##### 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 AND EXCHANGE ACT OF
1934
 For the quarterly period ended September 30, 2005
 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.
 (Exact name of registrant as specified in its charter)
 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)
 Registrants telephone number, including area code: (516) 349-8555
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o .
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ .
 Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes o No o
 As of the close of business on November 9, 2005, Coinmach Service Corp. had outstanding 18,911,532
shares of Class A common stock, par value $0.01 per share (the Class A Common Stock) and
24,980,445 shares of Class B common stock, par value $0.01 per share (the Class B Common Stock).




---



COINMACH SERVICE CORP. AND SUBSIDIARIES
 INDEX
 Page No.PART I.Financial InformationItem 1.
    
    Financial StatementsCondensed
Consolidated Balance Sheets  September 30, 2005 (Unaudited) and March 31, 2005
    
    
    3Condensed
Consolidated Statements of Operations (Unaudited)  Three months and Six months Ended September 30, 2005 and 2004
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the Six months Ended September 30, 2005
    
    
    5Condensed
Consolidated Statements of Cash Flows (Unaudited)  Six months Ended September 30, 2005 and 2004
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 4.
    
    Controls and Procedures
    
    
    52PART II.Other InformationItem 1.
    
    Legal Proceedings
    
    
    53Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 3.
    
    Defaults Upon Senior Securities
    
    
    53Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    53Item 5.
    
    Other Information
    
    
    53Item 6.
    
    Exhibits
    
    
    54Signature Page
    
    
    55EX-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
  September 30,2005
    
    
    March 31, 20051(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    49,692
    
    
    $
    57,271Receivables, net
    
    
    5,702
    
    
    
    6,486Inventories
    
    
    12,536
    
    
    
    12,432Assets held for sale
    
    
    349
    
    
    
    2,475Prepaid expenses
    
    
    3,944
    
    
    
    4,994Interest rate swap asset
    
    
    790
    
    
    
    832Other current assets
    
    
    2,303
    
    
    
    2,625Total current assets
    
    
    75,316
    
    
    
    87,115Advance location payments
    
    
    70,179
    
    
    
    72,222Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization of $366,441 and $329,130
    
    
    262,130
    
    
    
    264,264Contract rights, net of accumulated amortization of $107,733 and $100,975
    
    
    303,676
    
    
    
    309,698Goodwill
    
    
    204,780
    
    
    
    204,780Other assets
    
    
    19,084
    
    
    
    18,597Total assets
    
    $
    935,165
    
    
    $
    956,676LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable and accrued expenses
    
    $
    32,461
    
    
    $
    33,983Accrued rental payments
    
    
    33,603
    
    
    
    30,029Accrued interest
    
    
    9,234
    
    
    
    9,512Current portion of long-term debt
    
    
    5,961
    
    
    
    17,704Total current liabilities
    
    
    81,259
    
    
    
    91,228Deferred income taxes
    
    
    63,380
    
    
    
    65,546Long-term debt, less current portion
    
    
    692,384
    
    
    
    690,687Total liabilities
    
    
    837,023
    
    
    
    847,461Stockholders equity:Class A Common Stock  $0.01 par value; 100,000,000 shares
authorized; 18,911,532 shares issued and outstanding
    
    
    189
    
    
    
    189Class B Common Stock  $0.01 par value; 100,000,000 shares
authorized; 24,980,445 shares issued and outstanding
    
    
    250
    
    
    
    250Capital in excess of par value
    
    
    319,038
    
    
    
    319,038Carryover basis adjustment
    
    
    (7,988
    )
    
    
    (7,988
    )Accumulated other comprehensive income, net of tax
    
    
    467
    
    
    
    492Accumulated deficit
    
    
    (213,814
    )
    
    
    (202,754
    )Deferred compensation
    
    
    
    
    
    
    (12
    )Total stockholders equity
    
    
    98,142
    
    
    
    109,215Total liabilities and stockholders equity
    
    $
    935,165
    
    
    $
    956,676
  
 1
    
    The March 31, 2005 balance sheet has been derived from the audited consolidated financial
statements as of that date. 3




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004REVENUES
    
    $
    132,320
    
    
    $
    132,950
    
    
    $
    266,150
    
    
    $
    266,449COSTS AND EXPENSES:Laundry operating expenses (exclusive of
depreciation and amortization and
amortization of advance location
payments)
    
    
    90,117
    
    
    
    91,507
    
    
    
    181,032
    
    
    
    182,632General and administrative (including
stock-based compensation expense of $12,
$19, $12 and $37, respectively)
    
    
    3,047
    
    
    
    2,323
    
    
    
    5,570
    
    
    
    4,727Depreciation and amortization
    
    
    18,929
    
    
    
    19,029
    
    
    
    37,861
    
    
    
    38,058Amortization of advance location payments
    
    
    5,038
    
    
    
    4,926
    
    
    
    9,173
    
    
    
    9,852Amortization of intangibles
    
    
    3,485
    
    
    
    3,580
    
    
    
    6,970
    
    
    
    7,260Other items, net
    
    
    310
    
    
    
    500
    
    
    
    310
    
    
    
    500120,926
    
    
    
    121,865
    
    
    
    240,916
    
    
    
    243,029OPERATING INCOME
    
    
    11,394
    
    
    
    11,085
    
    
    
    25,234
    
    
    
    23,420INTEREST EXPENSE
    
    
    15,315
    
    
    
    14,398
    
    
    
    30,646
    
    
    
    28,625INTEREST EXPENSE  preferred stock
    
    
    
    
    
    
    6,808
    
    
    
    
    
    
    
    13,368LOSS BEFORE INCOME TAXES
    
    
    (3,921
    )
    
    
    (10,121
    )
    
    
    (5,412
    )
    
    
    (18,573
    )BENEFIT FOR INCOME TAXES:Current
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    35Deferred
    
    
    (1,633
    )
    
    
    (1,269
    )
    
    
    (2,149
    )
    
    
    (1,956
    )(1,633
    )
    
    
    (1,249
    )
    
    
    (2,149
    )
    
    
    (1,921
    )NET LOSS
    
    $
    (2,288
    )
    
    $
    (8,872
    )
    
    $
    (3,263
    )
    
    $
    (16,652
    )Basic and diluted distributed earnings:Class A Common Stock
    
    $
    0.21
    
    
    $
    
    
    
    $
    0.41
    
    
    $
    Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Basic and diluted net income (loss):Class A Common Stock
    
    $
    0.07
    
    
    $
    
    
    
    $
    0.16
    
    
    $
    Class B Common Stock
    
    $
    (0.14
    )
    
    $
    (0.36
    )
    
    $
    (0.25
    )
    
    $
    (0.67
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    18,911,532
    
    
    
    
    
    
    
    18,911,532
    
    
    
    18,911,532Class B Common Stock
    
    
    24,980,445
    
    
    
    24,980,445
    
    
    
    24,980,445
    
    
    
    24,980,445Cash Dividends per Share:Class A Common Stock
    
    $
    0.21
    
    
    $
    
    
    
    $
    0.41
    
    
    $
    Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  4




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Stockholders Equity
 For the Six Months Ended September 30, 2005
 (UNAUDITED)
  AccumulatedOtherClass A
    
    Class B
    
    Capital
    
    Carryover
    
    Comprehensive
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    Common
    
    in Excess
    
    Basis
    
    Income, net of
    
    Accumulated
    
    Deferred
    
    StockholdersStock
    
    Stock
    
    of Par
    
    Adjustment
    
    tax
    
    Deficit
    
    Compensation
    
    EquityBalance, March 31,
2005
    
    $
    189
    
    
    $
    250
    
    
    $
    319,038
    
    
    $
    (7,988
    )
    
    $
    492
    
    
    $
    (202,754
    )
    
    $
    (12
    )
    
    $
    109,215Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,263
    )
    
    
    
    
    
    
    (3,263
    )Loss on
derivative
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    (25
    )Total comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,288
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,797
    )
    
    
    
    
    
    
    (7,797
    )Stockbased
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12Balance, September
30, 2005
    
    $
    189
    
    
    $
    250
    
    
    $
    319,038
    
    
    $
    (7,988
    )
    
    $
    467
    
    
    $
    (213,814
    )
    
    
    
    
    
    $
    98,142
  5




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  Six Months EndedSeptember
30,2005
    
    

September
30,2004OPERATING ACTIVITIES:Net loss
    
    $
    (3,263
    )
    
    $
    (16,652
    )Adjustments to reconcile net loss to net cash provided by operating
activities:Depreciation and amortization
    
    
    37,861
    
    
    
    38,058Amortization of advance location payments
    
    
    9,173
    
    
    
    9,852Amortization of intangibles
    
    
    6,970
    
    
    
    7,260Deferred income taxes
    
    
    (2,149
    )
    
    
    (1,956
    )Interest expense  preferred stock
    
    
    
    
    
    
    13,368Amortization of deferred issue costs
    
    
    1,063
    
    
    
    1,207Loss (gain) on sale of equipment
    
    
    27
    
    
    
    (54
    )Stock based compensation
    
    
    12
    
    
    
    37Change in operating assets and liabilities, net of businesses acquired:Other assets
    
    
    (1,190
    )
    
    
    925Receivables, net
    
    
    784
    
    
    
    (2,624
    )Inventories and prepaid expenses
    
    
    946
    
    
    
    (20
    )Accounts payable and accrued expenses, net
    
    
    2,052
    
    
    
    (1,259
    )Accrued interest
    
    
    (278
    )
    
    
    202Net cash provided by operating activities
    
    
    52,008
    
    
    
    48,344INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (29,944
    )
    
    
    (27,670
    )Advance location payments to location owners
    
    
    (7,130
    )
    
    
    (9,285
    )Acquisition of net assets related to acquisitions of businesses
    
    
    (1,210
    )
    
    
    (618
    )Proceeds from sale of property and equipment
    
    
    498
    
    
    
    291Net cash used in investing activities
    
    
    (37,786
    )
    
    
    (37,282
    )FINANCING ACTIVITIES:Repayments under credit facility
    
    
    (11,223
    )
    
    
    (3,066
    )Principal payments on capitalized lease obligations
    
    
    (2,660
    )
    
    
    (2,224
    )(Repayments) borrowings from bank and other borrowings
    
    
    (121
    )
    
    
    217Cash dividends paid
    
    
    (7,797
    )
    
    
    Receivables from shareholders
    
    
    
    
    
    
    (4
    )Net cash used in financing activities
    
    
    (21,801
    )
    
    
    (5,077
    )Net (decrease) increase in cash and cash equivalents
    
    
    (7,579
    )
    
    
    5,985CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    57,271
    
    
    
    31,620CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    49,692
    
    
    $
    37,605SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    29,861
    
    
    $
    27,285Income taxes paid
    
    $
    251
    
    
    $
    197NON-CASH FINANCING ACTIVITIES:Acquisition of fixed assets through capital leases
    
    $
    3,958
    
    
    $
    3,217Transfer of assets held for sale to fixed assets
    
    $
    1,936
    
    
    $
    
  
 6




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##### Table of Contents



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




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




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      9




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
    2.
    
    Inventories
  September 30,
    
    
    March 31,2005
    
    
    2005Laundry equipment
    
    $
    8,872
    
    
    $
    8,882Machine repair parts
    
    
    3,664
    
    
    
    3,550$
    12,536
    
    
    $
    12,432
 3.
    
    Assets Held for Sale
 Accounting for the Impairment or Disposal of
Long-Lived Assets
 10




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  4.
    
    Goodwill and Contract Rights
 Goodwill and Other Intangible Assets
 Route
    
    $
    195,026Rental (AWA)
    
    
    6,837Distribution (Super Laundry)
    
    
    2,917$
    204,780
    11




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Years ending March 31,2006 (remainder of year)
    
    $
    6.82007
    
    
    13.32008
    
    
    13.02009
    
    
    12.62010
    
    
    12.3
 Accounting for the Impairment and Disposal of Long-Lived Assets
 5.
    
    Long-Term Debt
  September 30,
    
    
    March 31,2005
    
    
    20059% Senior Notes due 2010
    
    $
    324,500
    
    
    $
    324,500Credit facility indebtedness
    
    
    229,284
    
    
    
    240,507IDS 11% Senior Secured Notes
    
    
    116,117
    
    
    
    116,117Third party 11% Senior Secured Notes
    
    
    20,000
    
    
    
    20,000Obligations under capital leases
    
    
    7,928
    
    
    
    6,630Other long-term debt with varying terms and maturities
    
    
    516
    
    
    
    637698,345
    
    
    
    708,391Less current portion
    
    
    5,961
    
    
    
    17,704$
    692,384
    
    
    $
    690,687
 11% Senior Secured Notes
  12




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
      9% Senior Notes
  13




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##### Table of Contents



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




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
    Intercompany Loan
 provided, however
  15




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  provided
  Interest Rate Swaps
  6. Guarantor Subsidiaries
  16




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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, 2005Coinmach
    
    
    Coinmach
    
    
    AdjustmentsCoinmach
    
    
    Laundry
    
    
    Corporation
    
    
    andService Corp.
    
    
    Corporation
    
    
    and Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventory, assets held
for sale, prepaid expenses and other
current assets
    
    $
    437
    
    
    $
    
    
    
    $
    74,925
    
    
    $
    (46
    )
    
    $
    75,316Advance location payments
    
    
    
    
    
    
    
    
    
    
    70,179
    
    
    
    
    
    
    
    70,179Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    262,130
    
    
    
    
    
    
    
    262,130Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    508,456
    
    
    
    
    
    
    
    508,456Deferred income taxes
    
    
    
    
    
    
    5,416
    
    
    
    
    
    
    
    (5,416
    )
    
    
    Intercompany loans and advances
    
    
    491
    
    
    
    49,275
    
    
    
    
    
    
    
    (49,766
    )
    
    
    Investment in subsidiaries
    
    
    (39,929
    )
    
    
    88,210
    
    
    
    
    
    
    
    (48,281
    )
    
    
    Investment in preferred stock
    
    
    182,595
    
    
    
    
    
    
    
    
    
    
    
    (182,595
    )
    
    
    Other assets
    
    
    94,617
    
    
    
    155
    
    
    
    8,374
    
    
    
    (84,062
    )
    
    
    19,084Total assets
    
    $
    238,211
    
    
    $
    143,056
    
    
    $
    924,064
    
    
    $
    (370,166
    )
    
    $
    935,165Liabilities and Stockholders Equity
(Deficit)Current liabilities:Accounts payable and accrued expenses
    
    $
    4,095
    
    
    $
    
    
    
    $
    73,641
    
    
    $
    (2,438
    )
    
    $
    75,298Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    5,961
    
    
    
    
    
    
    
    5,961Total current liabilities
    
    
    4,095
    
    
    
    
    
    
    
    79,602
    
    
    
    (2,438
    )
    
    
    81,259Deferred income taxes
    
    
    222
    
    
    
    
    
    
    
    68,574
    
    
    
    (5,416
    )
    
    
    63,380Long-term debt, less current portion
    
    
    136,117
    
    
    
    
    
    
    
    556,267
    
    
    
    
    
    
    
    692,384Loan Payable to Parent
    
    
    
    
    
    
    
    
    
    
    81,670
    
    
    
    (81,670
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    49,766
    
    
    
    (49,766
    )
    
    
    Preferred stock and dividends payable
    
    
    
    
    
    
    182,595
    
    
    
    
    
    
    
    (182,595
    )
    
    
    Total stockholders equity (deficit)
    
    
    97,777
    
    
    
    (39,539
    )
    
    
    88,185
    
    
    
    (48,281
    )
    
    
    98,142Total liabilities and stockholders
equity (deficit)
    
    $
    238,211
    
    
    $
    143,056
    
    
    $
    924,064
    
    
    $
    (370,166
    )
    
    $
    935,165
 17




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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, 2005CoinmachCoinmach
    
    
    Corporation
    
    
    AdjustmentsCoinmach
    
    
    Laundry
    
    
    and
    
    
    andService Corp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets, consisting of cash,
receivables, inventory, assets held
for sale, prepaid expenses and other
current assets
    
    $
    474
    
    
    $
    
    
    
    $
    86,678
    
    
    $
    (37
    )
    
    $
    87,115Advance location payments
    
    
    
    
    
    
    
    
    
    
    72,222
    
    
    
    
    
    
    
    72,222Property, equipment and leasehold
improvements, net
    
    
    
    
    
    
    
    
    
    
    264,264
    
    
    
    
    
    
    
    264,264Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    514,478
    
    
    
    
    
    
    
    514,478Deferred income taxes
    
    
    1,087
    
    
    
    2,307
    
    
    
    
    
    
    
    (3,394
    )
    
    
    Intercompany loans and advances
    
    
    2,060
    
    
    
    49,475
    
    
    
    
    
    
    
    (51,535
    )
    
    
    Investment in subsidiaries
    
    
    (34,770
    )
    
    
    99,698
    
    
    
    
    
    
    
    (64,928
    )
    
    
    Investment in preferred stock
    
    
    186,034
    
    
    
    
    
    
    
    
    
    
    
    (186,034
    )
    
    
    Other assets
    
    
    94,866
    
    
    
    162
    
    
    
    7,619
    
    
    
    (84,050
    )
    
    
    18,597Total assets
    
    $
    249,751
    
    
    $
    151,642
    
    
    $
    945,261
    
    
    $
    (389,978
    )
    
    $
    956,676Liabilities and Stockholders Equity
(Deficit)Current liabilities:Accounts payable and accrued expenses
    
    $
    4,797
    
    
    $
    
    
    
    $
    71,145
    
    
    $
    (2,418
    )
    
    $
    73,524Current portion of long-term debt
    
    
    
    
    
    
    
    
    
    
    17,704
    
    
    
    
    
    
    
    17,704Total current liabilities
    
    
    4,797
    
    
    
    
    
    
    
    88,849
    
    
    
    (2,418
    )
    
    
    91,228Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    68,940
    
    
    
    (3,394
    )
    
    
    65,546Long-term debt, less current portion
    
    
    136,117
    
    
    
    
    
    
    
    554,570
    
    
    
    
    
    
    
    690,687Loan payable to Parent
    
    
    
    
    
    
    
    
    
    
    81,670
    
    
    
    (81,670
    )
    
    
    Due to parent/subsidiary
    
    
    
    
    
    
    
    
    
    
    51,534
    
    
    
    (51,534
    )
    
    
    Preferred stock and dividends payable
    
    
    
    
    
    
    186,034
    
    
    
    
    
    
    
    (186,034
    )
    
    
    Total stockholders equity (deficit)
    
    
    108,837
    
    
    
    (34,392
    )
    
    
    99,698
    
    
    
    (64,928
    )
    
    
    109,215Total liabilities and stockholders
equity (deficit)
    
    $
    249,751
    
    
    $
    151,642
    
    
    $
    945,261
    
    
    $
    (389,978
    )
    
    $
    956,676
 18




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations
 Three Months Ended September 30, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    132,320
    
    
    $
    
    
    
    $
    132,320Costs and expenses
    
    
    618
    
    
    
    104
    
    
    
    120,204
    
    
    
    
    
    
    
    120,926Operating (loss) income
    
    
    (618
    )
    
    
    (104
    )
    
    
    12,116
    
    
    
    
    
    
    
    11,394Interest expense  preferred stock
    
    
    (3,699
    )
    
    
    3,699
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    1,641
    
    
    
    
    
    
    
    13,674
    
    
    
    
    
    
    
    15,315Income (loss) before taxes
    
    
    1,440
    
    
    
    (3,803
    )
    
    
    (1,558
    )
    
    
    
    
    
    
    (3,921
    )Income tax provision (benefit)
    
    
    587
    
    
    
    (1,615
    )
    
    
    (605
    )
    
    
    
    
    
    
    (1,633
    )853
    
    
    
    (2,188
    )
    
    
    (953
    )
    
    
    
    
    
    
    (2,288
    )Equity in loss (income) of
subsidiaries
    
    
    3,141
    
    
    
    953
    
    
    
    
    
    
    
    (4,094
    )
    
    
    Net loss
    
    $
    (2,288
    )
    
    $
    (3,141
    )
    
    $
    (953
    )
    
    $
    4,094
    
    
    $
    (2,288
    )
 Three Months Ended September 30, 2004Coinmach
    
    
    CoinmachLaundry
    
    
    CorporationCorporation
    
    
    and Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    132,950
    
    
    $
    
    
    
    $
    132,950Costs and expenses
    
    
    126
    
    
    
    121,739
    
    
    
    
    
    
    
    121,865Operating (loss) income
    
    
    (126
    )
    
    
    11,211
    
    
    
    
    
    
    
    11,085Interest expense  preferred stock
    
    
    6,808
    
    
    
    
    
    
    
    
    
    
    
    6,808Interest expense, net
    
    
    
    
    
    
    14,398
    
    
    
    
    
    
    
    14,398Loss before taxes
    
    
    (6,934
    )
    
    
    (3,187
    )
    
    
    
    
    
    
    (10,121
    )Income tax provision (benefit)
    
    
    2
    
    
    
    (1,251
    )
    
    
    
    
    
    
    (1,249
    )(6,936
    )
    
    
    (1,936
    )
    
    
    
    
    
    
    (8,872
    )Equity in loss of subsidiaries
    
    
    1,936
    
    
    
    
    
    
    
    (1,936
    )
    
    
    Net loss
    
    $
    (8,872
    )
    
    $
    (1,936
    )
    
    $
    1,936
    
    
    $
    (8,872
    )
 19




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Condensed Consolidating Statements of Operations
 Six Months Ended September 30, 2005CoinmachCoinmach
    
    
    Coinmach
    
    
    CorporationService
    
    
    Laundry
    
    
    andCorp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    266,150
    
    
    $
    
    
    
    $
    266,150Costs and expenses
    
    
    905
    
    
    
    218
    
    
    
    239,793
    
    
    
    
    
    
    
    240,916Operating (loss) income
    
    
    (905
    )
    
    
    (218
    )
    
    
    26,357
    
    
    
    
    
    
    
    25,234Interest expense  preferred stock
    
    
    (7,391
    )
    
    
    7,391
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    3,282
    
    
    
    
    
    
    
    27,364
    
    
    
    
    
    
    
    30,646Income (loss) before taxes
    
    
    3,204
    
    
    
    (7,609
    )
    
    
    (1,007
    )
    
    
    
    
    
    
    (5,412
    )Income tax provision (benefit)
    
    
    1,308
    
    
    
    (3,108
    )
    
    
    (349
    )
    
    
    
    
    
    
    (2,149
    )1,896
    
    
    
    (4,501
    )
    
    
    (658
    )
    
    
    
    
    
    
    (3,263
    )Equity in loss (income) of
subsidiaries
    
    
    (5,159
    )
    
    
    (658
    )
    
    
    
    
    
    
    (5,817
    )
    
    
    Net loss
    
    $
    (3,263
    )
    
    $
    (5,159
    )
    
    $
    (658
    )
    
    $
    5,817
    
    
    $
    (3,263
    )
 Six Months Ended September 30, 2004Coinmach
    
    
    CoinmachLaundry
    
    
    CorporationCorporation
    
    
    and Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    266,449
    
    
    $
    
    
    
    $
    266,449Costs and expenses
    
    
    250
    
    
    
    242,779
    
    
    
    
    
    
    
    243,029Operating (loss) income
    
    
    (250
    )
    
    
    23,670
    
    
    
    
    
    
    
    23,420Interest expense  preferred stock
    
    
    13,368
    
    
    
    
    
    
    
    
    
    
    
    13,368Interest expense, net
    
    
    
    
    
    
    28,625
    
    
    
    
    
    
    
    28,625Loss before taxes
    
    
    (13,618
    )
    
    
    (4,955
    )
    
    
    
    
    
    
    (18,573
    )Income tax provision (benefit)
    
    
    10
    
    
    
    (1,931
    )
    
    
    
    
    
    
    (1,921
    )(13,628
    )
    
    
    (3,024
    )
    
    
    
    
    
    
    (16,652
    )Equity in loss of subsidiaries
    
    
    3,024
    
    
    
    
    
    
    
    (3,024
    )
    
    
    Net loss
    
    $
    (16,652
    )
    
    $
    (3,024
    )
    
    $
    3,024
    
    
    $
    (16,652
    )
 20




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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
 Six Months Ended September 30, 2005CoinmachCoinmach
    
    
    CorporationCoinmach
    
    
    Laundry
    
    
    andService Corp.
    
    
    Corporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet income (loss) income
    
    $
    1,896
    
    
    $
    (4,501
    )
    
    $
    (658
    )
    
    $
    
    
    
    $
    (3,263
    )Noncash adjustments
    
    
    (5,814
    )
    
    
    4,294
    
    
    
    54,477
    
    
    
    
    
    
    
    52,957Change in operating assets and
liabilities
    
    
    (684
    )
    
    
    8
    
    
    
    2,990
    
    
    
    
    
    
    
    2,314Net cash (used in) provided by
operating activities
    
    
    (4,602
    )
    
    
    (199
    )
    
    
    56,809
    
    
    
    
    
    
    
    52,008Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (37,074
    )
    
    
    
    
    
    
    (37,074
    )Acquisition of assets
    
    
    
    
    
    
    
    
    
    
    (1,210
    )
    
    
    
    
    
    
    (1,210
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    
    
    
    
    498
    
    
    
    
    
    
    
    498Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (37,786
    )
    
    
    
    
    
    
    (37,786
    )Financing ActivitiesRepayment of debt
    
    
    
    
    
    
    
    
    
    
    (11,223
    )
    
    
    
    
    
    
    (11,223
    )Other financing items
    
    
    4,602
    
    
    
    199
    
    
    
    (15,379
    )
    
    
    
    
    
    
    (10,578
    )Net cash provided by (used in)
financing activities
    
    
    4,602
    
    
    
    199
    
    
    
    (26,602
    )
    
    
    
    
    
    
    (21,801
    )Net decrease in cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (7,579
    )
    
    
    
    
    
    
    (7,579
    )Cash and cash equivalents, beginning
of period
    
    
    431
    
    
    
    
    
    
    
    56,840
    
    
    
    
    
    
    
    57,271Cash and cash equivalents, end of
period
    
    $
    431
    
    
    $
    
    
    
    $
    49,261
    
    
    $
    
    
    
    $
    49,692
 21




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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)
 Six Months Ended September 30, 2004CoinmachCoinmach
    
    
    CorporationLaundry
    
    
    andCorporation
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet loss
    
    $
    (13,628
    )
    
    $
    (3,024
    )
    
    $
    
    
    
    $
    (16,652
    )Noncash adjustments
    
    
    13,433
    
    
    
    54,339
    
    
    
    
    
    
    
    67,772Change in operating assets and liabilities
    
    
    (233
    )
    
    
    (2,543
    )
    
    
    
    
    
    
    (2,776
    )Net cash (used in) provided by operating
activities
    
    
    (428
    )
    
    
    48,772
    
    
    
    
    
    
    
    48,344Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    (36,955
    )
    
    
    
    
    
    
    (36,955
    )Acquisition of assets
    
    
    
    
    
    
    (618
    )
    
    
    
    
    
    
    (618
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    291Net cash used in investing activities
    
    
    
    
    
    
    (37,282
    )
    
    
    
    
    
    
    (37,282
    )Financing ActivitiesRepayment of debt
    
    
    
    
    
    
    (3,066
    )
    
    
    
    
    
    
    (3,066
    )Other financing items
    
    
    428
    
    
    
    (2,439
    )
    
    
    
    
    
    
    (2,011
    )Net cash provided by (used in) financing
activities
    
    
    428
    
    
    
    (5,505
    )
    
    
    
    
    
    
    (5,077
    )Net increase in cash and cash equivalents
    
    
    
    
    
    
    5,985
    
    
    
    
    
    
    
    5,985Cash and cash equivalents, beginning of
period
    
    
    
    
    
    
    31,620
    
    
    
    
    
    
    
    31,620Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    37,605
    
    
    $
    
    
    
    $
    37,605
 22




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 7.
Segment Information
  23




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
  Three Months ended September 30,
    
    

Six Months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue:Route
    
    $
    116,747
    
    
    $
    115,991
    
    
    $
    236,516
    
    
    $
    234,238All other:Rental
    
    
    8,848
    
    
    
    8,540
    
    
    
    17,496
    
    
    
    16,880Distribution
    
    
    6,725
    
    
    
    8,419
    
    
    
    12,138
    
    
    
    15,331Subtotal
    
    
    15,573
    
    
    
    16,959
    
    
    
    29,634
    
    
    
    32,211Total revenue
    
    $
    132,320
    
    
    $
    132,950
    
    
    $
    266,150
    
    
    $
    266,449EBITDA (1):Route
    
    $
    38,122
    
    
    $
    37,525
    
    
    $
    77,493
    
    
    $
    76,730All other:Rental
    
    
    3,695
    
    
    
    3,392
    
    
    
    7,212
    
    
    
    6,646Distribution
    
    
    386
    
    
    
    526
    
    
    
    413
    
    
    
    441Subtotal
    
    
    4,081
    
    
    
    3,918
    
    
    
    7,625
    
    
    
    7,087Other items, net
    
    
    (310
    )
    
    
    (500
    )
    
    
    (310
    )
    
    
    (500
    )Corporate expenses
    
    
    (3,047
    )
    
    
    (2,323
    )
    
    
    (5,570
    )
    
    
    (4,727
    )Total EBITDA
    
    
    38,846
    
    
    
    38,620
    
    
    
    79,238
    
    
    
    78,590Reconciling items:Depreciation and amortization
expense, amortization of advance
location payments and
amortization of intangibles:Route
    
    
    (24,507
    )
    
    
    (24,677
    )
    
    
    (48,099
    )
    
    
    (49,376
    )All other
    
    
    (2,128
    )
    
    
    (2,146
    )
    
    
    (4,271
    )
    
    
    (4,271
    )Corporate
    
    
    (817
    )
    
    
    (712
    )
    
    
    (1,634
    )
    
    
    (1,523
    )Total depreciation
    
    
    (27,452
    )
    
    
    (27,535
    )
    
    
    (54,004
    )
    
    
    (55,170
    )Interest expense
    
    
    (15,315
    )
    
    
    (14,398
    )
    
    
    (30,646
    )
    
    
    (28,625
    )Interest expense  Preferred Stock
    
    
    
    
    
    
    (6,808
    )
    
    
    
    
    
    
    (13,368
    )Consolidated loss before income
taxes
    
    $
    (3,921
    )
    
    $
    (10,121
    )
    
    $
    (5,412
    )
    
    $
    (18,573
    )
 
 (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. 24




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Non-GAAP Financial Measures
  Three Months ended September 30,
    
    
    Six Months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (2.3
    )
    
    $
    (8.9
    )
    
    $
    (3.3
    )
    
    $
    (16.7
    )Benefit for income taxes
    
    
    (1.6
    )
    
    
    (1.2
    )
    
    
    (2.1
    )
    
    
    (1.9
    )Interest expense
    
    
    15.3
    
    
    
    14.4
    
    
    
    30.6
    
    
    
    28.6Interest expense  preferred stock
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    13.4Depreciation and amortization
    
    
    27.4
    
    
    
    27.5
    
    
    
    54.0
    
    
    
    55.2EBITDA
    
    $
    38.8
    
    
    $
    38.6
    
    
    $
    79.2
    
    
    $
    78.6
 25




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 8. Income Taxes
  September 30, 2005
    
    
    March 31, 2005Deferred tax liabilities:Accelerated tax depreciation and contract rights
    
    $
    106,269
    
    
    $
    108,058Interest rate swap
    
    
    323
    
    
    
    340Other
    
    
    1,971
    
    
    
    1,798108,563
    
    
    
    110,196Deferred tax assets:Net operating loss carryforwards
    
    
    41,815
    
    
    
    41,464Covenant not to compete
    
    
    1,009
    
    
    
    1,073Other
    
    
    2,359
    
    
    
    2,11345,183
    
    
    
    44,650Net deferred tax liability
    
    $
    63,380
    
    
    $
    65,546
   Three Months ended September 30,
    
    
    Six Months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Federal
    
    $
    (1,273
    )
    
    $
    (989
    )
    
    $
    (1,676
    )
    
    $
    (1,524
    )State
    
    
    (360
    )
    
    
    (260
    )
    
    
    (473
    )
    
    
    (397
    )$
    (1,633
    )
    
    $
    (1,249
    )
    
    $
    (2,149
    )
    
    $
    (1,921
    )
  Three Months ended September 30,
    
    
    Six Months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Expected tax benefit
    
    $
    (1,373
    )
    
    $
    (3,542
    )
    
    $
    (1,896
    )
    
    $
    (6,500
    )State tax benefit, net of federal taxes
    
    
    (233
    )
    
    
    (169
    )
    
    
    (308
    )
    
    
    (258
    )Non deductible interest -
Preferred Stock
    
    
    
    
    
    
    2,383
    
    
    
    
    
    
    
    4,679Permanent book/tax differences
    
    
    (27
    )
    
    
    79
    
    
    
    55
    
    
    
    158Tax benefit
    
    $
    (1,633
    )
    
    $
    (1,249
    )
    
    $
    (2,149
    )
    
    $
    (1,921
    )
 26




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 9.
Loss per Common Share
   Three Months ended
    
    
    Six Months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss attributable to common stockholders
    
    $
    (2,288
    )
    
    $
    (8,872
    )
    
    $
    (3,263
    )
    
    $
    (16,652
    )Add: Dividends paid on Class A common stock
    
    
    (3,899
    )
    
    
    
    
    
    
    (7,797
    )
    
    
    Undistributed loss available to Class A and Class B
common stock
    
    $
    (6,187
    )
    
    $
    (8,872
    )
    
    $
    (11,060
    )
    
    $
    (16,652
    )Basic and diluted allocation of undistributed loss:Class A Common Stock
    
    $
    (2,666
    )
    
    $
    
    
    
    $
    (4,765
    )
    
    $
    Class B Common Stock
    
    
    (3,521
    )
    
    
    (8,872
    )
    
    
    (6,295
    )
    
    
    (16,652
    )Total
    
    $
    (6,187
    )
    
    $
    (8,872
    )
    
    $
    (11,060
    )
    
    $
    (16,652
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    18,911,532
    
    
    
    
    
    
    
    18,911,532
    
    
    
    Class B Common Stock
    
    
    24,980,445
    
    
    
    24,980,445
    
    
    
    24,980,445
    
    
    
    24,980,445Total
    
    
    43,891,977
    
    
    
    24,980,445
    
    
    
    43,891,977
    
    
    
    24,980,445Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    
    
    
    $
    0.41
    
    
    $
    Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Undistributed loss per share:Class A Common Stock
    
    $
    (0.14
    )
    
    $
    
    
    
    $
    (0.25
    )
    
    $
    Class B Common Stock
    
    $
    (0.14
    )
    
    $
    (0.36
    )
    
    $
    (0.25
    )
    
    $
    (0.67
    )Basic and diluted income (loss) per share:Class A Common Stock
    
    $
    0.07
    
    
    $
    
    
    
    $
    0.16
    
    
    $
    Class B Common Stock
    
    $
    (0.14
    )
    
    $
    (0.36
    )
    
    $
    (0.25
    )
    
    $
    (0.67
    )
 27




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 Pro-Forma Presentation
  Three Months ended
    
    
    Six Months endedSeptember
30,
    
    

September
30,2005
    
    
    2005
    
    
    2004
    
    
    2004Net loss attributable to common stockholders
    
    $
    (2,288
    )
    
    $
    (8,872
    )
    
    $
    (3,263
    )
    
    $
    (16,652
    )Add: Dividends paid on Class A common stock
    
    
    (3,899
    )
    
    
    
    
    
    
    (7,797
    )
    
    
    Undistributed loss available to Class A and
Class B common stock
    
    $
    (6,187
    )
    
    $
    (8,872
    )
    
    $
    (11,060
    )
    
    $
    (16,652
    )Basic and diluted allocation of undistributed loss:Class A Common Stock
    
    $
    (2,666
    )
    
    $
    (3,823
    )
    
    $
    (4,765
    )
    
    $
    (7,175
    )Class B Common Stock
    
    
    (3,521
    )
    
    
    (5,049
    )
    
    
    (6,295
    )
    
    
    (9,477
    )Total
    
    $
    (6,187
    )
    
    $
    (8,872
    )
    
    $
    (11,060
    )
    
    $
    (16,652
    )Weighted average common stock outstanding:Class A Common Stock
    
    
    18,911,532
    
    
    
    18,911,532
    
    
    
    18,911,532
    
    
    
    18,911,532Class B Common Stock
    
    
    24,980,445
    
    
    
    24,980,445
    
    
    
    24,980,445
    
    
    
    24,980,445Total
    
    
    43,891,977
    
    
    
    43,891,977
    
    
    
    43,891,977
    
    
    
    43,891,977Distributed earnings per share:Class A Common Stock
    
    $
    0.21
    
    
    $
    
    
    
    $
    0.41
    
    
    $
    Class B Common Stock
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Undistributed loss per share:Class A Common Stock
    
    $
    (0.14
    )
    
    $
    (0.20
    )
    
    $
    (0.25
    )
    
    $
    (0.38
    )Class B Common Stock
    
    $
    (0.14
    )
    
    $
    (0.20
    )
    
    $
    (0.25
    )
    
    $
    (0.38
    )Basic and diluted income (loss) per share:Class A Common Stock
    
    $
    0.07
    
    
    $
    (0.20
    )
    
    $
    0.16
    
    
    $
    (0.38
    )Class B Common Stock
    
    $
    (0.14
    )
    
    $
    (0.20
    )
    
    $
    (0.25
    )
    
    $
    (0.38
    )
   28




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
 10. Redeemable Preferred Stock and Stockholders Deficit
  Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equities
    29




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (continued)
     11. 2004 Long-Term Incentive Plan
  30




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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, 2005 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
    31




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
   Critical Accounting Policies: Use of Estimates
      32




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




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




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Results of Operations
  Comparison of the three- and six-month periods ended September 30, 2005 and September 30,
2004.
  Three months ended September 30,
    
    
    Six months ended September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeRoute
    
    $
    116.7
    
    
    $
    116.0
    
    
    $
    0.7
    
    
    $
    236.5
    
    
    $
    234.2
    
    
    $
    2.3Rental
    
    
    8.9
    
    
    
    8.5
    
    
    
    0.4
    
    
    
    17.5
    
    
    
    16.9
    
    
    
    0.6Distribution
    
    
    6.7
    
    
    
    8.4
    
    
    
    (1.7
    )
    
    
    12.1
    
    
    
    15.3
    
    
    
    (3.2
    )$
    132.3
    
    
    $
    132.9
    
    
    $
    (0.6
    )
    
    $
    266.1
    
    
    $
    266.4
    
    
    $
    (0.3
    )
      36




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
        37




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
   Three months ended September 30,
    
    
    Six months ended September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeRoute
    
    $
    38.1
    
    
    $
    37.5
    
    
    $
    0.6
    
    
    $
    77.5
    
    
    $
    76.7
    
    
    $
    0.8Rental
    
    
    3.7
    
    
    
    3.4
    
    
    
    0.3
    
    
    
    7.2
    
    
    
    6.6
    
    
    
    0.6Distribution
    
    
    0.4
    
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    0.4
    
    
    
    0.5
    
    
    
    (0.1
    )Other items, net
    
    
    (0.3
    )
    
    
    (0.5
    )
    
    
    0.2
    
    
    
    (0.3
    )
    
    
    (0.5
    )
    
    
    0.2Corporate expenses
    
    
    (3.1
    )
    
    
    (2.3
    )
    
    
    (0.8
    )
    
    
    (5.6
    )
    
    
    (4.7
    )
    
    
    (0.9
    )Total EBITDA
    
    $
    38.8
    
    
    $
    38.6
    
    
    $
    0.2
    
    
    $
    79.2
    
    
    $
    78.6
    
    
    $
    0.6
   39




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Liquidity and Capital Resources
      Dividend Policy
  40




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
     Financing Activities
  The Initial Public Offering
   41




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 11% Senior Secured Notes
     Senior Secured Credit Facility
  42




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
      9% Senior Notes
  43




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




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
     Operating and Investing Activities
   45




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
  Three months ended September 30,
    
    
    Six months ended September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeRoute
    
    $
    15.7
    
    
    $
    15.7
    
    
    $
    
    
    
    $
    30.4
    
    
    $
    32.5
    
    
    $
    (2.1
    )Rental
    
    
    2.5
    
    
    
    1.8
    
    
    
    0.7
    
    
    
    3.5
    
    
    
    2.6
    
    
    
    0.9Distribution
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    Corporate
    
    
    1.0
    
    
    
    0.6
    
    
    
    0.4
    
    
    
    2.5
    
    
    
    1.4
    
    
    
    1.1$
    19.3
    
    
    $
    18.2
    
    
    $
    1.1
    
    
    $
    36.6
    
    
    $
    36.7
    
    
    $
    (0.1
    )
  Summary of Contractual Obligations
  Payments Due in Fiscal YearTotal
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    AfterLong-Term Debt Obligations
    
    $
    690.4
    
    
    $
    1.3
    
    
    $
    2.5
    
    
    $
    12.0
    
    
    $
    11.9
    
    
    $
    526.5
    
    
    $
    136.2Interest on Long-Term Debt (1)
    
    
    480.4
    
    
    
    30.5
    
    
    
    59.8
    
    
    
    59.5
    
    
    
    58.7
    
    
    
    52.3
    
    
    
    219.6Capital Lease Obligations (2)
    
    
    9.2
    
    
    
    2.1
    
    
    
    3.5
    
    
    
    2.2
    
    
    
    1.2
    
    
    
    0.2
    
    
    
    Operating Lease Obligations
    
    
    26.3
    
    
    
    4.2
    
    
    
    7.0
    
    
    
    5.1
    
    
    
    4.0
    
    
    
    3.0
    
    
    
    3.0$
    1,206.3
    
    
    $
    38.1
    
    
    $
    72.8
    
    
    $
    78.8
    
    
    $
    75.8
    
    
    $
    582.0
    
    
    $
    358.8
 
 (1)
    
    As of September 30, 2005, approximately $229.3 million of our long-term debt
outstanding under our Senior Secured 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 6.88% based on the Eurodollar rate in
effect at September 30, 2005. In addition, at September 30, 2005, $324.5 million of our
long-term debt outstanding was subject to a fixed interest rate of 9.0% and approximately
$136.1 million of our long-term debt outstanding was subject to a fixed interest rate of
11.0%. In addition, in connection with the Senior Secured Credit Facility, Coinmach is a
party to three separate interest rate swap agreements totaling $150.0 million which expire
on February 1, 2006. Such agreements effectively convert $150.0 million principal amount
of floating rate term loans under the Senior Secured Credit Facility to a fixed interest
rate of 5.66%.(2)
    
    Includes both principal and interest. Future Capital Needs and Resources
  46




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
      47




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
    Certain Accounting Treatment
  48




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 Inflation and Seasonality
  Special Note Concerning Forward Looking Statements
    
    
    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;
 49




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
 
    
    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 reduced
liquidity resulting from any distributions Coinmach may make to us should we elect to pay
cash dividends on our common stock;
    
    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;
    
    the risk of adverse tax consequences should the 11% Senior Secured Notes not be
respected as debt for U.S. federal income tax purposes;
    
    risks associated with changes in accounting standards promulgated by the Financial
Accounting Standards Board, the SEC or the American Institute of Certified Public
Accountants; and
    
    other factors discussed elsewhere in this report and in our public filings with the
SEC.
  50




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      51




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 4.
    
    CONTROLS AND PROCEDURES
   
 52




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 PART II.
    
    OTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings
  
 ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Not applicable.
 
 ITEM 3.
    
    Defaults Upon Senior Securities
 Not applicable.
 
 ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
   Votes For
    
    Votes Withheld1. Stephen R. Kerrigan
    
    
    65,256,606
    
    
    
    3,087,0552. James N. Chapman
    
    
    65,249,206
    
    
    
    3,094,4553. David A. Donnini
    
    
    65,249,206
    
    
    
    3,094,4554. Woody M. McGee
    
    
    68,173,681
    
    
    
    169,9805. Bruce V. Rauner
    
    
    63,560,206
    
    
    
    4,783,4556. John R. Scheessele
    
    
    68,172,831
    
    
    
    170,830
   Votes For

68,333,261
    
    Votes Against

9,650
    
    Abstain/Non-Vote

750
 
 ITEM 5.
    
    Other Information
  53




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 ITEM 6.
    
    Exhibits
 ExhibitNumber
    
    Description31.1
    
    Certificate of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14,
as enacted by Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certificate of Chief Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as
enacted by Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certificate of Chief Executive Officer pursuant to 18 United States Code, Section 1350, as
enacted by Section 302 of the Sarbanes-Oxley Act of 200232.2
    
    Certificate of Chief Financial Officer pursuant to 18 United States Code, Section 1350, as
enacted by Section 302 of the Sarbanes-Oxley Act of 2002
 54




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COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 SIGNATURES
  COINMACH SERVICE CORP.Date: November 9, 2005
    /s/ Robert M. DoyleRobert M. DoyleChief Financial Officer
(On behalf of registrant and as
Principal Financial Officer) 55




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##### Table of Contents



COINMACH SERVICE CORP. AND SUBSIDIARIES
 
 INDEX TO EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    Certificate of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14,
as enacted by Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certificate of Chief Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as
enacted by Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certificate of Chief Executive Officer pursuant to 18 United States Code, Section 1350, as
enacted by Section 302 of the Sarbanes-Oxley Act of 200232.2
    
    Certificate of Chief Financial Officer pursuant to 18 United States Code, Section 1350, as
enacted by Section 302 of the Sarbanes-Oxley Act of 2002
 56