##### 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 December 31, 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 January 31, 2007Class A common stock, $0.01 par value per share
    
    29,246,141 sharesClass B common stock, $0.01 par value per share
    
    23,374,450 shares




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##### 



COINMACH
SERVICE CORP. AND SUBSIDIARIES
 INDEX
  
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3ITEM 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  December 31, 2006 (Unaudited) and
March 31, 2006
    
    
    3Condensed Consolidated Statements of Operations (Unaudited)  Three Months
and Nine Months ended December 31, 2006 and 2005
    
    
    4Condensed Consolidated Statement of Stockholders Equity  Nine Months ended
December 31, 2006 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited)  Nine Months
ended December 31, 2006 and 2005
    
    
    6Notes To Condensed Consolidated Financial Statements (Unaudited)
    
    
    7ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
    
    
    30ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    47ITEM 4. CONTROLS AND PROCEDURES
    
    
    48PART II. OTHER INFORMATION
    
    
    49ITEM 1. Legal Proceedings
    
    
    49ITEM 1A. Risk Factors
    
    
    49ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    49ITEM 3. Defaults Upon Senior Securities
    
    
    49ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    49ITEM 5. Other Information
    
    
    49ITEM 6. Exhibits
    
    
    49Signature Page
    
    
    51Index to Exhibits
    
    
    52EX-10.1: RESTRICTED STOCK AWARD AGREEMENTEX-10.2: RESTRICTED STOCK AWARD AGREEMENTEX-10.3: RESTRICTED STOCK AWARD AGREEMENTEX-10.4: RESTRICTED STOCK AWARD AGREEMENTEX-10.5: RESTRICTED STOCK AWARD AGREEMENTEX-10.6: RESTRICTED STOCK AWARD AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31, 2006
    
    
    March 31, 20061(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    38,354
    
    
    $
    62,008Receivables, net
    
    
    6,610
    
    
    
    5,635Inventories
    
    
    14,645
    
    
    
    11,458Prepaid expenses
    
    
    6,041
    
    
    
    4,375Interest rate swap asset
    
    
    933
    
    
    
    2,615Other current assets
    
    
    1,701
    
    
    
    1,796Total current assets
    
    
    68,284
    
    
    
    87,887Advance location payments
    
    
    64,527
    
    
    
    67,242Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization of $457,695 and $403,024
    
    
    245,396
    
    
    
    252,398Contract
rights, net of accumulated amortization of $124,890 and $114,535
    
    
    298,348
    
    
    
    296,912Goodwill
    
    
    208,496
    
    
    
    206,196Other assets
    
    
    9,741
    
    
    
    11,531Total assets
    
    $
    894,792
    
    
    $
    922,166LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable and accrued expenses
    
    $
    37,536
    
    
    $
    32,656Accrued rental payments
    
    
    34,319
    
    
    
    33,044Accrued interest
    
    
    7,026
    
    
    
    3,563Current portion of long-term debt
    
    
    5,601
    
    
    
    11,151Total current liabilities
    
    
    84,482
    
    
    
    80,414Deferred income taxes
    
    
    49,795
    
    
    
    49,984Long-term debt, less current portion
    
    
    652,635
    
    
    
    653,102Total liabilities
    
    
    786,912
    
    
    
    783,500Stockholders equity:Class A Common Stock  $0.01 par value; 100,000,000 shares authorized;
29,246,141 shares issued and outstanding at December 31, 2006
and 29,113,641 shares issued and outstanding at March 31, 2006
    
    
    292
    
    
    
    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
    
    
    389,801
    
    
    
    389,616Carryover basis adjustment
    
    
    (7,988
    )
    
    
    (7,988
    )Accumulated other comprehensive income, net of tax
    
    
    439
    
    
    
    1,547Accumulated deficit
    
    
    (274,898
    )
    
    
    (245,034
    )Total stockholders equity
    
    
    107,880
    
    
    
    138,666Total liabilities and stockholders equity
    
    $
    894,792
    
    
    $
    922,166
  
 1
    
    The March 31, 2006 balance sheet has been derived from the audited consolidated financial
statements as of that date. 3




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUES
    
    $
    140,971
    
    
    $
    138,744
    
    
    $
    416,566
    
    
    $
    404,894COSTS AND EXPENSES:Laundry operating expenses (exclusive of
depreciation and amortization and
amortization of advance location payments)
    
    
    94,732
    
    
    
    93,767
    
    
    
    281,934
    
    
    
    274,799General and administrative (including
stock-based compensation expense of $118,
$0, $194 and $12, respectively)
    
    
    3,100
    
    
    
    3,571
    
    
    
    9,236
    
    
    
    9,141Depreciation and amortization
    
    
    18,874
    
    
    
    19,027
    
    
    
    55,887
    
    
    
    56,887Amortization of advance location payments
    
    
    4,900
    
    
    
    5,015
    
    
    
    14,702
    
    
    
    14,188Amortization of intangibles
    
    
    3,560
    
    
    
    3,514
    
    
    
    10,680
    
    
    
    10,485Other items, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310125,166
    
    
    
    124,894
    
    
    
    372,439
    
    
    
    365,810OPERATING INCOME
    
    
    15,805
    
    
    
    13,850
    
    
    
    44,127
    
    
    
    39,084INTEREST EXPENSE
    
    
    13,999
    
    
    
    15,570
    
    
    
    41,359
    
    
    
    46,216TRANSACTION COSTS
    
    
    
    
    
    
    2,620
    
    
    
    845
    
    
    
    2,620INCOME (LOSS) BEFORE INCOME TAXES
    
    
    1,806
    
    
    
    (4,340
    )
    
    
    1,923
    
    
    
    (9,752
    )PROVISION (BENEFIT) FOR INCOME TAXES:Current
    
    
    506
    
    
    
    
    
    
    
    887
    
    
    
    Deferred
    
    
    440
    
    
    
    (1,674
    )
    
    
    384
    
    
    
    (3,823
    )946
    
    
    
    (1,674
    )
    
    
    1,271
    
    
    
    (3,823
    )NET INCOME (LOSS)
    
    $
    860
    
    
    $
    (2,666
    )
    
    $
    652
    
    
    $
    (5,929
    )Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21
    
    
    $
    0.62
    
    
    $
    0.62Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    0.53
    
    
    $
    Basic and diluted net income (loss) per share:Class A Common Stock
    
    $
    0.11
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.22Class B Common Stock
    
    $
    (0.10
    )
    
    $
    (0.15
    )
    
    $
    (0.04
    )
    
    $
    (0.40
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    29,060,305
    
    
    
    18,911,532
    
    
    
    29,052,500
    
    
    
    18,911,532Class B Common Stock
    
    
    23,374,450
    
    
    
    24,980,445
    
    
    
    23,374,450
    
    
    
    24,980,445Cash dividends per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21
    
    
    $
    0.62
    
    
    $
    0.62Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    0.53
    
    
    $
    
  4




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 NINE MONTHS ENDED DECEMBER 31, 2006
(UNAUDITED)
 AccumulatedOtherClass A
    
    
    Class B
    
    
    Capital in
    
    
    Carryover
    
    
    ComprehensiveCommon
    
    
    Common
    
    
    Excess of Par
    
    
    Basis
    
    
    Income, net of
    
    
    Accumulated
    
    
    StockholdersStock
    
    
    Stock
    
    
    Value
    
    
    Adjustment
    
    
    tax
    
    
    Deficit
    
    
    EquityBalance, March 31, 2006
    
    $
    291
    
    
    $
    234
    
    
    $
    389,616
    
    
    $
    (7,988
    )
    
    $
    1,547
    
    
    $
    (245,034
    )
    
    $
    138,666Issuance costs
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Issuance of common stock
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    652
    
    
    
    652Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,108
    )
    
    
    
    
    
    
    (1,108
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (456
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,516
    )
    
    
    (30,516
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194Balance, December 31, 2006
    
    $
    292
    
    
    $
    234
    
    
    $
    389,801
    
    
    $
    (7,988
    )
    
    $
    439
    
    
    $
    (274,898
    )
    
    $
    107,880
  5




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Nine Months EndedDecember 31, 2006
    
    
    December 31, 2005OPERATING ACTIVITIES:Net income (loss)
    
    $
    652
    
    
    $
    (5,929
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    55,886
    
    
    
    56,887Amortization of advance location payments
    
    
    14,702
    
    
    
    14,188Amortization of intangibles
    
    
    10,681
    
    
    
    10,485Deferred income taxes
    
    
    384
    
    
    
    (3,823
    )Amortization of deferred issue costs
    
    
    595
    
    
    
    1,603Write-off of deferred financing costs
    
    
    414
    
    
    
    1,700Premium on redemption of 11% senior secured notes due 2024
    
    
    417
    
    
    
    Gain on sale of equipment
    
    
    (365
    )
    
    
    (46
    )Stock-based compensation
    
    
    194
    
    
    
    12Change in operating assets and liabilities, net of businesses
acquired:Other assets
    
    
    263
    
    
    
    (567
    )Receivables, net
    
    
    (804
    )
    
    
    391Inventories and prepaid expenses
    
    
    (4,426
    )
    
    
    529Accounts payable and accrued expenses, net
    
    
    5,461
    
    
    
    2,739Accrued interest
    
    
    3,463
    
    
    
    6,304Net cash provided by operating activities
    
    
    87,517
    
    
    
    84,473INVESTING ACTIVITIES:Additions to property, equipment and leasehold improvements
    
    
    (42,398
    )
    
    
    (43,431
    )Advance location payments to location owners
    
    
    (10,775
    )
    
    
    (9,806
    )Acquisition of net assets related to acquisitions of
businesses, net of cash acquired
    
    
    (17,837
    )
    
    
    (3,436
    )Proceeds from sale of property and equipment
    
    
    1,168
    
    
    
    1,077Net cash used in investing activities
    
    
    (69,842
    )
    
    
    (55,596
    )FINANCING ACTIVITIES:Repayments under credit facility
    
    
    (1,725
    )
    
    
    (240,507
    )Proceeds from credit facility
    
    
    
    
    
    
    230,000Redemption 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
    
    
    (2,872
    )
    
    
    (3,652
    )Repayments from bank and other borrowings
    
    
    (141
    )
    
    
    (183
    )Debt issuance costs
    
    
    (9
    )
    
    
    (3,225
    )Cash dividends paid
    
    
    (30,516
    )
    
    
    (11,696
    )Net cash used in financing activities
    
    
    (41,329
    )
    
    
    (29,263
    )Net decrease in cash and cash equivalents
    
    
    (23,654
    )
    
    
    (386
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    62,008
    
    
    
    57,271CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    38,354
    
    
    $
    56,885SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    37,301
    
    
    $
    38,309Income taxes paid
    
    $
    199
    
    
    $
    930NON CASH FINANCING ACTIVITIES:Acquisition of fixed assets through capital leases
    
    $
    4,370
    
    
    $
    4,531Transfer of assets held for sale to fixed assets
    
    $
    
    
    
    $
    1,936
  6




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 1. Basis of Presentation
      The IDS Transactions and Class A Common Stock Offering
  7




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##### Table of Contents



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




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Dividends
  2. Inventories
  December 31, 2006
    
    
    March 31, 2006Laundry equipment
    
    $
    10,806
    
    
    $
    7,884Machine repair parts
    
    
    3,839
    
    
    
    3,574$
    14,645
    
    
    $
    11,458
 3. Goodwill and Contract Rights
  9




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 December 31, 2006
    
    
    March 31, 2006Route
    
    $
    197,015
    
    
    $
    195,026Rental
    
    
    8,564
    
    
    
    8,253Distribution
    
    
    2,917
    
    
    
    2,917$
    208,496
    
    
    $
    206,196
    Years ending March 31,2007 (remainder of year)
    
    $
    3.62008
    
    
    13.62009
    
    
    13.32010
    
    
    12.92011
    
    
    12.62012
    
    
    12.3
  10




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
    4. Long-Term Debt
  December 31,
    
    
    March 31,2006
    
    
    2006Credit facility indebtedness
    
    $
    567,700
    
    
    $
    569,42511% Senior Secured Notes
    
    
    82,067
    
    
    
    87,716Obligations under capital leases
    
    
    8,219
    
    
    
    6,721Other long-term debt with varying terms
and maturities
    
    
    250
    
    
    
    391658,236
    
    
    
    664,253Less current portion
    
    
    5,601
    
    
    
    11,151$
    652,635
    
    
    $
    653,102
 11% Senior Secured Notes
   11




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      Senior Credit Facility
   12




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
     Intercompany Loan
   Interest Rate Swaps
  13




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##### Table of Contents



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




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Condensed Consolidating Balance Sheets
 December 31, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    Corporation
    
    
    AdjustmentsService
    
    
    Laundry
    
    
    And
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventories, prepaid
expenses and other current assets
    
    $
    944
    
    
    $
    
    
    
    $
    67,413
    
    
    $
    (73
    )
    
    $
    68,284Advance location payments
    
    
    
    
    
    
    
    
    
    
    64,527
    
    
    
    
    
    
    
    64,527Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    245,396
    
    
    
    
    
    
    
    245,396Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    506,844
    
    
    
    
    
    
    
    506,844Deferred income taxes
    
    
    
    
    
    
    815
    
    
    
    
    
    
    
    (815
    )
    
    
    Intercompany loans and advances
    
    
    (9,295
    )
    
    
    
    
    
    
    
    
    
    
    9,295
    
    
    
    Due from Parent
    
    
    
    
    
    
    48,977
    
    
    
    
    
    
    
    (48,977
    )
    
    
    Investment in subsidiaries
    
    
    (166,235
    )
    
    
    (50,738
    )
    
    
    
    
    
    
    216,973
    
    
    
    Investment in preferred stock
    
    
    164,826
    
    
    
    
    
    
    
    
    
    
    
    (164,826
    )
    
    
    Other assets
    
    
    194,906
    
    
    
    
    
    
    
    3,486
    
    
    
    (188,651
    )
    
    
    9,741Total assets
    
    $
    185,146
    
    
    $
    (946
    )
    
    $
    887,666
    
    
    $
    (177,074
    )
    
    $
    894,792Liabilities and Stockholders Equity
(Deficit)Current liabilities:Accounts payable, accrued expenses
and accrued rental payments
    
    $
    3,025
    
    
    $
    73
    
    
    $
    80,943
    
    
    $
    (5,160
    )
    
    $
    78,881Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    5,601
    
    
    
    
    
    
    
    5,601Total current liabilities
    
    
    3,025
    
    
    
    73
    
    
    
    86,544
    
    
    
    (5,160
    )
    
    
    84,482Deferred income taxes
    
    
    (7,436
    )
    
    
    
    
    
    
    58,046
    
    
    
    (815
    )
    
    
    49,795Long-term debt, less current portion
    
    
    82,067
    
    
    
    
    
    
    
    570,568
    
    
    
    
    
    
    
    652,635Loan payable to parent
    
    
    
    
    
    
    
    
    
    
    183,564
    
    
    
    (183,564
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    39,682
    
    
    
    (39,682
    )
    
    
    Preferred stock and dividends
payable
    
    
    
    
    
    
    164,826
    
    
    
    
    
    
    
    (164,826
    )
    
    
    Total stockholders equity (deficit)
    
    
    107,490
    
    
    
    (165,845
    )
    
    
    (50,738
    )
    
    
    216,973
    
    
    
    107,880Total liabilities and stockholders
equity (deficit)
    
    $
    185,146
    
    
    $
    (946
    )
    
    $
    887,666
    
    
    $
    (177,074
    )
    
    $
    894,792
 15




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##### 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, inventories, 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, accrued expenses
and accrued rental payments
    
    $
    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
 16




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations
 Three Months Ended December 31, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    140,971
    
    
    $
    
    
    
    $
    140,971Costs and expenses
    
    
    529
    
    
    
    104
    
    
    
    124,533
    
    
    
    
    
    
    
    125,166Operating (loss) income
    
    
    (529
    )
    
    
    (104
    )
    
    
    16,438
    
    
    
    
    
    
    
    15,805Interest (income) expense, net
    
    
    (5,996
    )
    
    
    3,316
    
    
    
    16,679
    
    
    
    
    
    
    
    13,999Income (loss) before taxes
    
    
    5,467
    
    
    
    (3,420
    )
    
    
    (241
    )
    
    
    
    
    
    
    1,806Income tax provision (benefit)
    
    
    879
    
    
    
    (42
    )
    
    
    (109
    )
    
    
    
    
    
    
    9464,588
    
    
    
    (3,378
    )
    
    
    (350
    )
    
    
    
    
    
    
    860Equity in loss (income) of
Subsidiaries
    
    
    3,728
    
    
    
    350
    
    
    
    
    
    
    
    (4,078
    )
    
    
    Net income (loss)
    
    $
    860
    
    
    $
    (3,728
    )
    
    $
    (350
    )
    
    $
    4,078
    
    
    $
    860
 Three Months Ended December 31, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    138,744
    
    
    $
    
    
    
    $
    138,744Costs and expenses
    
    
    859
    
    
    
    106
    
    
    
    123,929
    
    
    
    
    
    
    
    124,894Operating (loss) income
    
    
    (859
    )
    
    
    (106
    )
    
    
    14,815
    
    
    
    
    
    
    
    13,850Interest (income) expense
 non cash preferred
stock dividend
    
    
    (3,663
    )
    
    
    3,663
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    1,641
    
    
    
    
    
    
    
    13,929
    
    
    
    
    
    
    
    15,570Transaction costs
    
    
    206
    
    
    
    
    
    
    
    2,414
    
    
    
    
    
    
    
    2,620Income (loss) before taxes
    
    
    957
    
    
    
    (3,769
    )
    
    
    (1,528
    )
    
    
    
    
    
    
    (4,340
    )Income tax provision
(benefit)
    
    
    431
    
    
    
    (1,539
    )
    
    
    (566
    )
    
    
    
    
    
    
    (1,674
    )526
    
    
    
    (2,230
    )
    
    
    (962
    )
    
    
    
    
    
    
    (2,666
    )Equity in loss (income) of
subsidiaries
    
    
    3,192
    
    
    
    962
    
    
    
    
    
    
    
    (4,154
    )
    
    
    Net loss
    
    $
    (2,666
    )
    
    $
    (3,192
    )
    
    $
    (962
    )
    
    $
    4,154
    
    
    $
    (2,666
    )
 17




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations
 Nine Months Ended December 31, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    416,566
    
    
    $
    
    
    
    $
    416,566Costs and expenses
    
    
    1,698
    
    
    
    312
    
    
    
    370,429
    
    
    
    
    
    
    
    372,439Operating (loss) income
    
    
    (1,698
    )
    
    
    (312
    )
    
    
    46,137
    
    
    
    
    
    
    
    44,127Interest (income) expense, net
    
    
    (18,087
    )
    
    
    10,092
    
    
    
    49,354
    
    
    
    
    
    
    
    41,359Transaction costs
    
    
    845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    845Income (loss) before taxes
    
    
    15,544
    
    
    
    (10,404
    )
    
    
    (3,217
    )
    
    
    
    
    
    
    1,923Income tax provision (benefit)
    
    
    2,227
    
    
    
    (127
    )
    
    
    (829
    )
    
    
    
    
    
    
    1,27113,317
    
    
    
    (10,277
    )
    
    
    (2,388
    )
    
    
    
    
    
    
    652Equity in loss (income) of
subsidiaries
    
    
    12,665
    
    
    
    2,388
    
    
    
    
    
    
    
    (15,053
    )
    
    
    Net income (loss)
    
    $
    652
    
    
    $
    (12,665
    )
    
    $
    (2,388
    )
    
    $
    15,053
    
    
    $
    652
 Nine Months Ended December 31, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    404,894
    
    
    $
    
    
    
    $
    404,894Costs and expenses
    
    
    1,764
    
    
    
    324
    
    
    
    363,722
    
    
    
    
    
    
    
    365,810Operating (loss) income
    
    
    (1,764
    )
    
    
    (324
    )
    
    
    41,172
    
    
    
    
    
    
    
    39,084Interest (income) expense
 non cash preferred
stock dividend
    
    
    (11,053
    )
    
    
    11,053
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    4,923
    
    
    
    
    
    
    
    41,293
    
    
    
    
    
    
    
    46,216Transaction costs
    
    
    206
    
    
    
    
    
    
    
    2,414
    
    
    
    
    
    
    
    2,620Income (loss) before taxes
    
    
    4,160
    
    
    
    (11,377
    )
    
    
    (2,535
    )
    
    
    
    
    
    
    (9,752
    )Income tax provision
(benefit)
    
    
    1,739
    
    
    
    (4,647
    )
    
    
    (915
    )
    
    
    
    
    
    
    (3,823
    )2,421
    
    
    
    (6,730
    )
    
    
    (1,620
    )
    
    
    
    
    
    
    (5,929
    )Equity in loss (income) of
subsidiaries
    
    
    8,350
    
    
    
    1,620
    
    
    
    
    
    
    
    (9,970
    )
    
    
    Net (loss) income
    
    $
    (5,929
    )
    
    $
    (8,350
    )
    
    $
    (1,620
    )
    
    $
    9,970
    
    
    $
    (5,929
    )
 18




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Cash Flows
 Nine Months Ended December 31, 2006CoinmachCoinmach
    
    
    CorporationCoinmach
    
    
    Laundry
    
    
    AndService Corp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net income (loss)
    
    $
    13,317
    
    
    $
    (10,277
    )
    
    $
    (2,388
    )
    
    $
    
    
    
    $
    652Noncash adjustments
    
    
    (6,874
    )
    
    
    9,966
    
    
    
    79,816
    
    
    
    
    
    
    
    82,908Change in operating assets and
Liabilities
    
    
    (2,392
    )
    
    
    35
    
    
    
    6,314
    
    
    
    
    
    
    
    3,957Net cash provided by (used in)
operating activities
    
    
    4,051
    
    
    
    (276
    )
    
    
    83,742
    
    
    
    
    
    
    
    87,517Investing Activities:Capital expenditures and
advance location payments
    
    
    
    
    
    
    
    
    
    
    (53,173
    )
    
    
    
    
    
    
    (53,173
    )Acquisition of net assets
    
    
    
    
    
    
    
    
    
    
    (17,837
    )
    
    
    
    
    
    
    (17,837
    )Proceeds from sale of property
and equipment
    
    
    
    
    
    
    
    
    
    
    1,168
    
    
    
    
    
    
    
    1,168Net cash used in investing
activities
    
    
    
    
    
    
    
    
    
    
    (69,842
    )
    
    
    
    
    
    
    (69,842
    )Financing Activities:Repayment of debt
    
    
    (5,649
    )
    
    
    
    
    
    
    (1,725
    )
    
    
    
    
    
    
    (7,374
    )Other financing items
    
    
    1,627
    
    
    
    276
    
    
    
    (35,858
    )
    
    
    
    
    
    
    (33,955
    )Net cash (used in) provided by
financing activities
    
    
    (4,022
    )
    
    
    276
    
    
    
    (37,583
    )
    
    
    
    
    
    
    (41,329
    )Net increase (decrease) in cash
and cash equivalents
    
    
    29
    
    
    
    
    
    
    
    (23,683
    )
    
    
    
    
    
    
    (23,654
    )Cash and cash equivalents,
beginning of period
    
    
    880
    
    
    
    
    
    
    
    61,128
    
    
    
    
    
    
    
    62,008Cash and cash equivalents, end
of period
    
    $
    909
    
    
    $
    
    
    
    $
    37,445
    
    
    $
    
    
    
    $
    38,354
 19




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Cash Flows (continued)
 Nine Months Ended December 31, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorporation
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Elimination
    
    
    ConsolidatedOperating Activities:Net income (loss)
    
    $
    2,421
    
    
    $
    (6,730
    )
    
    $
    (1,620
    )
    
    $
    
    
    
    $
    (5,929
    )Noncash adjustments
    
    
    (11,147
    )
    
    
    11,053
    
    
    
    81,100
    
    
    
    
    
    
    
    81,006Change in operating assets and
Liabilities
    
    
    1,832
    
    
    
    (4,623
    )
    
    
    12,187
    
    
    
    
    
    
    
    9,396Net cash (used in) provided by
operating activities
    
    
    (6,894
    )
    
    
    (300
    )
    
    
    91,667
    
    
    
    
    
    
    
    84,473Investing Activities:Capital expenditures and
advance location payments
    
    
    
    
    
    
    
    
    
    
    (53,237
    )
    
    
    
    
    
    
    (53,237
    )Acquisition of net assets
    
    
    
    
    
    
    
    
    
    
    (3,436
    )
    
    
    
    
    
    
    (3,436
    )Proceeds from sale of
property and equipment
    
    
    
    
    
    
    
    
    
    
    1,077
    
    
    
    
    
    
    
    1,077Net cash used in investing
activities
    
    
    
    
    
    
    
    
    
    
    (55,596
    )
    
    
    
    
    
    
    (55,596
    )Financing Activities:Repayment of debt
    
    
    
    
    
    
    
    
    
    
    (240,507
    )
    
    
    
    
    
    
    (240,507
    )Other financing items
    
    
    6,894
    
    
    
    300
    
    
    
    204,050
    
    
    
    
    
    
    
    211,244Net cash provided by (used in)
financing activities
    
    
    6,894
    
    
    
    300
    
    
    
    (36,457
    )
    
    
    
    
    
    
    (29,263
    )Net decrease in cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (386
    )
    
    
    
    
    
    
    (386
    )Cash and cash equivalents,
beginning of period
    
    
    431
    
    
    
    
    
    
    
    56,840
    
    
    
    
    
    
    
    57,271Cash and cash equivalents, end
of period
    
    $
    431
    
    
    $
    
    
    
    $
    56,454
    
    
    $
    
    
    
    $
    56,885
 20




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 6. Segment Information
  21




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue:Route
    
    $
    125,424
    
    
    $
    122,102
    
    
    $
    369,332
    
    
    $
    358,618All other:Rental
    
    
    9,582
    
    
    
    9,255
    
    
    
    28,850
    
    
    
    26,751Distribution
    
    
    5,965
    
    
    
    7,387
    
    
    
    18,384
    
    
    
    19,525Subtotal
    
    
    15,547
    
    
    
    16,642
    
    
    
    47,234
    
    
    
    46,276Total Revenue
    
    $
    140,971
    
    
    $
    138,744
    
    
    $
    416,566
    
    
    $
    404,894EBITDA (1):Route
    
    $
    41,243
    
    
    $
    40,734
    
    
    $
    120,350
    
    
    $
    118,227All other:Rental
    
    
    4,425
    
    
    
    4,031
    
    
    
    12,838
    
    
    
    11,243Distribution
    
    
    571
    
    
    
    212
    
    
    
    1,444
    
    
    
    625Subtotal
    
    
    4,996
    
    
    
    4,243
    
    
    
    14,282
    
    
    
    11,868Other items, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (310
    )Transaction costs (2)
    
    
    
    
    
    
    (2,620
    )
    
    
    (845
    )
    
    
    (2,620
    )Corporate expenses
    
    
    (3,100
    )
    
    
    (3,571
    )
    
    
    (9,236
    )
    
    
    (9,141
    )Total EBITDA
    
    
    43,139
    
    
    
    38,786
    
    
    
    124,551
    
    
    
    118,024Reconciling items:Depreciation and amortization
expense, amortization of
advance location payments and
amortization of intangibles:Route
    
    
    (24,430
    )
    
    
    (24,586
    )
    
    
    (72,177
    )
    
    
    (72,685
    )All other
    
    
    (1,925
    )
    
    
    (2,150
    )
    
    
    (6,108
    )
    
    
    (6,421
    )Corporate
    
    
    (979
    )
    
    
    (820
    )
    
    
    (2,984
    )
    
    
    (2,454
    )Total depreciation
    
    
    (27,334
    )
    
    
    (27,556
    )
    
    
    (81,269
    )
    
    
    (81,560
    )Interest expense
    
    
    (13,999
    )
    
    
    (15,570
    )
    
    
    (41,359
    )
    
    
    (46,216
    )Consolidated income (loss) before
income taxes
    
    $
    1,806
    
    
    $
    (4,340
    )
    
    $
    1,923
    
    
    $
    (9,752
    )
 
 (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 nine months ended December 31, 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.The computation of EBITDA for the three and nine months ended December 31, 2005
has not been adjusted to exclude transaction costs consisting of: (i) the
write-off of the unamortized deferred financing costs relating to the previous
senior secured credit facility term loans repaid aggregating approximately $1.7
million, (ii) expenses aggregating approximately $0.7 million relating to an
amendment to the previous senior secured credit facility and (iii) additional
expenses aggregating approximately $0.2 million relating to the IPO. 22




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Non-GAAP Financial Measures
  Three Months Ended December 31,
    
    
    Nine Months Ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    0.9
    
    
    $
    (2.7
    )
    
    $
    0.7
    
    
    $
    (5.9
    )Provision (benefit) for income taxes
    
    
    0.9
    
    
    
    (1.7
    )
    
    
    1.3
    
    
    
    (3.8
    )Interest expense
    
    
    14.0
    
    
    
    15.6
    
    
    
    41.3
    
    
    
    46.2Depreciation and amortization
    
    
    27.3
    
    
    
    27.6
    
    
    
    81.3
    
    
    
    81.5EBITDA *
    
    $
    43.1
    
    
    $
    38.8
    
    
    $
    124.6
    
    
    $
    118.0
 
 *
    
    The computation of EBITDA for the nine months ended December 31, 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.The computation of EBITDA for the three and nine months ended December 31, 2005 has not been
adjusted to exclude transaction costs consisting of: (i) the write-off of the unamortized
deferred financing costs relating to the previous senior secured credit facility term loans
repaid aggregating approximately $1.7 million, (ii) expenses aggregating approximately $0.7
million relating to an amendment to the previous senior secured credit facility and (iii)
additional expenses aggregating approximately $0.2 million relating to the IPO. 23




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 7. Income Taxes
  December 31, 2006
    
    
    March 31, 2006Deferred tax liabilities:Accelerated tax depreciation and contract rights
    
    $
    89,911
    
    
    $
    97,084Interest rate swap
    
    
    381
    
    
    
    1,063Other
    
    
    2,438
    
    
    
    2,123Total deferred tax liabilities
    
    
    92,730
    
    
    
    100,270Deferred tax assets:Net operating loss carryforwards
    
    
    47,436
    
    
    
    55,430Covenant not to compete
    
    
    1,342
    
    
    
    1,267Transaction costs
    
    
    3,068
    
    
    
    2,726Other
    
    
    1,819
    
    
    
    1,593Total deferred tax asset
    
    
    53,665
    
    
    
    61,016Valuation allowance
    
    
    (10,730
    )
    
    
    (10,730
    )Net deferred tax assets
    
    
    42,935
    
    
    
    50,286Net deferred tax liability
    
    $
    49,795
    
    
    $
    49,984
   Three months ended December 31,
    
    
    Nine months ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Federal
    
    $
    493
    
    
    $
    (1,256
    )
    
    $
    449
    
    
    $
    (2,868
    )State
    
    
    453
    
    
    
    (418
    )
    
    
    822
    
    
    
    (955
    )$
    946
    
    
    $
    (1,674
    )
    
    $
    1,271
    
    
    $
    (3,823
    )
  Three months ended December 31,
    
    
    Nine months ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Expected tax provision (benefit)
    
    $
    629
    
    
    $
    (1,429
    )
    
    $
    670
    
    
    $
    (3,323
    )State tax provision (benefit),
net of federal taxes
    
    
    294
    
    
    
    (272
    )
    
    
    535
    
    
    
    (580
    )Permanent book/tax differences
    
    
    23
    
    
    
    27
    
    
    
    66
    
    
    
    80Tax provision (benefit)
    
    $
    946
    
    
    $
    (1,674
    )
    
    $
    1,271
    
    
    $
    (3,823
    )
 24




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 8. Income (Loss) per Common Share
   Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss) attributable to common
stockholders
    
    $
    860
    
    
    $
    (2,666
    )
    
    $
    652
    
    
    $
    (5,929
    )Add: Dividends paid on common stock
    
    
    (6,014
    )
    
    
    (3,899
    )
    
    
    (30,517
    )
    
    
    (11,696
    )Undistributed loss available to Class A and Class B
common stock
    
    $
    (5,154
    )
    
    $
    (6,565
    )
    
    $
    (29,865
    )
    
    $
    (17,625
    )Basic and diluted allocation of undistributed loss:Class A Common Stock
    
    $
    (2,856
    )
    
    $
    (2,829
    )
    
    $
    (16,550
    )
    
    $
    (7,594
    )Class B Common Stock
    
    
    (2,298
    )
    
    
    (3,736
    )
    
    
    (13,315
    )
    
    
    (10,031
    )Total
    
    $
    (5,154
    )
    
    $
    (6,565
    )
    
    $
    (29,865
    )
    
    $
    (17,625
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    29,060,305
    
    
    
    18,911,532
    
    
    
    29,052,500
    
    
    
    18,911,532Class B Common Stock
    
    
    23,374,450
    
    
    
    24,980,445
    
    
    
    23,374,450
    
    
    
    24,980,445Total
    
    
    52,434,755
    
    
    
    43,891,977
    
    
    
    52,426,950
    
    
    
    43,891,977Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21
    
    
    $
    0.62
    
    
    $
    0.62Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    0.53
    
    
    $
    Undistributed loss per share:Class A Common Stock
    
    $
    (0.10
    )
    
    $
    (0.15
    )
    
    $
    (0.57
    )
    
    $
    (0.40
    )Class B Common Stock
    
    $
    (0.10
    )
    
    $
    (0.15
    )
    
    $
    (0.57
    )
    
    $
    (0.40
    )Basic and diluted income (loss) per shareClass A Common Stock
    
    $
    0.11
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.22Class B Common Stock
    
    $
    (0.10
    )
    
    $
    (0.15
    )
    
    $
    (0.04
    )
    
    $
    (0.40
    )
 25




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
     9. 2004 Long-Term Incentive Plan
    26




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
        27




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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
    
    
    $
    9.01Granted
    
    
    132,500
    
    
    
    10.00Vested
    
    
    20,083
    
    
    
    9.38Restricted shares unvested at December 31, 2006
    
    
    179,530
    
    
    $
    9.70
  10. New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No.
109.
 Fair Value Measurements.
 28




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 29




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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
   30




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
   Critical Accounting Policies:
  Accounting for Computer Software Developed For or Obtained For Internal-Use
 31




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
 Results of Operations
  Comparison of the three- and nine-month periods ended December 31, 2006 and December 31, 2005.
  Three months ended December 31,
    
    
    Nine months ended December 31,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeRoute
    
    $
    125.4
    
    
    $
    122.1
    
    
    $
    3.3
    
    
    $
    369.3
    
    
    $
    358.6
    
    
    $
    10.7Rental
    
    
    9.6
    
    
    
    9.2
    
    
    
    0.4
    
    
    
    28.9
    
    
    
    26.8
    
    
    
    2.1Distribution
    
    
    6.0
    
    
    
    7.4
    
    
    
    (1.4
    )
    
    
    18.4
    
    
    
    19.5
    
    
    
    (1.1
    )$
    141.0
    
    
    $
    138.7
    
    
    $
    2.3
    
    
    $
    416.6
    
    
    $
    404.9
    
    
    $
    11.7
     32




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
      33




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
      35




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
   Three months ended December 31,
    
    
    Nine months ended December 31,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeRoute
    
    $
    41.2
    
    
    $
    40.7
    
    
    $
    0.5
    
    
    $
    120.3
    
    
    $
    118.2
    
    
    $
    2.1Rental
    
    
    4.4
    
    
    
    4.0
    
    
    
    0.4
    
    
    
    12.8
    
    
    
    11.2
    
    
    
    1.6Distribution
    
    
    0.6
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    1.5
    
    
    
    0.6
    
    
    
    0.9Other items, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    0.3Corporate expenses
    
    
    (3.1
    )
    
    
    (3.5
    )
    
    
    0.4
    
    
    
    (9.2
    )
    
    
    (9.1
    )
    
    
    (0.1
    )Transaction costs(1)
    
    
    
    
    
    
    (2.6
    )
    
    
    2.6
    
    
    
    (0.9
    )
    
    
    (2.6
    )
    
    
    1.7Total EBITDA
    
    $
    43.1
    
    
    $
    38.8
    
    
    $
    4.3
    
    
    $
    124.5
    
    
    $
    118.0
    
    
    $
    6.5
 
 (1)
    
    The computation of EBITDA for the nine-months ended December 31, 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. The computation
of EBITDA for the three and nine months ended December 31, 2005 has not been adjusted to
exclude transaction costs consisting of: (i) the write-off of the unamortized deferred
financing costs relating to the previous senior secured credit facility term loans repaid
aggregating approximately $1.7 million, (ii) expenses aggregating approximately $0.7 million
relating to an amendment to the previous senior secured credit facility and (iii) additional
expenses aggregating approximately $0.2 million relating to the IPO.  36




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
  Liquidity and Capital Resources
     37




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
  Financing Activities
  11% Senior Secured Notes
    Senior Credit Facility
  39




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
    The Intercompany Loan
    40




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
 Operating and Investing Activities
  Capital Expenditures
   Three months ended December 31,
    
    
    Nine months ended December 31,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeRoute
    
    $
    14.9
    
    
    $
    13.1
    
    
    $
    1.8
    
    
    $
    46.5
    
    
    $
    43.4
    
    
    $
    3.1Rental
    
    
    0.5
    
    
    
    0.8
    
    
    
    (0.3
    )
    
    
    2.2
    
    
    
    4.4
    
    
    
    (2.2
    )Distribution
    
    
    
    
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )Corporate
    
    
    1.1
    
    
    
    1.6
    
    
    
    (0.5
    )
    
    
    3.3
    
    
    
    4.2
    
    
    
    (0.9
    )$
    16.5
    
    
    $
    15.6
    
    
    $
    0.9
    
    
    $
    52.0
    
    
    $
    52.2
    
    
    $
    (0.2
    )
  Summary of Contractual Obligations
  41




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
 Payments Due in Fiscal YearTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    AfterLong-Term Debt Obligations
    
    $
    650.0
    
    
    $
    0.6
    
    
    $
    2.4
    
    
    $
    3.2
    
    
    $
    5.7
    
    
    $
    5.7
    
    
    $
    632.4Interest on Long-Term Debt (1)
    
    
    420.3
    
    
    
    18.0
    
    
    
    53.6
    
    
    
    53.4
    
    
    
    53.1
    
    
    
    52.6
    
    
    
    189.6Capital Lease Obligations (2)
    
    
    9.5
    
    
    
    1.1
    
    
    
    3.6
    
    
    
    2.6
    
    
    
    1.3
    
    
    
    0.8
    
    
    
    0.1Operating Lease Obligations
    
    
    31.6
    
    
    
    2.2
    
    
    
    7.4
    
    
    
    6.2
    
    
    
    5.3
    
    
    
    3.5
    
    
    
    7.0$
    1,111.4
    
    
    $
    21.9
    
    
    $
    67.0
    
    
    $
    65.4
    
    
    $
    65.4
    
    
    $
    62.6
    
    
    $
    829.1
 
 (1)
    
    As of December 31, 2006, $567.7 million of our long-term debt outstanding under the Senior
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 7.875% based on the Eurodollar rate in effect at December 31,
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 Senior 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 Senior 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
   42




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
     43




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (continued)
   Inflation and Seasonality
  Special Note Concerning Forward Looking Statements
  44




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS 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;
 45




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      47




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  48




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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
    
    Description10.1*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Stephen R. Kerrigan and CSC10.2*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Robert M. Doyle and CSC10.3*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Mitchell Blatt and CSC10.4*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Michael E. Stanky and CSC10.5*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Ramon Norniella and CSC
 49




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ExhibitNumber
    
    Description10.6*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between James N. Chapman and CSC31.1*
    
    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
 50




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 SIGNATURES
  COINMACH SERVICE CORP.Date: February 5, 2007
    /s/ Robert M. DoyleRobert M. DoyleChief Financial Officer
(on behalf of registrant and as
Principal Financial Officer) 51




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Stephen R. Kerrigan and CSC10.2*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Robert M. Doyle and CSC10.3*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Mitchell Blatt and CSC10.4*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Michael E. Stanky and CSC10.5*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between Ramon Norniella and CSC10.6*
    
    Restricted Stock Award Agreement, dated November 3, 2006, by and
between James N. Chapman and CSC31.1*
    
    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 52