |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Net income (loss)                                                                                  |  | $                                         | (2,286   | ) |                                        | $ | (28,392 | )                                   |  | $ | 13,459  |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Depreciation and amortization                                                                      |  |                                           | 14,743   |   |                                        |   | 526     |                                     |  |   | 7,585   |  
|Non-cash interest                                                                                  |  |                                           | (680     | ) |                                        |   | 351     |                                     |  |   | 3,456   |  
|Non-cash incentive unit compensation                                                               |  |                                           |         |   |                                        |   | 1,089   |                                     |  |   | 540     |  
|Non-cash debt financing write-off                                                                  |  |                                           |         |   |                                        |   | 5,751   |                                     |  |   |        |  
|Non-cash inventory expense                                                                         |  |                                           | 6,246    |   |                                        |   |        |                                     |  |   |        |  
|Deferred income tax assets                                                                         |  |                                           | (1,042   | ) |                                        |   |        |                                     |  |   |        |  
|Loss on sale of property, plant and equipment                                                      |  |                                           | 48       |   |                                        |   |        |                                     |  |   |        |  
|Changes in assets and liabilities:                                                                 |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Accounts receivable                                                                                |  |                                           | (2,379   | ) |                                        |   | (556    | )                                   |  |   | 203     |  
|Inventories                                                                                        |  |                                           | (20      | ) |                                        |   | (1,833  | )                                   |  |   | (2,748  | )
|Other assets                                                                                       |  |                                           | 1,918    |   |                                        |   | 101     |                                     |  |   | 1,722   |  
|Accounts payable                                                                                   |  |                                           | (23,119  | ) |                                        |   | 19,076  |                                     |  |   | 541     |  
|Other liabilities                                                                                  |  |                                           | 644      |   |                                        |   | (2,732  | )                                   |  |   | 1,308   |  
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Net cash (used in) provided by operating activities                                                |  |                                           | (5,927   | ) |                                        |   | (6,619  | )                                   |  |   | 26,066  |  
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Cash flows from investing activities:                                                              |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Additions to property, plant and equipment                                                         |  |                                           | (3,168   | ) |                                        |   | (188    | )                                   |  |   | (2,982  | )
|Proceeds on disposal of property, plant and equipment                                              |  |                                           | 2        |   |                                        |   |        |                                     |  |   | 67      |  
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Net cash used in investing activities                                                              |  |                                           | (3,166   | ) |                                        |   | (188    | )                                   |  |   | (2,915  | )
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Cash flows from financing activities:                                                              |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Principal payments on long-term debt                                                               |  |                                           | (13,000  | ) |                                        |   | 1       |                                     |  |   | (21,183 | )
|Proceeds from senior term loan                                                                     |  |                                           | 200,000  |   |                                        |   |        |                                     |  |   |        |  
|Proceeds from senior subordinated notes                                                            |  |                                           | 149,250  |   |                                        |   |        |                                     |  |   |        |  
|Repayment of long-term debt                                                                        |  |                                           | (275,920 | ) |                                        |   |        |                                     |  |   |        |  
|Contribution from member                                                                           |  |                                           | 117,000  |   |                                        |   |        |                                     |  |   |        |  
|Distribution to old unitholders                                                                    |  |                                           | (154,658 | ) |                                        |   |        |                                     |  |   |        |  
|Debt financing costs                                                                               |  |                                           | (13,230  | ) |                                        |   |        |                                     |  |   |        |  
|Cash paid for capitalized offering related costs                                                   |  |                                           | (1,364   | ) |                                        |   |        |                                     |  |   | (1,071  | )
|Net proceeds - management note                                                                     |  |                                           |         |   |                                        |   | (71     | )                                   |  |   |        |  
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Net cash provided by (used in) financing activities                                                |  |                                           | 8,078    |   |                                        |   | (70     | )                                   |  |   | (22,254 | )
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|(Decrease) increase in cash                                                                        |  |                                           | (1,015   | ) |                                        |   | (6,877  | )                                   |  |   | 897     |  
|Cash at beginning of period                                                                        |  |                                           | 4,594    |   |                                        |   | 11,471  |                                     |  |   | 7,937   |  
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  
|Cash at end of period                                                                              |  | $                                         | 3,579    |   |                                        | $ | 4,594   |                                     |  | $ | 8,834   |  
|                                                                                                   |  |                                           |          |   |                                        |   |         |                                     |  |   |         |  



The accompanying notes
are an integral part of the financial statements.



5



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ALLIANCE LAUNDRY HOLDINGS LLC

CONDENSED CONSOLIDATED STATEMENT OF MEMBERS EQUITY (DEFICIT) AND

COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)



|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  
|----------------------------------------------------------- |  | ------------------------- | -------- | - | ---------------- | - | ------ | ------------------------- |  | - | ------------------------------------------------- | - |  | ----------------------------- | ------ | - |  | - | -------- | -
|                                                            |  | Members Equity (Deficit) |          |   | Management Loans |   |        | Minimum Pension Liability |  |   | Unrealized Holding Gain on ResidualInterests, Net |   |  | TotalMembersEquity (Deficit) |       
|Predecessor balances at December 31, 2004                   |  | $                         | (131,227 | ) |                  | $ | (1,380 | )                         |  | $ | (3,619                                            | ) |  | $                             | 1,129  |   |  | $ | (135,097 | )
|Net (loss) from January 1, 2005 through January 27, 2005    |  |                           | (28,392  | ) |                  |   |       |                           |  |   |                                                  |   |  |                               |       |   |  |   | (28,392  | )
|Unrealized holding gain, net                                |  |                           |         |   |                  |   |       |                           |  |   |                                                  |   |  |                               | 203    |   |  |   | 203      |  
|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  
|Total comprehensive (loss)                                  |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  | $ | (28,189  | )
|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  
|Predecessor balances at January 27, 2005                    |  |                           | (159,619 | ) |                  |   | (1,380 | )                         |  |   | (3,619                                            | ) |  |                               | 1,332  |   |  |   | (163,286 | )
|Transaction and purchase accounting                         |  |                           | 254,863  |   |                  |   | 1,380  |                           |  |   | 3,619                                             |   |  |                               |       |   |  |   | 259,862  |  
|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  
|Successor balances at January 27, 2005                      |  |                           | 95,244   |   |                  |   |       |                           |  |   |                                                  |   |  |                               | 1,332  |   |  |   | 96,576   |  
|Net (loss) from January 28, 2005 through September 30, 2005 |  |                           | (2,286   | ) |                  |   |       |                           |  |   |                                                  |   |  |                               |       |   |  |   | (2,286   | )
|Unrealized holding (loss), net                              |  |                           |         |   |                  |   |       |                           |  |   |                                                  |   |  |                               | (1,316 | ) |  |   | (1,316   | )
|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  
|Total comprehensive (loss)                                  |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  | $ | (3,602   | )
|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  
|Successor balances at September 30, 2005                    |  | $                         | 92,958   |   |                  | $ |       |                           |  | $ |                                                  |   |  | $                             | 16     |   |  | $ | 92,974   |  
|                                                            |  |                           |          |   |                  |   |        |                           |  |   |                                                   |   |  |                               |        |   |  |   |          |  



The accompanying notes
are an integral part of the financial statements.



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Notes to Unaudited Condensed Consolidated Financial Statements



NOTE 1. BASIS OF PRESENTATION



As a result of the January 27, 2005 transactions described further in Note 2, activity that occurred prior to January 27, 2005 has been
reflected as the Predecessor and activity that occurred after January 27, 2005 has been reflected as the Successor. We have inserted a dark vertical line to segregate the activities of the Predecessor and Successor. The distinction between
Predecessor and Successor relates to the application of purchase accounting in accordance with Statement of Financial Standard (SFAS) No. 141, Business Combinations. The basis of the assets and liabilities has been reflected at fair
market values in the Successor financial statements.



Throughout this quarterly report, we refer to Alliance Laundry Holdings LLC, a Delaware limited liability company, as Alliance Holdings, and, together with its consolidated operations, as Alliance, we,
our, Predecessor, Successor, and us, unless otherwise indicated. Any reference to Alliance Laundry refers to our wholly-owned subsidiary, Alliance Laundry Systems LLC, a Delaware limited
liability company, and its consolidated operations, unless otherwise indicated.



The unaudited financial statements as of and for the quarter ended September 30, 2005 present the consolidated financial position and results of operations of Alliance Laundry Holdings LLC, including our
wholly-owned direct and indirect subsidiaries, Alliance Laundry Systems LLC and Alliance Laundry Corporation.



In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary (consisting only of normal
recurring adjustments) for a fair statement of our financial position and operating results for the periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the
full year.



These interim financial statements have been
prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such regulations. We believe the disclosures provided are adequate to prevent the information presented from being misleading.



Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.



This report on Form 10-Q for the period ended
September 30, 2005 should be read in conjunction with the audited financial statements presented in our Annual Report on Form 10-K (file no. 333-56857) filed with the Securities and Exchange Commission, which includes our audited financial
statements as of and for the year ended December 31, 2004.



NOTE 2. SALE OF ALLIANCE LAUNDRY HOLDINGS LLC



On January 27, 2005, ALH Holding Inc. (ALH), an entity formed by Teachers Private Capital, the private equity arm of Ontario Teachers Pension Plan Board (OTPP), acquired 100%
of the outstanding equity interests in Alliance Holdings pursuant to a unit purchase agreement for aggregate consideration of $466.3 million. In connection with such acquisition, the executive officers of Alliance Laundry acquired $7.4 million of
newly issued shares of common stock of ALH, and our other management employees acquired $2.2



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million of newly issued shares of ALH common stock in exchange for equity interests in Alliance Holdings and cash pursuant to ALHs stock purchase and
rollover investment plan. A portion of the aggregate acquisition consideration was used to repay our existing indebtedness, redeem our outstanding preferred equity interests and pay certain fees and expenses payable in connection with the
consummation of the acquisition and the financing transactions described below, and the balance was paid to the then current equity holders of Alliance Holdings.



We refer to the acquisition of Alliance Holdings and the related management investments in ALH as the
Acquisition. The Acquisition was financed with $350.0 million of debt financing described below, the management equity, approximately $107.4 million of new equity capital from OTPP and available cash. As a result of the Acquisition, all
of the outstanding equity interests of Alliance Laundry are owned by Alliance Holdings, all of the equity interests of Alliance Holdings are owned by ALH and approximately 91.8% of the capital stock of ALH is owned by OTPP. The remaining capital
stock of ALH is owned by our management.



In connection with
the closing of the Acquisition, we consummated the following financing transactions, (the Financing Transactions, which we refer to, together with the Acquisition, as the Transactions):



| |  |  | the closing of the issuance of $150.0 million 8 1/2% senior subordinated notes due January 15, 2013, the 2005 Senior Subordinated Notes. The proceeds from the
2005 Senior Subordinated Notes offering were $149.3 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the closing of Alliance Laundrys new $250.0 million senior secured credit facility, which we refer to as the New Senior Credit Facility, consisting of a six-year
$50.0 million revolving credit facility and a seven-year $200.0 million term loan facility. On the closing date (January 27, 2005), the term loan facility was drawn in full, but the revolving credit facility remained undrawn; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the settlement of the tender offer and consent solicitation, or the tender offer, initiated by us on January 4, 2005 for the $110.0 million aggregate principal amount of our
then outstanding 9 5/8% Senior Subordinated Notes due 2008 (the 1998 Senior Subordinated Notes). The tender offer expired at 5:00 PM New York City time on February 2, 2005, and approximately 5.10% of the total principal amount of
the 1998 Senior Subordinated Notes remained outstanding after the consummation of the tender offer. We redeemed the remaining 1998 Senior Subordinated Notes in accordance with the indenture governing such notes on March 7, 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In connection with the consummation of the
Transactions, Alliance Laundry and Alliance Laundry Corporation became the obligors under the 2005 Senior Subordinated Notes. Alliance Laundry is the borrower and obligor under the New Senior Credit Facility and Alliance Laundry Corporation became a
guarantor under the New Senior Credit Facility, and Alliance Holdings became a guarantor of the New Senior Credit Facility and the 2005 Senior Subordinated Notes.



Alliance Laundry Corporation is a wholly-owned subsidiary of Alliance Laundry and was originally incorporated for the sole
purpose of serving as a co-issuer of the 1998 Senior Subordinated Notes. Alliance Holdings is the parent of Alliance Laundry and has provided a full and unconditional guarantee of the 2005 Senior Subordinated Notes. Alliance Holdings and Alliance
Laundry Corporation do not have any operations or assets independent of Alliance Laundry.



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New Senior Credit Facility



Concurrent with the closing of the Acquisition we entered into a New Senior Credit Facility, consisting of a six-year $50.0
million revolving credit facility (the New Revolving Credit Facility) and a seven-year $200.0 million term loan facility (the New Term Loan Facility). Alliance Laundry is the borrower under this facility and Alliance Holdings
and Alliance Laundry Corporation are the guarantors under this facility. After considering the scheduled payments and $12.0 million of voluntary prepayments made through September 30, 2005, the New Term Loan Facility requires quarterly
principal payments of approximately $0.5 million beginning on December 31, 2006 through December 31, 2011. The final principal payment of $177.0 million is due on January 27, 2012. We are required to make prepayments with the proceeds
from the issuance of certain equity, the incurrence of certain indebtedness, the disposition of certain assets and from excess cash flow, as defined in the New Senior Credit Facility.



The New Revolving Credit Facility is available, subject to certain conditions, for general corporate purposes in the
ordinary course of business and for other transactions permitted under the New Senior Credit Facility. A portion of the New Revolving Credit Facility not in excess of $35.0 million is available for the issuance of letters of credit.



Borrowings under the New Senior Credit Facility bear interest, at our option,
at a rate equal to an applicable margin plus (a) the base rate, which is the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate and (2) the federal funds effective rate from time to time plus
0.5% or (b) the Eurodollar rate, which will be the rate at which Eurodollar deposits for one, two, three or six months are offered in the interbank Eurodollar market. The applicable margin for the New Revolving Credit Facility is expected to
be, initially, 1.50% with respect to base rate loans and 2.50% with respect to Eurodollar loans, subject to step-downs if we meet certain leverage ratios. The applicable margin for the New Term Loan Facility is 1.25% with respect to base rate loans
and 2.25% with respect to Eurodollar loans, subject to step-downs if we meet certain leverage ratios. The interest rate on these borrowings as of September 30, 2005 was 5.97%.



In addition, we are obligated to pay a quarterly commitment fee currently equal to 1/2 of 1% per annum on the average
daily unused portion of the $50.0 million revolving loan commitment. We are also obligated to pay a commission on all outstanding letters of credit in the amount of the applicable margin, then in effect with respect to Eurodollar loans under the New
Revolving Credit Facility, which currently is 2.50%, as well as a 0.25% fronting fee on the aggregate amount of all outstanding letters of credit.



Additional borrowings and the issuance of additional letters of credit under the New Senior Credit Facility are subject to certain continuing
representations and warranties, including the absence of any development or event which has had or could reasonably be expected to have a material adverse effect on our business or financial condition.



2005 Senior Subordinated Notes



As part of the Financing Transactions, we offered and sold $150.0 million of
2005 Senior Subordinated Notes and received proceeds of approximately $149.3 million. The maturity date of the 2005 Senior Subordinated Notes is January 15, 2013. The 2005 Senior Subordinated Notes are general unsecured obligations and are
subordinated in right of payment to all current and future senior indebtedness, including permitted borrowings under the New Senior Credit Facility. The indenture governing the 2005 Senior Subordinated Notes, among other things, restricts our
ability and the ability of our restricted subsidiaries to make investments, incur or guarantee additional indebtedness, pay dividends, create liens, sell assets, merge or consolidate with other entities, enter into transactions with affiliates and
engage in certain business activities.



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Interest on the 2005 Senior Subordinated Notes accrues at the rate of 8 1/2% per annum and is
payable semi-annually in arrears on January 15 and July 15. Such payments commenced on July 15, 2005.



The 2005 Senior Subordinated Notes are subject to redemption on or after January 15, 2009, in whole or in part, upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on
January 15 of the years indicated below:



|                    |  |                 |  
|------------------- |  | --------------- | -
|Year                |  | RedemptionPrice |  
|2009                |  | 104.250         | %
|2010                |  | 102.125         | %
|2011 and thereafter |  | 100.000         | %



If we experience
certain kinds of changes in control, we must offer to repurchase the then outstanding notes at the redemption price set forth in the indenture governing the 2005 Senior Subordinated Notes. At any time prior to January 15, 2009, we may redeem up
to 35% of the notes with the net cash proceeds of certain equity offerings at the redemption price set forth in the indenture governing the 2005 Senior Subordinated Notes.



Debt Maturities and Liquidity Considerations



The aggregate scheduled maturities of long-term debt in subsequent years, after giving effect to $12.0 million of voluntary
prepayments made prior to September 30, 2005, are as follows (in thousands):



|           |  |   |        
|---------- |  | - | -------
|2005       |  | $ |       
|2006       |  |   | 475    
|2007       |  |   | 1,898  
|2008       |  |   | 1,898  
|2009       |  |   | 1,898  
|Thereafter |  |   | 330,831
|           |  |   |        
|           |  | $ | 337,000
|           |  |   |        



The New Senior Credit
Facility and the indenture governing the 2005 Senior Subordinated Notes contain a number of covenants that, among other things, restrict our ability to dispose of assets, repay other indebtedness (including, in the case of the New Senior Credit
Facility, the 2005 Senior Subordinated Notes), incur liens, make capital expenditures and make certain investments or acquisitions, engage in mergers or consolidation and otherwise restrict our operating activities. In addition, under the New Senior
Credit Facility, the Company is required to satisfy specified financial ratios and tests, including a maximum of total debt to Adjusted EBITDA (as defined in the credit agreement governing the New Senior Credit Facility) and a minimum interest
coverage ratio.



The maximum ratio of consolidated debt to
Adjusted EBITDA under the New Senior Credit Facility is scheduled to be reduced from 6.50 at September 30, 2005 to 6.25 at June 30, 2006. At September 30, 2005, based upon the maximum ratio of consolidated debt to Adjusted EBITDA
allowable under the Senior Credit Facility of 6.50, we could have borrowed an additional $19.8 million of the available and unutilized New Revolving Credit Facility to finance our operations. We believe that future cash flows from operations,
together with available borrowings under the New Revolving Credit Facility, will be adequate to meet our anticipated requirements for



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capital expenditures, working capital, interest payments, scheduled principal payments and other debt repayments that may be required as a result of the
scheduled ratio of consolidated debt to Adjusted EBITDA discussed above.



NOTE 3. NEW ASSET BACKED FACILITY



On June 28, 2005, Alliance Laundry, through a special-purpose bankruptcy remote subsidiary, Alliance Laundry Equipment Receivables 2005 LLC (ALER 2005), and a trust, Alliance Laundry Equipment Receivables Trust 2005-A
(ALERT 2005A), entered into a four year $330.0 million revolving credit facility (the Asset Backed Facility), backed by equipment loans and trade receivables originated by us. During the first four years of the new Asset
Backed Facility, Alliance Laundry is permitted, from time to time, to sell its trade receivables and certain equipment loans to the special-purpose subsidiary, which in turn will sell them to the trust. The trust finances the acquisition of the
trade receivables and equipment loans through borrowings under the Asset Backed Facility in the form of funding notes, which are limited to an advance rate of approximately 95% for equipment loans and 60-70% for trade receivables. Funding
availability for trade receivables is limited to a maximum of $60.0 million, while funding for equipment loans is limited at $330.0 million less the amount of funding outstanding for trade receivables. Funding for the trade receivables and equipment
loans is subject to certain eligibility criteria, including concentration and other limits, standard for transactions of this type. After four years from the closing date, which is June 27, 2009, (or earlier in the event of a rapid amortization
event or an event of default), the trust will not be permitted to request new borrowings under the facility and the outstanding borrowings will amortize over a period of up to nine years. As of September 30, 2005, the balance of variable
funding notes due to lenders under the Asset Backed Facility for equipment loans was $219.1 million.



Additional advances under the Asset Backed Facility are subject to certain continuing conditions, including but not limited to (i) covenant
restrictions relating to the weighted average life, weighted average interest rate, and the amount of fixed rate equipment loans held by the trust, (ii) the absence of a rapid amortization event or event of default, as defined, (iii) our
compliance, as servicer, with certain financial covenants, and (iv) no event having occurred which materially and adversely affects our operations.



The variable funding notes under the Asset Backed Facility will commence amortization and borrowings thereunder will cease prior to four years after the
closing date upon the occurrence of certain rapid amortization events which include: (i) a borrowing base shortfall exists and remains uncured, (ii) delinquency, dilution or default ratios on pledged receivables and equipment
loans exceeding certain specified ratios in any given month, (iii) the days sales outstanding on receivables exceed a specified number of days, (iv) the occurrence and continuance of an event of default or servicer default under the Asset
Backed Facility, including but not limited to, as servicer, a material adverse change in our business or financial condition and our compliance with certain required financial covenants, and (v) a number of other specified events.



The risk of loss to the note purchasers under the new Asset Backed
Facility resulting from default or dilution on the trade receivables and equipment loans is protected by credit enhancement, provided by us in the form of cash reserves, letters of credit and overcollateralization. Further, the timely payment of
interest and the ultimate payment of principal on the facility are guaranteed by Ambac Assurance Corporation. All of the residual beneficial interests in the trust and cash flows remaining from the pool of receivables and loans after payment of all
obligations under the Asset Backed Facility would accrue to the benefit of Alliance Laundry. Except for the retained interests and amounts of the letters of credit outstanding from time to time as credit enhancement, we provide no support or
recourse for the risk of loss relating to default on the assets transferred to the trust. In addition, we are paid a monthly servicing fee equal to one-twelfth of 1.0% of the aggregate balance of such trade receivables and equipment loans.



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The estimated fair value of Alliance Laundrys beneficial interests in the accounts receivable and
notes sold to ALERT 2005A are based on the amount and timing of expected distributions to Alliance Laundry as the holder of the trusts residual equity interests. Such distributions may be substantially deferred or eliminated, and result in an
impairment of our residual interests, if repayment of the variable funding notes issued by ALERT 2005A is accelerated upon an event of default or rapid amortization event described above.



The Asset Backed Facility replaces a similar facility previously maintained with CDC Financial Products, Inc., Bear,
Stearns & Co., Inc. and Altamira Funding, LLC (the ALERT 2002A Facility). In connection with the establishment of the new facility, Alliance Laundry, through its special-purpose subsidiaries, repurchased and simultaneously
resold the assets held by the ALERT 2002A Facility to the new Asset Backed Facility.



On November 28, 2000, Alliance Laundry, through a special-purpose bankruptcy remote subsidiary, Alliance Laundry Equipment Receivables LLC (ALER), and a trust, Alliance Laundry Equipment Receivables
Trust 2000-A (ALERT), completed the securitization of $137.8 million of notes receivable related to equipment loans (the ALERT 2000A Facility). On July 15, 2005, pursuant to a clean up call option, Alliance Laundry
re-purchased the remaining equipment loans and related collateral from ALERT; and ALER and ALERT ceased operation and the ALERT 2000A Facility was terminated. Substantially all of the equipment loans repurchased by Alliance Laundry were resold to
the new Asset Backed Facility.



NOTE 4.
PRINCIPLES OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES



As a result of the Acquisition certain of our principles of consolidation and significant accounting policies have been adjusted accordingly. For a complete discussion of our principles of consolidation and significant accounting policies,
the following comments should be read in conjunction with the audited financial statements presented in our Annual Report on Form 10-K. The new policies adopted are discussed below.



Goodwill and Other Intangible Assets



In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill will not be amortized. However, under SFAS No. 142,
goodwill will be tested for impairment at least annually and more frequently if an event occurs which indicates the goodwill may be impaired. Impairment of goodwill is measured according to a two-step approach. In the first step, the fair value of a
reporting unit, as defined by the statement, is compared to the carrying value of the reporting unit, including goodwill. If the carrying amount exceeds the fair value, the second step of the goodwill impairment test is performed to measure the
amount of the impairment loss, if any. In the second step the implied value of the goodwill is estimated as the fair value of the reporting unit less the fair value of all other tangible and intangible assets of the reporting unit. If the carrying
amount of the goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.



Additionally, under SFAS No. 142, intangible assets not subject to
amortization (indefinite lived intangible assets) shall be tested for impairment at least annually and more frequently if an event occurs which indicates the intangible asset may be impaired. The impairment test consists of a comparison of the fair
value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Companys other recorded intangible
assets, tradenames and trademarks, have been deemed to have an indefinite life.



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Income Taxes



Certain items of income and expense are not recognized on our income tax returns and financial statements in the same year, which creates timing
differences. The income tax effect of these timing differences results in (1) deferred income tax assets that create a reduction in future income taxes and (2) deferred income tax liabilities that create an increase in future income taxes.
Recognition of deferred income tax assets is based on managements belief that it is more likely than not that the income tax benefit associated with certain temporary differences, income tax operating loss and capital loss carry forwards and
income tax credits, would be realized. We have not recorded a valuation allowance to reduce our deferred income tax assets based, in part, on our assessment of future taxable income and in light of our ongoing prudent and feasible income tax
strategies. If our estimate of future taxable income or tax strategies change at any time in the future, we may have to record a valuation allowance; recording such an adjustment could have a material effect on our consolidated statement of income.



NOTE 5. RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS



During January 2003, the Financial Accounting
Standards Board, or FASB, issued FIN No. 46, Consolidation of Variable Interest Entities, which clarifies the consolidation and disclosure requirements related to variable interests in a variable interest entity. A variable interest
entity is an entity for which control is achieved through means other than voting rights. In December 2003, the FASB issued a revision to FIN No. 46, which replaced FIN No. 46. The revised Interpretation (FIN 46-R) was adopted
by us beginning on January 1, 2005 for interests in entities created on or before December 31, 2003. The impact was not material to the financial statements.



FIN 46-R provides exceptions from its scope for certain entities, including qualifying special-purpose securitization
entities subject to the reporting requirements of SFAS No. 140 and business entities, as defined, that do not possess certain characteristics.



Our primary variable interests are notes receivable that we have retained and are comprised primarily of equipment loans to laundromat operators and other
end-users. The carrying value of such loans was approximately $4.1 million at September 30, 2005. If in the future we are required to consolidate a variable interest entity in which our SFAS No. 140 qualifying special-purpose entity also
holds a variable interest, the qualifying status of the special-purpose entity would be eliminated. In that instance, we would be required to determine if we are the primary beneficiary of the affected securitization entity under FIN 46-R and if so,
to consolidate that entity, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.



During December 2004, the FASB issued SFAS No. 123R Share-Based Payment (SFAS 123R), which replaces SFAS No. 123,
Accounting for Stock-Based Compensation, (SFAS 123) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized as expense in the financial statements based on their fair values beginning with the first annual period after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer
be an alternative to expense recognition. We will adopt SFAS 123R using the modified-prospective method in the first quarter of fiscal 2006. We are currently evaluating the impact of SFAS 123R on our financial statements.



The FASB is expected to re-expose a proposed statement that would amend and
clarify SFAS No. 140 (and related implementation guidance). The proposed statement will address permitted activities of qualifying special-purpose entities, including the degree of discretion allowable in determining the terms of beneficial
interests issued after inception, and whether certain transfers can meet the criteria for sale accounting under



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SFAS No. 140 if the transferor or any consolidated affiliate provides liquidity support for the transferees beneficial interests. As the proposed
statement has not been issued, we are unable to determine the effects of the related transition provisions, if any, on our existing securitization entity. However, in the event that transfers to our existing asset backed facility would no longer
qualify as sales of financial assets in the future, we may recognize additional costs for a replacement facility or it may have other material financial statement effects. An exposure draft was issued in the third quarter of 2005 and a final
document is anticipated in the first quarter of 2006.



In May
2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. This statement applies to voluntary changes in accounting principles and requires
retrospective application to prior period financial statements, unless impracticable to determine. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not
expect this standard to have any material impact on our results of operations or financial condition.



In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47), which
clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated even though uncertainty exists about the timing and/or method of settlement.
The Company is required to adopt FIN 47 by the end of fiscal 2006. The adoption of FIN 47 is not expected to have an impact on the Companys results of operations and financial condition.



NOTE 6. INFREQUENTLY OCCURRING ITEMS



In connection with the Acquisition, the Company incurred $18.8 million of
seller related expenses. These expenses were comprised of underwriting, legal and professional fees of $5.9 million, change of control bonuses paid to the executive management of $6.2 million and fees paid to Bain Capital Partners LLC and Bruckman,
Rosser, Sherrill & Co. totaling $6.7 million. These amounts were expensed in the period ended January 27, 2005, and are reflected as a deduction in determining operating income (loss).



In connection with the Acquisition, the Company incurred $9.9 million in
expenses related to the early redemption of debt. These expenses were comprised of tender and call premium fees of $4.1 million associated with the redemption of the 1998 Senior Subordinated Notes and the write-off of $5.8 million of remaining
unamortized debt issuance costs associated with both the Companys 1998 Senior Subordinated Notes and the Companys prior Senior Credit Facility. These amounts were expensed in the period ended January 27, 2005, and are reflected as a
loss from early retirement of debt.



In connection with the
Asset Backed Facility, the Company incurred $8.1 million in expenses related to establishing the new securitization facility. These expenses were comprised of structuring and underwriting fees of $5.8 million, legal and professional fees of $1.3
million and a LIBOR based cap premium of $1.0 million.



In
April of 2004 we announced that Alliance Laundry Holdings Inc. (Alliance Laundry Holdings), a company formed to be the holding company for the operations of Alliance Laundry Systems LLC, and its subsidiaries filed a registration
statement with the Securities and Exchange Commission relating to the proposed initial public offering of Income Deposit Securities (IDSs) representing shares of Alliance Laundry Holdings Class A common stock and senior
subordinated notes. The registration statement also related to an offering of a separate issue of senior subordinated notes of the same series as the senior subordinated notes represented by the IDSs. In connection with the proposed IDS offering, as
of September 30, 2004 we had



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incurred and recorded $1.3 million of offering related expenses in the consolidated statement of income, and had capitalized $3.1 million of debt and
offering related costs in other assets within the consolidated balance sheet. By December of 2004 we had incurred and recorded $1.3 million of offering related expenses in the consolidated statement of income and had capitalized $3.5 million of debt
and offering related costs in other assets within the consolidated balance sheet. On December 7, 2004 we chose to abandon the proposed IDS offering, and consequently wrote off the $3.5 million of capitalized costs in 2004.



NOTE 7. GOODWILL AND OTHER INTANGIBLES



The Acquisition price including transaction costs was approximately $466.3
million. The sources and uses of funds in connection with the Acquisition are summarized below (in thousands):



|                                                        |  |   |        
|------------------------------------------------------- |  | - | -------
|Sources:                                                |  |   |        
|Proceeds from Senior Term Loan                          |  | $ | 200,000
|Proceeds from 8 1/2% Senior Subordinated Notes due 2013 |  |   | 149,250
|Proceeds from equity investors                          |  |   | 108,396
|Exchange of equity                                      |  |   | 8,604  
|                                                        |  |   |        
|Total sources                                           |  | $ | 466,250
|                                                        |  |   |        
|Uses:                                                   |  |   |        
|Stated purchase price                                   |  | $ | 450,000
|Working capital adjustment                              |  |   | 791    
|Fees and expenses                                       |  |   | 15,459 
|                                                        |  |   |        
|Total uses                                              |  | $ | 466,250
|                                                        |  |   |        



The Company has
prepared an allocation of the purchase price to the assets acquired and liabilities assumed based upon their respective fair values as determined by an independent third-party valuation firm as of the date of the acquisition. The allocation of the
purchase price to the fair value of net assets acquired was finalized during the second quarter of 2005 and is summarized below (in thousands):



|                                                                                 |  |       |         |                      |   |         |                                |  |   |        
|-------------------------------------------------------------------------------- |  | ----- | ------- | -------------------- | - | ------- | ------------------------------ |  | - | -------
|                                                                                 |  | Gross |         | EITF 88-16Adjustment |   |         | AdjustedBalanceJanuary 27,2005
|Acquired tangible net assets                                                     |  | $     | 152,991 |                      | $ | (4,153  | )                              |  | $ | 148,838
|Acquired intangible assets - trademarks and tradenames                           |  |       | 122,800 |                      |   | (8,697  | )                              |  |   | 114,103
|Acquired intangible assets - customer agreements and distributor network         |  |       | 30,400  |                      |   | (2,153  | )                              |  |   | 28,247 
|Acquired intangible assets - engineering and manufacturing designs and processes |  |       | 8,460   |                      |   | (599    | )                              |  |   | 7,861  
|Acquired intangible assets - patents                                             |  |       | 70      |                      |   |        |                                |  |   | 70     
|Acquired intangible assets - computer software and other                         |  |       | 963     |                      |   | (58     | )                              |  |   | 905    
|Goodwill                                                                         |  |       | 150,566 |                      |   | (10,663 | )                              |  |   | 139,903
|                                                                                 |  |       |         |                      |   |         |                                |  |   |        
|Total allocation of purchase price                                               |  | $     | 466,250 |                      | $ | (26,323 | )                              |  | $ | 439,927
|                                                                                 |  |       |         |                      |   |         |                                |  |   |        



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In accordance with Emerging Issues Task Force (EITF) Issue No. 88-16, Basis in
Leveraged Buyout Transactions, managements continuing residual interest has been reflected at its original cost, adjusted for its share of the Companys earnings, losses and equity adjustments since the date of original
acquisition (predecessor basis). In accordance with EITF Issue No. 90-12, Allocating Basis to Individual Assets and Liabilities within the Scope of Issue 88-16, only a partial step-up of assets and liabilities to fair
value has been recorded in purchase accounting. The partial step-up has resulted in the Companys assets and liabilities being adjusted by approximately 92.92% of the difference between their fair value at the date of acquisition and their
historical carrying cost.



Identifiable intangible assets,
which are subject to amortization, consist primarily of customer agreements and distributor networks which are amortized over the assets estimated useful lives ranging from five to twelve years; engineering drawings, product designs and
manufacturing processes, which are amortized over their estimated useful lives ranging from four to fifteen years; and computer software and patents which are amortized over their estimated useful lives ranging from four to fifteen years. Intangible
assets also include trademarks and tradenames, which have an indefinite life. Such assets are not amortized, but will be subject to an annual impairment test pursuant to SFAS No. 142, Goodwill and Other Intangible Assets.
Amortization expense associated with identifiable intangible assets was as follows (in thousands):



|                     |  |                                        |       |  |                                    |   |                                          |  |   |                                       |  |                                   |   |    |  |   |    
|-------------------- |  | -------------------------------------- | ----- |  | ---------------------------------- | - | ---------------------------------------- |  | - | ------------------------------------- |  | --------------------------------- | - | -- |  | - | ---
|                     |  | Three Months    EndedSeptember 30,2005 |       |  | Three MonthsEndedSeptember 30,2004 |   | January 28,2005 throughSeptember 30,2005 |  |   | January 1,2005 throughJanuary 27,2005 |  | Nine MonthsEndedSeptember 30,2004
|                     |  | Successor                              |       |  | Predecessor                        |   | Successor                                |  |   | Predecessor                           |  | Predecessor                      
|Amortization expense |  | $                                      | 1,131 |  |                                    | $ | 45                                       |  | $ | 3,016                                 |  |                                   | $ | 14 |  | $ | 153
|                     |  |                                        |       |  |                                    |   |                                          |  |   |                                       |  |                                   |   |    |  |   |    



The following is a
summary of identifiable intangible assets as of September 30, 2005 (in thousands):



|                                                    |  |                    |         |                         |   |           |  |   |        
|--------------------------------------------------- |  | ------------------ | ------- | ----------------------- | - | --------- |  | - | -------
|                                                    |  | September 30, 2005
|                                                    |  | GrossAmount        |         | AccumulatedAmortization |   | NetAmount
|Identifiable intangible assets:                     |  |                    |         |                         |   |           |  |   |        
|Trademarks, tradenames                              |  | $                  | 114,103 |                         | $ |          |  | $ | 114,103
|Customer agreements and distributor network         |  |                    | 28,247  |                         |   | 2,422     |  |   | 25,825 
|Engineering and manufacturing designs and processes |  |                    | 7,861   |                         |   | 430       |  |   | 7,431  
|Patents                                             |  |                    | 226     |                         |   | 1         |  |   | 225    
|Computer software and other                         |  |                    | 666     |                         |   | 163       |  |   | 503    
|                                                    |  |                    |         |                         |   |           |  |   |        
|                                                    |  | $                  | 151,103 |                         | $ | 3,016     |  | $ | 148,087
|                                                    |  |                    |         |                         |   |           |  |   |        



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The following is a summary of identifiable intangible assets as of December 31, 2004 (in thousands):



|                                  |  |                   |       |                          |   |            |  |   |      
|--------------------------------- |  | ----------------- | ----- | ------------------------ | - | ---------- |  | - | -----
|                                  |  | December 31, 2004
|                                  |  | Gross Amount      |       | Accumulated Amortization |   | Net Amount
|Identifiable intangible assets:   |  |                   |       |                          |   |            |  |   |      
|Intangible pension asset          |  | $                 | 412   |                          | $ |           |  | $ | 412  
|Non-qualified deferred comp asset |  |                   | 1,255 |                          |   |           |  |   | 1,255
|Patents                           |  |                   | 178   |                          |   | 18         |  |   | 160  
|Computer software and other       |  |                   | 2,531 |                          |   | 2,519      |  |   | 12   
|                                  |  |                   |       |                          |   |            |  |   |      
|                                  |  | $                 | 4,376 |                          | $ | 2,537      |  | $ | 1,839
|                                  |  |                   |       |                          |   |            |  |   |      



Estimated amortization
expense for existing identifiable intangible assets is expected to be approximately $4.2 million, $4.5 million, $4.5 million, $4.5 million and $4.2 million for each of the years in the five-year period ending December 31,
2009, respectively. Estimated amortization expense can be affected by various factors including future acquisitions or divestitures of product and/or licensing and distribution rights.



In connection with the Transactions, the Company recorded approximately $150.6 million of Successor goodwill. In
accordance with Emerging Issues Task Force (EITF) Issue No. 88-16, Basis in Leveraged Buyout Transactions, the goodwill attributable to the Predecessor basis of $10.7 million has been recorded as a reduction of equity.
Pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, the Successor goodwill will not be amortized but will be subject to an annual impairment test.



NOTE 8. INVENTORIES



Inventories are stated at cost using the first-in, first-out method but not in excess of net realizable value, and consist
of the following (in thousands):



|                              |  |                    |        |   |                   |   |        |  
|----------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | -
|                              |  | September 30, 2005 |        |   | December 31, 2004 |  
|                              |  | Successor          |        |   | Predecessor       |  
|Materials and purchased parts |  | $                  | 9,772  |   |                   | $ | 9,899  |  
|Work in process               |  |                    | 3,618  |   |                   |   | 3,713  |  
|Finished goods                |  |                    | 16,814 |   |                   |   | 14,468 |  
|Inventory reserves            |  |                    | (1,590 | ) |                   |   | (1,319 | )
|                              |  |                    |        |   |                   |   |        |  
|                              |  | $                  | 28,614 |   |                   | $ | 26,761 |  
|                              |  |                    |        |   |                   |   |        |  



The Company recorded
inventories at fair market value as a result of the Acquisition. This resulted in a net write-up of $6.2 million. Of this amount $5.6 million was expensed to cost of sales in the period January 28, 2005 through March 31, 2005 and the
remaining $0.6 million was expensed in the second quarter as this inventory was sold.



NOTE 9. COMMITMENTS AND CONTINGENCIES



Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened against us. While we cannot predict
the outcome of these matters, in the opinion of management,



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any liability arising thereunder will not have a material adverse effect on our business, financial condition and results of operations after giving effect
to provisions already recorded.



In April 2002 we were named as
a defendant in a lawsuit filed by Imonex Services, Inc. for patent infringement, arising from a coin selector, the W2000, which was a component supplied by our vendor, W. H. Münzprüfer Dietmar Trenner GmbH
(Münzprüfer), and which was used in certain of our products. Imonex accused us, and other Münzprüfer customers, of patent infringement resulting from the sales of the W2000 within the Münzprüfer
customers products. Münzprüfer indemnified us and agreed to pay, and has paid for, our representation in this matter. An initial trial yielded a finding of infringement and a permanent injunction against us, while a second trial on
damages yielded a final judgment of $614,662 against us, plus an additional $157,066 of prejudgment interest. In addition, the final judgment awarded court costs, including attorneys fees of $446,990, to Imonex. Imonex appealed the final
judgment to the United States Court of Appeals for the Federal Circuit (CAFC). The CAFC sustained the final judgment, and denied Imonex Motion for Rehearing. The final judgment, attorney fees, prejudgment interest and postjudgment interest,
totaling $1,289,469 were satisfied in September 2005.



Pursuant
to an agreement with Münzprüfer relating to its indemnification obligations to us in connection with this matter, $796,564 of the final award was paid by Münzprüfer on behalf of the Company, with the remaining award of $492,905
paid directly by the Company. Münzprüfer has further agreed that $464,000 of the amount paid by the Company will be repaid by Münzprüfer to the Company over a five (5) year period.



In accordance with GAAP, as a judgment had been rendered by the court, in the
fourth quarter of 2003, we recorded an appropriate payable to Imonex related to our estimated liability and a corresponding receivable balance from Münzprüfer within our consolidated financial statements. During the second quarter of 2005,
the estimated amount payable to Imonex and the corresponding receivable from Münzprüfer were updated. Additionally, in the second quarter of 2005, we applied a $71,385 discount to the re-payments to be made over the five year period, with
a corresponding charge to interest expense in the second quarter. During the third quarter, the receivable balance from Münzprüfer was reduced to $464,000 and the payable balance to Imonex was adjusted accordingly.



Environmental, Health and Safety Matters



We are subject to comprehensive and frequently changing federal, state and
local environmental and occupational health and safety laws and regulations, including laws and regulations governing emissions of air pollutants, discharges of waste and storm water and the disposal of hazardous wastes. We are also subject to
liability for the investigation and remediation of environmental contamination (including contamination caused by other parties) at the properties we own or operate and at other properties where our Company or predecessors have arranged for the
disposal of hazardous substances. As a result, we are involved, from time to time, in administrative and judicial proceedings and inquiries relating to environmental matters. There can be no assurance that we will not be involved in such proceedings
in the future and that the aggregate amount of future clean-up costs and other environmental liabilities will not have a material adverse effect on our business, financial condition and results of operations. We believe that our facilities and
operations are in material compliance with all environmental, health and safety laws.



Certain environmental investigatory and remedial work had been conducted at our Marianna, Florida facility by a former operator of the property and had been funded through an escrow account. On December 28, 2004,
a Conditional Site Rehabilitation Completion Order was issued by the Florida Department of Natural Resources. Therefore, the remediation by the former operator of the property has been successfully concluded. Accordingly, the remaining balance in
the escrow account, after we were reimbursed for our



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remaining expenses, was released to the former operator during the first quarter of 2005, per our escrow agreement.



NOTE 10. GUARANTEES



We, through our special purpose bankruptcy remote subsidiary, entered into a
$330.0 million Asset Backed Facility on June 28, 2005 for the purpose of selling trade receivables and certain equipment loans. Pursuant to the terms of the Asset Backed Facility, we provide credit enhancement to the note purchasers consisting
of an irrevocable letter of credit, an unconditional lending commitment of the lenders under the Senior Credit Facility, subject to certain limits. We are obligated under the reimbursement provisions of the Senior Credit Facility to reimburse the
lenders for any drawings on the credit enhancement by the facility indenture trustee. If the credit enhancement is not replenished by us after a drawing, the trust will not be permitted to request new borrowings under the Asset Backed Facility and
the Asset Backed Facility will begin to amortize. The amount of the irrevocable letter of credit related to the Asset Backed Facility at September 30, 2005 was $28.5 million.



We offer warranties to our customers depending upon the specific product and the product use. Standard product warranties
vary from one to three years for most parts with certain components extending to five years. Certain customers have elected to buy products without warranty coverage. The standard warranty program requires that we replace defective components within
a specified time period from the date of installation. We record an estimate for future warranty related costs based on actual historical incident rates and cost per incident trends. Based on analysis of these and other factors, the carrying amount
of our warranty liability is adjusted as necessary. While our warranty costs have historically been within our calculated estimates, it is possible that future warranty costs could exceed those estimates.



The changes in the carrying amount of our total product warranty liability
for the periods presented were as follows (in thousands):



|                                                                          |  |                                             |        |   |                                          |   |       |                                      |  |   |        |  
|------------------------------------------------------------------------- |  | ------------------------------------------- | ------ | - | ---------------------------------------- | - | ----- | ------------------------------------ |  | - | ------ | -
|                                                                          |  | January 28, 2005 through September 30, 2005 |        |   | January 1, 2005 through January 27, 2005 |   |       | Nine Months Ended September 30, 2004 | 
|                                                                          |  | Successor                                   |        |   | Predecessor                              |   |       | Predecessor                          | 
|Balance at beginning of period                                            |  | $                                           | 4,309  |   |                                          | $ | 4,309 |                                      |  | $ | 4,759  |  
|Accruals for current and pre-existing warranties issued during the period |  |                                             | 1,623  |   |                                          |   | 140   |                                      |  |   | 1,434  |  
|Settlements made during the period                                        |  |                                             | (1,723 | ) |                                          |   | (140  | )                                    |  |   | (1,884 | )
|                                                                          |  |                                             |        |   |                                          |   |       |                                      |  |   |        |  
|Balance at end of period                                                  |  | $                                           | 4,209  |   |                                          | $ | 4,309 |                                      |  | $ | 4,309  |  
|                                                                          |  |                                             |        |   |                                          |   |       |                                      |  |   |        |  



NOTE
11. INCOME TAXES



As of January 27, 2005 Alliance
Holdings is a single member LLC owned by ALH, which is a corporation for U.S. tax purposes. Accordingly, the consolidated financial statements are being presented as if Alliance Holdings was taxed as a corporation. As of January 28, 2005, we
use the asset and liability method of accounting for income taxes whereby deferred income taxes are recorded for the future tax consequences attributable to differences between the financial statement and tax bases of assets and liabilities.
Deferred income tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years



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in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and liabilities are revalued to reflect new tax
rates during the periods in which rate changes are enacted.



As
a result of the Acquisition, the net book values of the Companys assets and liabilities have been reestablished. Deferred income tax assets (liabilities) were established as of January 28, 2005 as follows (in thousands):



|                                        |  |                 |        |  
|--------------------------------------- |  | --------------- | ------ | -
|                                        |  | January 28,2005 |       
|                                        |  | Successor       |       
|Deferred income tax liability:          |  |                 |        |  
|Unrealized gain on equipment notes sold |  | $               | (1,727 | )
|Deferred income tax assets:             |  |                 |        |  
|Basis difference in inventory           |  |                 | 181    |  
|Basis difference in fixed assets        |  |                 | 1,346  |  
|Basis difference in intangibles         |  |                 | 4,372  |  
|Deferred financing costs                |  |                 | 3,422  |  
|Other                                   |  |                 | 58     |  
|                                        |  |                 |        |  
|                                        |  | $               | 9,379  |  
|                                        |  |                 |        |  
|Net deferred income tax assets          |  | $               | 7,652  |  
|                                        |  |                 |        |  



The income tax
provision (benefit) is determined by applying an estimated annual effective income tax rate of 32% to income before taxes. The estimated effective income tax rate was determined by applying statutory income tax rates to our annualized forecast of
pretax income adjusted for certain permanent book/tax differences [goodwill amortization, state income tax net of the federal benefit and others] and tax credits.



There are various factors that may cause our tax assumptions to change in the near term, and we may have to record a
valuation allowance against our deferred income tax assets. We cannot predict whether future U.S. federal and state income tax laws and regulations might be passed that could have a material effect on our results of operations. We will assess the
impact of significant changes to the U.S. federal and state income tax laws and regulations on a regular basis and update the assumptions and estimates used to prepare our consolidated financial statements when new regulations and legislation are
enacted.



We did not provide for U.S. federal income taxes or
tax benefits for the Predecessor Company as it was a partnership for tax reporting purposes and the payment of federal and most state taxes were the responsibility of the partners.



NOTE 12. COMPREHENSIVE INCOME / (LOSS)



Comprehensive income/(loss) for the three months ended September 30, 2005 and 2004 consist of the following (in thousands):



|                                                         |  |                                      |        |   |                                      |   |      
|-------------------------------------------------------- |  | ------------------------------------ | ------ | - | ------------------------------------ | - | -----
|                                                         |  | Three MonthsEnded September 30, 2005 |        |   | Three MonthsEnded September 30, 2004
|                                                         |  | Successor                            |        |   | Predecessor                         
|Comprehensive income (loss):                             |  |                                      |        |   |                                      |   |      
|Net income                                               |  | $                                    | 3,377  |   |                                      | $ | 3,039
|Net unrealized holding (loss) gain on residual interests |  |                                      | (1,541 | ) |                                      |   | 693  
|                                                         |  |                                      |        |   |                                      |   |      
|Comprehensive income                                     |  | $                                    | 1,836  |   |                                      | $ | 3,732
|                                                         |  |                                      |        |   |                                      |   |      



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Comprehensive income/(loss) for the periods presented consist of the following (in thousands):



|                                                         |  |                                             |        |   |                                          |   |         |                                      |  |   |        |  
|-------------------------------------------------------- |  | ------------------------------------------- | ------ | - | ---------------------------------------- | - | ------- | ------------------------------------ |  | - | ------ | -
|                                                         |  | January 28, 2005 through September 30, 2005 |        |   | January 1, 2005 through January 27, 2005 |   |         | Nine Months Ended September 30, 2004 | 
|                                                         |  | Successor                                   |        |   | Predecessor                              |   |         | Predecessor                          | 
|Comprehensive (loss) income:                             |  |                                             |        |   |                                          |   |         |                                      |  |   |        |  
|Net (loss) income                                        |  | $                                           | (2,286 | ) |                                          | $ | (28,392 | )                                    |  | $ | 13,459 |  
|Net unrealized holding (loss) gain on residual interests |  |                                             | (1,316 | ) |                                          |   | 203     |                                      |  |   | (451   | )
|                                                         |  |                                             |        |   |                                          |   |         |                                      |  |   |        |  
|Comprehensive (loss) income                              |  | $                                           | (3,602 | ) |                                          | $ | (28,189 | )                                    |  | $ | 13,008 |  
|                                                         |  |                                             |        |   |                                          |   |         |                                      |  |   |        |  



NOTE
13. EMPLOYEE BENEFIT PLANS



Substantially all of our employees
are covered by a defined benefit pension plan. In addition, we provide certain health care benefits for retired employees. The components of periodic benefit costs for the three months ended September 30, 2005 and 2004 are as follows (in
thousands):



|                                   |  |                                      |      |   |                                      |   |      |                                      |  |   |                                      |   |  |   |   
|---------------------------------- |  | ------------------------------------ | ---- | - | ------------------------------------ | - | ---- | ------------------------------------ |  | - | ------------------------------------ | - |  | - | --
|                                   |  | Pension Benefits                     |      |   | Other Benefits                      
|                                   |  | Three MonthsEnded September 30, 2005 |      |   | Three MonthsEnded September 30, 2004 |   |      | Three MonthsEnded September 30, 2005 |  |   | Three MonthsEnded September 30, 2004
|                                   |  | Successor                            |      |   | Predecessor                          |   |      | Successor                            |  |   | Predecessor                         
|Service cost                       |  | $                                    | 439  |   |                                      | $ | 406  |                                      |  | $ | 16                                   |   |  | $ | 23
|Interest cost                      |  |                                      | 686  |   |                                      |   | 671  |                                      |  |   | 25                                   |   |  |   | 27
|Expected return on assets          |  |                                      | (909 | ) |                                      |   | (827 | )                                    |  |   |                                     |   |  |   |  
|Amortization of net obligation     |  |                                      |     |   |                                      |   |     |                                      |  |   |                                     |   |  |   | 11
|Amortization of prior service cost |  |                                      |     |   |                                      |   | 18   |                                      |  |   | (15                                  | ) |  |   |  
|Amortization of loss               |  |                                      |     |   |                                      |   | 18   |                                      |  |   |                                     |   |  |   | 14
|                                   |  |                                      |      |   |                                      |   |      |                                      |  |   |                                      |   |  |   |   
|Net periodic benefit cost          |  | $                                    | 216  |   |                                      | $ | 286  |                                      |  | $ | 26                                   |   |  | $ | 75
|                                   |  |                                      |      |   |                                      |   |      |                                      |  |   |                                      |   |  |   |   



The components of periodic benefit
costs for these plans for the periods presented are as follows (in thousands):



|                                   |  |                                             |        |   |                                          |   |      |                                      |  |   |                                             |   |  |                                          |     |                                      |  |   |    |  |   |    
|---------------------------------- |  | ------------------------------------------- | ------ | - | ---------------------------------------- | - | ---- | ------------------------------------ |  | - | ------------------------------------------- | - |  | ---------------------------------------- | --- | ------------------------------------ |  | - | -- |  | - | ---
|                                   |  | Pension Benefits                            |        |   | Other Benefits                          
|                                   |  | January 28, 2005 through September 30, 2005 |        |   | January 1, 2005 through January 27, 2005 |   |      | Nine Months Ended September 30, 2004 |  |   | January 28, 2005 through September 30, 2005 |   |  | January 1, 2005 through January 27, 2005 |     | Nine Months Ended September 30, 2004
|                                   |  | Successor                                   |        |   | Predecessor                              |   |      | Predecessor                          |  |   | Successor                                   |   |  | Predecessor                              |     | Predecessor                         
|Service cost                       |  | $                                           | 1,170  |   |                                          | $ | 151  |                                      |  | $ | 1,218                                       |   |  | $                                        | 70  |                                      |  | $ | 11 |  | $ | 69 
|Interest cost                      |  |                                             | 1,831  |   |                                          |   | 229  |                                      |  |   | 2,013                                       |   |  |                                          | 79  |                                      |  |   | 10 |  |   | 81 
|Expected return on assets          |  |                                             | (2,424 | ) |                                          |   | (311 | )                                    |  |   | (2,480                                      | ) |  |                                          |    |                                      |  |   |   |  |   |   
|Amortization of net obligation     |  |                                             |       |   |                                          |   |     |                                      |  |   |                                            |   |  |                                          |    |                                      |  |   |   |  |   | 34 
|Amortization of prior service cost |  |                                             |       |   |                                          |   | 6    |                                      |  |   | 53                                          |   |  |                                          | (15 | )                                    |  |   | 4  |  |   |   
|Amortization of loss               |  |                                             |       |   |                                          |   | 4    |                                      |  |   | 54                                          |   |  |                                          |    |                                      |  |   | 7  |  |   | 43 
|                                   |  |                                             |        |   |                                          |   |      |                                      |  |   |                                             |   |  |                                          |     |                                      |  |   |    |  |   |    
|Net periodic benefit cost          |  | $                                           | 577    |   |                                          | $ | 79   |                                      |  | $ | 858                                         |   |  | $                                        | 134 |                                      |  | $ | 32 |  | $ | 227
|                                   |  |                                             |        |   |                                          |   |      |                                      |  |   |                                             |   |  |                                          |     |                                      |  |   |    |  |   |    



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Employer Contributions



During July of 2005, we made a voluntary contribution of approximately $1.0 million to the pension plan which is consistent with our previous
disclosures in our financial statements for the year ended December 31, 2004. No further contributions are expected for the remainder of fiscal 2005.



In April 2004, the Pension Funding Equity Act of 2004 (the Act) was signed into law allowing many corporations to reduce their required
pension contributions during 2004 and 2005. The Act had no material impact on our 2005 required minimum contribution of zero.



NOTE 14. RELATED PARTY TRANSACTIONS



Pre-Acquisition Executive Unit Purchase Agreements



Certain members of management of the Company had entered into executive unit purchase agreements (the Purchase Agreements) which governed the
Executives investment in their common membership interests of the Company prior to the Acquisition. The Purchase Agreements included vesting provisions for certain Class M, Class B and Class C Units which were issued as an incentive for the
Executives retention and future performance. The Class M, Class B and Class C Units were purchased by the Executives at a nominal value based upon the subordinated nature of such interests.



Based upon a valuation of these and all other previously issued incentive
units, for the period ended January 27, 2005, we recognized $1.1 million of compensation expense, primarily associated with the acceleration of vesting of these units as of the Acquisition date. We recognized incentive unit compensation income
of $0.2 million and expense of $0.5 million for the quarter and nine month periods ended September 30, 2004, respectively.



NOTE 15. MANDATORILY REDEEMABLE PREFERRED INTERESTS



Prior to the Acquisition, we had outstanding mandatorily redeemable preferred interests (the preferred
interests) with a liquidation value of $6.0 million. The holders of the preferred interests were entitled to receive distributions from us in an amount equal to their unreturned capital (as defined in the Alliance Laundry Holdings Amended and
Restated Limited Liability Company Agreement) prior to distributions in respect of any other membership interests of the Company. These units were redeemed as of January 27, 2005.



NOTE 16. SUBSEQUENT EVENTS



Costs Associated With Exit or Disposal Activities



On October 12, 2005, we committed to a plan to close our Marianna, Florida facility (the Facility) and
consolidate the manufacture and design of the Facilitys product lines into our existing Ripon, Wisconsin operations. We expect to complete the facility closure and consolidation by the end of the third quarter of 2006. The decision was based
on an analysis of each facilitys manufacturing capabilities as well as the continuing investment requirements for each of the locations. We believe that efficiencies will be gained with the consolidation of the design and manufacturing of all
of our product lines within our Ripon, Wisconsin operations.



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We estimate total cash costs and expenses associated with the closure of the Facility to be approximately
$7.0 million, comprised of (1) approximately $3.0 million of one-time termination benefits and relocation costs; (2) approximately $0.9 million of other labor related costs including training and temporary living expenses;
(3) approximately $1.9 million related to the relocation of the Facilitys tooling and equipment; and (4) approximately $1.2 million of other related expenses.



In addition, in accordance with applicable accounting rules, we have re-evaluated the remaining useful lives of our Marianna
Facilitys buildings and land improvements. As a result, we expect to incur additional depreciation expense of approximately $3.4 million over the next 12 months.



As of September 30, 2005, there were no costs recorded for the Facility closure. In the fourth quarter of 2005, we
anticipate recording a charge in connection with the Facility closure of $1.9 million. This anticipated charge includes a cash charge of $0.5 million for the portion of employee termination costs allocable to the fourth quarter, with less than $0.5
million of other cash charges in the fourth quarter of 2005. Additionally, we anticipate a non-cash charge of $0.9 million related to the additional depreciation expense for the Marianna Facility in the fourth quarter of 2005.



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



OVERVIEW



We believe we are the leading designer, manufacturer and marketer of stand-alone commercial laundry equipment in North America and a leader worldwide.
Under the well-known brand names of Speed Queen®,
UniMac®, Huebsch® and Ajax®, we produce a full line of commercial washing machines and dryers with load capacities from 16 to 250 pounds as well as
presses and finishing equipment. Our commercial products are sold to four distinct customer groups: (i) laundromats; (ii) multi-housing laundries, consisting primarily of common laundry facilities in apartment buildings, universities and
military installations; (iii) on-premise laundries, consisting primarily of in-house laundry facilities of hotels, hospitals, nursing homes and prisons; and (iv) drycleaners.



The North American stand-alone commercial laundry equipment industrys revenues are primarily driven by population
growth and the replacement cycle of laundry equipment. With economic conditions having limited effect on the frequency of use, and therefore the useful life of laundry equipment, industry revenues have been relatively stable over time. Similarly,
with a majority of our revenues generated by recurring sales of replacement equipment and service parts, we have experienced stable revenues even during economic slowdowns.



Sales of stand-alone commercial laundry equipment are the single most important driver of our revenues. In 2004, our full
year net revenues from the sale of commercial laundry equipment were approximately $239.2 million, which comprised over 85% of our total net revenues. The other main component of our revenues is the sale of high margin service parts. We offer
immediate response service whereby many of our parts are available on a 24-hour turnaround for emergency repair parts orders. In 2004, our full year net revenues from the sale of service parts were approximately $38.2 million, almost 14% of our
total net revenues.



We have achieved steady revenues by
building an extensive and loyal distribution network for our products, establishing a significant installed base of units and developing and offering a full innovative product line. As a result of our large installed base, a significant majority of
our revenue is attributable to replacement sales of equipment and service parts.



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We believe that continued population expansion in North America will continue to drive steady demand for
garment and textile laundering by all customer groups that purchase commercial laundry equipment. We anticipate growth in demand for commercial laundry equipment in international markets as well, especially in developing countries where laundry
processing has historically been far less sophisticated than in North America. In addition, customers are increasingly trading up to equipment with enhanced functionality, thereby raising average selling prices. Customers are also moving towards
equipment with increased water and energy efficiency as the result of government and consumer pressure and a focus on operating costs.



Recent Developments



On September 28, 2005, Alliance Laundry Systems LLC (Alliance Laundry) and the United Steelworkers of America entered into an amendment
(the Amendment) to their existing labor contract, dated March 1, 2004 (the Labor Contract). The Amendment created a third tier of wages which permits Alliance Laundry to pay employees hired after January 1, 2006 at
a wage approximately 31% below the current assembly wage for employees hired under Tier 1 of the Labor Contract, approximately 4% below the current assembly wage for employees hired under Tier 2 of the Labor Contract and approximately 15% below the
fabrication wage for employees hired under both Tier 1 and Tier 2 of the Labor Contract. The Amendment also provides that employees hired after January 1, 2006 will not qualify for pension benefits under the Labor Contract and will be required
to contribute 20% of the cost of their medical coverage. The Amendment also contains amendments to provisions that are customary for an agreement of this type, including, among others, those related to overtime and severance pay; pension and savings
plans; and life, disability, medical and dental plan coverage.



On October 12, 2005, we committed to a plan to close our Marianna, Florida facility (the Facility) and consolidate the manufacture and design of the Facilitys product lines into our existing Ripon, Wisconsin
operations. We expect to complete the facility closure and consolidation by the end of the third quarter of 2006. The decision was based on an analysis of each facilitys manufacturing capabilities as well as the continuing investment
requirements for each of the locations. We believe that efficiencies will be gained with the consolidation of the design and manufacturing of all of our product lines within our Ripon, Wisconsin operations.



We estimate total cash costs and expenses associated with the closure of the
Facility to be approximately $7.0 million, comprised of (1) approximately $3.0 million of one-time termination benefits and relocation costs; (2) approximately $0.9 million of other labor related costs including training and temporary
living expenses; (3) approximately $1.9 million related to the relocation of the Facilitys tooling and equipment; and (4) approximately $1.2 million of other related expenses.



In addition, in accordance with applicable accounting rules, we have
re-evaluated the remaining useful lives of our Marianna Facilitys buildings and land improvements. As a result, we expect to incur additional depreciation expense of approximately $3.4 million over the next 12 months.



As of September 30, 2005, there were no costs recorded for the Facility
closure. In the fourth quarter of 2005, we anticipate recording a charge in connection with the Facility closure of $1.9 million. This anticipated charge includes a cash charge of $0.5 million for the portion of employee termination costs allocable
to the fourth quarter, with less than $0.5 million of other cash charges in the fourth quarter of 2005. Additionally, we anticipate a non-cash charge of $0.9 million related to the additional depreciation expense for the Marianna Facility in the
fourth quarter of 2005.



On January 27, 2005, ALH Holding
Inc. (ALH), an entity formed by Teachers Private Capital, the private equity arm of Ontario Teachers Pension Plan Board (OTPP), acquired 100% of the outstanding equity interests in Alliance Holdings pursuant to a
unit purchase agreement for aggregate consideration of $466.3 million. In connection with such acquisition, the executive officers of Alliance Laundry acquired $7.4 million of newly issued shares of common stock of ALH, and our other management
employees acquired $2.2 million of newly issued shares of ALH common stock in exchange for equity interests in Alliance Holdings and cash pursuant to ALHs stock purchase and rollover investment plan. A portion of the aggregate acquisition
consideration was used to repay our existing indebtedness, redeem our outstanding preferred equity interests and pay certain fees and expenses payable in connection with the consummation of the acquisition and the financing transactions described
below, and the balance was paid to the then current equity holders of Alliance Holdings.



We refer to the acquisition of Alliance Holdings and the related management investments in ALH as the Acquisition. The Acquisition was financed with $350.0 million of debt financing described below, the
management equity, approximately $107.4 million of new equity capital from OTPP and available cash. As a result of the Acquisition, all of the outstanding equity interests of Alliance Laundry are owned by Alliance Holdings, all of the equity
interests of Alliance Holdings are owned by ALH and approximately 91.8% of the capital stock of ALH is owned by OTPP. The remaining capital stock of ALH is owned by our management.



In connection with the closing of the Acquisition, we consummated the following financing transactions, (the Financing
Transactions, which we refer to, together with the Acquisition, as the Transactions):



| |  |  | the closing of the issuance of $150.0 million 8 1/2% senior subordinated notes due January 15, 2013, the 2005 Senior Subordinated Notes. The proceeds from the
2005 Senior Subordinated Notes offering were $149.3 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the closing of Alliance Laundrys new $250.0 million senior secured credit facility, which we refer to as the New Senior Credit Facility, consisting of a six-year
$50.0 million revolving credit facility and a seven-year $200.0 million term loan facility. On the closing date (January 27, 2005), the term loan facility was drawn in full, but the revolving credit facility remained undrawn; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The settlement of the tender offer and consent solicitation, or the tender offer, initiated by us on January 4, 2005 for the $110.0 million aggregate principal amount of our
then outstanding 1998 Senior Subordinated Notes. The tender offer expired at 5:00 PM New York City time on February 2, 2005, and approximately 5.10% of the total principal amount of the 1998 Senior Subordinated Notes remained outstanding after
the consummation of the tender offer. We redeemed the remaining 1998 Senior Subordinated Notes in accordance with the indenture governing such notes on March 7, 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In connection with the consummation of the Transactions, Alliance Laundry and Alliance Laundry
Corporation became the obligors under the 2005 Senior Subordinated Notes. Alliance Laundry is the borrower and obligor under the New Senior Credit Facility, Alliance Laundry Corporation became a guarantor under the New Senior Credit Facility and
Alliance Holdings became a guarantor of the New Senior Credit Facility and the 2005 Senior Subordinated Notes.



Alliance Laundry Corporation is a wholly-owned subsidiary of Alliance Laundry and was originally incorporated for the sole purpose of serving as a
co-issuer of the 1998 Senior Subordinated Notes. Alliance Holdings is the parent of Alliance Laundry and has provided a full and unconditional guarantee of the 2005 Senior Subordinated Notes. Alliance Holdings and Alliance Laundry Corporation do not
have any operations or assets independent of Alliance Laundry.



CRITICAL ACCOUNTING POLICIES



The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the financial statement date and reported amounts of revenues and expenses, including amounts that are susceptible to change. Our critical accounting policies include accounting methods and estimates underlying
such financial statement preparation, as well as judgments around uncertainties affecting the application of those policies. In applying critical accounting policies, materially different amounts or results could be reported under different
conditions or using different assumptions. We believe that our critical accounting policies, involving significant estimates, uncertainties and susceptibility to change, include the following:



Revenue Recognition. Revenue from product sales is recognized by us
when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and ownership has transferred to the customer; (iii) the price to the customer is fixed or determinable; and
(iv) collectibility is reasonably assured. With the exception of certain sales to international customers, which are recognized upon receipt or acceptance by the customer, these criteria are satisfied, and accordingly, revenue is recognized
upon shipment by us. In addition, warranty and sales incentive costs are estimated and accrued at the time of sale, as appropriate.



We sell notes receivable and accounts receivable through our special-purpose bankruptcy remote entities. Servicing revenue, interest income on beneficial
interests retained, and gains on the sale of notes receivable are included in commercial laundry revenue. In determining the gain on sales of notes receivable, the investment in the sold receivable pool is allocated between the portion sold and the
portion retained, based on their relative fair values. We generally estimate the fair values of our retained interests based on the present value of expected future cash flows to be received, using our best estimate of key assumptions, including
credit losses, prepayment rates, interest rates and discount rates commensurate with the risks involved.



Inventories. We value inventories at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Valuing inventories
at the lower of cost or market requires the use of estimates and judgment. Our policy is to evaluate all inventory quantities for amounts on-hand that are potentially in excess of estimated usage requirements, and to write-down any excess quantities
to estimated net realizable value. Inherent in the estimates of net realizable value are our estimates related to our future manufacturing schedules, customer demand, possible alternative uses and ultimate realization of potentially excess
inventory.



Notes and Accounts Receivable. We value
notes receivable not sold and accounts receivable net of allowances for uncollectible accounts. These allowances are based on estimates of the portion of the receivables that will not be collected in the future, and in the case of notes receivable,
also considers estimated



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collateral liquidation proceeds. However, the ultimate collectibility of a receivable is significantly dependent upon the financial condition of the
individual customer, which can change rapidly and without advance warning. Balances are written off after all collection efforts have been exhausted.



Retained Interests in Securitized Notes Receivable. We value retained beneficial interests in notes receivable sold to our off-balance sheet
special-purpose entities based upon the present value of expected future cash flows to be received on the residual portion of cash flows on the notes, using our best estimate of key assumptions, including credit losses, prepayment rates, interest
rates and discount rates commensurate with the risks inherent in such estimates. Unrealized gains and losses resulting from changes in the estimated fair value of retained interests are recorded as other comprehensive income (loss). Impairment
losses are recognized when the estimated fair value is less than the carrying amount of the retained interest.



Goodwill and Other Intangible Assets. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill will not be
amortized. However, under SFAS No. 142, goodwill will be tested for impairment at least annually and more frequently if an event occurs which indicates the goodwill may be impaired. Impairment of goodwill is measured according to a two-step
approach. In the first step, the fair value of a reporting unit, as defined by the statement, is compared to the carrying value of the reporting unit, including goodwill. If the carrying amount exceeds the fair value, the second step of the goodwill
impairment test is performed to measure the amount of the impairment loss, if any. In the second step the implied value of the goodwill is estimated as the fair value of the reporting unit less the fair value of all other tangible and intangible
assets of the reporting unit. If the carrying amount of the goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.



Additionally, under SFAS No. 142, intangible assets not subject to
amortization (indefinite lived intangible assets) shall be tested for impairment at least annually and more frequently if an event occurs which indicates the intangible asset may be impaired. The impairment test consists of a comparison of the fair
value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Companys other recorded intangible
assets, tradenames and trademarks, have been deemed to have an indefinite life.



Income Taxes.Certain items of income and expense are not recognized on our income tax returns and financial statements in the same year, which creates timing differences. The income tax effect of these timing
differences results in (1) deferred income tax assets that create a reduction in future income taxes and (2) deferred income tax liabilities that create an increase in future income taxes. Recognition of deferred income tax assets is based
on managements belief that it is more likely than not that the income tax benefit associated with certain temporary differences, income tax operating loss and capital loss carry forwards and income tax credits, would be realized. We have not
recorded a valuation allowance to reduce our deferred income tax assets based, in part, on our assessment of future taxable income and in light of our ongoing prudent and feasible income tax strategies. If our estimate of future taxable income or
tax strategies change at any time in the future, we may have to record a valuation allowance and recording such an adjustment could have a material effect on our financial condition.



The successor period January 28, 2005 through September 30, 2005 loss before income taxes of $3.3 million includes
one-time charges of $8.1 million for the ALERT 2005 securitization and $6.2 million of charges related to the write up of inventory related to the Acquisition. We recorded positive pre-tax income for 2002, 2003 and 2004. We will need to generate
$3.3 million of pre-tax income to be able to use the net operating loss carry forward from the successor period through September 30, 2005. Management believes it is more likely than not that we will be able to utilize the net operating loss carry
forward before it expires in 2025. Most of the net operating loss carryforward is expected to be utilized in the fourth quarter of 2005 as the one-time charges above will not recur and the underlying business remains profitable.



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Employee Pensions. We sponsor a defined benefit pension plan covering the majority of our
employees. Generally accepted accounting principles require us to develop actuarial assumptions in determining annual pension expense and benefit obligations for the related plan. Such assumptions include discount rate, expected rate of return on
plan assets, compensation increases and employee turnover rates. These assumptions are reviewed on an annual basis and modified as necessary to reflect changed conditions. For purposes of determining our pension expense for 2005, the discount rate
and expected rate of return on plan assets have been reduced to 5.75% and 8.75%, respectively.



Further, generally accepted accounting principles require the recognition of a minimum pension liability and in certain circumstances an adjustment to members equity (deficit) when the fair market value of
year-end pension assets are less than the accumulated benefit obligation. Accordingly, any adjustment to members equity (deficit), if needed, will be recognized in the fourth quarter of 2005.



RESULTS OF OPERATIONS



The following discussion should be read in conjunction with the Financial
Statements and Notes thereto included in this report.



As a
result of the Acquisition, the Consolidated Financial Statements present our results of operations, financial position and cash flows prior to the date of the Acquisition transaction under Predecessor. The financial effects of the
Acquisition transaction and our results of operations, financial position and cash flows following the closing of the Acquisition are presented under Successor. In accordance with generally accepted accounting principles in the United
States, or GAAP, our Predecessor results have not been aggregated with our Successor results and, accordingly, our Consolidated Financial Statements do not show results of operations or cash flows for the nine months ended September 30, 2005.
However, in order to facilitate an understanding of our results of operations for the nine months ended September 30, 2005 in comparison with the nine months ended September 30, 2004, we have presented and discussed below our Predecessor
results and our Successor results on a combined basis. The combined results of operations are non-GAAP financial measures and should not be considered in isolation or as a substitute for the Predecessor and Successor results.



The following table sets forth our historical net revenues for the periods indicated:



|                   |  |                       |      |                   |   |     
|------------------ |  | --------------------- | ---- | ----------------- | - | ----
|                   |  | Quarter Ended        
|                   |  | September 30,2005     |      | September 30,2004
|                   |  | (Dollars in millions)
|Net revenues:      |  |                       |      |                   |   |     
|Commercial laundry |  | $                     | 68.5 |                   | $ | 55.8
|Service parts      |  |                       | 9.9  |                   |   | 9.3 
|                   |  |                       |      |                   |   |     
|                   |  | $                     | 78.4 |                   | $ | 65.1
|                   |  |                       |      |                   |   |     



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The following table sets forth certain condensed historical financial data for us expressed as a
percentage of net revenues for each of the periods indicated:



|                                            |  |                   |   |  |                   |  
|------------------------------------------- |  | ----------------- | - |  | ----------------- | -
|                                            |  | Quarter Ended     |  
|                                            |  | September 30,2005 |   |  | September 30,2004 |  
|Net revenues                                |  | 100.0             | % |  | 100.0             | %
|Cost of sales                               |  | 71.4              | % |  | 72.1              | %
|Gross profit                                |  | 28.6              | % |  | 27.9              | %
|Selling, general and administrative expense |  | 12.5              | % |  | 12.7              | %
|Securitization and other costs              |  | 0.1               | % |  |                  |  
|Operating income                            |  | 16.0              | % |  | 15.2              | %
|Net income                                  |  | 4.3               | % |  | 4.7               | %



Net revenues.
Net revenues for the quarter ended September 30, 2005 increased $13.2 million, or 20.3%, to $78.4 million from $65.1 million for the quarter ended September 30, 2004. This increase was attributable to higher product revenues of $12.6
million, and service parts revenue increases of $0.6 million. The increase in product revenue was due to higher North American commercial equipment revenue of $7.6 million, higher international revenue of $2.8 million and higher earnings from our
off-balance sheet equipment financing program of $2.6 million, with lower U.S. consumer laundry revenue of $0.4 million. Revenue for North America was higher for coin-operated laundry customers and on-premise laundries. Revenue for international
customers was higher primarily in Asia, Latin America and Europe. Our off-balance sheet equipment financing program earnings were higher due to an increase in notes sold and due to adjusting beneficial interests to their respective fair market
values. The revenue increases stated above include net price increases of approximately $4.0 million.



Gross profit. Gross profit for the quarter ended September 30, 2005 increased $4.3 million, or 23.4%, to $22.4 million from $18.1 million for
the quarter ended September 30, 2004. This increase was primarily attributable to price increases, profit margins related to increased sales and the higher earnings from our off-balance sheet equipment financing program. These gross profit
increases were partially offset by material cost increases of approximately $3.2 million, mostly related to steel cost increases, and higher depreciation expense of $0.5 million driven by the Acquisition asset write-up to fair market values. As a
result of these factors, gross profit as a percentage of net revenues increased to 28.6% for the quarter ended September 30, 2005 from 27.9% for the quarter ended September 30, 2004.



Selling, general and administrative expense. Selling, general and
administrative expense for the quarter ended September 30, 2005 increased $1.6 million, or 19.4%, to $9.8 million from $8.2 million for the quarter ended September 30, 2004. The increase in selling, general and administrative expense was
primarily due to increased amortization expenses of $1.0 million driven by Acquisition date write-ups to fair market value for customer agreements, engineering drawings, and our distribution network. Expenses also increased by $0.3 million as a
result of a retention program for key executives and increased by $0.3 million for management bonuses. Selling, general and administrative expense as a percentage of net revenues decreased to 12.5% for the quarter ended September 30, 2005 as
compared to 12.7% for the quarter ended September 30, 2004 as these costs did not increase as significantly as net revenues.



Operating income (loss). As a result of the foregoing, operating income (loss) as a percentage of net revenues increased to 16.0% for the quarter
ended September 30, 2005 as compared to 15.2% for the quarter ended September 30, 2004.



Interest expense. Interest expense for the quarter ended September 30, 2005 decreased $0.7 million, or 10.4%, to $6.1 million from $6.8
million for the quarter ended September 30, 2004. Interest expense in 2005



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includes a favorable non-cash adjustment of $0.8 million to reflect changes in the fair value of an interest rate swap agreement entered into after the
Acquisition. There was essentially no change in the fair value of a previous interest rate swap agreement for the quarter ended September 30, 2004.



Income tax provision. The provision for income taxes for the quarter ended September 30, 2005 was $3.0 million, with no similar provision for
the quarter ended September 30, 2004. Prior to January 28, 2005, we did not provide for U.S. federal income taxes or tax benefits as the Predecessor Company was a partnership for tax reporting purposes and the payment of federal and most
state taxes were the responsibility of the partners.



Net
income (loss). As a result of the foregoing, our net income for the quarter ended September 30, 2005 increased $0.4 million, or 11.1%, to $3.4 million from $3.0 million for the quarter ended September 30, 2004. Net income (loss) as a
percentage of net revenues for the quarter ended September 30, 2005 decreased to 4.3% for the quarter ended September 30, 2005 as compared to 4.7% for the quarter ended September 30, 2004.



Below is a reconciliation of the combined results of operations for the periods presented (in
thousands):



|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|-------------------------------------------------- |  | ---------------------------------------- | ------- | - | ------------------------------------- | - | ------- | --------------------------------- |  | - | --------------------------------- | - |  | - | -------
|                                                   |  | January 28,2005 throughSeptember 30,2005 |         |   | January 1,2005 throughJanuary 27,2005 |   |         | Nine MonthsEndedSeptember 30,2005 |  |   | Nine MonthsEndedSeptember 30,2004
|                                                   |  | Successor                                |         |   | Predecessor                           |   |         | Combined                          |  |   | Predecessor                      
|Net revenues:                                      |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|Commercial and consumer laundry                    |  | $                                        | 185,767 |   |                                       | $ | 17,470  |                                   |  | $ | 203,237                           |   |  | $ | 176,023
|Service parts                                      |  |                                          | 27,493  |   |                                       |   | 3,213   |                                   |  |   | 30,706                            |   |  |   | 28,773 
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|                                                   |  |                                          | 213,260 |   |                                       |   | 20,683  |                                   |  |   | 233,943                           |   |  |   | 204,796
|Cost of sales                                      |  |                                          | 164,374 |   |                                       |   | 15,585  |                                   |  |   | 179,959                           |   |  |   | 144,761
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|Gross profit                                       |  |                                          | 48,886  |   |                                       |   | 5,098   |                                   |  |   | 53,984                            |   |  |   | 60,035 
|Selling, general and administrative expense        |  |                                          | 26,673  |   |                                       |   | 3,829   |                                   |  |   | 30,502                            |   |  |   | 25,995 
|Securitization and other costs                     |  |                                          | 8,055   |   |                                       |   |        |                                   |  |   | 8,055                             |   |  |   |       
|Transaction costs associated with sale of business |  |                                          |        |   |                                       |   | 18,790  |                                   |  |   | 18,790                            |   |  |   |       
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|Total operating expense                            |  |                                          | 34,728  |   |                                       |   | 22,619  |                                   |  |   | 57,347                            |   |  |   | 25,995 
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|Operating income (loss)                            |  |                                          | 14,158  |   |                                       |   | (17,521 | )                                 |  |   | (3,363                            | ) |  |   | 34,040 
|Interest expense                                   |  |                                          | 17,439  |   |                                       |   | 995     |                                   |  |   | 18,434                            |   |  |   | 19,219 
|Loss from early extinguishment of debt             |  |                                          |        |   |                                       |   | 9,867   |                                   |  |   | 9,867                             |   |  |   |       
|Costs related to abandoned public offerings        |  |                                          |        |   |                                       |   |        |                                   |  |   |                                  |   |  |   | 1,298  
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|(Loss) income before taxes                         |  |                                          | (3,281  | ) |                                       |   | (28,383 | )                                 |  |   | (31,664                           | ) |  |   | 13,523 
|Provision for income taxes                         |  |                                          | (995    | ) |                                       |   | 9       |                                   |  |   | (986                              | ) |  |   | 64     
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        
|Net (loss) income                                  |  | $                                        | (2,286  | ) |                                       | $ | (28,392 | )                                 |  | $ | (30,678                           | ) |  | $ | 13,459 
|                                                   |  |                                          |         |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        



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Below is a reconciliation of certain items of the combined statements of cash flows for the periods
presented (in thousands):



|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|----------------------------------------------------- |  | ---------------------------------------- | -------- | - | ------------------------------------- | - | ------- | --------------------------------- |  | - | --------------------------------- | - |  | - | ------- | -
|                                                      |  | January 28,2005 throughSeptember 30,2005 |          |   | January 1,2005 throughJanuary 27,2005 |   |         | Nine MonthsEndedSeptember 30,2005 |  |   | Nine MonthsEndedSeptember 30,2004 |  
|                                                      |  | Successor                                |          |   | Predecessor                           |   |         | Combined                          |  |   | Predecessor                       |  
|Net cash (used in) provided by operations             |  | $                                        | 17,029   |   |                                       | $ | (20,675 | )                                 |  | $ | (3,646                            | ) |  | $ | 25,040  |  
|Net cash (used for) provided by working capital       |  |                                          | (22,956  | ) |                                       |   | 14,056  |                                   |  |   | (8,900                            | ) |  |   | 1,026   |  
|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Net cash (used in) provided by operating activities   |  | $                                        | (5,927   | ) |                                       | $ | (6,619  | )                                 |  | $ | (12,546                           | ) |  | $ | 26,066  |  
|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Cash flows from investing activities:                 |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Additions to property, plant and equipment            |  | $                                        | (3,168   | ) |                                       | $ | (188    | )                                 |  | $ | (3,356                            | ) |  | $ | (2,982  | )
|Proceeds on disposal of property, plant and equipment |  |                                          | 2        |   |                                       |   |        |                                   |  |   | 2                                 |   |  |   | 67      |  
|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Net cash used in investing activities                 |  | $                                        | (3,166   | ) |                                       | $ | (188    | )                                 |  | $ | (3,354                            | ) |  | $ | (2,915  | )
|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Cash flows from financing activities:                 |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Principal payments on long-term debt                  |  | $                                        | (13,000  | ) |                                       | $ | 1       |                                   |  | $ | (12,999                           | ) |  | $ | (21,183 | )
|Proceeds from senior term loan                        |  |                                          | 200,000  |   |                                       |   |        |                                   |  |   | 200,000                           |   |  |   |        |  
|Proceeds from senior subordinated notes               |  |                                          | 149,250  |   |                                       |   |        |                                   |  |   | 149,250                           |   |  |   |        |  
|Repayment of long-term debt                           |  |                                          | (275,920 | ) |                                       |   |        |                                   |  |   | (275,920                          | ) |  |   |        |  
|Contribution from member                              |  |                                          | 117,000  |   |                                       |   |        |                                   |  |   | 117,000                           |   |  |   |        |  
|Distribution to old unitholders                       |  |                                          | (154,658 | ) |                                       |   |        |                                   |  |   | (154,658                          | ) |  |   |        |  
|Debt financing costs                                  |  |                                          | (13,230  | ) |                                       |   |        |                                   |  |   | (13,230                           | ) |  |   |        |  
|Cash paid for capitalized offering related costs      |  |                                          | (1,364   | ) |                                       |   |        |                                   |  |   | (1,364                            | ) |  |   | (1,071  | )
|Net proceeds - management note                        |  |                                          |         |   |                                       |   | (71     | )                                 |  |   | (71                               | ) |  |   |        |  
|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  
|Net cash provided by (used in) financing activities   |  | $                                        | 8,078    |   |                                       | $ | (70     | )                                 |  | $ | 8,008                             |   |  | $ | (22,254 | )
|                                                      |  |                                          |          |   |                                       |   |         |                                   |  |   |                                   |   |  |   |         |  



Net revenues.
Net revenues for the nine months ended September 30, 2005 increased $29.1 million, or 14.2%, to $233.9 million from $204.8 million for the nine months ended September 30, 2004. This increase was attributable to higher product revenue of
$27.2 million and higher service parts revenue of $1.9 million. The increase in product revenue was due to higher international revenue of $8.4 million, higher North American commercial equipment revenue of $12.8 million, higher U.S. consumer
laundry revenue of $3.1 million and higher earnings from our off-balance sheet equipment financing program of $2.9 million. Revenue for North America was higher for coin-operated laundry customers and on-premise laundries. Revenue for international
customers was higher in Asia, Europe, Latin America and middle eastern countries. Alliance re-entered the U.S. consumer laundry marketplace in the third quarter of 2004, and as such, there was no comparable revenue recognized in the first six months
of 2004. The revenue increases stated above include net price increases of approximately $11.8 million, which were effective during the quarter ended March 31, 2005.



Gross profit. Gross profit for the nine months ended September 30, 2005 decreased $6.0 million, or 10.1%, to
$54.0 million from $60.0 million for the nine months ended September 30, 2004. This decrease was primarily attributable to the amortization of $6.2 million related to an inventory step-up to fair market value recorded on the Acquisition date,
higher depreciation expense of $4.2 million driven by the Acquisition asset write-up to fair market values and material cost increases of approximately $11.7 million, mostly related to steel cost increases. These cost increases as compared to the
prior year were mostly offset by price increases, margins associated with higher sales volumes and the higher earnings from our off-balance sheet equipment financing program. As a result of these factors, gross profit as a percentage of net revenues
decreased to 23.1% for the nine months ended September 30, 2005 from 29.3% for the nine months ended September 30, 2004.



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Selling, general and administrative expense. Selling, general and administrative expense for the
nine months ended September 30, 2005 increased $4.5 million, or 17.3%, to $30.5 million from $26.0 million for the nine months ended September 30, 2004. The increase in selling, general and administrative expense was primarily due to $2.8
million of increased amortization expenses driven primarily by Acquisition date write-ups to fair market value for customer agreements, engineering drawings, and our distribution network and charges related to $0.5 million of non-cash incentive
compensation resulting from the acceleration of vesting for incentive units on the date of the Acquisition. Sales expenses also increased by $0.8 million as compared to the prior period due to incremental costs associated with U.S. consumer laundry
and higher trade show and advertising costs. As a result of these factors, selling, general and administrative expense as a percentage of net revenues increased to 13.0% for the nine months ended September 30, 2005 as compared to 12.7% for the
nine months ended September 30, 2004.



Securitization
and other costs. Securitization and other costs for the nine months ended September 30, 2005 were $8.1 million, with no similar costs in 2004. These costs are comprised of $8.1 million of transaction costs incurred in establishing a new
asset backed facility for the sale of equipment notes and trade receivables. Securitization and other costs as a percentage of net revenues was 3.5% for the nine months ended September 30, 2005. Substantially all of these costs were incurred
during the quarter ended June 30, 2005.



Transaction costs
associated with sale of business. Transaction costs associated with sale of business for the nine months ended September 30, 2005 were $18.8 million, with no similar costs in 2004. These costs are comprised of seller transaction fees
including transaction underwriting fees of $4.5 million, legal and professional fees of $1.3 million, a management sale bonus of $6.2 million and advisory fees to Bain Capital Partners LLC and Bruckman, Rosser, Sherrill & Co. of $6.8
million. Transaction costs associated with sale of business as a percentage of net revenues was 8.0% for the nine months ended September 30, 2005. All transaction costs associated with the sale of the business were incurred during the quarter
ended March 31, 2005.



Operating income (loss). As
a result of the foregoing, operating income (loss) for the nine months ended September 30, 2005 decreased $37.4 million, to a loss of $3.4 million as compared to operating income of $34.0 million for the nine months ended September 30,
2004. Operating income as a percentage of net revenues decreased to negative 1.4% for the nine months ended September 30, 2005 as compared to a positive 16.6% for the nine months ended September 30, 2004.



Interest expense. Interest expense for the nine months ended
September 30, 2005 decreased $0.8 million, or 4.1%, to $18.4 million from $19.2 million for the nine months ended September 30, 2004. This decrease was primarily attributable to the recognition of $0.7 million of interest income in 2005
related to investor promissory notes for the period from May 5, 1998 through January 27, 2005 in accordance with applicable accounting requirements and lower average interest rates associated with the current capital structure as compared
to the average interest rates for the Predecessor Company.



Loss on early extinguishment of debt. Loss on early extinguishment of debt for the nine months ended September 30, 2005 was $9.9 million, with no similar costs in 2004. These costs include the write-off of $5.8 million of
unamortized deferred financing costs associated with pre-Acquisition debt, which was paid off as of the Acquisition date and $4.1 million of call and call premium costs associated with redeeming the 1998 Senior Subordinated Notes. Offering related
expense as a percentage of net revenues was 4.2% for the nine months ended September 30, 2005.



Costs Related to Abandoned Public Offerings. Costs related to abandoned public offerings for the nine months ended September 30, 2004 were
$1.3 million with no similar costs in 2005. During 2004, we pursued an initial public offering of Income Deposit Securities for which we incurred offering related expenses and for



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which we capitalized debt and offering related costs totaling $3.1 million as of September 30, 2004. In the fourth quarter of 2004, this public offering
was abandoned and all related capitalized costs were expensed at that time.



Income tax provision. The provision for income taxes for the nine months ended September 30, 2005 was a benefit of $1.0 million, with no similar provision for the quarter ended September 30, 2004.
Prior to January 28, 2005, we did not provide for U.S. federal income taxes or tax benefits as the Predecessor Company was a partnership for tax reporting purposes and the payment of federal and most state taxes were the responsibility of the
partners.



Net income (loss). As a result of the
foregoing, our net loss for the nine months ended September 30, 2005 was $30.7 million as compared to net income of $13.5 million for the nine months ended September 30, 2004. Net (loss) income as a percentage of net revenues for the nine
months ended September 30, 2005 was a negative 13.1% as compared to a positive 6.6% for the nine months ended September 30, 2004.



LIQUIDITY AND CAPITAL RESOURCES



In connection with the consummation of the January 27, 2005 Transactions, we refinanced substantially all of our indebtedness with the proceeds of
the offering of the 2005 Senior Subordinated Notes and borrowings under the New Senior Credit Facility.



2002 Senior Credit Facility. All borrowings under our amended and restated credit agreement dated as of August 2, 2002 (2002 Senior
Credit Facility), which was comprised of a $193.0 million term loan facility and a $45.0 million revolving credit facility were repaid in connection with the consummation of the Transactions and all outstanding letters of credit under our
amended and restated August 2002 credit agreement were refinanced.



New Senior Credit Facility. The New Senior Credit Facility is comprised of a senior secured revolving credit facility in a total principal amount of up to $50.0 million (less amounts received for letters of credit), which we refer to
as the New Revolving Credit Facility, and a senior secured term loan facility in an aggregate principal amount of $200.0 million, which we refer to as the New Term Loan Facility. The New Revolving Credit Facility has a
six-year maturity and the New Term Loan Facility has a seven-year maturity. We expect to use borrowings under the New Revolving Credit Facility for general corporate purposes, including working capital, capital expenditures and letters of credit. We
used borrowings under the New Term Loan Facility together with proceeds from the offering of the 2005 Senior Subordinated Notes to pay the adjusted equity purchase price under the Acquisition, to repay outstanding debt, including the 2002 Senior
Credit Facility, 1998 Senior Subordinated Notes, junior subordinated promissory notes, unreturned capital on certain preferred units, and to pay fees and expenses related to the Financing Transactions.



The New Senior Credit Facility requires that we meet certain financial tests
including, without limitation, a maximum total leverage ratio and a minimum interest coverage ratio. For the quarter ended September 30, 2005, the New Senior Credit Facility allows a maximum ratio of consolidated debt to Adjusted EBITDA (as
defined by the New Senior Credit Facility) of 6.50. We are in compliance with this and all other debt related covenants as of September 30, 2005. The New Senior Credit Facility contains customary covenants and restrictions including, among others,
limitations or prohibitions on capital expenditures and acquisitions, declaring and paying dividends and other distributions, redeeming and repurchasing our other indebtedness, loans and investments, additional indebtedness, liens, guarantees,
recapitalizations, mergers, asset sales and transactions with affiliates.



Additional borrowings and the issuance of additional letters of credit under the New Senior Credit Facility are subject to certain continuing representations and warranties, including the absence of any development or



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event which has had or could reasonably be expected to have a material adverse effect on our business or financial condition.



Securitization Programs.On June 28, 2005, Alliance Laundry,
through a special-purpose bankruptcy remote subsidiary, Alliance Laundry Equipment Receivables 2005 LLC (ALER 2005), and a trust, Alliance Laundry Equipment Receivables Trust 2005-A (ALERT 2005A), entered into a four year
$330.0 million revolving credit facility (the Asset Backed Facility), backed by equipment loans and trade receivables originated by us. During the first four years of the new Asset Backed Facility, Alliance Laundry is permitted, from
time to time, to sell its trade receivables and certain equipment loans to the special-purpose subsidiary, which in turn will sell them to the trust. The trust finances the acquisition of the trade receivables and equipment loans through borrowings
under the Asset Backed Facility in the form of funding notes, which are limited to an advance rate of approximately 95% for equipment loans and 60-70% for trade receivables. Funding availability for trade receivables is limited to a maximum of $60.0
million, while funding for equipment loans is limited at $330.0 million less the amount of funding outstanding for trade receivables. Funding for the trade receivables and equipment loans is subject to certain eligibility criteria, including
concentration and other limits, standard for transactions of this type. After four years from the closing date, which is June 27, 2009, (or earlier in the event of a rapid amortization event or an event of default), the trust will not be
permitted to request new borrowings under the facility and the outstanding borrowings will amortize over a period of up to nine years. As of September 30, 2005, the balance of variable funding notes due to lenders under the Asset Backed
Facility for equipment loans was $219.1 million.



Additional
advances under the Asset Backed Facility are subject to certain continuing conditions, including but not limited to (i) covenant restrictions relating to the weighted average life, weighted average interest rate, and the amount of fixed rate
equipment loans held by the trust, (ii) the absence of a rapid amortization event or event of default, as defined, (iii) our compliance, as servicer, with certain financial covenants, and (iv) no event having occurred which materially
and adversely affects our operations.



The variable funding
notes under the Asset Backed Facility will commence amortization and borrowings thereunder will cease prior to four years after the closing date upon the occurrence of certain rapid amortization events which include: (i) a borrowing
base shortfall exists and remains uncured, (ii) delinquency, dilution or default ratios on pledged receivables and equipment loans exceeding certain specified ratios in any given month, (iii) the days sales outstanding on receivables
exceed a specified number of days, (iv) the occurrence and continuance of an event of default or servicer default under the Asset Backed Facility, including but not limited to, as servicer, a material adverse change in our business or financial
condition and our compliance with certain required financial covenants, and (v) a number of other specified events.



The risk of loss to the note purchasers under the new Asset Backed Facility resulting from default or dilution on the trade receivables and equipment
loans is protected by credit enhancement, provided by us in the form of cash reserves, letters of credit and overcollateralization. Further, the timely payment of interest and the ultimate payment of principal on the facility are guaranteed by Ambac
Assurance Corporation. All of the residual beneficial interests in the trust and cash flows remaining from the pool of receivables and loans after payment of all obligations under the Asset Backed Facility would accrue to the benefit of Alliance
Laundry. Except for the retained interests and amounts of the letters of credit outstanding from time to time as credit enhancement, we provide no support or recourse for the risk of loss relating to default on the assets transferred to the trust.
In addition, we are paid a monthly servicing fee equal to one-twelfth of 1.0% of the aggregate balance of such trade receivables and equipment loans.



The estimated fair value of Alliance Laundrys beneficial interests in the accounts receivable and notes sold to ALERT 2005A are based on the amount
and timing of expected distributions to Alliance Laundry as the holder of the trusts residual equity interests. Such distributions may be substantially deferred or eliminated,



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and result in an impairment of our residual interests, if repayment of the variable funding notes issued by ALERT 2005A is accelerated upon an event of
default or rapid amortization event described above.



The Asset
Backed Facility replaces a similar facility previously maintained with CDC Financial Products, Inc., Bear, Stearns & Co., Inc. and Altamira Funding, LLC (the ALERT 2002A Facility). In connection with the establishment of the new
facility, Alliance Laundry, through its special-purpose subsidiaries, repurchased and simultaneously resold the assets held by the ALERT 2002A Facility to the new Asset Backed Facility.



1998 Senior Subordinated Notes. On January 4, 2005, we commenced a cash tender offer and consent solicitation
with respect to all $110.0 million of our outstanding 1998 Senior Subordinated Notes. The tender offer for the 1998 Senior Subordinated Notes expired at 5:00 p.m. New York City time on February 2, 2005, and approximately 5.10% of the principal
amount of the 1998 Senior Subordinated Notes remained outstanding after the consummation of the tender offer. We redeemed the remaining 1998 Senior Subordinated Notes in accordance with the indenture governing such notes on March 7, 2005.



2005 Senior Subordinated Notes. As part of the
Financing Transactions, we offered and sold $150.0 million of 2005 Senior Subordinated Notes and received proceeds of approximately $149.3 million. The 2005 Notes Indenture governing the 2005 Senior Subordinated Notes, among other things, restricts
our ability and the ability of our restricted subsidiaries to make investments, incur or guarantee additional indebtedness, pay dividends, create liens, sell assets, merge or consolidate with other entities, enter into transactions with affiliates
and engage in certain business activities.



EBITDA and Adjusted EBITDA



We have presented EBITDA below and Adjusted EBITDA below
because certain covenants in the indenture governing our 2005 Senior Subordinated Notes are tied to ratios based on these measures. EBITDA represents net income (loss) before interest expense, income tax (provision) benefit and
depreciation and amortization, and Adjusted EBITDA is EBITDA as further adjusted to exclude, among other things, certain non-recurring expenses and other non-recurring non-cash charges. EBITDA and Adjusted EBITDA do not represent, and
should not be considered, an alternative to net income or cash flow from operations, as determined by GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. Based on our industry and debt
financing experience, we believe that EBITDA and Adjusted EBITDA are customarily used to provide useful information regarding a companys ability to service and/or incur indebtedness. In addition, EBITDA and Adjusted EBITDA are defined in the
indenture governing our 2005 Senior Subordinated Notes in a manner which is identical to the definition of EBITDA and Adjusted EBITDA in our New Senior Credit Facility under which we are required to satisfy specified financial ratios and tests,
including a maximum of total debt to Adjusted EBITDA and a minimum interest coverage ratio. The indenture governing our 2005 Senior Subordinated Notes also requires us to meet a fixed charge coverage ratio in order to incur additional indebtedness,
subject to certain exceptions.



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The following is a reconciliation from net income (loss) to EBITDA and from EBITDA to Adjusted EBITDA for
the combined periods presented (in thousands):



|                                                          |  |                    |        |   |                   |   |        |  
|--------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | -
|                                                          |  | Three Months Ended |       
|                                                          |  | September 30,2005  |        |   | September 30,2004 |  
|                                                          |  | Successor          |        |   | Predecessor       |  
|Net income (loss)                                         |  | $                  | 3,377  |   |                   | $ | 3,039  |  
|Provision for income taxes                                |  |                    | 3,026  |   |                   |   | 10     |  
|                                                          |  |                    |        |   |                   |   |        |  
|Net income (loss) before income taxes                     |  |                    | 6,403  |   |                   |   | 3,049  |  
|Adjustments:                                              |  |                    |        |   |                   |   |        |  
|Interest expense                                          |  |                    | 6,138  |   |                   |   | 6,849  |  
|Depreciation and amortization (a)                         |  |                    | 4,401  |   |                   |   | 2,467  |  
|Non-cash interest (income) included in amortization above |  |                    | (602   | ) |                   |   | (468   | )
|                                                          |  |                    |        |   |                   |   |        |  
|EBITDA                                                    |  | $                  | 16,340 |   |                   | $ | 11,897 |  
|                                                          |  |                    |        |   |                   |   |        |  
|Adjustments:                                              |  |                    |        |   |                   |   |        |  
|Finance program adjustments (b)                           |  | $                  | (2,615 | ) |                   | $ | 1,091  |  
|Other non-recurring charges (c)                           |  |                    | 330    |   |                   |   | 30     |  
|Other non-cash charges (d)                                |  |                    |       |   |                   |   | (130   | )
|Management fees paid to affiliates of Bain                |  |                    |       |   |                   |   | 262    |  
|                                                          |  |                    |        |   |                   |   |        |  
|Adjusted EBITDA                                           |  | $                  | 14,055 |   |                   | $ | 13,150 |  
|                                                          |  |                    |        |   |                   |   |        |  



|                                                          |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|--------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------------------------------------- | - | ------- | --------------------------------- |  | - | --------------------------------- | - |  | - | ------ | -
|                                                          |  | January 28,2005 throughSeptember 30,2005 |        |   | January 1,2005 throughJanuary 27,2005 |   |         | Nine MonthsEndedSeptember 30,2005 |  |   | Nine MonthsEndedSeptember 30,2004 |  
|                                                          |  | Successor                                |        |   | Predecessor                           |   |         | Combined                          |  |   | Predecessor                       |  
|Net income (loss)                                         |  | $                                        | (2,286 | ) |                                       | $ | (28,392 | )                                 |  | $ | (30,678                           | ) |  | $ | 13,459 |  
|Provision for income taxes                                |  |                                          | (995   | ) |                                       |   | 9       |                                   |  |   | (986                              | ) |  |   | 64     |  
|                                                          |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|Net income (loss) before income taxes                     |  |                                          | (3,281 | ) |                                       |   | (28,383 | )                                 |  |   | (31,664                           | ) |  |   | 13,523 |  
|Adjustments:                                              |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|Interest expense                                          |  |                                          | 17,439 |   |                                       |   | 995     |                                   |  |   | 18,434                            |   |  |   | 19,219 |  
|Depreciation and amortization (a)                         |  |                                          | 14,805 |   |                                       |   | 526     |                                   |  |   | 15,331                            |   |  |   | 7,585  |  
|Non-cash interest (income) included in amortization above |  |                                          | (1,552 | ) |                                       |   |        |                                   |  |   | (1,552                            | ) |  |   | (1,428 | )
|                                                          |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|EBITDA                                                    |  | $                                        | 27,411 |   |                                       | $ | (26,862 | )                                 |  | $ | 549                               |   |  | $ | 38,899 |  
|                                                          |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|Adjustments:                                              |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|Finance program adjustments (b)                           |  | $                                        | (2,195 | ) |                                       | $ | 31      |                                   |  | $ | (2,164                            | ) |  | $ | 2,832  |  
|Other non-recurring charges (c)                           |  |                                          | 8,828  |   |                                       |   | 28,657  |                                   |  |   | 37,485                            |   |  |   | 1,298  |  
|Other non-cash charges (d)                                |  |                                          | 6,246  |   |                                       |   | 1,089   |                                   |  |   | 7,335                             |   |  |   | 540    |  
|Management fees paid to affiliates of Bain                |  |                                          |       |   |                                       |   | 83      |                                   |  |   | 83                                |   |  |   | 773    |  
|                                                          |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  
|Adjusted EBITDA                                           |  | $                                        | 40,290 |   |                                       | $ | 2,998   |                                   |  | $ | 43,288                            |   |  | $ | 44,342 |  
|                                                          |  |                                          |        |   |                                       |   |         |                                   |  |   |                                   |   |  |   |        |  



|(a) | Depreciation and amortization amounts include amortization of deferred financing costs included in interest expense.
|--- | --------------------------------------------------------------------------------------------------------------------



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|(b) | We currently operate an off-balance sheet commercial equipment finance program in which newly originated equipment loans are sold to qualified special-purpose bankruptcy remote
entities. In accordance with GAAP, we are required to record gains/losses on the sale of these equipment based promissory notes. In calculating Adjusted EBITDA, management determines the cash impact of net interest income on these notes. The finance
program adjustments are the difference between GAAP basis revenues (as prescribed by SFAS No. 125/140) and cash basis revenues.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Other non-recurring charges include executive retention costs included in administrative expenses and infrequently occurring items as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other non-recurring charges in 2004 relate to expenses associated with a proposed initial public offering of Income Deposit Securities (IDS). In connection with the
proposed IDS offering, as of December 31, 2004 we had incurred and recorded $1.3 million of offering related expenses in the consolidated statement of income. In addition we had capitalized $3.5 million of debt and offering related costs in
other assets within the consolidated balance sheet. On December 7, 2004, we chose to abandon the proposed IDS offering, and consequently wrote off the $3.5 million of capitalized costs in 2004. As of September 30, 2004 we had incurred $1.3
million of expenses associated with this proposed transaction.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other non-recurring charges for the period from January 1, 2005 through January 27, 2005 relate to seller transaction costs of $18.8 million incurred as part of the
business sale and a loss on the early extinguishment of debt of $9.9 million. The seller transaction costs are primarily comprised of transaction underwriting fees of $4.5 million, legal and professional fees of $1.3 million, Bain and BRS advisory
fees of $6.8 million and a management sale bonus of $6.2 million. The loss on early extinguishment of debt includes the write-off of $5.8 million of unamortized deferred financing costs associated with pre-Acquisition debt, which was paid off as of
the Acquisition date and $4.1 million of call and call premium costs associated with redeeming the 1998 Senior Subordinated Notes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other non-recurring charges for the period from January 28, 2005 through September 30, 2005 relate to $8.1 million of costs associated with establishing a new asset backed
facility for the sale of equipment notes and trade receivables and a periodic accrual of $0.8 million under a one time retention bonus agreement, entered into with certain management employees concurrent with the Acquisition. Under the retention
bonus agreements, the executives are entitled to receive special retention bonus awards upon the second anniversary of the closing date of the Acquisition, subject generally to their continued employment with Alliance Laundry through such date. The
aggregate amount of retention bonuses payable under these agreements is approximately $2.3 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Other non-cash charges are described as follows:
|--- | ------------------------------------------------



| |  |  | Non-cash charges for the period from January 1, 2005 through January 27, 2005 relate to non-cash incentive compensation expense resulting from the acceleration of vesting
for the incentive units at the date of the Acquisition.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-cash charges for the period from July 1, 2004 through September 30, 2004 relate to non-cash incentive compensation expense adjustments related to management incentive
units.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-cash charges for the period from January 28, 2005 through September 30, 2005 relate to $6.2 million associated with the inventory step-up to fair market value recorded
at the Acquisition date.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Financing Activities



After the Acquisition, our principal sources of liquidity are cash flows generated from operations and borrowings under our $50.0 million New Revolving
Credit Facility. Our principal uses of liquidity are to meet debt service requirements, finance our capital expenditures and provide working capital. We expect that capital expenditures in 2005 will not exceed $5.0 million. We expect the ongoing
requirements for debt service, capital expenditures and working capital will be funded by internally generated cash flow and borrowings under the New Revolving Credit Facility. The aggregate scheduled maturities of long-term debt in subsequent
years, after giving effect to the scheduled payments and $12.0 million of voluntary prepayments made through September 30, 2005, are as follows:



|           |  |                      |      
|---------- |  | -------------------- | -----
|Year       |  | Amount Due          
|           |  | (Dollars inmillions)
|2005       |  | $                    |     
|2006       |  |                      | 0.5  
|2007       |  |                      | 1.9  
|2008       |  |                      | 1.9  
|2009       |  |                      | 1.9  
|Thereafter |  |                      | 330.8



The New Senior Credit
Facility and the indenture governing the 2005 Senior Subordinated Notes contain a number of covenants that, among other things, restrict our ability to dispose of assets, repay other indebtedness, incur liens, make capital expenditures and make
certain investments or acquisitions, engage in mergers or consolidation and otherwise restrict our operating activities. In addition, under the New Senior Credit Facility, the Company is required to satisfy specified financial ratios and tests,
including a maximum of total debt to Adjusted EBITDA (as defined in the credit agreement governing the New Senior Credit Facility) and a minimum interest coverage ratio.



The New Senior Credit Facility requires us to comply with certain financial ratios and tests in order to comply with the
terms of the agreement. The occurrence of any default of these covenants could result in acceleration of our obligations under the New Senior Credit Facility (approximately $187.0 million) and foreclosure on the collateral securing such obligations.
Further, such an acceleration would constitute an event of default under the indenture governing the 2005 Senior Subordinated Notes.



At September 30, 2005, there were no borrowings under our Revolving Credit Facility. Letters of credit issued on our behalf under the Revolving
Credit Facility totaled $30.2 million at September 30, 2005. At September 30, 2005, we had $19.8 million of our existing $50.0 million Revolving Credit Facility available, subject to certain limitations under the New Senior Credit
Facility. After considering such limitations, which relate primarily to the maximum ratio of consolidated debt to Adjusted EBITDA, we could have borrowed $19.8 million at September 30, 2005 in additional indebtedness under the Revolving Credit
Facility.



The maximum ratio of consolidated debt to Adjusted
EBITDA under the New Senior Credit Facility is 6.50 at September 30, 2005. We are in compliance with this and all other debt related covenants as of September 30, 2005. We believe that future cash flows from operations, together with
available borrowings under the New Revolving Credit Facility, will be adequate to meet our anticipated requirements for capital expenditures, working capital, interest payments, scheduled principal payments and other debt repayments that may be
required as a result of the scheduled ratio of consolidated debt to Adjusted EBITDA discussed above.



The New Term Loan Facility is repayable in the following aggregate annual amounts:



|           |  |                      |      
|---------- |  | -------------------- | -----
|Year       |  | Amount Due          
|           |  | (Dollars inmillions)
|2005       |  | $                    |     
|2006       |  |                      | 0.5  
|2007       |  |                      | 1.9  
|2008       |  |                      | 1.9  
|2009       |  |                      | 1.9  
|Thereafter |  |                      | 180.8



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The New Term Loan Facility is also subject to mandatory prepayment with the proceeds of certain debt
incurrences, asset sales and a portion of Excess Cash Flow (as defined in the New Senior Credit Facility). The New Revolving Credit Facility will terminate on January 27, 2011.



We believe, based on currently available information, that for the foreseeable future, cash flows from operations, together
with available borrowings under the New Senior Credit Facility, will be adequate to meet our anticipated requirements for capital expenditures, working capital, interest payments, scheduled principal payments and other debt repayments while
achieving all required covenant requirements under the New Senior Credit Facility and 2005 Senior Subordinated Notes.



Our ability to make scheduled payments of principal or to refinance our indebtedness, or to pay the interest or liquidated damages, if any thereon, or to
fund planned capital expenditures, will depend upon our future performance, which, in turn, is subject to general economic, financial, competitive and other factors that are beyond our control. There can be no assurance that our business will
continue to generate sufficient cash flow from operations in the future to service our debt and make necessary capital expenditures after satisfying certain liabilities arising in the ordinary course of business. If unable to do so, we may be
required to refinance all or a portion of our debt, to sell assets or to obtain additional financing. There can be no assurance that any such refinancing would be available or that any such sales of assets or additional financing could be obtained.



Our Asset Backed Facility provides for a total of $330.0
million in off-balance sheet financing for trade receivables and equipment loans. We have structured, and intend to continue to structure, the finance programs in a manner that qualifies for off-balance sheet treatment in accordance with generally
accepted accounting principles. It is expected that under the Asset Backed Facility, we will continue to act as originator and servicer of the equipment financing promissory notes and the trade receivables.



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations



On June 28, 2005, Alliance Laundry Equipment Receivables Trust 2005-A
(ALERT 2005A), a trust formed by Alliance Laundry Equipment Receivables 2005 LLC (ALER 2005) a special-purpose bankruptcy remote subsidiary of Alliance Laundry, entered into a $330.0 million ABS Funding Facility (the
Asset Backed Facility) backed by equipment loans and trade receivables originated by Alliance Laundry. Pursuant to a Purchase Agreement, dated June 28, 2005, between Alliance Laundry, as seller, and ALER, as buyer, Alliance Laundry
will sell or contribute all of the trade receivables and certain of the equipment loans that it originates to ALER 2005. Immediately thereafter, pursuant to a Pooling and Servicing Agreement, dated June 28, 2005, ALER 2005 will sell such trade
receivables and equipment loans to ALERT 2005A. ALERT 2005A will finance the acquisition of the trade receivables and equipment loans through borrowings under variable funding notes (the Notes) issued to the lenders under the Asset
Backed Facility (which lenders shall initially be certain affiliates of IXIS Financial Products Inc. and Lehman Brothers Holdings Inc. (collectively, the Initial Lenders)), pursuant to a master indenture, dated June 28, 2005 (the
Indenture). The Bank of New York will act as indenture trustee under the Indenture. The Notes will be secured by all of the assets of ALERT 2005A. The Initial Lenders advanced $245.4 million against the maximum facility amount to ALERT
2005A on June 28, 2005 pursuant to a Note Purchase Agreement, dated June 28, 2005 (the Note Purchase Agreement).



Without the consent of the lenders, advances against the equipment loan Notes may be made no more than once in each calendar week and advances against the
trade receivable Notes may be made no more than



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twice in each calendar week. Funding availability for trade receivable Notes is limited to a maximum of $60.0 million, while funding for equipment loan Notes
is limited to $330.0 million less the amount of funding outstanding for trade receivable Notes. Funding of the Notes is subject to certain advance rate and eligibility criteria standard for transactions of this type. After June 27, 2009 (or
earlier in the event of a rapid amortization event, an event of default or the termination of the Asset Backed Facility by Alliance Laundry), ALERT 2005A will not be permitted to request new borrowings under the Asset Backed Facility and the
outstanding borrowings will amortize over a period of up to nine years thereafter.



Additional advances under the Asset Backed Facility are subject to certain continuing conditions, including but not limited to (i) the absence of a rapid amortization event or event of default, as defined in the
Note Purchase Agreement, (ii) compliance by Alliance Laundry, as servicer, with certain covenants, including financial covenants and (iii) no event having occurred which materially and adversely affects the operations of Alliance Laundry.
In addition, advances under the Asset Backed Facility in respect of fixed rate equipment loans are subject to limitations on the weighted average interest rate and the aggregate loan balance of all fixed rate equipment loans then held by ALERT
2005A.



The risk of loss resulting from default or dilution on
the trade receivables and equipment loans is protected by credit enhancement, provided in the form of cash reserves, letters of credit and overcollateralization. The timely payment of interest and the ultimate payment of principal on the Asset
Backed Facility are guaranteed by Ambac Assurance Corporation (Ambac) in the form of a financial guaranty insurance policy (the Policy). All of the residual beneficial interests in ALERT 2005A and cash flows remaining from
the pool of receivables and loans after payment of all obligations under the asset backed facility will accrue to the benefit of Alliance Laundry. Except for amounts of the letters of credit outstanding from time to time as credit enhancement,
Alliance Laundry will provide no support or recourse for the risk of loss relating to default on the assets transferred to ALERT 2005A. Alliance Laundry, as servicer, will be paid a monthly servicing fee equal to one-twelfth of 1.0% of the aggregate
balance of such trade receivables and equipment loans.



Interest payments on the Notes are paid monthly, which began in August 2005, at an interest rate equal to 1-month LIBOR plus the applicable margin, which will be 0.5% for the four-year period after the closing date of June 28, 2005 and
0.85% thereafter (including the last day of such four-year period). If an event of default occurs the otherwise applicable interest rate will be increased by an amount equal to two percent (2%) per annum. Prior to a rapid amortization event or
event of default, the lenders under the Asset Backed Facility will also earn an unused facility fee of 0.175% of the unfunded portion of each lenders commitment amount.



The Indenture provides that upon a written demand by the Control Party (initially, AMBAC as surety provider) after the
occurrence of a rapid amortization event (including, among others, the occurrence of a shortfall in the applicable borrowing base (an amount calculated based on the value of the equipment loans or trade receivables, the value of the credit
enhancements and certain other credit characteristics of the collateral) that remains unremedied for three or more business days; a draw on the reserve account; termination of or a drawing on the letters of credit providing credit enhancement for
the benefit of the Notes (unless the proceeds are deposited in the reserve account); failure to maintain certain financial and other ratios; or the occurrence of an event of default or a servicer default) the Notes will amortize and borrowings under
the Notes will cease. Upon written demand by the Control Party after the occurrence of a servicer default (including, among others, a failure to deposit amounts required to be deposited by the servicer, failure of the servicer or ALER 2005 to
observe certain covenants, including financial covenants, which failure has a material adverse effect on the Control Party or lenders under the Asset Backed Facility, voluntary or involuntary bankruptcy of the servicer, a material adverse change in
the financial condition or business of the servicer, occurrence of a cross default for indebtedness in excess of $5.0 million or failure of the equipment loans and trade receivables to meet certain performance metrics) the servicer may be replaced.
The Indenture also includes usual and customary events of default for facilities of this nature (with customary grace periods and options for curing, as applicable). The



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Indenture provides that upon written demand by the Control Party after the occurrence of an event of default (including, among others, default in the payment
of principal, interest or the premium to the surety provider when due or a draw on the Policy) the Notes may be accelerated and/or the collateral sold.



Cash Flows



Cash used in operating activities for the combined nine months ended September 30, 2005 of $12.5 million was driven by cash used in operations of
$3.6 million (net income adjusted for depreciation, amortization and other non-cash adjustments) and higher working capital requirements of $8.9 million. The higher cash used in operations includes $18.8 million of transaction costs associated with
the sale of the business, $4.1 million of call and call premium costs associated with redeeming the 1998 Senior Subordinated Notes and $8.1 million of transaction costs incurred in establishing a new asset backed facility for the sale of equipment
notes and trade receivables. Working capital requirements increased for accounts receivable, inventory and accounts payable, with a decrease in working capital for other assets. The working capital investment in receivables at September 30,
2005 of $8.5 million increased $2.9 million as compared to the balance of $5.6 million at December 31, 2004 due solely to the timing of sales of accounts receivable to the new qualified special-purpose bankruptcy remote entity. The working
capital investment in inventories of $28.6 million increased $1.8 million as compared to the balance of $26.8 million at December 31, 2004 in preparation to meet fourth quarter sales needs.



Net cash used in operating activities for the combined nine months ended
September 30, 2005 of $12.5 million increased by $38.6 million as compared to the nine months ended September 30, 2004. This increase was primarily due to lower cash provided by operations of $28.7 million and higher net cash used in
changes in assets and liabilities of $9.9 million for the combined nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004. The lower cash provided by operations of $38.6 million includes $18.8 million
of transaction costs associated with the sale of the business, $4.1 million of call and call premium costs associated with redeeming the 1998 Senior Subordinated Notes and $8.1 million of transaction costs incurred in establishing a new asset backed
facility for the sale of equipment notes and trade receivables. The higher net cash used in changes in assets and liabilities for the nine months ended September 30, 2005 of $9.9 million was largely due to a $2.9 million increase in accounts
receivable for the combined nine months ended September 30, 2005 as compared to a decrease of $0.2 million for the same period in 2004, and a decrease in accounts payable of $4.0 million for the combined nine months ended September 30,
2005 as compared to an increase of $0.5 million for the same period in 2004. The change in the working capital investment in accounts receivable was due to the timing of sales of accounts receivable to the respective qualified special-purpose
bankruptcy remote entities.



Capital Expenditures



Our capital expenditures for the nine months ended September 30, 2005
and September 30, 2004 were $3.4 million and $3.0 million, respectively. Capital spending in both 2005 and 2004 was principally oriented toward product enhancements, manufacturing process improvements and the replacement of old or obsolete
machinery.



RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS



During January 2003, the Financial Accounting
Standards Board, or FASB, issued FIN No. 46, Consolidation of Variable Interest Entities, which clarifies the consolidation and disclosure requirements related to variable interests in a variable interest entity. A variable interest
entity is an entity for which control is achieved through means other than voting rights. In December 2003, the FASB issued a revision to FIN No. 46, which replaced FIN No. 46. The revised Interpretation (FIN 46-R) was adopted
by us beginning on



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January 1, 2005 for interests in entities created on or before December 31, 2003. The impact was not material to the financial statements.



FIN 46-R provides exceptions from its scope for certain
entities, including qualifying special-purpose securitization entities subject to the reporting requirements of SFAS No. 140 and business entities, as defined, that do not possess certain characteristics.



Our primary variable interests are notes receivable that we have retained and
are comprised primarily of equipment loans to laundromat operators and other end-users. The carrying value of such loans was approximately $3.9 million at September 30, 2005. If in the future we are required to consolidate a variable interest
entity in which our SFAS No. 140 qualifying special-purpose entity also holds a variable interest, the qualifying status of the special-purpose entity would be eliminated. In that instance, we would be required to determine if we are the
primary beneficiary of the affected securitization entity under FIN 46-R and if so, to consolidate that entity, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.



During December 2004, the FASB issued SFAS No. 123R Share-Based
Payment, (SFAS 123R), which replaces SFAS No. 123 Accounting for Stock-Based Compensation, (SFAS 123), and supersedes APB Opinion No. 25 Accounting for Stock Issued to Employees. SFAS
123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as expense in the financial statements based on their fair values beginning with the first annual period after June 15, 2005. The
pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to expense recognition. We will adopt SFAS 123R using the modified-prospective method in the first quarter of fiscal 2006. We are currently evaluating the
impact of SFAS 123R on our financial statements.



The FASB is
expected to re-expose a proposed statement that would amend and clarify SFAS No. 140 (and related implementation guidance). The proposed statement will address permitted activities of qualifying special-purpose entities, including the degree of
discretion allowable in determining the terms of beneficial interests issued after inception, and whether certain transfers can meet the criteria for sale accounting under SFAS No. 140 if the transferor or any consolidated affiliate provides
liquidity support for the transferees beneficial interests. As the proposed statement has not been issued, we are unable to determine the effects of the related transition provisions, if any, on our existing securitization entity. However, in
the event that transfers to our existing asset backed facility would no longer qualify as sales of financial assets in the future, we may recognize additional costs for a replacement facility or it may have other material financial statement
effects. An exposure draft was issued in the third quarter of 2005 and a final document is anticipated in the first quarter of 2006.



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB
Statement No. 3. This statement applies to voluntary changes in accounting principles and requires retrospective application to prior period financial statements, unless impracticable to determine. This Statement is effective for accounting
changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not expect this standard to have any material impact on our results of operations or financial condition.



In March 2005, the FASB issued Interpretation No. 47, Accounting
for Conditional Asset Retirement Obligations (FIN 47), which clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably
estimated even though uncertainty exists about the timing and/or method of settlement. The Company is required to adopt FIN 47 by the end of fiscal 2006. The adoption of FIN 47 is not expected to have an impact on the Companys results of
operations and financial condition.



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|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



We are potentially exposed to market risk associated with changes in interest and foreign exchange rates. From time to time we may enter into derivative
financial instruments to hedge our interest rate exposures and to hedge exchange rate fluctuations between United States dollars and foreign currencies. An instrument will be treated as a hedge if it is effective in offsetting the impact of
volatility in our underlying exposures. We do not enter into derivatives for speculative purposes. There have been no material changes in our market risk exposures as compared to those discussed in our Annual Report on Form 10-K (file no.
333-56857).



On December 12, 2002, we entered into an
$80.0 million interest rate swap agreement with Lehman Brothers Special Financing Inc. to hedge a portion of our interest rate risk related to our term loan borrowings under the previous Senior Credit Facility. This swap agreement was settled on
January 27, 2005 with an immaterial impact.



Effective
March 4, 2005, we entered into a $67.0 million interest rate swap agreement with The Bank of Nova Scotia to hedge a portion of our interest rate risk related to our term loan borrowings under the Senior Credit Facility. Under the swap, which
matures on March 4, 2008, we pay a fixed rate of 3.81%, and receive or pay quarterly interest payments based upon the three month LIBOR rate. Under the swap, there was no net cash interest paid or received during the nine months ended
September 30, 2005. The fair value of this interest rate swap agreement, which represents the amount that we would receive upon a settlement of this instrument, was $1.0 million at September 30, 2005.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



(a) We carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of our management,
including our Chairman and Chief Executive Officer along with our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, as of the end of the period covered by
this quarterly report on Form 10-Q, our Chief Executive Officer along with our Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934) are effective for
the purposes set forth in the definition thereof in Exchange Act Rule 15d-15(e).



(b) There have been no changes in our internal control over financial reporting that have occurred during the quarter ended September 30, 2005 that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.



FORWARD-LOOKING STATEMENTS



With the exception of the
reported actual results, the information presented herein contains predictions, estimates or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Act of 1934, as amended, including items specifically discussed in the Note 9  Commitments and Contingencies section of this document. Such forward-looking statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking
statements are based on reasonable assumptions, we can give no assurance that such plans, intentions, expectations, objectives or goals will be achieved. Important factors that could cause actual results to differ materially from those included in
forward-looking statements include: impact of competition; continued sales to key customers; possible fluctuations in the cost of raw materials and components; possible fluctuations in currency exchange rates, which affect the competitiveness of our
products abroad; market acceptance of new and enhanced versions of our products; the impact of substantial leverage and debt service on us and other risks listed from time to time in our reports, including but not limited to our Annual Report on
Form 10-K (file no. 333-56857). We do not undertake any obligation to update any such forward-looking statements unless required by law.



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PART II OTHER INFORMATION



|Item 1. | Legal Proceedings. See Note 9 to Item 1 in Part I.
|------- | --------------------------------------------------



|Item 2. | Changes in Securities and Use of Proceeds. None.
|------- | ------------------------------------------------



|Item 3. | Defaults upon Senior Securities. None.
|------- | --------------------------------------



|Item 4. | Submission of Matters to a Vote of Security Holders. None.
|------- | ----------------------------------------------------------



|Item 5. | Other Information. None.
|------- | ------------------------



|Item 6. | Exhibits.
|------- | ---------



a) List of Exhibits.



|     |  |                                                                                                                                                                       
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Agreement by and between Alliance Laundry Systems LLC and The United Steelworkers of America Local 1327 Ripon, Wisconsin, executed and accepted on September 28, 2005.
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                   
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                   
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                    
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                    



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SIGNATURES



Alliance Laundry Systems
LLC has duly caused this quarterly report to be signed on its behalf by the undersigned thereunto duly authorized.



|                                                  |  |                                         |  |         
|------------------------------------------------- |  | --------------------------------------- |  | --------
|Signature                                         |  | Title                                   |  | Date    
|                                                  |  |                                        
|/s/    THOMAS F.
LESPERANCEThomas F.
LEsperance |  | CEO and President                       |  | 11-10-05
|                                                  |  |                                        
|/s/    BRUCE P. ROUNDSBruce P. Rounds             |  | Vice President, Chief Financial Officer |  | 11-10-05



Alliance Laundry Corp.
has duly caused this quarterly report to be signed on its behalf by the undersigned thereunto duly authorized.



|                                                  |  |                                         |  |         
|------------------------------------------------- |  | --------------------------------------- |  | --------
|Signature                                         |  | Title                                   |  | Date    
|                                                  |  |                                        
|/s/    THOMAS F.
LESPERANCEThomas F.
LEsperance |  | CEO and President                       |  | 11-10-05
|                                                  |  |                                        
|/s/    BRUCE P. ROUNDSBruce P. Rounds             |  | Vice President, Chief Financial Officer |  | 11-10-05



Alliance Laundry
Holdings LLC has duly caused this quarterly report to be signed on its behalf by the undersigned thereunto duly authorized.



|                                                  |  |                                         |  |         
|------------------------------------------------- |  | --------------------------------------- |  | --------
|Signature                                         |  | Title                                   |  | Date    
|                                                  |  |                                        
|/s/    THOMAS F.
LESPERANCEThomas F.
LEsperance |  | CEO and President                       |  | 11-10-05
|                                                  |  |                                        
|/s/    BRUCE P. ROUNDSBruce P. Rounds             |  | Vice President, Chief Financial Officer |  | 11-10-05



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