##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 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, New York
    
    11803(Address of principal executive offices)
    
    (Zip Code)
 (516) 349-8555
  þ o
  o þ o
  o þ
  Class
    
    Outstanding at July 31, 2007Class A common stock, $0.01 par value per share
    
    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
    
    
    3ITEM 1.
    
    Financial Statements
    
    
    3Condensed
Consolidated Balance Sheets  June 30, 2007 (Unaudited) and March 31, 2007
    
    
    3Condensed Consolidated Statements of Operations (Unaudited)  Three Months ended June 30, 2007 and 2006
    
    
    4Condensed Consolidated Statement of Stockholders Equity  Three Months ended June 30, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited)  Three Months ended June 30, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition 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
    
    
    50Index to Exhibits
    
    
    51EX-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
  June 30, 2007
    
    
    March 31, 20071(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    31,168
    
    
    $
    39,030Receivables, net
    
    
    6,484
    
    
    
    6,755Inventories
    
    
    14,940
    
    
    
    14,575Prepaid expenses
    
    
    4,798
    
    
    
    4,997Interest rate swap asset
    
    
    3,043
    
    
    
    Other current assets
    
    
    2,999
    
    
    
    2,377Total current assets
    
    
    63,432
    
    
    
    67,734Advance location payments
    
    
    62,618
    
    
    
    64,371Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization of $493,578 and $475,926
    
    
    236,881
    
    
    
    239,740Contract rights, net of accumulated amortization of $131,863 and $128,466
    
    
    291,403
    
    
    
    294,800Goodwill
    
    
    208,737
    
    
    
    208,590Other assets
    
    
    8,882
    
    
    
    8,608Total assets
    
    $
    871,953
    
    
    $
    883,843LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable and accrued expenses
    
    $
    39,494
    
    
    $
    35,796Accrued rental payments
    
    
    34,476
    
    
    
    33,019Accrued interest
    
    
    6,902
    
    
    
    6,847Interest rate swap liability
    
    
    
    
    
    
    155Current portion of long-term debt
    
    
    5,968
    
    
    
    5,527Total current liabilities
    
    
    86,840
    
    
    
    81,344Deferred income taxes
    
    
    49,986
    
    
    
    50,005Long-term debt, less current portion
    
    
    650,310
    
    
    
    651,768Total liabilities
    
    
    787,136
    
    
    
    783,117Stockholders equity:Class A Common Stock  $0.01 par value; 100,000,000 shares authorized;
29,263,595 shares issued and outstanding
    
    
    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
    
    
    389,965
    
    
    
    389,862Carryover basis adjustment
    
    
    (7,988
    )
    
    
    (7,988
    )Accumulated other comprehensive income (loss), net of tax
    
    
    1,735
    
    
    
    (231
    )Accumulated deficit
    
    
    (299,421
    )
    
    
    (281,443
    )Total stockholders equity
    
    
    84,817
    
    
    
    100,726Total liabilities and stockholders equity
    
    $
    871,953
    
    
    $
    883,843
  
 1
    
    The March 31, 2007 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 EndedJune 30, 2007
    
    
    June 30, 2006REVENUES
    
    $
    137,094
    
    
    $
    139,285COSTS AND EXPENSES:Laundry operating expenses (exclusive of
depreciation and amortization and
amortization of advance location
payments)
    
    
    92,986
    
    
    
    94,399General and administrative (including
stock-based compensation expense of $103
and $38, respectively)
    
    
    3,826
    
    
    
    3,034Depreciation and amortization
    
    
    18,130
    
    
    
    18,624Amortization of advance location payments
    
    
    4,900
    
    
    
    4,900Amortization of intangibles
    
    
    3,492
    
    
    
    3,560123,334
    
    
    
    124,517OPERATING INCOME
    
    
    13,760
    
    
    
    14,768INTEREST EXPENSE
    
    
    13,714
    
    
    
    13,430TRANSACTION COSTS
    
    
    3,000
    
    
    
    845(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (2,954
    )
    
    
    493(BENEFIT) PROVISION FOR INCOME TAXES:Current
    
    
    246
    
    
    
    168Deferred
    
    
    (1,253
    )
    
    
    133(1,007
    )
    
    
    301NET (LOSS) INCOME
    
    $
    (1,947
    )
    
    $
    192Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21Class B Common Stock
    
    $
    0.43
    
    
    $
    0.53Basic and diluted net (loss) income per share:Class A Common Stock
    
    $
    (0.13
    )
    
    $
    (0.14
    )Class B Common Stock
    
    $
    0.09
    
    
    $
    0.18Weighted average common stock outstanding:Class A Common Stock
    
    
    29,080,247
    
    
    
    29,046,528Class B Common Stock
    
    
    23,374,450
    
    
    
    23,374,450Cash dividends per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21Class B Common Stock
    
    $
    0.43
    
    
    $
    0.53
  4




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
  THREE MONTHS ENDED JUNE 30, 2007
 (UNAUDITED)
  AccumulatedOtherClass A
    
    
    Class B
    
    
    Capital
    
    
    Carryover
    
    
    ComprehensiveCommon
    
    
    Common
    
    
    in Excess
    
    
    Basis
    
    
    Income, net of
    
    
    Accumulated
    
    
    StockholdersStock
    
    
    Stock
    
    
    of Par Value
    
    
    Adjustment
    
    
    tax
    
    
    Deficit
    
    
    EquityBalance, March 31, 2007
    
    $
    292
    
    
    $
    234
    
    
    $
    389,862
    
    
    $
    (7,988
    )
    
    $
    (231
    )
    
    $
    (281,443
    )
    
    $
    100,726Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,947
    )
    
    
    (1,947
    )Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,966
    
    
    
    
    
    
    
    1,966Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,031
    )
    
    
    (16,031
    )Stockbased compensation
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103Balance, June 30, 2007
    
    $
    292
    
    
    $
    234
    
    
    $
    389,965
    
    
    $
    (7,988
    )
    
    $
    1,735
    
    
    $
    (299,421
    )
    
    $
    84,817
  5




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  Three Months EndedJune 30, 2007
    
    
    June 30, 2006OPERATING ACTIVITIES:Net (loss) income
    
    $
    (1,947
    )
    
    $
    192Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    18,130
    
    
    
    18,624Amortization of advance location payments
    
    
    4,900
    
    
    
    4,900Amortization of intangibles
    
    
    3,492
    
    
    
    3,560Deferred income taxes
    
    
    (1,253
    )
    
    
    133Amortization of deferred issue costs
    
    
    198
    
    
    
    200Write-off of deferred issue costs
    
    
    
    
    
    
    414Premium on redemption of 11% senior secured notes due 2024
    
    
    
    
    
    
    417Gain on sale of equipment
    
    
    (196
    )
    
    
    (77
    )Stock-based compensation
    
    
    103
    
    
    
    38Change in operating assets and liabilities, net of businesses acquired:Other assets
    
    
    (1,212
    )
    
    
    311Receivables, net
    
    
    840
    
    
    
    (751
    )Inventories and prepaid expenses
    
    
    (166
    )
    
    
    (2,177
    )Accounts payable and accrued expenses, net
    
    
    4,591
    
    
    
    1,635Accrued interest
    
    
    55
    
    
    
    3,169Net cash provided by operating activities
    
    
    27,535
    
    
    
    30,588INVESTING ACTIVITIES:Additions to property, equipment and leasehold improvements
    
    
    (15,230
    )
    
    
    (14,534
    )Advance location payments to location owners
    
    
    (3,147
    )
    
    
    (3,346
    )Acquisition of net assets related to acquisitions of businesses,
net of cash acquired
    
    
    (196
    )
    
    
    (14,541
    )Proceeds from sale of property and equipment
    
    
    774
    
    
    
    293Net cash used in investing activities
    
    
    (17,799
    )
    
    
    (32,128
    )FINANCING ACTIVITIES:Repayments under credit facility
    
    
    (8,575
    )
    
    
    (575
    )Proceeds from credit facility
    
    
    8,000
    
    
    
    Principal payments on capitalized lease obligations
    
    
    (980
    )
    
    
    (945
    )Repayments to bank and other borrowings
    
    
    (12
    )
    
    
    (70
    )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
    
    
    (16,031
    )
    
    
    (18,502
    )Net cash used in financing activities
    
    
    (17,598
    )
    
    
    (26,167
    )Net decrease in cash and cash equivalents
    
    
    (7,862
    )
    
    
    (27,707
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    39,030
    
    
    
    62,008CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    31,168
    
    
    $
    34,301SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    13,461
    
    
    $
    10,061Income taxes paid
    
    $
    107
    
    
    $
    90NON CASH FINANCING ACTIVITIES:Acquisition of fixed assets through capital leases
    
    $
    550
    
    
    $
    674
  6




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 The IDS Transactions and Class A Common Stock Offering
   Dividends
  8




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 2. Inventories
  June 30, 2007
    
    
    March 31, 2007Laundry equipment
    
    $
    10,983
    
    
    $
    10,825Machine repair parts
    
    
    3,957
    
    
    
    3,750$
    14,940
    
    
    $
    14,575
 3. Goodwill and Contract Rights
  June 30, 2007
    
    
    March 31, 2007Route
    
    $
    197,158
    
    
    $
    197,158Rental
    
    
    8,662
    
    
    
    8,515Distribution
    
    
    2,917
    
    
    
    2,917$
    208,737
    
    
    $
    208,590
   9




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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)
    
    $
    10.22009
    
    
    13.32010
    
    
    12.92011
    
    
    12.62012
    
    
    12.32013
    
    
    12.0
    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
  June 30, 2007
    
    
    March 31, 2007Credit facility indebtedness
    
    $
    566,550
    
    
    $
    567,12511% Senior Secured Notes
    
    
    82,067
    
    
    
    82,067Obligations under capital leases
    
    
    7,435
    
    
    
    7,865Other long-term debt with varying
terms and maturities
    
    
    226
    
    
    
    238656,278
    
    
    
    657,295Less current portion
    
    
    5,968
    
    
    
    5,527$
    650,310
    
    
    $
    651,768
 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
      Interest Rate Swaps
  12




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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
   13




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Balance Sheets
 June 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    Corporation
    
    
    AdjustmentsService
    
    
    Laundry
    
    
    And
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventories, prepaid
expenses and other current assets
    
    $
    76
    
    
    $
    
    
    
    $
    63,439
    
    
    $
    (83
    )
    
    $
    63,432Advance location payments
    
    
    
    
    
    
    
    
    
    
    62,618
    
    
    
    
    
    
    
    62,618Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    236,881
    
    
    
    
    
    
    
    236,881Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    500,140
    
    
    
    
    
    
    
    500,140Deferred income taxes
    
    
    6,946
    
    
    
    927
    
    
    
    
    
    
    
    (7,873
    )
    
    
    Due from parent
    
    
    
    
    
    
    48,712
    
    
    
    
    
    
    
    (48,712
    )
    
    
    Investment in preferred stock
    
    
    154,747
    
    
    
    
    
    
    
    
    
    
    
    (154,747
    )
    
    
    Other assets
    
    
    192,337
    
    
    
    
    
    
    
    5,194
    
    
    
    (188,649
    )
    
    
    8,882Total assets
    
    $
    354,106
    
    
    $
    49,639
    
    
    $
    868,272
    
    
    $
    (400,064
    )
    
    $
    871,953Liabilities and Stockholders Equity
(Deficit)Current liabilities:Accounts payable, accrued expenses and
accrued rental payments
    
    $
    3,358
    
    
    $
    80
    
    
    $
    82,604
    
    
    $
    (5,170
    )
    
    $
    80,872Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    5,968
    
    
    
    
    
    
    
    5,968Total current liabilities
    
    
    3,358
    
    
    
    80
    
    
    
    88,572
    
    
    
    (5,170
    )
    
    
    86,840Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    57,859
    
    
    
    (7,873
    )
    
    
    49,986Intercompany loans and advances
    
    
    9,197
    
    
    
    
    
    
    
    
    
    
    
    (9,197
    )
    
    
    Long-term debt, less current portion
    
    
    82,067
    
    
    
    
    
    
    
    568,243
    
    
    
    
    
    
    
    650,310Loan payable to parent
    
    
    
    
    
    
    
    
    
    
    183,564
    
    
    
    (183,564
    )
    
    
    Investment in subsidiaries
    
    
    175,057
    
    
    
    69,479
    
    
    
    
    
    
    
    (244,536
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    39,513
    
    
    
    (39,513
    )
    
    
    Preferred stock and dividends payable
    
    
    
    
    
    
    154,747
    
    
    
    
    
    
    
    (154,747
    )
    
    
    Total stockholders equity (deficit)
    
    
    84,427
    
    
    
    (174,667
    )
    
    
    (69,479
    )
    
    
    244,536
    
    
    
    84,817Total liabilities and stockholders
equity (deficit)
    
    $
    354,106
    
    
    $
    49,639
    
    
    $
    868,272
    
    
    $
    (400,064
    )
    
    $
    871,953
 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 (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
 15




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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 June 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    137,094
    
    
    $
    
    
    
    $
    137,094Costs and expenses
    
    
    442
    
    
    
    98
    
    
    
    122,794
    
    
    
    
    
    
    
    123,334Operating (loss) income
    
    
    (442
    )
    
    
    (98
    )
    
    
    14,300
    
    
    
    
    
    
    
    13,760Interest (income) expense, net
    
    
    (2,681
    )
    
    
    
    
    
    
    16,395
    
    
    
    
    
    
    
    13,714Interest (income) expense -
non cash preferred stock
dividend
    
    
    (3,217
    )
    
    
    3,217
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Income (loss) before taxes
    
    
    2,456
    
    
    
    (3,315
    )
    
    
    (2,095
    )
    
    
    
    
    
    
    (2,954
    )Income tax benefit
    
    
    (310
    )
    
    
    (40
    )
    
    
    (657
    )
    
    
    
    
    
    
    (1,007
    )2,766
    
    
    
    (3,275
    )
    
    
    (1,438
    )
    
    
    
    
    
    
    (1,947
    )Equity in loss (income) of
subsidiaries
    
    
    4,713
    
    
    
    1,438
    
    
    
    
    
    
    
    (6,151
    )
    
    
    Net loss
    
    $
    (1,947
    )
    
    $
    (4,713
    )
    
    $
    (1,438
    )
    
    $
    6,151
    
    
    $
    (1,947
    )
 Three Months Ended June 30, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    139,285
    
    
    $
    
    
    
    $
    139,285Costs and expenses
    
    
    391
    
    
    
    105
    
    
    
    124,021
    
    
    
    
    
    
    
    124,517Operating (loss) income
    
    
    (391
    )
    
    
    (105
    )
    
    
    15,264
    
    
    
    
    
    
    
    14,768Interest (income) expense, net
    
    
    (2,632
    )
    
    
    
    
    
    
    16,062
    
    
    
    
    
    
    
    13,430Interest (income) expense -
non cash preferred stock
dividend
    
    
    (3,462
    )
    
    
    3,462
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs
    
    
    845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    845Income (loss) before taxes
    
    
    4,858
    
    
    
    (3,567
    )
    
    
    (798
    )
    
    
    
    
    
    
    493Income tax provision (benefit)
    
    
    570
    
    
    
    (43
    )
    
    
    (226
    )
    
    
    
    
    
    
    3014,288
    
    
    
    (3,524
    )
    
    
    (572
    )
    
    
    
    
    
    
    192Equity in loss (income) of
subsidiaries
    
    
    4,096
    
    
    
    572
    
    
    
    
    
    
    
    (4,668
    )
    
    
    Net income (loss)
    
    $
    192
    
    
    $
    (4,096
    )
    
    $
    (572
    )
    
    $
    4,668
    
    
    $
    192
 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 Cash Flows
 Three Months Ended June 30, 2007CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    AndCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net income (loss)
    
    $
    2,766
    
    
    $
    (3,275
    )
    
    $
    (1,438
    )
    
    $
    
    
    
    $
    (1,947
    )Noncash adjustments
    
    
    (3,416
    )
    
    
    3,177
    
    
    
    25,613
    
    
    
    
    
    
    
    25,374Change in operating assets and
liabilities
    
    
    2,784
    
    
    
    
    
    
    
    1,324
    
    
    
    
    
    
    
    4,108Net cash provided by (used in)
operating activities
    
    
    2,134
    
    
    
    (98
    )
    
    
    25,499
    
    
    
    
    
    
    
    27,535Investing Activities:Capital expenditures and advance
location payments
    
    
    
    
    
    
    
    
    
    
    (18,377
    )
    
    
    
    
    
    
    (18,377
    )Acquisition of net assets
    
    
    
    
    
    
    
    
    
    
    (196
    )
    
    
    
    
    
    
    (196
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    
    
    
    
    774
    
    
    
    
    
    
    
    774Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (17,799
    )
    
    
    
    
    
    
    (17,799
    )Financing Activities:Repayment of debt
    
    
    
    
    
    
    
    
    
    
    (8,575
    )
    
    
    
    
    
    
    (8,575
    )Other financing items
    
    
    (3,059
    )
    
    
    98
    
    
    
    (6,062
    )
    
    
    
    
    
    
    (9,023
    )Net cash (used in) provided by
financing activities
    
    
    (3,059
    )
    
    
    98
    
    
    
    (14,637
    )
    
    
    
    
    
    
    (17,598
    )Net decrease in cash and cash
equivalents
    
    
    (925
    )
    
    
    
    
    
    
    (6,937
    )
    
    
    
    
    
    
    (7,862
    )Cash and cash equivalents, beginning
of period
    
    
    925
    
    
    
    
    
    
    
    38,105
    
    
    
    
    
    
    
    39,030Cash and cash equivalents, end of
period
    
    $
    
    
    
    $
    
    
    
    $
    31,168
    
    
    $
    
    
    
    $
    31,168
 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 Cash Flows (continued)
 Three Months Ended June 30, 2006CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorporation
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Elimination
    
    
    ConsolidatedOperating Activities:Net income (loss)
    
    $
    4,288
    
    
    $
    (3,524
    )
    
    $
    (572
    )
    
    $
    
    
    
    $
    192Noncash adjustments
    
    
    (1,967
    )
    
    
    3,420
    
    
    
    26,756
    
    
    
    
    
    
    
    28,209Change in operating assets and
liabilities
    
    
    (1,497
    )
    
    
    5
    
    
    
    3,679
    
    
    
    
    
    
    
    2,187Net cash provided by (used in)
operating activities
    
    
    824
    
    
    
    (99
    )
    
    
    29,863
    
    
    
    
    
    
    
    30,588Investing Activities:Capital expenditures and advance
location payments
    
    
    
    
    
    
    
    
    
    
    (17,880
    )
    
    
    
    
    
    
    (17,880
    )Acquisition of net assets
    
    
    
    
    
    
    
    
    
    
    (14,541
    )
    
    
    
    
    
    
    (14,541
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    
    
    
    
    293
    
    
    
    
    
    
    
    293Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (32,128
    )
    
    
    
    
    
    
    (32,128
    )Financing Activities:Repayment of debt
    
    
    (5,649
    )
    
    
    
    
    
    
    (575
    )
    
    
    
    
    
    
    (6,224
    )Other financing items
    
    
    4,853
    
    
    
    99
    
    
    
    (24,895
    )
    
    
    
    
    
    
    (19,943
    )Net cash (used in) provided by
financing activities
    
    
    (796
    )
    
    
    99
    
    
    
    (25,470
    )
    
    
    
    
    
    
    (26,167
    )Net increase (decrease) in cash and
cash equivalents
    
    
    28
    
    
    
    
    
    
    
    (27,735
    )
    
    
    
    
    
    
    (27,707
    )Cash and cash equivalents, beginning
of period
    
    
    880
    
    
    
    
    
    
    
    61,128
    
    
    
    
    
    
    
    62,008Cash and cash equivalents, end of
period
    
    $
    908
    
    
    $
    
    
    
    $
    33,393
    
    
    $
    
    
    
    $
    34,301
 18




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 7. Segment Information
  19




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three months ended June 30,2007
    
    
    2006Revenue:Route
    
    $
    121,952
    
    
    $
    123,978All other:Rental
    
    
    9,690
    
    
    
    9,545Distribution
    
    
    5,452
    
    
    
    5,762Subtotal
    
    
    15,142
    
    
    
    15,307Total revenue
    
    $
    137,094
    
    
    $
    139,285EBITDA (1):Route
    
    $
    39,483
    
    
    $
    40,500All other:Rental
    
    
    4,316
    
    
    
    4,122Distribution
    
    
    309
    
    
    
    264Subtotal
    
    
    4,625
    
    
    
    4,386Transaction costs (2)(3)
    
    
    (3,000
    )
    
    
    (845
    )Corporate expenses
    
    
    (3,826
    )
    
    
    (3,034
    )Total EBITDA
    
    
    37,282
    
    
    
    41,007Reconciling items:Depreciation and amortization expense,
amortization of advance location payments and
amortization of intangibles:Route
    
    
    (23,168
    )
    
    
    (23,967
    )All other
    
    
    (1,998
    )
    
    
    (2,114
    )Corporate
    
    
    (1,356
    )
    
    
    (1,003
    )Total depreciation
    
    
    (26,522
    )
    
    
    (27,084
    )Interest expense
    
    
    (13,714
    )
    
    
    (13,430
    )Consolidated (loss) income before
income taxes
    
    $
    (2,954
    )
    
    $
    493
 
 (1)
    
    See description of Non-GAAP Financial Measures immediately following
this table for more information regarding EBITDA and a reconciliation of net
(loss) income to EBITDA for the periods indicated above.(2)
    
    The computation of EBITDA for the three months ended June 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 months ended June 30, 2006 has not
been adjusted to exclude transaction costs consisting of: (i) the premium paid
to purchase certain 11% Senior Secured Notes of approximately $0.4 million and
(ii) the write-off of a proportionate amount of unamortized deferred financing
costs of approximately $0.4 million. 20




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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 June 30,2007
    
    
    2006Net (loss) income
    
    $
    (2.0
    )
    
    $
    0.2(Benefit) provision for income taxes
    
    
    (1.0
    )
    
    
    0.3Interest expense
    
    
    13.7
    
    
    
    13.4Depreciation and amortization
    
    
    26.6
    
    
    
    27.1EBITDA(1)(2)
    
    $
    37.3
    
    
    $
    41.0
 
 (1)
    
    The computation of EBITDA for the three months ended June 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.(2)
    
    The computation of EBITDA for the three months ended June 30, 2006 has not
been adjusted to exclude transaction costs consisting of: (i) the premium paid
to purchase certain 11% Senior Secured Notes of approximately $0.4 million and
(ii) the write-off of a proportionate amount of unamortized deferred financing
costs of approximately $0.4 million. 21




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 8. Income Taxes
  June 30, 2007
    
    
    March 31, 2007Deferred tax liabilities:Accelerated tax depreciation and contract rights
    
    $
    98,836
    
    
    $
    99,222Interest rate swap
    
    
    1,243
    
    
    
    Other
    
    
    2,375
    
    
    
    2,419Total deferred tax liabilities
    
    
    102,454
    
    
    
    101,641Deferred tax assets:Net operating loss carryforwards
    
    
    50,433
    
    
    
    49,696Covenant not to compete
    
    
    1,107
    
    
    
    1,124Interest rate swap
    
    
    
    
    
    
    63Other
    
    
    928
    
    
    
    753Total deferred tax asset
    
    
    52,468
    
    
    
    51,636Net deferred tax liability
    
    $
    49,986
    
    
    $
    50,005
  Accounting for Uncertainty in Income Taxes, Accounting for Income Taxes
  22




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
   Three months ended June 30,2007
    
    
    2006Federal
    
    $
    (976
    )
    
    $
    104State
    
    
    (31
    )
    
    
    197$
    (1,007
    )
    
    $
    301
  Three months ended June 30,2007
    
    
    2006Expected tax (benefit) provision
    
    $
    (1,034
    )
    
    $
    173State tax (benefit) provision, net of federal taxes
    
    
    (20
    )
    
    
    128Permanent book/tax differences
    
    
    47
    
    
    
    Tax (benefit) provision
    
    $
    (1,007
    )
    
    $
    301
 9. (Loss) Income per Common Share
   Three Months Ended June 30,2007
    
    
    2006Net (loss) income attributable to common stockholders
    
    $
    (1,947
    )
    
    $
    192Add: Dividends paid on common stock
    
    
    (16,031
    )
    
    
    (18,502
    )Undistributed loss available to Class A and Class B common stock
    
    $
    (17,978
    )
    
    $
    (18,310
    )
 23




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Three Months Ended June 30,2007
    
    
    2006Basic and diluted allocation of undistributed loss:Class A Common Stock
    
    $
    (9,967
    )
    
    $
    (10,146
    )Class B Common Stock
    
    
    (8,011
    )
    
    
    (8,164
    )Total
    
    $
    (17,978
    )
    
    $
    (18,310
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    29,080,247
    
    
    
    29,046,528Class B Common Stock
    
    
    23,374,450
    
    
    
    23,374,450Total
    
    
    52,454,697
    
    
    
    52,420,978Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    0.21Class B Common Stock
    
    $
    0.43
    
    
    $
    0.53Undistributed loss per share:Class A Common Stock
    
    $
    (0.34
    )
    
    $
    (0.35
    )Class B Common Stock
    
    $
    (0.34
    )
    
    $
    (0.35
    )Basic and diluted (loss) income per share:Class A Common Stock
    
    $
    (0.13
    )
    
    $
    (0.14
    )Class B Common Stock
    
    $
    0.09
    
    
    $
    0.18
   10. 2004 Long-Term Incentive Plan
  24




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##### Table of Contents



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




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
       Weighted AverageShares
    
    Fair Value at DateOutstanding
    
    of ContractRestricted shares unvested at April 1, 2007
    
    
    179,778
    
    
    $
    9.81Granted
    
    
    3,565
    
    
    
    11.71Vested
    
    
    10,057
    
    
    
    9.69Restricted shares unvested at June 30, 2007
    
    
    173,286
    
    
    $
    9.86
  26




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
   11. New Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB
Statement No. 115 Accounting for
Certain Investments in Debt and Equity Securities
 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)
     29




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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
  Accounting for Uncertainty in Income Taxes, an Interpretation of FASB
Statement No. 109
  31




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  New Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB
Statement No. 115 Accounting for
Certain Investments in Debt and Equity Securities
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COINMACH SERVICE CORP. AND SUBSIDIARIES
 Results of Operations
  Comparison of the three-month periods ended June 30, 2007 and June 30, 2006.
  Three months ended June 30,2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    122.0
    
    
    $
    124.0
    
    
    $
    (2.0
    )Rental
    
    
    9.7
    
    
    
    9.5
    
    
    
    0.2Distribution
    
    
    5.4
    
    
    
    5.8
    
    
    
    (0.4
    )$
    137.1
    
    
    $
    139.3
    
    
    $
    (2.2
    )
       33




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COINMACH SERVICE CORP. AND SUBSIDIARIES
        34




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COINMACH SERVICE CORP. AND SUBSIDIARIES
      Three months ended June 30,2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    39.5
    
    
    $
    40.5
    
    
    $
    (1.0
    )Rental
    
    
    4.3
    
    
    
    4.1
    
    
    
    0.2Distribution
    
    
    0.3
    
    
    
    0.3
    
    
    
    Corporate expenses
    
    
    (3.8
    )
    
    
    (3.0
    )
    
    
    (0.8
    )Transaction costs
    
    
    (3.0
    )
    
    
    (0.9
    )
    
    
    (2.1
    )Total EBITDA (1)(2)
    
    $
    37.3
    
    
    $
    41.0
    
    
    $
    (3.7
    )
 
 (1)
    
    The computation of EBITDA for the three months
ended June 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.(2)
    
    The computation of EBITDA for the three months ended
June 30 2006 has not been adjusted to exclude transaction
costs consisting of: (i) the premium paid to purchase
certain 11% Senior Secured Notes of approximately $0.4
million and (ii) the write-off of a proportionate amount
of unamortized deferred financing costs of approximately
$0.4 million.  35




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COINMACH SERVICE CORP. AND SUBSIDIARIES
   Liquidity and Capital Resources
   36




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COINMACH SERVICE CORP. AND SUBSIDIARIES
   Dividend Policy
      37




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 Financing Activities
  11% Senior Secured Notes
     Senior Credit Facility
   38




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COINMACH SERVICE CORP. AND SUBSIDIARIES
    The Intercompany Loan
    Merger Agreement
  39




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COINMACH SERVICE CORP. AND SUBSIDIARIES
       40




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COINMACH SERVICE CORP. AND SUBSIDIARIES
    Operating and Investing Activities
  Capital Expenditures
  41




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COINMACH SERVICE CORP. AND SUBSIDIARIES
   Three months ended June 30,2007
    
    
    2006
    
    
    ChangeRoute
    
    $
    16.2
    
    
    $
    16.0
    
    
    $
    0.2Rental
    
    
    0.8
    
    
    
    0.4
    
    
    
    0.4Distribution
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    0.6
    
    
    
    1.2
    
    
    
    (0.6
    )$
    17.6
    
    
    $
    17.6
    
    
    $
    
  Summary of Contractual Obligations
  Payments Due in Fiscal YearTotal
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    AfterLong-Term Debt Obligations
    
    $
    648.8
    
    
    $
    1.8
    
    
    $
    3.2
    
    
    $
    5.7
    
    
    $
    5.8
    
    
    $
    5.7
    
    
    $
    626.6Interest on Long-Term Debt (1)
    
    
    389.0
    
    
    
    40.2
    
    
    
    53.5
    
    
    
    53.1
    
    
    
    52.6
    
    
    
    52.2
    
    
    
    137.4Capital Lease Obligations (2)
    
    
    8.5
    
    
    
    2.8
    
    
    
    2.9
    
    
    
    1.6
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    Operating Lease Obligations
    
    
    34.9
    
    
    
    6.5
    
    
    
    7.4
    
    
    
    6.3
    
    
    
    4.6
    
    
    
    2.8
    
    
    
    7.3$
    1,081.2
    
    
    $
    51.3
    
    
    $
    67.0
    
    
    $
    66.7
    
    
    $
    64.0
    
    
    $
    60.9
    
    
    $
    771.3
 
 (1)
    
    As of June 30, 2007, $566.6 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 June 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 42




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 reducing the impact of interest rate changes on future interest expense.(2)
    
    Includes both principal and interest. Future Capital Needs and Resources
     43




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COINMACH SERVICE CORP. AND SUBSIDIARIES
      44




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  Inflation and Seasonality
  Special Note Concerning Forward Looking Statements
   45




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COINMACH SERVICE CORP. AND SUBSIDIARIES
  
    
    the restrictive debt covenants and other requirements related to our substantial
leverage that could restrict our operating flexibility;
    
    our ability to continue to renew our lease contracts with property owners and
management companies;
    
    extended periods of reduced occupancy which could result in reduced revenues and cash
flow from operations in certain areas;
    
    our ability to compete effectively in a highly competitive and capital intensive
industry which is fragmented nationally, with many small, private and family-owned
businesses operating throughout all major metropolitan areas;
    
    compliance obligations and liabilities under regulatory, judicial and environmental
laws and regulations, including, but not limited to, governmental action imposing
heightened energy and water efficiency standards or other requirements with respect to
commercial clothes washers;
    
    our ability to maintain borrowing flexibility and to meet our projected and future cash
needs, including capital expenditure requirements with respect to maintaining our machine
base, given our substantial level of indebtedness, history of net losses and cash dividends
on our common stock pursuant to our dividend policy;
    
    risks associated with expansion of our business through tuck-ins and other
acquisitions and integration of acquired operations into our existing business;
    
    as a holding company, our dependence on cash flow from our operating subsidiaries to
make payments under the 11% Senior Secured Notes, and contractual and legal restrictions on
the ability of our subsidiaries to make dividends and distributions to us;
    
    the risk of adverse tax consequences should the 11% Senior Secured Notes not be
respected as debt for U.S. federal income tax purposes;
    
    risks associated with changes in accounting standards promulgated by the Financial
Accounting Standards Board, the SEC or the American Institute of Certified Public
Accountants;
    
    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.
 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
 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
 49




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 SIGNATURES  COINMACH SERVICE CORP.Date: August 9, 2007
    
    /s/ Robert M. DoyleRobert M. DoyleChief Financial Officer(On behalf of registrant and asPrincipal Financial Officer)
 50




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description31.1*
    
    Certificate of Chief Executive Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as enacted by Section 302 of
the Sarbanes-Oxley Act of 200231.2*
    
    Certificate of Chief Financial Officer pursuant to Exchange
Act Rules 13a-14 and 15d-14, as enacted by Section 302 of
the Sarbanes-Oxley Act of 200232.1
    
    Certificate of Chief Executive Officer pursuant to 18
United States Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certificate of Chief Financial Officer pursuant to 18
United States Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith
    
    Furnished herewith 51