##### 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 September 30, 2007
 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,
    
    11803New York(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
  o þ o
 o þ
  Class
    
    Outstanding at October 31, 2007Class A
common stock, $0.01 par value per share shares
    
    29,263,595 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
    
    
    1ITEM 1.
    
    Financial Statements
    
    
    1Condensed
Consolidated Balance Sheets - September 30, 2007 (Unaudited) and March 31, 2007
    
    
    1Condensed
Consolidated Statements of Operations (Unaudited)  Three Months and Six Months ended September 30, 2007 and 2006
    
    
    2Condensed
Consolidated Statements of Stockholders Equity (Unaudited) for the Six Months ended September 30, 2007
    
    
    3Condensed
Consolidated Statements of Cash Flows (Unaudited)  Six Months ended September 30, 2007 and 2006
    
    
    4Notes To Condensed Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2.
    
    MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
    
    
    30ITEM 3.
    
    QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    50ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    50PART II.
    
    OTHER INFORMATION
    
    
    52ITEM 1.
    
    Legal Proceedings
    
    
    52ITEM 1A.
    
    Risk Factors
    
    
    52ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    52ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    52ITEM 5.
    
    Other Information
    
    
    52ITEM 6.
    
    Exhibits
    
    
    52Signature Page
    
    
    
    
    53Index to Exhibits
    
    
    
    
    54EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  (i)




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30, 2007
    
    
    March 31, 20071(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    33,052
    
    
    $
    39,030Receivables, net
    
    
    8,693
    
    
    
    6,755Inventories
    
    
    14,701
    
    
    
    14,575Prepaid expenses
    
    
    4,075
    
    
    
    4,997Other current assets
    
    
    3,740
    
    
    
    2,377Total current assets
    
    
    64,261
    
    
    
    67,734Advance location payments
    
    
    61,126
    
    
    
    64,371Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization of $511,230 and $475,926
    
    
    236,115
    
    
    
    239,740Contract rights, net of accumulated
amortization of $135,260 and $128,466
    
    
    288,239
    
    
    
    294,800Goodwill
    
    
    208,737
    
    
    
    208,590Other assets
    
    
    9,082
    
    
    
    8,608Total assets
    
    $
    867,560
    
    
    $
    883,843LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts
payable and accrued expenses
    
    $
    43,360
    
    
    $
    35,796Accrued rental payments
    
    
    36,995
    
    
    
    33,019Accrued interest
    
    
    7,853
    
    
    
    6,847Interest rate swap liability
    
    
    1,716
    
    
    
    155Current portion of long-term debt
    
    
    6,141
    
    
    
    5,527Total current liabilities
    
    
    96,065
    
    
    
    81,344Deferred income taxes
    
    
    47,965
    
    
    
    50,005Long-term debt, less current portion
    
    
    649,929
    
    
    
    651,768Total liabilities
    
    
    793,959
    
    
    
    783,117Stockholders equity:Class A Common Stock  $0.01 par value; 100,000,000
shares authorized; 29,263,595 shares issued and outstanding at
September 30, 2007 and 29,260,030 shares issued and outstanding at
March 31, 2007
    
    
    292
    
    
    
    292Class 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
    
    
    390,043
    
    
    
    389,862Carryover basis adjustment
    
    
    (7,988
    )
    
    
    (7,988
    )Accumulated other comprehensive loss, net of tax
    
    
    (1,190
    )
    
    
    (231
    )Accumulated deficit
    
    
    (307,790
    )
    
    
    (281,443
    )Total stockholders equity
    
    
    73,601
    
    
    
    100,726Total liabilities and stockholders equity
    
    $
    867,560
    
    
    $
    883,843
 
 1
    
    The March 31, 2007 balance sheet has been derived from the audited consolidated financial statements as of that date. See accompanying notes.




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUES
    
    $
    135,475
    
    
    $
    136,310
    
    
    $
    272,569
    
    
    $
    275,595COSTS AND EXPENSES:Laundry operating expenses
(exclusive of
depreciation and amortization and
amortization
of
advance
location
payments)
    
    
    92,983
    
    
    
    92,803
    
    
    
    185,969
    
    
    
    187,202General and administrative
(including stock-based compensation expense of $78, $38, $181 and $76, respectively)
    
    
    3,190
    
    
    
    3,102
    
    
    
    7,016
    
    
    
    6,136Depreciation
and
amortization
    
    
    18,130
    
    
    
    18,389
    
    
    
    36,261
    
    
    
    37,013Amortization of advance
location payments
    
    
    4,900
    
    
    
    4,901
    
    
    
    9,800
    
    
    
    9,801Amortization
of
intangibles
    
    
    3,492
    
    
    
    3,560
    
    
    
    6,983
    
    
    
    7,120122,695
    
    
    
    122,755
    
    
    
    246,029
    
    
    
    247,272OPERATING INCOME
    
    
    12,780
    
    
    
    13,555
    
    
    
    26,540
    
    
    
    28,323INTEREST EXPENSE
    
    
    14,051
    
    
    
    13,931
    
    
    
    27,765
    
    
    
    27,361TRANSACTION COSTS
    
    
    1,015
    
    
    
    
    
    
    
    4,015
    
    
    
    845(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (2,286
    )
    
    
    (376
    )
    
    
    (5,240
    )
    
    
    117PROVISION (BENEFIT) FOR INCOME TAXES:Current
    
    
    238
    
    
    
    214
    
    
    
    484
    
    
    
    382Deferred
    
    
    (187
    )
    
    
    (189
    )
    
    
    (1,440
    )
    
    
    (56
    )51
    
    
    
    25
    
    
    
    (956
    )
    
    
    326NET LOSS
    
    $
    (2,337
    )
    
    $
    (401
    )
    
    $
    (4,284
    )
    
    $
    (209
    )Distributed
earnings per share:Class A
Common Stock
    
    $
    0.21
    
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.41Class B
Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    0.43
    
    
    $
    0.53Basic and diluted net income (loss)
per share:Class A
Common Stock
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    (0.09
    )
    
    $
    (0.06
    )Class B
Common Stock
    
    $
    (0.16
    )
    
    $
    (0.12
    )
    
    $
    (0.07
    )
    
    $
    0.06Weighted average common stock
outstanding:Class A
Common Stock
    
    
    29,090,859
    
    
    
    29,050,722
    
    
    
    29,085,306
    
    
    
    29,048,625Class B
Common Stock
    
    
    23,374,450
    
    
    
    23,374,450
    
    
    
    23,374,450
    
    
    
    23,374,450Cash dividends per
share:Class A
Common Stock
    
    $
    0.21
    
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.41Class B
Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    0.43
    
    
    $
    0.53
  -2-




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##### Table of Contents



COINMACH
SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
- SIX MONTHS ENDED SEPTEMBER 30, 2007 -
(UNAUDITED)
 AccumulatedClass A
    
    
    Class B
    
    
    Capital in
    
    
    Carryover
    
    
    OtherCommon
    
    
    Common
    
    
    Excess of
    
    
    Basis
    
    
    Comprehensive
    
    
    Accumulated
    
    
    StockholdersStock
    
    
    Stock
    
    
    Par Value
    
    
    Adjustment
    
    
    Loss, net of tax
    
    
    Deficit
    
    
    EquityBalance, March 31, 2007
    
    $
    292
    
    
    $
    234
    
    
    $
    389,862
    
    
    $
    (7,988
    )
    
    $
    (231
    )
    
    $
    (281,443
    )
    
    $
    100,726Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,284
    )
    
    
    (4,284
    )Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (959
    )
    
    
    
    
    
    
    (959
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,243
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,063
    )
    
    
    (22,063
    )Stockbased compensation
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181Balance, September 30, 2007
    
    $
    292
    
    
    $
    234
    
    
    $
    390,043
    
    
    $
    (7,988
    )
    
    $
    (1,190
    )
    
    $
    (307,790
    )
    
    $
    73,601See accompanying notes.
 -3-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Six Months EndedSeptember 30, 2007
    
    
    September 30, 2006OPERATING ACTIVITIES:Net loss
    
    $
    (4,284
    )
    
    $
    (209
    )Adjustments to reconcile net loss to net cash
provided by
operating activities:Depreciation and amortization
    
    
    36,261
    
    
    
    37,013Amortization of advance location payments
    
    
    9,800
    
    
    
    9,801Amortization of intangibles
    
    
    6,983
    
    
    
    7,120Deferred income taxes
    
    
    (1,440
    )
    
    
    (56
    )Amortization of deferred issue costs
    
    
    394
    
    
    
    396Write off of deferred issue costs
    
    
    
    
    
    
    414Premium on redemption of 11% senior
secured notes due
2024
    
    
    
    
    
    
    417Gain on sale of equipment
    
    
    (462
    )
    
    
    (183
    )Stock based compensation
    
    
    181
    
    
    
    76Change in operating assets and liabilities, net of businesses
acquired:Other assets
    
    
    (2,673
    )
    
    
    (481
    )Receivables, net
    
    
    (1,284
    )
    
    
    (1,444
    )Inventories and prepaid expenses
    
    
    796
    
    
    
    (1,445
    )Accounts payable and accrued expenses, net
    
    
    10,890
    
    
    
    4,764Accrued interest
    
    
    1,006
    
    
    
    3,225Net cash provided by operating activities
    
    
    56,168
    
    
    
    59,408INVESTING ACTIVITIES:Additions to property, equipment and leasehold improvements
    
    
    (31,913
    )
    
    
    (29,855
    )Advance location payments to location owners
    
    
    (6,555
    )
    
    
    (6,361
    )Acquisition of net assets related to acquisitions of
businesses,
net of cash acquired
    
    
    (196
    )
    
    
    (17,136
    )Proceeds from sale of property and equipment
    
    
    1,630
    
    
    
    710Net cash used in investing activities
    
    
    (37,034
    )
    
    
    (52,642
    )FINANCING ACTIVITIES:Repayments under credit facility
    
    
    (24,350
    )
    
    
    (1,150
    )Proceeds from credit facility
    
    
    23,200
    
    
    
    Principal payments on capitalized lease obligations
    
    
    (1,874
    )
    
    
    (1,898
    )Repayments to bank and other borrowings
    
    
    (25
    )
    
    
    (129
    )Redemption of 11% senior secured notes due 2024
    
    
    
    
    
    
    (5,649
    )Payment of premium on 11% senior secured notes due 2024
    
    
    
    
    
    
    (417
    )Issuance costs
    
    
    
    
    
    
    (9
    )Cash dividends paid
    
    
    (22,063
    )
    
    
    (24,503
    )Net cash used in financing activities
    
    
    (25,112
    )
    
    
    (33,755
    )Net decrease in cash and cash equivalents
    
    
    (5,978
    )
    
    
    (26,989
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    39,030
    
    
    
    62,008CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    33,052
    
    
    $
    35,019SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:Interest paid
    
    $
    26,365
    
    
    $
    23,740Income taxes paid
    
    $
    215
    
    
    $
    144NON CASH FINANCING ACTIVITIES:Acquisition of fixed assets through capital leases
    
    $
    1,824
    
    
    $
    2,606See accompanying notes.
 -4-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
September 30, 2007
 1. Basis of Presentation
       -5-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  The IDS Transactions and Class A Common Stock Offering
   Dividends
  -6-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 2. Inventories
  September 30, 2007
    
    
    March 31, 2007Laundry equipment
    
    $
    10,865
    
    
    $
    10,825Machine repair parts
    
    
    3,836
    
    
    
    3,750$
    14,701
    
    
    $
    14,575
 3. Goodwill and Contract Rights
  September 30, 2007
    
    
    March 31, 2007Route
    
    $
    197,158
    
    
    $
    197,158Rental
    
    
    8,662
    
    
    
    8,515Distribution
    
    
    2,917
    
    
    
    2,917$
    208,737
    
    
    $
    208,590
   -7-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Years ending March 31,2008 (remainder of year)
    
    $
    6.82009
    
    
    13.32010
    
    
    12.92011
    
    
    12.62012
    
    
    12.32013
    
    
    12.0
    -8-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 4. Long-Term Debt
  September 30, 2007
    
    
    March 31, 2007Credit facility indebtedness
    
    $
    565,975
    
    
    $
    567,12511% Senior Secured Notes
    
    
    82,067
    
    
    
    82,067Obligations under capital leases
    
    
    7,815
    
    
    
    7,865Other long-term debt with varying terms and
maturities
    
    
    213
    
    
    
    238656,070
    
    
    
    657,295Less current portion
    
    
    6,141
    
    
    
    5,527$
    649,929
    
    
    $
    651,768
 11% Senior Secured Notes
      -9-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Senior Credit Facility
      Interest Rate Swaps
  -10-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  5. Intercompany Loan
    6. Guarantor Subsidiaries
  -11-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Condensed Consolidating Balance Sheets
 September 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    Corporation
    
    
    AdjustmentsService
    
    
    Laundry
    
    
    and
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventories,
prepaid expenses and other
current assets
    
    $
    56
    
    
    $
    
    
    
    $
    64,284
    
    
    $
    (79
    )
    
    $
    64,261Advance location payments
    
    
    
    
    
    
    
    
    
    
    61,126
    
    
    
    
    
    
    
    61,126Property, equipment and
leasehold improvements, net
    
    
    
    
    
    
    
    
    
    
    236,115
    
    
    
    
    
    
    
    236,115Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    496,976
    
    
    
    
    
    
    
    496,976Deferred income taxes
    
    
    5,670
    
    
    
    967
    
    
    
    
    
    
    
    (6,637
    )
    
    
    Due from parent/sub
    
    
    
    
    
    
    48,613
    
    
    
    
    
    
    
    (48,613
    )
    
    
    Investment in preferred stock
    
    
    154,596
    
    
    
    
    
    
    
    
    
    
    
    (154,596
    )
    
    
    Other assets
    
    
    194,654
    
    
    
    
    
    
    
    3,079
    
    
    
    (188,651
    )
    
    
    9,082Total assets
    
    $
    354,976
    
    
    $
    49,580
    
    
    $
    861,580
    
    
    $
    (398,576
    )
    
    $
    867,560Liabilities and Stockholders Equity (Deficit)Current liabilities:Accounts payable, accrued
expenses and accrued rental
payments
    
    $
    6,216
    
    
    $
    78
    
    
    $
    88,796
    
    
    $
    (5,166
    )
    
    $
    89,924Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    6,141
    
    
    
    
    
    
    
    6,141Total current liabilities
    
    
    6,216
    
    
    
    78
    
    
    
    94,937
    
    
    
    (5,166
    )
    
    
    96,065Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    54,602
    
    
    
    (6,637
    )
    
    
    47,965Intercompany loans and advances
    
    
    10,136
    
    
    
    
    
    
    
    
    
    
    
    (10,136
    )
    
    
    Long-term debt, less current
portion
    
    
    82,067
    
    
    
    
    
    
    
    567,862
    
    
    
    
    
    
    
    649,929Loan payable to parent
    
    
    
    
    
    
    
    
    
    
    183,564
    
    
    
    (183,564
    )
    
    
    Investment in subsidiaries
    
    
    183,346
    
    
    
    77,862
    
    
    
    
    
    
    
    (261,208
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    38,477
    
    
    
    (38,477
    )
    
    
    Preferred stock and dividends
payable
    
    
    
    
    
    
    154,596
    
    
    
    
    
    
    
    (154,596
    )
    
    
    Total stockholders equity
(deficit)
    
    
    73,211
    
    
    
    (182,956
    )
    
    
    (77,862
    )
    
    
    261,208
    
    
    
    73,601Total liabilities and stockholders equity (deficit)
    
    $
    354,976
    
    
    $
    49,580
    
    
    $
    861,580
    
    
    $
    (398,576
    )
    
    $
    867,560
 -12-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Balance Sheets (continued)
 March 31, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    Corporation
    
    
    AdjustmentsService
    
    
    Laundry
    
    
    and
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventories, prepaid
expenses and other current assets
    
    $
    1,003
    
    
    $
    
    
    
    $
    66,810
    
    
    $
    (79
    )
    
    $
    67,734Advance location payments
    
    
    
    
    
    
    
    
    
    
    64,371
    
    
    
    
    
    
    
    64,371Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    239,740
    
    
    
    
    
    
    
    239,740Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    503,390
    
    
    
    
    
    
    
    503,390Deferred income taxes
    
    
    6,634
    
    
    
    888
    
    
    
    
    
    
    
    (7,522
    )
    
    
    Due from parent
    
    
    
    
    
    
    48,808
    
    
    
    
    
    
    
    (48,808
    )
    
    
    Investment in preferred stock
    
    
    164,794
    
    
    
    
    
    
    
    
    
    
    
    (164,794
    )
    
    
    Other assets
    
    
    194,823
    
    
    
    
    
    
    
    2,436
    
    
    
    (188,651
    )
    
    
    8,608Total assets
    
    $
    367,254
    
    
    $
    49,696
    
    
    $
    876,747
    
    
    $
    (409,854
    )
    
    $
    883,843Liabilities and Stockholders
Equity (Deficit)Current liabilities:Accounts payable, accrued
expenses and accrued rental
payments
    
    $
    2,976
    
    
    $
    78
    
    
    $
    77,929
    
    
    $
    (5,166
    )
    
    $
    75,817Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    5,527
    
    
    
    
    
    
    
    5,527Total current liabilities
    
    
    2,976
    
    
    
    78
    
    
    
    83,456
    
    
    
    (5,166
    )
    
    
    81,344Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    57,527
    
    
    
    (7,522
    )
    
    
    50,005Intercompany loans and advances
    
    
    9,566
    
    
    
    
    
    
    
    
    
    
    
    (9,566
    )
    
    
    Long-term debt, less current
portion
    
    
    82,067
    
    
    
    
    
    
    
    569,701
    
    
    
    
    
    
    
    651,768Loan payable to parent
    
    
    
    
    
    
    
    
    
    
    183,564
    
    
    
    (183,564
    )
    
    
    Investment in subsidiaries
    
    
    172,310
    
    
    
    56,743
    
    
    
    
    
    
    
    (229,053
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    39,242
    
    
    
    (39,242
    )
    
    
    Preferred stock and dividends
payable
    
    
    
    
    
    
    164,794
    
    
    
    
    
    
    
    (164,794
    )
    
    
    Total stockholders equity
(deficit)
    
    
    100,335
    
    
    
    (171,919
    )
    
    
    (56,743
    )
    
    
    229,053
    
    
    
    100,726Total liabilities and stockholders
equity (deficit)
    
    $
    367,254
    
    
    $
    49,696
    
    
    $
    876,747
    
    
    $
    (409,854
    )
    
    $
    883,843
 -13-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations
 Three Months Ended September 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    135,475
    
    
    $
    
    
    
    $
    135,475Costs and expenses
    
    
    486
    
    
    
    97
    
    
    
    122,112
    
    
    
    
    
    
    
    122,695Operating (loss) income
    
    
    (486
    )
    
    
    (97
    )
    
    
    13,363
    
    
    
    
    
    
    
    12,780Interest (income) expense, net
    
    
    (2,682
    )
    
    
    
    
    
    
    16,733
    
    
    
    
    
    
    
    14,051Interest (income) expense 
non cash preferred stock
dividend
    
    
    (3,113
    )
    
    
    3,113
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs
    
    
    1,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,015Income (loss) before taxes
    
    
    4,294
    
    
    
    (3,210
    )
    
    
    (3,370
    )
    
    
    
    
    
    
    (2,286
    )Income tax provision (benefit)
    
    
    1,268
    
    
    
    (40
    )
    
    
    (1,177
    )
    
    
    
    
    
    
    513,026
    
    
    
    (3,170
    )
    
    
    (2,193
    )
    
    
    
    
    
    
    (2,337
    )Equity in loss (income) of
subsidiaries
    
    
    5,363
    
    
    
    2,193
    
    
    
    
    
    
    
    (7,556
    )
    
    
    Net loss
    
    $
    (2,337
    )
    
    $
    (5,363
    )
    
    $
    (2,193
    )
    
    $
    7,556
    
    
    $
    (2,337
    )
 Three Months Ended September 30, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    136,310
    
    
    $
    
    
    
    $
    136,310Costs and expenses
    
    
    778
    
    
    
    104
    
    
    
    121,873
    
    
    
    
    
    
    
    122,755Operating (loss) income
    
    
    (778
    )
    
    
    (104
    )
    
    
    14,437
    
    
    
    
    
    
    
    13,555Interest (income) expense, net
    
    
    (2,682
    )
    
    
    
    
    
    
    16,613
    
    
    
    
    
    
    
    13,931Interest (income) expense  non cash
preferred stock dividend
    
    
    (3,314
    )
    
    
    3,314
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before taxes
    
    
    5,218
    
    
    
    (3,418
    )
    
    
    (2,176
    )
    
    
    
    
    
    
    (376
    )Income tax provision (benefit)
    
    
    777
    
    
    
    (42
    )
    
    
    (710
    )
    
    
    
    
    
    
    254,441
    
    
    
    (3,376
    )
    
    
    (1,466
    )
    
    
    
    
    
    
    (401
    )Equity in loss (income) of subsidiaries
    
    
    4,842
    
    
    
    1,466
    
    
    
    
    
    
    
    (6,308
    )
    
    
    Net loss
    
    $
    (401
    )
    
    $
    (4,842
    )
    
    $
    (1,466
    )
    
    $
    6,308
    
    
    $
    (401
    )
 -14-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations (continued)
 Six Months Ended September 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    272,569
    
    
    $
    
    
    
    $
    272,569Costs and expenses
    
    
    927
    
    
    
    196
    
    
    
    244,906
    
    
    
    
    
    
    
    246,029Operating (loss) income
    
    
    (927
    )
    
    
    (196
    )
    
    
    27,663
    
    
    
    
    
    
    
    26,540Interest (income) expense, net
    
    
    (5,363
    )
    
    
    
    
    
    
    33,128
    
    
    
    
    
    
    
    27,765Interest (income) expense 
non cash preferred stock
dividend
    
    
    (6,330
    )
    
    
    6,330
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs
    
    
    4,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,015Income (loss) before taxes
    
    
    6,751
    
    
    
    (6,526
    )
    
    
    (5,465
    )
    
    
    
    
    
    
    (5,240
    )Income tax provision (benefit)
    
    
    958
    
    
    
    (80
    )
    
    
    (1,834
    )
    
    
    
    
    
    
    (956
    )5,793
    
    
    
    (6,446
    )
    
    
    (3,631
    )
    
    
    
    
    
    
    (4,284
    )Equity in loss (income) of
subsidiaries
    
    
    10,077
    
    
    
    3,631
    
    
    
    
    
    
    
    (13,708
    )
    
    
    Net loss
    
    $
    (4,284
    )
    
    $
    (10,077
    )
    
    $
    (3,631
    )
    
    $
    13,708
    
    
    $
    (4,284
    )
 Six Months Ended September 30, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    275,595
    
    
    $
    
    
    
    $
    275,595Costs and expenses
    
    
    1,169
    
    
    
    209
    
    
    
    245,894
    
    
    
    
    
    
    
    247,272Operating (loss) income
    
    
    (1,169
    )
    
    
    (209
    )
    
    
    29,701
    
    
    
    
    
    
    
    28,323Interest (income) expense, net
    
    
    (5,314
    )
    
    
    
    
    
    
    32,675
    
    
    
    
    
    
    
    27,361Interest (income) expense 
non cash preferred stock
dividend
    
    
    (6,776
    )
    
    
    6,776
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs
    
    
    845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    845Income (loss) before taxes
    
    
    10,076
    
    
    
    (6,985
    )
    
    
    (2,974
    )
    
    
    
    
    
    
    117Income tax provision (benefit)
    
    
    1,348
    
    
    
    (85
    )
    
    
    (937
    )
    
    
    
    
    
    
    3268,728
    
    
    
    (6,900
    )
    
    
    (2,037
    )
    
    
    
    
    
    
    (209
    )Equity in loss (income) of
subsidiaries
    
    
    8,937
    
    
    
    2,037
    
    
    
    
    
    
    
    (10,974
    )
    
    
    Net loss
    
    $
    (209
    )
    
    $
    (8,937
    )
    
    $
    (2,037
    )
    
    $
    10,974
    
    
    $
    (209
    )
 -15-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended September 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet income (loss)
    
    $
    5,793
    
    
    $
    (6,446
    )
    
    $
    (3,631
    )
    
    $
    
    
    
    $
    (4,284
    )Noncash adjustments
    
    
    (5,143
    )
    
    
    6,250
    
    
    
    50,610
    
    
    
    
    
    
    
    51,717Change in operating
assets and
liabilities
    
    
    3,277
    
    
    
    
    
    
    
    5,458
    
    
    
    
    
    
    
    8,735Net cash provided by
(used in) operating
activities
    
    
    3,927
    
    
    
    (196
    )
    
    
    52,437
    
    
    
    
    
    
    
    56,168Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (38,468
    )
    
    
    
    
    
    
    (38,468
    )Acquisition of assets
    
    
    
    
    
    
    
    
    
    
    (196
    )
    
    
    
    
    
    
    (196
    )Proceeds from sale
of property and
equipment
    
    
    
    
    
    
    
    
    
    
    1,630
    
    
    
    
    
    
    
    1,630Net cash used in
investing activities
    
    
    
    
    
    
    
    
    
    
    (37,034
    )
    
    
    
    
    
    
    (37,034
    )Financing ActivitiesRepayment of debt
    
    
    
    
    
    
    
    
    
    
    (24,350
    )
    
    
    
    
    
    
    (24,350
    )Other financing items
    
    
    (4,836
    )
    
    
    196
    
    
    
    3,878
    
    
    
    
    
    
    
    (762
    )Net cash (used in)
provided by
financing activities
    
    
    (4,836
    )
    
    
    196
    
    
    
    (20,472
    )
    
    
    
    
    
    
    (25,112
    )Net decrease in cash
and cash equivalents
    
    
    (909
    )
    
    
    
    
    
    
    (5,069
    )
    
    
    
    
    
    
    (5,978
    )Cash and cash
equivalents,
beginning of period
    
    
    925
    
    
    
    
    
    
    
    38,105
    
    
    
    
    
    
    
    39,030Cash and cash
equivalents, end of
period
    
    $
    16
    
    
    $
    
    
    
    $
    33,036
    
    
    $
    
    
    
    $
    33,052
 -16-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Cash Flows (continued)
 Six Months Ended September 30, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet income (loss)
    
    $
    8,728
    
    
    $
    (6,900
    )
    
    $
    (2,037
    )
    
    $
    
    
    
    $
    (209
    )Noncash adjustments
    
    
    (4,413
    )
    
    
    6,692
    
    
    
    52,719
    
    
    
    
    
    
    
    54,998Change in operating
assets and
liabilities
    
    
    (1,329
    )
    
    
    30
    
    
    
    5,918
    
    
    
    
    
    
    
    4,619Net cash provided
(used in) by
operating activities
    
    
    2,986
    
    
    
    (178
    )
    
    
    56,600
    
    
    
    
    
    
    
    59,408Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (36,216
    )
    
    
    
    
    
    
    (36,216
    )Acquisition of assets
    
    
    
    
    
    
    
    
    
    
    (17,136
    )
    
    
    
    
    
    
    (17,136
    )Proceeds from sale
of property and
equipment
    
    
    
    
    
    
    
    
    
    
    710
    
    
    
    
    
    
    
    710Net cash used in
investing activities
    
    
    
    
    
    
    
    
    
    
    (52,642
    )
    
    
    
    
    
    
    (52,642
    )Financing ActivitiesRepayment of debt
    
    
    (5,649
    )
    
    
    
    
    
    
    (1,150
    )
    
    
    
    
    
    
    (6,779
    )Other financing items
    
    
    2,691
    
    
    
    178
    
    
    
    (29,825
    )
    
    
    
    
    
    
    (26,956
    )Net cash (used in)
provided by
financing activities
    
    
    (2,958
    )
    
    
    178
    
    
    
    (30,975
    )
    
    
    
    
    
    
    (33,755
    )Net increase
(decrease) in cash
and cash equivalents
    
    
    28
    
    
    
    
    
    
    
    (27,017
    )
    
    
    
    
    
    
    (26,989
    )Cash and cash
equivalents,
beginning of period
    
    
    880
    
    
    
    
    
    
    
    61,128
    
    
    
    
    
    
    
    62,008Cash and cash
equivalents, end of
period
    
    $
    908
    
    
    $
    
    
    
    $
    34,111
    
    
    $
    
    
    
    $
    35,019
 -17-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 7. Segment Information
  -18-




---



##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three months ended
    
    
    Six months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:Route
    
    $
    118,846
    
    
    $
    119,930
    
    
    $
    240,798
    
    
    $
    243,908All other:Rental
    
    
    10,064
    
    
    
    9,724
    
    
    
    19,754
    
    
    
    19,268Distribution
    
    
    6,565
    
    
    
    6,656
    
    
    
    12,017
    
    
    
    12,419Subtotal
    
    
    16,629
    
    
    
    16,380
    
    
    
    31,771
    
    
    
    31,687Total Revenue
    
    $
    135,475
    
    
    $
    136,310
    
    
    $
    272,569
    
    
    $
    275,595EBITDA (1):Route
    
    $
    37,480
    
    
    $
    38,606
    
    
    $
    76,963
    
    
    $
    79,106All other:Rental
    
    
    4,320
    
    
    
    4,292
    
    
    
    8,636
    
    
    
    8,414Distribution
    
    
    692
    
    
    
    609
    
    
    
    1,001
    
    
    
    873Subtotal
    
    
    5,012
    
    
    
    4,901
    
    
    
    9,637
    
    
    
    9,287Transaction costs (2)(3)
    
    
    (1,015
    )
    
    
    
    
    
    
    (4,015
    )
    
    
    (845
    )Corporate expenses
    
    
    (3,190
    )
    
    
    (3,102
    )
    
    
    (7,016
    )
    
    
    (6,136
    )Total EBITDA
    
    
    38,287
    
    
    
    40,405
    
    
    
    75,569
    
    
    
    81,412Reconciling items:Depreciation and amortization expense,
amortization of advance location payments and
amortization of intangibles:Route
    
    
    (23,166
    )
    
    
    (23,778
    )
    
    
    (46,335
    )
    
    
    (47,745
    )All other
    
    
    (2,000
    )
    
    
    (2,069
    )
    
    
    (3,998
    )
    
    
    (4,183
    )Corporate
    
    
    (1,356
    )
    
    
    (1,003
    )
    
    
    (2,711
    )
    
    
    (2,006
    )Total depreciation
    
    
    (26,522
    )
    
    
    (26,850
    )
    
    
    (53,044
    )
    
    
    (53,934
    )Interest expense
    
    
    (14,051
    )
    
    
    (13,931
    )
    
    
    (27,765
    )
    
    
    (27,361
    )Consolidated (loss) income before income taxes
    
    $
    (2,286
    )
    
    $
    (376
    )
    
    $
    (5,240
    )
    
    $
    117
 
 (1)
    
    See description of Non-GAAP Financial Measures immediately following this table for more information regarding
EBITDA and a reconciliation of net loss to EBITDA for the periods indicated above.(2)
    
    The computation of EBITDA for the six months ended September 30, 2007 has not been adjusted to exclude certain
transaction costs, including legal costs, incurred by the Company relating to the Merger Agreement and the transactions
contemplated thereby as described in Note 12.(3)
    
    The computation of EBITDA for the three and six months ended September 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. -19-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Non-GAAP Financial Measures
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (2.4
    )
    
    $
    (0.4
    )
    
    $
    (4.3
    )
    
    $
    (0.2
    )Provision (benefit) for income taxes
    
    
    0.1
    
    
    
    
    
    
    
    (0.9
    )
    
    
    0.3Interest expense
    
    
    14.1
    
    
    
    13.9
    
    
    
    27.8
    
    
    
    27.4Depreciation and amortization
    
    
    26.5
    
    
    
    26.9
    
    
    
    53.0
    
    
    
    53.9EBITDA*
    
    $
    38.3
    
    
    $
    40.4
    
    
    $
    75.6
    
    
    $
    81.4
 
 *
    
    The computation of EBITDA for the three and six months ended September 30, 2007 has not been adjusted to
exclude certain transaction costs, including legal costs, incurred by the Company relating to the Merger
Agreement and the transactions contemplated thereby as described in Note 12.
The computation of EBITDA for the six months ended September 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. -20-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 8. Income Taxes
  September 30, 2007
    
    
    March 31, 2007Deferred tax liabilities:Accelerated tax depreciation and contract rights
    
    $
    97,860
    
    
    $
    99,222Other
    
    
    2,770
    
    
    
    2,419Total deferred tax liabilities
    
    
    100,630
    
    
    
    101,641Deferred tax assets:Net operating loss carryforwards
    
    
    50,050
    
    
    
    49,696Covenant not to compete
    
    
    1,091
    
    
    
    1,124Interest rate swap
    
    
    701
    
    
    
    63Other
    
    
    823
    
    
    
    753Total deferred tax assets
    
    
    52,665
    
    
    
    51,636Net deferred tax liability
    
    $
    47,965
    
    
    $
    50,005
     -21-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three months ended September 30,
    
    
    Six months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Federal
    
    $
    (146
    )
    
    $
    (147
    )
    
    $
    (1,122
    )
    
    $
    (43
    )State
    
    
    197
    
    
    
    172
    
    
    
    166
    
    
    
    369$
    51
    
    
    $
    25
    
    
    $
    (956
    )
    
    $
    326
  Three months ended September 30,
    
    
    Six months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Expected tax (benefit)
provision
    
    $
    (800
    )
    
    $
    (132
    )
    
    $
    (1,834
    )
    
    $
    41State tax provision, net of
federal taxes
    
    
    128
    
    
    
    113
    
    
    
    108
    
    
    
    241Permanent book/tax differences
    
    
    723
    
    
    
    44
    
    
    
    770
    
    
    
    44Tax (benefit) provision
    
    $
    51
    
    
    $
    25
    
    
    $
    (956
    )
    
    $
    326
 9. Income (Loss) per Common Share
  -22-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three months ended
    
    
    Six months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss attributable to common
stockholders
    
    $
    (2,337
    )
    
    $
    (401
    )
    
    $
    (4,284
    )
    
    $
    (209
    )Add: Dividends paid on common stock
    
    
    (6,032
    )
    
    
    (6,002
    )
    
    
    (22,063
    )
    
    
    (24,503
    )Undistributed loss available to Class A
and Class B Common Stock
    
    $
    (8,369
    )
    
    $
    (6,403
    )
    
    $
    (26,347
    )
    
    $
    (24,712
    )Basic and diluted allocation of
undistributed loss:Class A Common Stock
    
    $
    (4,641
    )
    
    $
    (3,548
    )
    
    $
    (14,608
    )
    
    $
    (13,693
    )Class B Common Stock
    
    
    (3,728
    )
    
    
    (2,855
    )
    
    
    (11,739
    )
    
    
    (11,019
    )Total
    
    $
    (8,369
    )
    
    $
    (6,403
    )
    
    $
    (26,347
    )
    
    $
    (24,712
    )Weighted average common stock
outstanding:Class A Common Stock
    
    
    29,090,859
    
    
    
    29,050,722
    
    
    
    29,085,306
    
    
    
    29,048,625Class B Common Stock
    
    
    23,374,450
    
    
    
    23,374,450
    
    
    
    23,374,450
    
    
    
    23,374,450Total
    
    
    52,465,309
    
    
    
    52,425,172
    
    
    
    52,459,756
    
    
    
    52,423,075Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.41Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    0.43
    
    
    $
    0.53Undistributed loss per share:Class A Common Stock
    
    $
    (0.16
    )
    
    $
    (0.12
    )
    
    $
    (0.50
    )
    
    $
    (0.47
    )Class B Common Stock
    
    $
    (0.16
    )
    
    $
    (0.12
    )
    
    $
    (0.50
    )
    
    $
    (0.47
    )Basic and diluted income (loss) per shareClass A Common Stock
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    (0.09
    )
    
    $
    (0.06
    )Class B Common Stock
    
    $
    (0.16
    )
    
    $
    (0.12
    )
    
    $
    (0.07
    )
    
    $
    0.06
  -23-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  10. 2004 Long-Term Incentive Plan
      -24-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
       -25-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  WeightedAverage FairShares
    
    
    Value at Date ofOutstanding
    
    
    ContractRestricted shares unvested at April 1, 2007
    
    
    179,778
    
    
    $
    9.81Granted
    
    
    3,565
    
    
    
    11.71Vested
    
    
    17,745
    
    
    
    9.56Restricted shares unvested at September 30, 2007
    
    
    165,598
    
    
    $
    9.87
   11. New Accounting Pronouncements
   -26-




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      -28-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
    13. Subsequent Event
   -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, 2007 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
    Critical Accounting Policies: Use of Estimates
  Income Taxes
    -31-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 New Accounting Pronouncements
   -32-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 Results of Operations
  Comparison of the three- and six-month periods ended September 30, 2007 and September 30,
2006.
  Three months ended September 30,
    
    
    Six months ended September 30,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    118.8
    
    
    $
    119.9
    
    
    $
    (1.1
    )
    
    $
    240.8
    
    
    $
    243.9
    
    
    $
    (3.1
    )Rental
    
    
    10.1
    
    
    
    9.7
    
    
    
    0.4
    
    
    
    19.8
    
    
    
    19.3
    
    
    
    0.5Distribution
    
    
    6.6
    
    
    
    6.7
    
    
    
    (0.1
    )
    
    
    12.0
    
    
    
    12.4
    
    
    
    (0.4
    )$
    135.5
    
    
    $
    136.3
    
    
    $
    (0.8
    )
    
    $
    272.6
    
    
    $
    275.6
    
    
    $
    (3.0
    )
     -33-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Three months ended September 30,
    
    
    Six months ended September 30,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    85.6
    
    
    $
    85.7
    
    
    $
    (0.1
    )
    
    $
    171.6
    
    
    $
    172.9
    
    
    $
    (1.3
    )Rental
    
    
    5.7
    
    
    
    5.4
    
    
    
    0.3
    
    
    
    11.1
    
    
    
    10.9
    
    
    
    0.2Distribution
    
    
    1.7
    
    
    
    1.7
    
    
    
    
    
    
    
    3.3
    
    
    
    3.4
    
    
    
    (0.1
    )$
    93.0
    
    
    $
    92.8
    
    
    $
    0.2
    
    
    $
    186.0
    
    
    $
    187.2
    
    
    $
    (1.2
    )
     -34-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
        -35-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
     -36-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Three months ended September 30,
    
    
    Six months ended September 30,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    37.5
    
    
    $
    38.6
    
    
    $
    (1.1
    )
    
    $
    77.0
    
    
    $
    79.1
    
    
    $
    (2.1
    )Rental
    
    
    4.3
    
    
    
    4.3
    
    
    
    
    
    
    
    8.6
    
    
    
    8.4
    
    
    
    0.2Distribution
    
    
    0.7
    
    
    
    0.6
    
    
    
    0.1
    
    
    
    1.0
    
    
    
    0.9
    
    
    
    0.1Corporate expenses
    
    
    (3.2
    )
    
    
    (3.1
    )
    
    
    (0.1
    )
    
    
    (7.0
    )
    
    
    (6.1
    )
    
    
    (0.9
    )Transaction costs
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.0
    )
    
    
    (4.0
    )
    
    
    (0.9
    )
    
    
    (3.1
    )Total EBITDA(1)(2)
    
    $
    38.3
    
    
    $
    40.4
    
    
    $
    (2.1
    )
    
    $
    75.6
    
    
    $
    81.4
    
    
    $
    (5.8
    )
 
 (1)
    
    The computation of EBITDA for the three and six months ended September 30, 2007 has not been
adjusted to exclude certain transaction costs, including legal costs, incurred by the Company
relating to transactions contemplated by the Merger Agreement as described in Note 12.(2)
    
    The computation of EBITDA for the six months ended September 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.   -37-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Liquidity and Capital Resources
     -38-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 Dividend Policy
      Financing Activities
  -39-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 11% Senior Secured Notes
     Senior Credit Facility
   -40-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
   The Intercompany Loan
    Merger Agreement
   -41-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
      -42-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
     Operating and Investing Activities
  -43-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Capital Expenditures
  -44-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Three months ended September 30,
    
    
    Six months ended September 30,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    17.3
    
    
    $
    15.7
    
    
    $
    1.6
    
    
    $
    33.5
    
    
    $
    31.6
    
    
    $
    0.9Rental
    
    
    1.7
    
    
    
    1.2
    
    
    
    0.5
    
    
    
    2.5
    
    
    
    1.7
    
    
    
    0.8Distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    0.2
    
    
    
    1.0
    
    
    
    (0.8
    )
    
    
    0.8
    
    
    
    2.2
    
    
    
    (1.4
    )$
    19.2
    
    
    $
    17.9
    
    
    $
    1.3
    
    
    $
    36.8
    
    
    $
    35.5
    
    
    $
    1.3
  Summary of Contractual Obligations
  Payments Due in Fiscal YearTotal
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    AfterLong-Term Debt Obligations
    
    $
    648.3
    
    
    $
    1.2
    
    
    $
    3.2
    
    
    $
    5.8
    
    
    $
    5.8
    
    
    $
    5.7
    
    
    $
    626.6Interest on Long-Term Debt
(1)
    
    
    388.3
    
    
    
    28.0
    
    
    
    55.9
    
    
    
    55.5
    
    
    
    55.1
    
    
    
    54.6
    
    
    
    139.2Capital Lease Obligations (2)
    
    
    8.9
    
    
    
    2.0
    
    
    
    3.2
    
    
    
    2.0
    
    
    
    1.3
    
    
    
    0.4
    
    
    
    Operating Lease Obligations
    
    
    34.0
    
    
    
    4.4
    
    
    
    7.6
    
    
    
    6.5
    
    
    
    4.7
    
    
    
    3.3
    
    
    
    7.5$
    1,079.5
    
    
    $
    35.6
    
    
    $
    69.9
    
    
    $
    69.8
    
    
    $
    66.9
    
    
    $
    64.0
    
    
    $
    773.3
 
 (1)
    
    As of September 30, 2007, $566.0 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 8.0625% based on the Eurodollar rate in effect at September 30,
2007. 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
  -45-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
      -46-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
     -47-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Inflation and Seasonality
  Special Note Concerning Forward Looking Statements
    
    
    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;
 -48-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
    
    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;
 
    
    the delay or failure to consummate the proposed Merger, which could negatively impact our
business, stock price, financial condition and operations; and
 
    
    other factors discussed elsewhere in this report and in our other public filings with the
SEC, including the Companys Annual Report on Form 10-K/A filed on July 27, 2007.
  -49-




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 Changes in Internal Control over Financial Reporting
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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
 Exhibit Number
    
    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
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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 SIGNATURES
  Date: November 7, 2007
    COINMACH SERVICE CORP.By:

/s/  Robert M. DoyleName:
    Robert M. DoyleTitle:
    Chief Financial Officer (on behalf of
registrant and as Principal Financial Officer) -53-




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 INDEX TO EXHIBITS
 Exhibit Number
    
    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 -54-