##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 001-32359
 Coinmach Service Corp.
  Delaware
    
    20-0809839(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 303 Sunnyside Blvd.,
Suite 70, Plainview, New York
    
    11803(Address of principal executive offices)
    
    (Zip Code)
 (516) 349-8555
 þ o
  o þ o
 o þ
  Class
    
    Outstanding at July 31, 2006Class A common stock, $0.01 par value per share
    
    29,113,641 sharesClass B common stock, $0.01 par value per share
    
    23,374,450 shares




---



##### 



COINMACH SERVICE CORP. AND SUBSIDIARIES
 INDEX
 Page No.PART I. Financial InformationItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  June 30, 2006 (Unaudited) and March 31, 2006
    
    
    3Condensed Consolidated Statements of Operations (Unaudited)  Three months ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Three months ended June 30, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited)  Three months ended June 30, 2006 and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    55PART II. Other InformationItem 1. Legal Proceedings
    
    
    56Item 1A. Risk Factors
    
    
    56Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56Item 3. Defaults Upon Senior Securities
    
    
    56Item 4. Submission of Matters to a Vote of Security Holders
    
    
    56Item 5. Other Information
    
    
    56Item 6. Exhibits
    
    
    56Signature Page
    
    
    57EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 PART I. FINANCIAL INFORMATION
 
 ITEM 1.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  June 30, 2006
    
    
    March 31, 20061(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    34,301
    
    
    $
    62,008Receivables, net
    
    
    6,557
    
    
    
    5,635Inventories
    
    
    13,630
    
    
    
    11,458Prepaid expenses
    
    
    4,807
    
    
    
    4,375Interest rate swap asset
    
    
    5,598
    
    
    
    2,615Other current assets
    
    
    2,093
    
    
    
    1,796Total current assets
    
    
    66,986
    
    
    
    87,887Advance location payments
    
    
    66,574
    
    
    
    67,242Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization of $421,254 and $403,024
    
    
    251,188
    
    
    
    252,398Contract rights, net of accumulated amortization of $117,986 and $114,535
    
    
    303,367
    
    
    
    296,912Goodwill
    
    
    207,997
    
    
    
    206,196Other assets
    
    
    9,822
    
    
    
    11,531Total assets
    
    $
    905,934
    
    
    $
    922,166LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable and accrued expenses
    
    $
    36,247
    
    
    $
    32,656Accrued rental payments
    
    
    31,782
    
    
    
    33,044Accrued interest
    
    
    6,732
    
    
    
    3,563Current portion of long-term debt
    
    
    4,770
    
    
    
    11,151Total current liabilities
    
    
    79,531
    
    
    
    80,414Deferred income taxes
    
    
    51,337
    
    
    
    49,984Long-term debt
    
    
    652,918
    
    
    
    653,102Total liabilities
    
    
    783,786
    
    
    
    783,500Stockholders equity:Class A Common Stock  $0.01 par value; 100,000,000 shares authorized;
29,113,641 shares issued and outstanding
    
    
    291
    
    
    
    291Class B Common Stock  $0.01 par value; 100,000,000 shares authorized;
23,374,450 shares issued and outstanding
    
    
    234
    
    
    
    234Capital in excess of par value
    
    
    389,644
    
    
    
    389,616Carryover basis adjustment
    
    
    (7,988
    )
    
    
    (7,988
    )Accumulated other comprehensive income, net of tax
    
    
    3,311
    
    
    
    1,547Accumulated deficit
    
    
    (263,344
    )
    
    
    (245,034
    )Total stockholders equity
    
    
    122,148
    
    
    
    138,666Total liabilities and stockholders equity
    
    $
    905,934
    
    
    $
    922,166
  
 1
    
    The March 31, 2006 balance sheet has been derived from the audited consolidated financial
statements as of that date. 3




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
  Three Months EndedJune 30, 2006
    
    
    June 30, 2005REVENUES
    
    $
    139,285
    
    
    $
    133,830COSTS AND EXPENSES:Laundry operating expenses (exclusive of
depreciation and amortization and
amortization of advance location
payments)
    
    
    94,399
    
    
    
    90,915General and administrative (including
stock-based compensation expense of $38
and $12, respectively)
    
    
    3,034
    
    
    
    2,523Depreciation and amortization
    
    
    18,624
    
    
    
    18,932Amortization of advance location payments
    
    
    4,900
    
    
    
    4,135Amortization of intangibles
    
    
    3,560
    
    
    
    3,485124,517
    
    
    
    119,990OPERATING INCOME
    
    
    14,768
    
    
    
    13,840INTEREST EXPENSE
    
    
    13,430
    
    
    
    15,331TRANSACTION COSTS
    
    
    845
    
    
    
    INCOME (LOSS) BEFORE INCOME TAXES
    
    
    493
    
    
    
    (1,491
    )PROVISION (BENEFIT) FOR INCOME TAXES:Current
    
    
    168
    
    
    
    Deferred
    
    
    133
    
    
    
    (516
    )301
    
    
    
    (516
    )NET INCOME (LOSS)
    
    $
    192
    
    
    $
    (975
    )Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21Class B Common Stock
    
    $
    0.53
    
    
    $
    Basic and diluted net (loss) income per share:Class A Common Stock
    
    $
    (0.14
    )
    
    $
    0.10Class B Common Stock
    
    $
    0.18
    
    
    $
    (0.11
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    29,046,528
    
    
    
    18,911,532Class B Common Stock
    
    
    23,374,450
    
    
    
    24,980,445Cash dividends per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21Class B Common Stock
    
    $
    0.53
    
    
    $
    
  4




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Stockholders Equity
 For the Three Months Ended June 30, 2006
 (UNAUDITED)
  AccumulatedOtherClass A
    
    
    Class B
    
    
    Capital
    
    
    Carryover
    
    
    ComprehensiveCommon
    
    
    Common
    
    
    in Excess
    
    
    Basis
    
    
    Income, net of
    
    
    Accumulated
    
    
    StockholdersStock
    
    
    Stock
    
    
    of Par Value
    
    
    Adjustment
    
    
    tax
    
    
    Deficit
    
    
    EquityBalance, March 31, 2006
    
    $
    291
    
    
    $
    234
    
    
    $
    389,616
    
    
    $
    (7,988
    )
    
    $
    1,547
    
    
    $
    (245,034
    )
    
    $
    138,666Issuance costs
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    192Gain on derivative
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,764
    
    
    
    
    
    
    
    1,764Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,956Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,502
    )
    
    
    (18,502
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Balance, June 30, 2006
    
    $
    291
    
    
    $
    234
    
    
    $
    389,644
    
    
    $
    (7,988
    )
    
    $
    3,311
    
    
    $
    (263,344
    )
    
    $
    122,148
  5




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  Three Months EndedJune 30, 2006
    
    
    June 30, 2005OPERATING ACTIVITIES:Net income (loss)
    
    $
    192
    
    
    $
    (975
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    18,624
    
    
    
    18,932Amortization of advance location payments
    
    
    4,900
    
    
    
    4,135Amortization of intangibles
    
    
    3,560
    
    
    
    3,485Deferred income taxes
    
    
    133
    
    
    
    (516
    )Amortization of deferred issue costs
    
    
    200
    
    
    
    531Write off of deferred issue costs
    
    
    414
    
    
    
    Premium on redemption of 11% senior secured notes due 2024
    
    
    417
    
    
    
    Gain on sale of equipment
    
    
    (77
    )
    
    
    (112
    )Stock based compensation
    
    
    38
    
    
    
    12Change in operating assets and liabilities, net of businesses acquired:Other assets
    
    
    311
    
    
    
    (1,693
    )Receivables, net
    
    
    (751
    )
    
    
    295Inventories and prepaid expenses
    
    
    (2,177
    )
    
    
    853Accounts payable and accrued expenses, net
    
    
    1,635
    
    
    
    1,479Accrued interest
    
    
    3,169
    
    
    
    7,094Net cash provided by operating activities
    
    
    30,588
    
    
    
    33,520INVESTING ACTIVITIES:Additions to property, equipment and leasehold improvements
    
    
    (14,534
    )
    
    
    (15,008
    )Advance location payments to location owners
    
    
    (3,346
    )
    
    
    (2,904
    )Acquisition of net assets related to acquisitions of businesses, net
of cash acquired
    
    
    (14,541
    )
    
    
    Proceeds from sale of property and equipment
    
    
    293
    
    
    
    299Net cash used in investing activities
    
    
    (32,128
    )
    
    
    (17,613
    )FINANCING ACTIVITIES:Repayments under credit facility
    
    
    (575
    )
    
    
    (1,240
    )Redemption of 11% senior secured notes due 2024
    
    
    (5,649
    )
    
    
    Payment of premium on 11% senior secured notes due 2024
    
    
    (417
    )
    
    
    Principal payments on capitalized lease obligations
    
    
    (945
    )
    
    
    (1,438
    )Repayments from bank and other borrowings
    
    
    (70
    )
    
    
    (60
    )Debt issuance costs
    
    
    (9
    )
    
    
    Cash dividends paid
    
    
    (18,502
    )
    
    
    (3,898
    )Net cash used in financing activities
    
    
    (26,167
    )
    
    
    (6,636
    )Net (decrease) increase in cash and cash equivalents
    
    
    (27,707
    )
    
    
    9,271CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    62,008
    
    
    
    57,271CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    34,301
    
    
    $
    66,542SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    10,061
    
    
    $
    7,706Income taxes paid
    
    $
    90
    
    
    $
    58NON CASH FINANCING ACTIVITIES:Acquisition of fixed assets through capital leases
    
    $
    674
    
    
    $
    2,664
  6




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 1. Basis of Presentation
      The IDS Transactions
  7




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      8




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  The Class A Common Stock Offering
   9




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
   Voting Rights of Common Stock
   10




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
   Dividends
  2. Inventories
  June 30, 2006
    
    
    March 31, 2006Laundry equipment
    
    $
    9,743
    
    
    $
    7,884Machine repair parts
    
    
    3,887
    
    
    
    3,574$
    13,630
    
    
    $
    11,458
 3. Goodwill and Contract Rights
  11




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  June 30, 2006
    
    
    March 31, 2006Route
    
    $
    196,827
    
    
    $
    195,026Rental
    
    
    8,253
    
    
    
    8,253Distribution
    
    
    2,917
    
    
    
    2,917$
    207,997
    
    
    $
    206,196
    Years ending March 31,2007 (remainder of year)
    
    $
    10.52008
    
    
    13.62009
    
    
    13.22010
    
    
    12.92011
    
    
    12.62012
    
    
    12.3
 12




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
   4. Long-Term Debt
  June 30, 2006
    
    
    March 31, 2006Credit facility indebtedness
    
    $
    568,850
    
    
    $
    569,42511% Senior Secured Notes
    
    
    82,067
    
    
    
    87,716Obligations under capital leases
    
    
    6,450
    
    
    
    6,721Other long-term debt with varying terms and maturities
    
    
    321
    
    
    
    391657,688
    
    
    
    664,253Less current portion
    
    
    4,770
    
    
    
    11,151$
    652,918
    
    
    $
    653,102
 11% Senior Secured Notes
  13




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      14




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      Amended and Restated Credit Facility
  15




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
       16




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
     Intercompany Loan
  17




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
    Interest Rate Swaps
  5. Guarantor Subsidiaries
  18




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Condensed Consolidating Balance Sheets
 June 30, 2006CoinmachCoinmach
    
    
    Corporation
    
    
    AdjustmentsCoinmach
    
    
    Laundry
    
    
    And
    
    
    andService Corp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventory, prepaid
expenses and other current assets
    
    $
    948
    
    
    $
    
    
    
    $
    66,099
    
    
    $
    (61
    )
    
    $
    66,986Advance location payments
    
    
    
    
    
    
    
    
    
    
    66,574
    
    
    
    
    
    
    
    66,574Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    251,188
    
    
    
    
    
    
    
    251,188Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    511,364
    
    
    
    
    
    
    
    511,364Deferred income taxes
    
    
    
    
    
    
    731
    
    
    
    
    
    
    
    (731
    )
    
    
    Intercompany loans and advances
    
    
    (7,057
    )
    
    
    
    
    
    
    
    
    
    
    7,057
    
    
    
    Due from Parent
    
    
    
    
    
    
    49,154
    
    
    
    
    
    
    
    (49,154
    )
    
    
    Investment in subsidiaries
    
    
    (154,794
    )
    
    
    (39,572
    )
    
    
    
    
    
    
    194,366
    
    
    
    Investment in preferred stock
    
    
    164,675
    
    
    
    
    
    
    
    
    
    
    
    (164,675
    )
    
    
    Other assets
    
    
    195,077
    
    
    
    
    
    
    
    3,398
    
    
    
    (188,653
    )
    
    
    9,822Total assets
    
    $
    198,849
    
    
    $
    10,313
    
    
    $
    898,623
    
    
    $
    (201,851
    )
    
    $
    905,934Liabilities and Stockholders Equity
(Deficit)Current liabilities:Accounts payable and accrued expenses
    
    $
    3,925
    
    
    $
    42
    
    
    $
    75,944
    
    
    $
    (5,150
    )
    
    $
    74,761Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    4,770
    
    
    
    
    
    
    
    4,770Total current liabilities
    
    
    3,925
    
    
    
    42
    
    
    
    80,714
    
    
    
    (5,150
    )
    
    
    79,531Deferred income taxes
    
    
    (8,901
    )
    
    
    
    
    
    
    60,969
    
    
    
    (731
    )
    
    
    51,337Long-term debt, less current portion
    
    
    82,067
    
    
    
    
    
    
    
    570,851
    
    
    
    
    
    
    
    652,918Loan Payable to Parent
    
    
    
    
    
    
    
    
    
    
    183,564
    
    
    
    (183,564
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    42,097
    
    
    
    (42,097
    )
    
    
    Preferred stock and dividends payable
    
    
    
    
    
    
    164,675
    
    
    
    
    
    
    
    (164,675
    )
    
    
    Total stockholders equity (deficit)
    
    
    121,758
    
    
    
    (154,404
    )
    
    
    (39,572
    )
    
    
    194,366
    
    
    
    122,148Total liabilities and stockholders
equity (deficit)
    
    $
    198,849
    
    
    $
    10,313
    
    
    $
    898,623
    
    
    $
    (201,851
    )
    
    $
    905,934
 19




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Balance Sheets (continued)
 March 31, 2006CoinmachCoinmach
    
    
    Corporation
    
    
    AdjustmentsCoinmach
    
    
    Laundry
    
    
    and
    
    
    andService Corp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventory, prepaid
expenses and other current assets
    
    $
    940
    
    
    $
    
    
    
    $
    87,002
    
    
    $
    (55
    )
    
    $
    87,887Advance location payments
    
    
    
    
    
    
    
    
    
    
    67,242
    
    
    
    
    
    
    
    67,242Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    252,398
    
    
    
    
    
    
    
    252,398Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    503,108
    
    
    
    
    
    
    
    503,108Deferred income taxes
    
    
    9,471
    
    
    
    689
    
    
    
    
    
    
    
    (10,160
    )
    
    
    Intercompany loans and advances
    
    
    (311
    )
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    Due from Parent
    
    
    
    
    
    
    49,253
    
    
    
    
    
    
    
    (49,253
    )
    
    
    Investment in subsidiaries
    
    
    (152,462
    )
    
    
    (23,762
    )
    
    
    
    
    
    
    176,224
    
    
    
    Investment in preferred stock
    
    
    178,216
    
    
    
    
    
    
    
    
    
    
    
    (178,216
    )
    
    
    Other assets
    
    
    194,334
    
    
    
    
    
    
    
    4,602
    
    
    
    (187,405
    )
    
    
    11,531Total assets
    
    $
    230,188
    
    
    $
    26,180
    
    
    $
    914,352
    
    
    $
    (248,554
    )
    
    $
    922,166Liabilities and Stockholders Equity
(Deficit)Current liabilities:Accounts payable and accrued expenses
    
    $
    4,196
    
    
    $
    36
    
    
    $
    68,927
    
    
    $
    (3,896
    )
    
    $
    69,263Current portion of long-term debt
    
    
    5,649
    
    
    
    
    
    
    
    5,502
    
    
    
    
    
    
    
    11,151Total current liabilities
    
    
    9,845
    
    
    
    36
    
    
    
    74,429
    
    
    
    (3,896
    )
    
    
    80,414Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    60,144
    
    
    
    (10,160
    )
    
    
    49,984Long-term debt, less current portion
    
    
    82,067
    
    
    
    
    
    
    
    571,035
    
    
    
    
    
    
    
    653,102Loan payable to Parent
    
    
    
    
    
    
    
    
    
    
    183,564
    
    
    
    (183,564
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    48,942
    
    
    
    (48,942
    )
    
    
    Preferred stock and dividends payable
    
    
    
    
    
    
    178,216
    
    
    
    
    
    
    
    (178,216
    )
    
    
    Total stockholders equity (deficit)
    
    
    138,276
    
    
    
    (152,072
    )
    
    
    (23,762
    )
    
    
    176,224
    
    
    
    138,666Total liabilities and stockholders
equity (deficit)
    
    $
    230,188
    
    
    $
    26,180
    
    
    $
    914,352
    
    
    $
    (248,554
    )
    
    $
    922,166
 20




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations
 Three Months Ended June 30, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    139,285
    
    
    $
    
    
    
    $
    139,285Costs and expenses
    
    
    391
    
    
    
    105
    
    
    
    124,021
    
    
    
    
    
    
    
    124,517Operating (loss) income
    
    
    (391
    )
    
    
    (105
    )
    
    
    15,264
    
    
    
    
    
    
    
    14,768Transaction costs
    
    
    845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    845Interest expense, net
    
    
    (6,094
    )
    
    
    3,462
    
    
    
    16,062
    
    
    
    
    
    
    
    13,430Income (loss) before taxes
    
    
    4,858
    
    
    
    (3,567
    )
    
    
    (798
    )
    
    
    
    
    
    
    493Income tax provision
(benefit)
    
    
    570
    
    
    
    (43
    )
    
    
    (226
    )
    
    
    
    
    
    
    3014,288
    
    
    
    (3,524
    )
    
    
    (572
    )
    
    
    
    
    
    
    192Equity in loss (income) of
subsidiaries
    
    
    4,096
    
    
    
    572
    
    
    
    
    
    
    
    (4,668
    )
    
    
    Net income (loss)
    
    $
    192
    
    
    $
    (4,096
    )
    
    $
    (572
    )
    
    $
    4,668
    
    
    $
    192
 Three Months Ended June 30, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    133,830
    
    
    $
    
    
    
    $
    133,830Costs and expenses
    
    
    287
    
    
    
    114
    
    
    
    119,589
    
    
    
    
    
    
    
    119,990Operating (loss) income
    
    
    (287
    )
    
    
    (114
    )
    
    
    14,241
    
    
    
    
    
    
    
    13,840Interest expense  non cash
preferred stock dividend
    
    
    (3,692
    )
    
    
    3,692
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    1,641
    
    
    
    
    
    
    
    13,690
    
    
    
    
    
    
    
    15,331Income (loss) before taxes
    
    
    1,764
    
    
    
    (3,806
    )
    
    
    551
    
    
    
    
    
    
    
    (1,491
    )Income tax provision
(benefit)
    
    
    721
    
    
    
    (1,493
    )
    
    
    256
    
    
    
    
    
    
    
    (516
    )1,043
    
    
    
    (2,313
    )
    
    
    295
    
    
    
    
    
    
    
    (975
    )Equity in loss (income) of
subsidiaries
    
    
    2,018
    
    
    
    (295
    )
    
    
    
    
    
    
    (1,723
    )
    
    
    Net (loss) income
    
    $
    (975
    )
    
    $
    (2,018
    )
    
    $
    295
    
    
    $
    1,723
    
    
    $
    (975
    )
 21




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended June 30, 2006CoinmachCoinmach
    
    
    CorporationCoinmach
    
    
    Laundry
    
    
    AndService Corp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet income (loss)
    
    $
    4,288
    
    
    $
    (3,524
    )
    
    $
    (572
    )
    
    $
    
    
    
    $
    192Noncash adjustments
    
    
    (1,967
    )
    
    
    3,420
    
    
    
    26,756
    
    
    
    
    
    
    
    28,209Change in operating assets and
liabilities
    
    
    (1,497
    )
    
    
    5
    
    
    
    3,679
    
    
    
    
    
    
    
    2,187Net cash provided by (used in)
operating activities
    
    
    824
    
    
    
    (99
    )
    
    
    29,863
    
    
    
    
    
    
    
    30,588Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (17,880
    )
    
    
    
    
    
    
    (17,880
    )Acquisition of assets
    
    
    
    
    
    
    
    
    
    
    (14,541
    )
    
    
    
    
    
    
    (14,541
    )Proceeds from sale of property
and equipment
    
    
    
    
    
    
    
    
    
    
    293
    
    
    
    
    
    
    
    293Net cash used in investing
activities
    
    
    
    
    
    
    
    
    
    
    (32,128
    )
    
    
    
    
    
    
    (32,128
    )Financing ActivitiesRepayment of debt
    
    
    (5,649
    )
    
    
    
    
    
    
    (575
    )
    
    
    
    
    
    
    (6,224
    )Other financing items
    
    
    4,853
    
    
    
    99
    
    
    
    (24,895
    )
    
    
    
    
    
    
    (19,943
    )Net cash (used in) provided by
financing activities
    
    
    (796
    )
    
    
    99
    
    
    
    (25,470
    )
    
    
    
    
    
    
    (26,167
    )Net increase (decrease) in cash
and cash equivalents
    
    
    28
    
    
    
    
    
    
    
    (27,735
    )
    
    
    
    
    
    
    (27,707
    )Cash and cash equivalents,
beginning of period
    
    
    880
    
    
    
    
    
    
    
    61,128
    
    
    
    
    
    
    
    62,008Cash and cash equivalents, end
of period
    
    $
    908
    
    
    $
    
    
    
    $
    33,393
    
    
    $
    
    
    
    $
    34,301
 22




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Cash Flows (continued)
 Three Months Ended June 30, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorporation
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Elimination
    
    
    ConsolidatedOperating ActivitiesNet income (loss)
    
    $
    1,043
    
    
    $
    (2,313
    )
    
    $
    295
    
    
    $
    
    
    
    $
    (975
    )Noncash adjustments
    
    
    (2,837
    )
    
    
    2,211
    
    
    
    27,093
    
    
    
    
    
    
    
    26,467Change in operating assets and
liabilities
    
    
    (8
    )
    
    
    5
    
    
    
    8,031
    
    
    
    
    
    
    
    8,028Net cash (used in) provided by
operating activities
    
    
    (1,802
    )
    
    
    (97
    )
    
    
    35,419
    
    
    
    
    
    
    
    33,520Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (17,912
    )
    
    
    
    
    
    
    (17,912
    )Proceeds from sale of
property and equipment
    
    
    
    
    
    
    
    
    
    
    299
    
    
    
    
    
    
    
    299Net cash used in investing
activities
    
    
    
    
    
    
    
    
    
    
    (17,613
    )
    
    
    
    
    
    
    (17,613
    )Financing ActivitiesRepayment of debt
    
    
    
    
    
    
    
    
    
    
    (1,240
    )
    
    
    
    
    
    
    (1,240
    )Other financing items
    
    
    1,802
    
    
    
    97
    
    
    
    (7,295
    )
    
    
    
    
    
    
    (5,396
    )Net cash provided by (used in)
financing activities
    
    
    1,802
    
    
    
    97
    
    
    
    (8,535
    )
    
    
    
    
    
    
    (6,636
    )Net increase in cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    9,271
    
    
    
    
    
    
    
    9,271Cash and cash equivalents,
beginning of period
    
    
    431
    
    
    
    
    
    
    
    56,840
    
    
    
    
    
    
    
    57,271Cash and cash equivalents, end
of period
    
    $
    431
    
    
    $
    
    
    
    $
    66,111
    
    
    $
    
    
    
    $
    66,542
 23




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 6. Segment Information
  24




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three months ended June 30,2006
    
    
    2005Revenue:Route
    
    $
    123,978
    
    
    $
    119,769All other:Rental
    
    
    9,545
    
    
    
    8,648Distribution
    
    
    5,762
    
    
    
    5,413Subtotal
    
    
    15,307
    
    
    
    14,061Total revenue
    
    $
    139,285
    
    
    $
    133,830EBITDA (1):Route
    
    $
    40,500
    
    
    $
    39,371All other:Rental
    
    
    4,122
    
    
    
    3,517Distribution
    
    
    264
    
    
    
    27Subtotal
    
    
    4,386
    
    
    
    3,544Transaction costs (2)
    
    
    (845
    )
    
    
    Corporate expenses
    
    
    (3,034
    )
    
    
    (2,523
    )Total EBITDA
    
    
    41,007
    
    
    
    40,392Reconciling items:Depreciation and amortization
expense, amortization of advance
location payments and amortization
of intangibles:Route
    
    
    (23,967
    )
    
    
    (23,592
    )All other
    
    
    (2,114
    )
    
    
    (2,143
    )Corporate
    
    
    (1,003
    )
    
    
    (817
    )Total depreciation
    
    
    (27,084
    )
    
    
    (26,552
    )Interest expense
    
    
    (13,430
    )
    
    
    (15,331
    )Consolidated income (loss) before
income taxes
    
    $
    493
    
    
    $
    (1,491
    )
 
 (1)
    
    See description of Non-GAAP Financial Measures immediately following this table for more
information regarding EBITDA and a reconciliation of net income (loss) to EBITDA for the
periods indicated above.(2)
    
    The computation of EBITDA for the three months ended June 30, 2006 has not been adjusted to
exclude transaction costs consisting of: (i) the premium paid to purchase certain 11% Senior
Secured Notes of approximately $0.4 million and (ii) the write-off of a proportionate amount
of unamortized deferred financing costs of approximately $0.4 million. 25




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Non-GAAP Financial Measures
  Three months ended June 30,2006
    
    
    2005Net income (loss)
    
    $
    0.2
    
    
    $
    (1.0
    )Provision (benefit) for income taxes
    
    
    0.3
    
    
    
    (0.5
    )Interest expense
    
    
    13.4
    
    
    
    15.3Depreciation and amortization
    
    
    27.1
    
    
    
    26.6EBITDA*
    
    $
    41.0
    
    
    $
    40.4
 
 *
    
    The computation of EBITDA for the three months ended June 30, 2006 has not been adjusted to
exclude transaction costs consisting of: (i) the premium paid to purchase certain 11% Senior
Secured Notes of approximately $0.4 million and (ii) the write-off of a proportionate amount
of unamortized deferred financing costs of approximately $0.4 million. 26




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 7. Income Taxes
  June 30, 2006
    
    
    March 31, 2006Deferred tax liabilities:Accelerated tax depreciation and contract rights
    
    $
    94,693
    
    
    $
    97,084Interest rate swap
    
    
    2,288
    
    
    
    1,063Other
    
    
    2,229
    
    
    
    2,123Total deferred tax liabilities
    
    
    99,210
    
    
    
    100,270Deferred tax assets:Net operating loss carryforwards
    
    
    52,593
    
    
    
    55,430Covenant not to compete
    
    
    1,290
    
    
    
    1,267Transaction costs
    
    
    3,071
    
    
    
    2,726Other
    
    
    1,649
    
    
    
    1,593Total deferred tax asset
    
    
    58,603
    
    
    
    61,016Valuation allowance
    
    
    (10,730
    )
    
    
    (10,730
    )Net deferred tax assets
    
    
    47,873
    
    
    
    50,286Net deferred tax liability
    
    $
    51,337
    
    
    $
    49,984
   Three months ended June 30,2006
    
    
    2005Federal
    
    $
    104
    
    
    $
    (403
    )State
    
    
    197
    
    
    
    (113
    )$
    301
    
    
    $
    (516
    )
  Three months ended June 30,2006
    
    
    2005Expected tax provision (benefit)
    
    $
    173
    
    
    $
    (522
    )State tax provision (benefit), net of federal taxes
    
    
    128
    
    
    
    (74
    )Permanent book/tax differences
    
    
    
    
    
    
    80Tax provision (benefit)
    
    $
    301
    
    
    $
    (516
    )
 27




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 8. (Loss) Income per Common Share
   Three Months Ended June 30,2006
    
    
    2005Net income (loss)
    
    $
    192
    
    
    $
    (975
    )Add: Dividends paid on common stock
    
    
    (18,502
    )
    
    
    (3,898
    )Undistributed loss available to Class A and Class B common stock
    
    $
    (18,310
    )
    
    $
    (4,873
    )Basic and diluted allocation of undistributed loss:Class A Common Stock
    
    $
    (10,146
    )
    
    $
    (2,100
    )Class B Common Stock
    
    
    (8,164
    )
    
    
    (2,773
    )Total
    
    $
    (18,310
    )
    
    $
    (4,873
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    29,046,528
    
    
    
    18,911,532Class B Common Stock
    
    
    23,374,450
    
    
    
    24,980,445Total
    
    
    52,420,978
    
    
    
    43,891,977Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21Class B Common Stock
    
    $
    0.53
    
    
    $
    Undistributed loss per share:Class A Common Stock
    
    $
    (0.35
    )
    
    $
    (0.11
    )Class B Common Stock
    
    $
    (0.35
    )
    
    $
    (0.11
    )Basic and diluted (loss) income per share:Class A Common Stock
    
    $
    (0.14
    )
    
    $
    0.10Class B Common Stock
    
    $
    0.18
    
    
    $
    (0.11
    )
  28




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
   9. Redeemable Preferred Stock and Stockholders Deficit
     29




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      10. 2004 Long-Term Incentive Plan
   30




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
     Weighted AverageShares
    
    
    Fair Value at DateOutstanding
    
    
    of ContractRestricted shares unvested at April 1, 2006
    
    
    67,113
    
    
    $
    9.01Vested
    
    
    4,194
    
    
    
    9.01Restricted shares unvested at June 30, 2006
    
    
    62,919
    
    
    $
    9.01
  31




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
 General
 Except for the historical information contained herein, certain matters discussed in this
document are forward-looking statements based on the beliefs of our management and are subject to
certain risks and uncertainties, including the risks and uncertainties discussed below, as well as
other risks set forth in the Companys Annual Report on Form 10-K for the fiscal year ended March
31, 2006 under the caption Business  Risk Factors. Should any of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, our future performance and actual
results of operations may differ materially from those expected or intended. See Special Note
Concerning Forward Looking Statements below.
  Overview
   32




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
   Critical Accounting Policies: Use of Estimates
      33




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
    34




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
  Share-Based Compensation
    Accounting Treatment for IDSs
  35




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
     36




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
   Results of Operations
  Comparison of the three-month periods ended June 30, 2006 and June 30, 2005.
  Three months ended June 30,2006
    
    
    2005
    
    
    ChangeRoute
    
    $
    124.0
    
    
    $
    119.8
    
    
    $
    4.2Rental
    
    
    9.5
    
    
    
    8.6
    
    
    
    0.9Distribution
    
    
    5.8
    
    
    
    5.4
    
    
    
    0.4$
    139.3
    
    
    $
    133.8
    
    
    $
    5.5
 37




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
        38




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
         39




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
    Three months ended June 30,2006
    
    
    2005
    
    
    ChangeRoute
    
    $
    40.5
    
    
    $
    39.4
    
    
    $
    1.1Rental
    
    
    4.1
    
    
    
    3.5
    
    
    
    0.6Distribution
    
    
    0.3
    
    
    
    
    
    
    
    0.3Corporate expenses
    
    
    (3.0
    )
    
    
    (2.5
    )
    
    
    (0.5
    )Transaction costs
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.9
    )Total EBITDA (1)
    
    $
    41.0
    
    
    $
    40.4
    
    
    $
    0.6
 
 (1)
    
    The computation of EBITDA for the three months ended June 30, 2006 has not been
adjusted to exclude transaction costs consisting of: (i) the premium paid to purchase
certain 11% Senior Secured Notes of approximately $0.4 million and (ii) the write-off of a
proportionate amount of unamortized deferred financing costs of approximately $0.4 million.  40




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
   Liquidity and Capital Resources
     41




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
 Dividend Policy
      Financing Activities
  42




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
  The Class A Offering
  The Initial Public Offering
   11% Senior Secured Notes
  43




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
       44




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
   Amended and Restated Credit Facility
      45




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
      46




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
 The Intercompany Loan
      Operating and Investing Activities
  47




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
 Capital Expenditures
   Three months ended June 30,2006
    
    
    2005
    
    
    ChangeRoute
    
    $
    16.0
    
    
    $
    15.1
    
    
    $
    0.9Rental
    
    
    0.4
    
    
    
    0.9
    
    
    
    (0.5
    )Distribution
    
    
    
    
    
    
    0.1
    
    
    
    (0.1
    )Corporate
    
    
    1.2
    
    
    
    1.5
    
    
    
    (0.3
    )$
    17.6
    
    
    $
    17.6
    
    
    $
    
  Summary of Contractual Obligations
  Payments Due in Fiscal YearTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    AfterLong-Term Debt Obligations
    
    $
    651.2
    
    
    $
    1.8
    
    
    $
    2.3
    
    
    $
    3.2
    
    
    $
    5.8
    
    
    $
    5.8
    
    
    $
    632.3Interest on Long-Term Debt
(1)
    
    
    435.9
    
    
    
    39.5
    
    
    
    52.6
    
    
    
    52.4
    
    
    
    52.0
    
    
    
    51.6
    
    
    
    187.8Capital Lease Obligations (2)
    
    
    7.4
    
    
    
    2.7
    
    
    
    2.6
    
    
    
    1.6
    
    
    
    0.4
    
    
    
    0.1
    
    
    
    Operating Lease Obligations
    
    
    27.6
    
    
    
    6.1
    
    
    
    6.3
    
    
    
    5.2
    
    
    
    4.3
    
    
    
    2.5
    
    
    
    3.2$
    1,122.1
    
    
    $
    50.1
    
    
    $
    63.8
    
    
    $
    62.4
    
    
    $
    62.5
    
    
    $
    60.0
    
    
    $
    823.3
 
 (1)
    
    As of June 30, 2006, $568.9 million of our long-term debt outstanding under the Amended and
Restated Credit Facility term loans was subject to variable rates of interest. Interest
expense on these variable rate borrowings for future years was calculated using a weighted
average interest rate of approximately 7.75% based on the 48




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
 Eurodollar rate in effect at June 30, 2006. In addition, approximately $82.1 million of our
long-term debt outstanding was subject to a fixed interest rate of 11.0%. In connection with
the Amended and Restated Credit Facility, Coinmach is a party to two separate interest rate swap
agreements totaling $230.0 million in aggregate notional amount that effectively convert a
portion of its floating-rate term loans pursuant to the Amended and Restated Credit Facility to
a fixed interest rate of approximately 7.40%, thereby reducing the impact of interest rate
changes on future interest expense.(2)
    
    Includes both principal and interest.
 Future Capital Needs and Resources
    49




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
      50




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
  Inflation and Seasonality
  Special Note Concerning Forward Looking Statements
   51




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
  
    
    the restrictive debt covenants and other requirements related to our substantial
leverage that could restrict our operating flexibility;
    
    our ability to continue to renew our lease contracts with property owners and
management companies;
    
    extended periods of reduced occupancy which could result in reduced revenues and cash
flow from operations in certain areas;
    
    our ability to compete effectively in a highly competitive and capital intensive
industry which is fragmented nationally, with many small, private and family-owned
businesses operating throughout all major metropolitan areas;
    
    compliance obligations and liabilities under regulatory, judicial and environmental
laws and regulations, including, but not limited to, governmental action imposing
heightened energy and water efficiency standards or other requirements with respect to
commercial clothes washers;
    
    our ability to maintain borrowing flexibility and to meet our projected and future cash
needs, including capital expenditure requirements with respect to maintaining our machine
base, given our substantial level of indebtedness, history of net losses and cash dividends
on our common stock pursuant to our dividend policy;
    
    risks associated with expansion of our business through tuck-ins and other
acquisitions and integration of acquired operations into our existing business;
    
    as a holding company, our dependence on cash flow from our operating subsidiaries to
make payments under the 11% Senior Secured Notes, and contractual and legal restrictions on
the ability of our subsidiaries to make dividends and distributions to us;
    
    the risk of adverse tax consequences should the 11% Senior Secured Notes not be
respected as debt for U.S. federal income tax purposes;
    
    risks associated with changes in accounting standards promulgated by the Financial
Accounting Standards Board, the SEC or the American Institute of Certified Public
Accountants; and
    
    other factors discussed elsewhere in this report and in our other public filings with
the SEC.
  52




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
  53




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      54




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Changes in Internal Control over Financial Reporting
  55




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
 ExhibitNumber
    
    Description31.1*
    
    Certificate of Chief Executive Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as enacted by Section 302 of
the Sarbanes-Oxley Act of 200231.2*
    
    Certificate of Chief Financial Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as enacted by Section 302 of
the Sarbanes-Oxley Act of 200232.1
    
    Certificate of Chief Executive Officer pursuant to 18
United States Code Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certificate of Chief Financial Officer pursuant to 18
United States Code Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 56




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 SIGNATURES
  COINMACH SERVICE CORP.Date: August 4, 2006
    /s/ Robert M. DoyleRobert M. DoyleChief Financial Officer
(On behalf of registrant and as
Principal Financial Officer) 57




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description31.1*
    
    Certificate of Chief Executive Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as enacted by Section 302 of
the Sarbanes-Oxley Act of 200231.2*
    
    Certificate of Chief Financial Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as enacted by Section 302 of
the Sarbanes-Oxley Act of 200232.1
    
    Certificate of Chief Executive Officer pursuant to 18
United States Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certificate of Chief Financial Officer pursuant to 18
United States Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith
    
    Furnished herewith 58