10-Q 1 form10q_travers080803.txt COINMACH CORPORATION SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 2003 OR { } 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 0-7694 COINMACH CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 53-0188589 (State or other jurisdiction of (I. R. S. Employer incorporation 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 [X] NO [ ]. INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT). YES [ ] NO [X]. AS OF THE CLOSE OF BUSINESS ON AUGUST 8, 2003, COINMACH CORPORATION HAD OUTSTANDING 100 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON STOCK"), ALL OF WHICH SHARES WERE HELD BY COINMACH LAUNDRY CORPORATION. COINMACH CORPORATION AND SUBSIDIARIES INDEX

~~CONDENSED~~PART ~~CONSOLIDATED~~I. ~~BALANCE~~FINANCIAL ~~SHEETS~~INFORMATION ~~(In~~PAGE ~~Thousands~~NO. ofItem ~~Dollars)~~1. ~~December~~Financial ~~31,~~Statements ~~2002~~Condensed ~~March~~Consolidated ~~31,~~Balance ~~2002(1)~~Sheets -~~----------------~~ ~~--------------~~June 30, 2003 (Unaudited) ~~ASSETS: Cash~~ and ~~cash~~March ~~equivalents $ 32~~31,~~719~~ $2003 ~~27,820~~3 ~~Receivables,~~Condensed ~~net~~Consolidated ~~11,574~~Statements ~~11,883~~of ~~Inventories~~Operations ~~14,600~~(Unaudited) ~~13,109~~- ~~Prepaid~~Three ~~expenses~~Months ~~7,325~~Ended ~~7,166~~June ~~Advance location payments 71~~30,~~227~~ ~~69,257~~2003 ~~Land, property~~ and ~~equipment,~~2002 ~~net~~4 ofCondensed ~~accumulated~~Consolidated ~~depreciation~~Statements of ~~$166,353~~Cash ~~and~~Flows ~~$116,361~~(Unaudited) ~~287,863~~- ~~284,413~~Three ~~Contract~~Months ~~rights,~~Ended ~~net~~June ~~of accumulated amortization of $69~~30,~~375~~ 2003 and ~~$58,768~~2002 ~~338,591~~5 ~~348,462~~Notes ~~Goodwill~~to ~~205,128~~Condensed ~~204,284~~Consolidated ~~Other~~Financial ~~assets~~Statements ~~20,968~~(Unaudited) ~~22,927~~6 ~~----------~~Item ~~----------~~2. ~~Total assets $ 989,995 $ 989,321 ========== ========== LIABILITIES AND STOCKHOLDER~~Management'Ss ~~EQUITY:~~Discussion ~~Accounts payable~~ and ~~accrued~~Analysis ~~expenses~~of $Financial ~~32,389~~Condition $and ~~31,775~~Results ~~Accrued~~of ~~rental~~Operations ~~payments~~21 ~~30,870~~Item ~~28,576~~3. ~~Accrued~~Quantitative ~~interest~~and ~~18,171~~Qualitative ~~7,540~~Disclosures ~~Interest~~About ~~rate~~Market ~~swap~~Risk ~~liability~~31 ~~2,485~~Item --4. ~~Deferred~~Controls ~~income~~and ~~taxes~~Procedures ~~82,522~~32 ~~81,850~~PART 9%II. ~~Senior~~OTHER ~~Notes~~INFORMATION ~~due~~Item ~~2010~~1. ~~450,000~~Legal ~~450,000~~Proceedings ~~Credit~~33 ~~facility~~Item ~~indebtedness~~2. ~~261,250~~Changes ~~280,000~~in ~~Other~~Securities ~~long-term~~and ~~debt~~Use ~~7,254~~of ~~7,305~~Proceeds ~~Due~~33 toItem ~~parent~~3. ~~51,083~~Defaults ~~51,852~~Upon ~~Stockholder's~~Senior ~~equity:~~Securities ~~Common~~33 ~~stock~~Item ~~and~~4. ~~capital~~Submission ~~in excess~~ of ~~par~~Matters ~~value~~to ~~120,065~~a ~~117,391~~Vote ~~Accumulated other comprehensive loss, net~~ of ~~tax~~Security ~~(1,491)~~Holders --33 ~~Accumulated~~Item ~~deficit~~5. ~~(64,603)~~Other ~~(66,968)~~Information ~~----------~~33 ~~----------~~Item ~~Total~~6. ~~stockholder's~~Exhibits ~~equity 53,971 50,423 ---------- ---------- Total liabilities~~ and ~~stockholder's~~Reports ~~equity~~on $Form ~~989,995 $ 989,321 ========== ========== See accompanying notes.~~ 8-~~-----~~K ~~(1)~~33 ~~The~~SIGNATURE ~~March~~PAGE ~~31, 2002 balance sheet has been derived from the audited consolidated financial statements as of that date.~~34

2 COINMACH CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars)

~~CONDENSED~~June ~~CONSOLIDATED~~30, ~~STATEMENTS~~2003 OFMarch ~~OPERATIONS~~31, 2003(~~UNAUDITED~~1) ~~(In thousands of dollars) Three Months Ended Nine Months Ended~~ -------------~~-------------~~ --------------~~------------~~ ~~December~~(Unaudited) ~~31,~~ASSETS: ~~December~~Cash ~~31,~~and ~~December~~cash 31equivalents $ 36,253 ~~December~~$ 3127,428 ~~2002~~Receivables, ~~2001~~net ~~2002~~8,611 ~~2001~~10,453 ~~------------~~Inventories ~~------------~~16,582 ~~------------~~14,125 ~~------------~~Prepaid ~~REVENUES~~expenses $7,708 ~~134~~7,~~923~~617 $Advance ~~135,836~~location $payments ~~403~~72,~~088~~393 $70,911 ~~402~~Land,~~946~~ ~~COSTS~~property ~~AND~~and ~~EXPENSES:~~equipment, ~~Operating~~net ~~91,638~~of ~~91,910~~accumulated ~~273,442~~depreciation ~~271~~of $200,~~203~~422 ~~General~~ and ~~administrative 2~~$182,~~228~~474 2287,~~339~~468 6286,~~296~~686 6Contract rights,~~546~~ ~~Depreciation~~net ~~and~~of accumulated amortization 25of $76,~~982~~532 31and $73,~~584~~027 77331,~~850~~822 96335,~~549~~327 ~~Nonrecurring~~Goodwill ~~items~~203,904 ~~net (2~~203,~~507)~~860 --Other (2assets 19,~~507)~~264 --19,754 ---------- ---------- ~~----------~~Total ~~----------~~assets ~~117~~$ 984,~~341~~005 ~~125~~$ 976,~~833~~161 ~~355~~========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY: Accounts payable and accrued expenses $ 35,~~081~~723 ~~374~~$ 36,~~298~~843 ~~----------~~Accrued ~~----------~~rental ~~----------~~payments ~~----------~~30,061 ~~OPERATING~~29,481 ~~INCOME~~Accrued 17interest 18,~~582~~152 108,~~003~~094 48Interest rate swap liability 4,~~007~~853 283,~~648~~345 ~~INTEREST~~Deferred ~~EXPENSE~~income taxes 78,279 ~~NET~~79,621 14Long-term debt 718,~~717~~470 16718,~~545~~112 43Due to Parent 50,~~665~~697 50,~~562~~863 ~~----------~~Stockholder's ~~----------~~equity: ~~----------~~Common ~~----------~~stock ~~INCOME~~and ~~(LOSS)~~capital ~~BEFORE~~in ~~INCOME~~excess ~~TAXES~~of 2par value 121,~~865~~065 (6121,~~542)~~065 4Accumulated other comprehensive loss,~~342~~ net of tax (212,~~914~~912) ~~PROVISION~~ (~~BENEFIT~~2,007) ~~FOR~~Accumulated ~~INCOME~~deficit ~~TAXES 1,385~~ (170,~~260~~383) ~~1,977~~ (469,~~400~~256) ---------- ---------- Total stockholder's equity 47,770 49,802 ---------- ---------- ~~NET~~Total ~~INCOME~~liabilities ~~(LOSS)~~and $stockholder's ~~1,480~~equity $ (5984,~~282)~~005 $ 2976,~~365~~161 ~~$ (17,514)~~ ========== ========== ~~==========~~See ~~==========~~accompanying notes. ______ 1. The March 31, 2003 balance sheet has been derived from the audited consolidated financial statements as of that date.

3 COINMACH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands of dollars) Three Months Ended ------------------------- June 30, June 30, 2003 2002 ---------- ---------- REVENUES $ 132,517 $ 136,294 COSTS AND EXPENSES: Laundry operating expenses 90,871 92,518 General and administrative 2,209 2,042 Depreciation and amortization 26,912 25,894 ---------- ---------- 119,992 120,454 ---------- ---------- OPERATING INCOME 12,525 15,840 INTEREST EXPENSE, NET 14,316 14,471 ---------- ---------- (LOSS) INCOME BEFORE INCOME TAXES (1,791) 1,369 (BENEFIT) PROVISION FOR INCOME TAXES (664) 548 ---------- ---------- NET (LOSS) INCOME $ (1,127) $ 821 ========== ========== See accompanying notes. 4 COINMACH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands of dollars) Three Months Ended ------------------------------------------ June 30, June 30, 2003 2002 -------------------- -------------------- OPERATING ACTIVITIES: Net (loss) income $ (1,127) $ 821 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 17,982 16,733 Amortization of advance location payments 5,180 5,492 Amortization of intangibles 3,750 3,669 Gain on sale of investment and equipment (5) (145) Deferred income taxes (739) 548 Amortization of debt discount and deferred issue costs 604 610 Change in operating assets and liabilities: Other assets (361) 879 Receivables, net 1,842 902 Inventories and prepaid expenses (2,548) (1,379) Accounts payable and accrued expenses, net (977) 59 Accrued interest 10,058 10,771 --------- --------- Net cash provided by operating activities 33,659 38,960 --------- --------- INVESTING ACTIVITIES: Additions to property and equipment (17,470) (18,173) Advance location payments to location owners (6,203) (5,585) Proceeds from sale of property and equipment 37 368 --------- --------- Net cash used in investing activities (23,636) (23,390) --------- --------- FINANCING ACTIVITIES: Repayments to credit facility - (2,500) Net repayments to parent (166) (474) Repayments of bank and other borrowings (4) (4) Principal payments on capitalized lease obligations (1,028) (973) --------- --------- Net cash used in financing activities (1,198) (3,951) --------- --------- Net increase in cash and cash equivalents 8,825 11,619 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,428 27,820 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 36,253 $ 39,439 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 3,634 $ 3,100 ========= ========= Income taxes paid $ 172 $ 79 ========= ========= NON-CASH FINANCING ACTIVITIES: Acquisition of fixed assets through capital leases $ 1,368 $ 252 ========= =========

5 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION Coinmach Corporation, a Delaware corporation ("Coinmach" or the "Company"), is the leading supplier of outsourced laundry services for multi-family housing properties in North America. The consolidated financial statements of Coinmach include the accounts of all of its subsidiaries. Intercompany profits, transactions and balances have been eliminated in consolidation. The Company is a wholly-owned subsidiary of Coinmach Laundry Corporation ("CLC" or the "Parent"), which in turn is a wholly-owned subsidiary of Coinmach Holdings, LLC ("Holdings"), the ultimate parent. Holdings, a Delaware limited liability company, was formed on November 15, 2002 as part of the Restructuring Transactions, as defined herein. Unless otherwise specified herein, references to the "Company" shall mean Coinmach Corporation and its subsidiaries. The Company's core business (which the Company refers to as the "route" business) involves leasing laundry rooms from building owners and property management companies, installing and servicing laundry equipment, collecting revenues generated from laundry machines and operating and providing laundromat services at retail laundromats. Through Appliance Warehouse of America, Inc. ("AWA"), a recently formed subsidiary jointly-owned by the Company and Holdings, the Company leases laundry machines and other household appliances to property owners, managers of multi-family housing properties, and to a lesser extent, individuals and corporate relocation entities. At June 30, 2003, the Company owned and operated approximately 864,000 laundry machines in approximately 80,000 locations throughout North America and in 164 retail laundromats located throughout Texas and Arizona. Super Laundry Equipment Corp. ("Super Laundry"), a wholly-owned subsidiary of the Company, constructs, designs and retrofits laundromats and distributes laundromat equipment. In addition, Super Laundry, commencing in September 2002 and through its wholly-owned subsidiary American Laundry Franchising Corp. ("ALFC"), began to build and develop laundromat facilities for sale as franchise locations. The Restructuring Transactions did not result in a change in reporting entity. The accompanying financial statements include the accounts of Coinmach and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company's management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from such estimates. The interim results presented herein are not necessarily indicative of the results to be expected for the entire year. 6 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 1. BASIS OF PRESENTATION (continued) In the opinion of management of the Company, these unaudited condensed consolidated financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended March 31, 2003. Certain amounts in the financial statements have been reclassified for presentation purposes. 2. GOODWILL AND CONTRACT RIGHTS Goodwill roll forward for the three months ended June 30, 2003 consists of the following (in thousands): Excess costs of investments over net assets acquired - beginning of period $203,860 Acquisitions 44 -------- Excess costs of investments over net assets acquired - end of period $203,904 ======== The Company completed its most recent goodwill impairment test as of December 31, 2002. The test involved the assessment of the fair market value of the Company's segments. No impairment of goodwill was indicated at that time. Under Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, the Company is required to perform goodwill impairment tests on at least an annual basis or more frequently if circumstances dictate. The annual impairment test for fiscal 2004 will be completed by the Company's fiscal year end. There can be no assurances that future goodwill impairment tests will not result in a charge to income. Contract rights represent the value of location contracts arising from the acquisition of laundry machines on location. These amounts arose primarily from purchase price allocations pursuant to acquisitions based on independent appraisals. The Company does not record contract rights relating to new locations signed in the ordinary course of business. Such contract rights are amortized using accelerated methods over periods ranging from 30-35 years. 7 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 2. GOODWILL AND CONTRACT RIGHTS (continued) Amortization expense for contract rights for each of the next five years is estimated to be as follows (in millions of dollars): Years ending March 31, 2004 $14.0 2005 13.7 2006 13.4 2007 13.1 2008 12.8 Management evaluates the realizability of contract rights balances (if there are indicators of impairment) based upon the Company's forecasted undiscounted cash flows and operating income. Based upon present operations and strategic plans, management believes that no impairment of contract rights has occurred. 3. LONG-TERM DEBT Long-term debt consists of the following (in thousands): June 30, March 31, 2003 2003 -------- --------- 9% Senior Notes due 2010 $450,000 $450,000 Credit facility indebtedness 261,250 261,250 Obligations under capital leases 7,168 6,828 Other 52 34 -------- -------- $718,470 $718,112 ======== ======== On January 25, 2002, the Company issued $450 million of 9% Senior Notes due 2010 (the "9% Senior Notes") and entered into a $355 million senior secured credit facility (the "Senior Credit Facility") comprised of: (i) $280 million in aggregate principal amount of term loans and (ii) a revolving credit facility with a maximum borrowing limit of $75 million. The revolving credit portion of the Senior Credit Facility includes up to $10 million of letter of credit financings and short term borrowings under a swing line facility of up to $7.5 million. The Senior Credit Facility is secured by substantially all of the Company's assets and is guaranteed by the Company's domestic subsidiaries. In addition, CLC and the Company pledged to Bankers Trust Company, as Collateral Agent, their interests in all of the issued and outstanding shares of capital stock of the Company and the Company's domestic subsidiaries. 8 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 3. LONG-TERM DEBT (continued) At June 30, 2003, the Company had outstanding debt consisting of (a) $450 million of 9% Senior Notes and (b) $261.3 million of term loans with interest rates ranging from 4.13% to 4.63%. The term loans under the Senior Credit Facility, in aggregate principal amounts outstanding of $18.3 million and $243.0 million as of June 30, 2003, are scheduled to be fully repaid by January 25, 2008 and July 25, 2009, respectively. As of June 30, 2003, the Company had no amounts outstanding under its revolving credit facility, which is scheduled to expire on January 25, 2008. In addition to certain customary terms and provisions, including events of default and customary representations, covenants and agreements, the Senior Credit Facility contains certain restrictive covenants including, but not limited to, a maximum leverage ratio, a minimum consolidated interest coverage ratio and limitations on indebtedness, capital expenditures, advances, investments and loans, mergers and acquisitions, dividends, stock issuances and transactions with affiliates. Also, the indenture governing the 9% Senior Notes and the Senior Credit Facility limit the Company's ability to pay dividends. At June 30, 2003, the Company was in compliance with the covenants under the indenture governing the 9% Senior Notes and the Senior Credit Facility. On September 23, 2002, the Company entered into three separate interest rate swap agreements totaling $150 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 rate basis thereby reducing the impact of interest rate changes on future interest expense. The three swap agreements consist of: (i) a $50 million notional amount interest rate swap transaction with JP Morgan effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.91% and expiring on February 1, 2006, (ii) a $50 million notional amount interest rate swap transaction with Credit Lyonnais effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.91% and expiring on February 1, 2006 and (iii) a $50 million notional amount interest rate swap transaction with Deutsche Bank AG effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.90% and expiring on February 1, 2006. These interest rate swaps used to hedge the variability of forecasted cash flows attributable to interest rate risk were designated as cash flow hedges. The Company recognized an accumulated other comprehensive loss in the stockholder's equity section included in the Condensed Consolidated Balance Sheet at June 30, 2003 of approximately $2.9 million, net of tax, relating to the interest rate swaps that qualify as cash flow hedges. 9 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 4. APPLIANCE WAREHOUSE TRANSFER On November 29, 2002 (the "Transfer Date"), the Company transferred all of the assets of the Appliance Warehouse division of the Company to AWA. The value of the assets transferred as determined by an independent appraiser was $34.7 million as of the Transfer Date. In exchange for the transfer of such assets, AWA issued to the Company (i) an unsecured promissory note payable on demand in the amount of $19.6 million which accrues interest at a rate of 8% per annum, (ii) 1,000 shares of preferred stock of AWA, par value $0.01 per share (the "AWA Preferred Stock"), with a liquidation value of $14.6 million, and (iii) 10,000 shares of common stock of AWA, par value $0.01 per share ("AWA Common Stock"). The AWA Preferred Stock is not redeemable and is vested with voting rights. Except as may otherwise be required by applicable law, the AWA Common Stock does not have any voting rights. Dividends on the AWA Preferred Stock accrue quarterly at the rate of 11% per annum and are payable in cash, in kind in the form of additional shares of AWA Preferred Stock, or in a combination thereof, at the option of AWA. In March 2003, through a series of transactions (collectively, the "Restructuring Transactions"), all of the AWA Common Stock and all of the outstanding capital stock of CLC was contributed to Holdings in exchange for substantially equivalent equity interests (in the form of common and preferred membership units) in Holdings. As a result of these Restructuring Transactions, (i) Holdings became the sole holder of all of the outstanding AWA Common Stock, (ii) the Company became the sole holder of all of the outstanding AWA Preferred Stock, (iii) CLC became a wholly-owned subsidiary of Holdings, (iv) the former stockholders of CLC became unitholders of Holdings and (v) AWA, subject to certain specified qualifications, became a guarantor under, and subject to the covenants contained in, the indenture governing the 9% Senior Notes and the Senior Credit Facility. 5. GUARANTOR SUBSIDIARY The Company's domestic subsidiaries (collectively, the "Guarantor Subsidiaries") have guaranteed the Company's 9% Senior Notes and Senior Credit Facility referred to in Note 3. The Company has not included separate financial statements of the Guarantor Subsidiaries because the Company owns all of the outstanding voting shares of such Guarantor Subsidiaries, and the guarantees issued by such Guarantor Subsidiaries are full and unconditional. The condensed consolidating balance sheet as of June 30, 2003 and March 31, 2003, the condensed consolidating statements of operations for the three months ended June 30, 2003, and the condensed consolidating statement of cash flows for the three months ended June 30, 2003 include AWA as a Guarantor Subsidiary, however, any prior corresponding period does not include AWA as a Guarantor Subsidiary. In addition, certain prior period amounts have been reclassified to conform to the current year allocation and presentation methodologies. 10 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 5. GUARANTOR SUBSIDIARY (continued) Condensed consolidating financial information for the Company and its Guarantor Subsidiaries is as follows: CONDENSED CONSOLIDATING BALANCE SHEETS (in thousands of dollars)

~~CONDENSED~~JUNE ~~CONSOLIDATED~~30, ~~STATEMENTS~~2003 OF------------------------------------------------------------ ~~CASH~~COINMACH ~~FLOWS~~AND ~~(UNAUDITED)~~NON- ~~(In~~GUARANTOR ~~thousands~~GUARANTOR ofSUBSIDIARIES ~~dollars)~~SUBSIDIARIES ~~Nine~~ELIMINATIONS ~~Months~~CONSOLIDATED ~~Ended~~ -------------------------- ~~December 31, December 31, 2002 2001~~ ------------ ---------------------- ~~OPERATING~~ASSETS ~~ACTIVITIES: Net income (loss) $ 2~~Cash,~~365~~ ~~$(17~~receivables,~~514)~~ ~~Adjustments~~inventory toand ~~reconcile~~prepaid ~~net~~expenses ~~income~~$ ~~(loss)~~49,684 to$ ~~net~~19,470 ~~cash~~$ ~~provided~~- by$ ~~operating activities: Depreciation and amortization 50~~69,~~201~~154 ~~45,597~~Advance ~~Amortization of advance~~ location payments 1672,~~439~~277 ~~17,816~~116 ~~Amortization~~- ~~of intangibles 11~~72,~~210~~393 33Land,~~136~~ ~~Gain~~property ~~on sale of investment~~ and equipment (3,~~525)~~ ~~(104)~~net ~~Deferred income taxes 1~~256,~~666~~094 (431,~~400)~~374 ~~Amortization~~- of287,468 ~~debt~~Intangible ~~discount~~assets, ~~and~~net ~~deferred issue costs 1~~525,~~829~~972 19,~~433~~754 ~~Amortization~~- of535,726 ~~premium~~Intercompany onloans 11and ~~3/4%~~advances ~~Senior~~43,106 ~~Notes~~(43,106) - - ~~(926)~~Investment ~~Change~~ in ~~operating~~subsidiaries ~~assets and liabilities: Other assets~~ (~~414~~27,938) ~~161~~- ~~Receivables~~27,938 ~~net~~- ~~309~~Investment ~~(699)~~in ~~Inventories~~preferred ~~and~~stock ~~prepaid~~15,537 ~~expenses~~- (115,~~475~~537) ~~1,072~~- ~~Accounts~~Other ~~payable~~assets ~~and accrued expenses~~39,275 ~~net~~504 ~~189~~ (320,~~400~~515) ~~Accrued interest 10~~19,~~631~~264 ~~(8,600)~~ ----------- ----------- ~~Net cash provided by operating activities 89,425 63,572~~ ----------- ----------- ~~INVESTING~~Total ~~ACTIVITIES:~~assets ~~Additions~~$ to974,007 ~~property~~$ ~~and equipment (51~~18,~~127)~~112 ~~(49,225)~~$ ~~Advance location payments to location owners~~ (168,~~290~~114) ~~(12,218)~~$ ~~Acquisition of assets (1~~984,~~841)~~005 ~~(2,684)~~=========== ~~Proceeds~~=========== ~~from~~=========== ~~sale~~=========== ofLIABILITIES ~~investment~~AND ~~6,585~~STOCKHOLDER'S --EQUITY ~~Proceeds~~Accounts ~~from~~payable ~~sale~~and ofaccrued ~~property~~expenses ~~and~~$ ~~equipment~~79,207 ~~727~~$ 19,~~141~~582 ~~---------~~$ -~~--------~~ ~~Net~~$ ~~cash~~88,789 ~~used~~Deferred inincome ~~investing~~taxes ~~activities (61~~79,~~946)~~314 (621,~~986~~035) -~~--------~~ ~~---------~~78,279 ~~FINANCING~~Debt ~~ACTIVITIES: Proceeds from credit facility 6~~718,~~000~~140 3720,~~700~~845 ~~Repayments to credit facility~~ (2420,~~750~~515) ~~(33~~718,~~114)~~470 ~~Net~~Due ~~repayments~~ to parent ~~(769)~~50,697 ~~(981)~~- ~~Repayments~~- of50,697 ~~bank~~Preferred stock and ~~other~~dividends ~~borrowings~~payable ~~(12)~~- 15,537 (~~139~~15,537) ~~Principal~~- ~~payments~~Total onstockholder's ~~capitalized~~equity ~~lease~~46,649 ~~obligations~~ (326,~~049~~817) (227,~~778)~~938 47,770 --------- -- ------- ~~Net cash (used in) provided by financing activities (22,580) 688~~ ---- ----- ------~~---~~ ~~Net increase in cash and cash equivalents 4,899 1,274 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,820 25,859~~ --------- --~~-------~~ ~~CASH~~Total ~~AND~~liabilities ~~CASH~~and ~~EQUIVALENTS,~~stockholder's ~~END~~equity ~~OF PERIOD~~ $ 32974,~~719~~007 $ 2718,~~133~~112 ~~========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid~~ $ 31(8,~~301~~114) $ 58984,~~679~~005 ========= == ======= ~~Income taxes paid $ 349 $ 505~~ ==== ===== ======~~===~~ ~~NON-CASH FINANCING ACTIVITIES: Acquisition of fixed assets through capital leases $ 3,010 $ 4,499~~ ========= ==~~=======~~

11 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 5. GUARANTOR SUBSIDIARY (continued) CONDENSED CONSOLIDATING BALANCE SHEETS (IN THOUSANDS OF DOLLARS) (continued)

~~CONDENSED~~MARCH ~~CONSOLIDATING BALANCE SHEETS (in thousands of dollars) DECEMBER~~ 31, ~~2002~~2003 ------------------------------------------------------------ COINMACH AND NON- GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------- ------------ ------------ ----------------------- ASSETS Cash, receivables, inventory and prepaid expenses $ 4740,~~303~~217 $ 1819,~~915~~406 $ -- $ 6659,~~218~~623 Advance location payments 7170,~~098~~782 129 -- 7170,~~227~~911 Land, property and equipment, net ~~256~~255,~~878~~814 30,~~985~~872 -- ~~287~~286,~~863~~686 Intangible assets, net ~~535~~529,~~514~~433 89,~~205~~754 -- ~~543~~539,~~719~~187 Intercompany loans and advances 1837,~~501~~042 -- (1837,~~501~~042) - - Investment in subsidiaries (326,~~295~~821) ~~(7,326)~~- 1026,~~621~~821 -- Investment in preferred stock 1415,~~741~~135 -- (1415,~~741~~135) -- Other assets 39,~~643~~633 ~~1,062~~244 (1920,~~737~~123) 2019,~~968~~754 ------------ --------~~----~~ ---------~~---~~ ------------ Total assets $ ~~980~~961,~~383~~235 $ 5123,~~970~~363 $ (428,~~358~~437) $ ~~989~~976,~~995~~161 ============ ========~~====~~ =========~~===~~ ============ LIABILITIES AND STOCKHOLDER'S EQUITY Accounts payable and accrued expenses $ 7466,~~940~~606 $ 811,~~985~~157 $ ~~(10)~~- $ 8377,~~915~~763 Deferred income taxes 8276,~~285~~727 ~~289~~2,894 ~~(52)~~- 8279,~~522~~621 Debt ~~718~~717,~~025~~702 20,~~216~~533 (1920,~~737~~123) 718,~~504~~112 Due to parent 5150,~~083~~863 -- -- 5150,~~083~~863 Preferred stock and dividends payable -- 1415,~~741~~135 (1415,~~741~~135) -- Total stockholder's equity 5449,~~050~~337 ~~7,739~~ (726,~~818~~356) 5326,~~971~~821 49,802 ------------ --------~~----~~ ---------~~---~~ ------------ Total liabilities and stockholder's equity $ ~~980~~961,~~383~~235 $ 5123,~~970~~363 $ (428,~~358~~437) $ ~~989~~976,~~995~~161 =========== ========~~===~~ =========~~===~~ ============

12 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 5. GUARANTOR SUBSIDIARY (continued) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (in thousands of dollars)

~~MARCH~~THREE 31MONTHS ENDED JUNE 30, ~~2002~~2003 ---------------------------------------------------------------- COINMACH AND NON- GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------- ------------ ------------ --------------------------- ~~ASSETS~~Revenues ~~Cash, receivables, inventory and prepaid expenses~~ $ 44117,~~666~~596 $ 1514,~~312~~921 $ - $ 59132,~~978~~517 ~~Advance~~Costs ~~location~~and ~~payments~~expenses 69105,~~257~~371 -14,621 - 69119,~~257~~992 ~~Land,~~---------- ~~property~~--------- ~~and~~--------- ~~equipment,~~--------- ~~net~~Operating ~~283,268~~income 112,~~145~~225 300 - ~~284~~12,~~413~~525 ~~Intangible~~Interest ~~assets,~~expense ~~net 550~~13,~~744~~915 ~~2,002~~401 - ~~552~~14,~~746~~316 ~~Investment~~---------- in--------- ~~subsidiaries~~--------- ~~11,858~~--------- (1,~~291~~690) (~~10,567~~101) - ~~Other~~(1,791) ~~assets~~Income ~~22,132~~taxes ~~795~~(622) (42) - ~~22,927~~(664) ------------ ---------~~---~~ ---------~~---~~ ---------~~---~~ ~~Total assets $ 981~~(1,~~925~~068) $(59) ~~17,963~~- $ (101,~~567~~127) $Equity ~~989,321~~in ~~============~~loss ~~============~~of ~~============~~subsidiaries ~~============~~59 ~~LIABILITIES AND STOCKHOLDER'S EQUITY Accounts payable and accrued expenses $ 60,308 $ 7,583 $~~ - ~~$ 67,891 Deferred income taxes 82,037~~ (~~187~~59) - ~~81,850 Debt 737,305~~ ---------- --------- ~~737,305 Due to parent 51,852~~ --------- --------- 51(1,~~852~~127) ~~Total~~(59) ~~stockholder's~~59 ~~equity 50~~(1,~~423~~127) ~~10,567~~Dividend income (~~10,567~~402) ~~50,423~~- 402 - ----------- ---------~~---~~ ---------~~---~~ ---------~~---~~ ~~Total~~Net ~~liabilities~~loss ~~and stockholder's equity~~ $ ~~981,925~~(725) $ ~~17,963~~(59) $ (~~10,567~~343) $ ~~989~~(1,~~321~~127) ============ =========== =========~~===~~ =========~~===~~

~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, 2002 -------------------------------------------------------------- COINMACH AND NON- GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ -------------------------- Revenues $ ~~354~~125,~~656~~717 $ 4810,~~432~~577 $ -- $ ~~403~~136,~~088~~294 Costs and expenses, ~~net 309~~110,~~303~~015 4510,~~778~~439 -- ~~355~~120,~~081~~454 ---------- ---------- ---------- ---------- Operating income 4515,~~353~~702 ~~2,654~~138 -- 4815,~~007~~840 Interest expense, ~~net 41~~14,~~763~~467 ~~1,902~~4 -- 4314,~~665~~471 ---------- ---------- ---------- ---------- 31,~~590~~235 ~~752~~134 -- 41,~~342~~369 Income taxes ~~1,696~~494 ~~343~~54 ~~(62)~~- ~~1,977~~548 ---------- ---------- ---------- --------- ~~1,894~~741 ~~409~~80 62- ~~2,365~~821 Equity in ~~income~~earnings of subsidiaries ~~409~~80 -- (~~409~~80) -- ---------- ---------- ---------- --------- Net income ~~before preferred stock dividends 2,303 409 (347) 2,365 Preferred stock dividends (141) -- 141 -- ---------- ---------- ---------- ---------- Net income~~ $ ~~2,444~~821 $ ~~409~~80 $ (~~488~~80) $ ~~2,365~~821 ========== ========== ========== ==========

13 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 5. GUARANTOR SUBSIDIARY (continued) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)

~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2001~~2003 ------------------------------------------------------------------ COINMACH AND NON- GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ ------------------------------ ~~Revenues~~OPERATING ACTIVITIES Net loss $ ~~375,914~~(725) $ ~~27,032~~(59) $ --(343) $ ~~402~~(1,~~946~~127) ~~Costs~~Noncash adjustments 24,840 1,932 - 26,772 Change in operating assets and ~~expenses~~liabilities ~~347~~9,~~004~~414 27(1,~~294~~400) -- ~~374~~8,~~298~~014 ----------- ---------- ----------- ----------- ~~Operating~~Net ~~income~~cash provided by (~~loss~~used in) 28operating activities 33,~~910~~529 473 (~~262~~343) 33,659 ----------- ~~28,648~~-------- ~~Interest~~----------- ~~expense~~---------- ~~50,050~~INVESTING ~~512~~ACTIVITIES Investment in and advances to subsidiaries (343) - 343 - 50Capital expenditures (21,~~562~~189) (2,484) - (23,673) Sale of property and equipment - 37 - 37 ------- ---- -------- ----------- ----------- Net cash used in investing activities (21,~~140~~532) (~~774~~2,447) --343 (2123,~~914~~636) ~~Income~~----------- ~~taxes~~-------- ----------- ----------- FINANCING ACTIVITIES Other financing items (43,~~245~~655) ~~(155)~~2,457 -- (41,~~400~~198) ----------- ---------- ----------- ----------- Net cash (~~16,895~~used in) provided by financing activities (~~619~~3,655) 2,457 -- (171,~~514~~198) ~~Equity~~----------- in-------- ~~loss~~----------- of----------- ~~subsidiaries~~Net increase (~~619~~decrease) in cash and cash equivalents 8,342 483 -- ~~619~~8,825 Cash and cash equivalents, beginning of period 26,054 1,374 -- 27,428 ----------- ---------- ----------- ----------- ~~Net~~Cash ~~loss~~and cash equivalents, end of period $ ~~(17~~34,~~514)~~396 $ ~~(619)~~1,857 $ ~~619~~- $ ~~(17~~36,~~514)~~253 =========== ========== =========== ===========

14 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 5. GUARANTOR SUBSIDIARY (continued) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (in thousands of dollars) (continued)

THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, 2002 -------------------------------------------------------------------- COINMACH AND NON- GUARANTOR GUARANTOR SUBSIDIARIES ~~SUBSIDIARIES~~SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ -------------------------------- ~~Revenues~~OPERATING ACTIVITIES Net income $ ~~119,926~~821 $ ~~14,997~~80 $ --(80) $ ~~134,923~~821 ~~Costs~~Noncash ~~and~~adjustments ~~expenses~~26,683 ~~net~~224 ~~103~~- 26,~~076~~907 14Change in operating assets and liabilities 11,~~265~~343 (111) -- ~~117~~11,~~341~~232 -------- -------- -------- -------- Net cash provided by operating activities 38,847 193 (80) 38,960 -------- -------- -------- -------- ~~Operating~~INVESTING ~~income~~ACTIVITIES ~~16,850~~Investment ~~732~~in and advances to subsidiaries (80) - 80 - ~~17,582~~Capital ~~Interest~~expenditures ~~expense~~(23,728) ~~net~~(30) 13- (23,~~992~~758) ~~725~~Sale of property and equipment 368 - - ~~14,717~~368 -------- -------- -------- -------- Net cash used in investing activities (23,440) (30) 80 (23,390) -------- -------- -------- -------- FINANCING ACTIVITIES Repayment of debt (2,~~858~~500) 7- -- (2,~~865~~500) ~~Income~~Other ~~taxes~~financing items (1,~~444~~779) 3328 ~~(62)~~- (1,~~385~~451) ---------- ---------- ---------- ---------- ~~1,414~~Net 4cash 62(used ~~1,480 Equity~~ in) ~~loss~~provided ofby ~~subsidiaries~~financing activities (~~138~~4,279) 328 -- ~~138~~(3,951) -- ------~~----~~ ---------- ---------- ---------- Net ~~income~~increase ~~(loss)~~in ~~before~~cash ~~preferred~~and ~~stock~~cash ~~dividend~~equivalents 111,~~276~~128 4491 ~~200~~- 111,~~480~~619 ~~Preferred~~Cash ~~stock~~and ~~dividend~~cash ~~(141)~~equivalents, --beginning ~~141~~of period 27,562 258 -- 27,820 ---------- ---------- ---------- ---------- ~~Net~~Cash ~~income~~and ~~(loss)~~cash equivalents, end of period $ 138,~~417~~690 $ 4749 $ 59- $ 139,~~480~~439 ========== ========== ========== ==========

15 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 6. SEGMENT INFORMATION The Company reports segment information for its only reportable segment, the route segment, and provides information for its non-reportable segments as "All other". The route segment, which comprises the Company's core business, involves leasing laundry rooms from building owners and property management companies typically on a long-term, renewal basis, installing and servicing the laundry equipment, collecting revenues generated from laundry machines, and operating retail laundromats. The "All other" segment includes the aggregation of the rental, distribution and franchise businesses. The rental business involves the leasing of laundry machines and other household appliances to property owners, managers of multi-family housing properties and to a lesser extent, individuals and corporate relocation entities through the Company's jointly-owned subsidiary, AWA. The distribution business involves constructing complete turnkey retail laundromats, retrofitting existing retail laundromats, distributing exclusive lines of coin and non-coin machines and parts, selling service contracts and building and developing laundromat facilities for sale as franchise locations through the Company's subsidiaries, Super Laundry and ALFC. The Company evaluates performance and allocates resources based on EBITDA (earnings from continuing operations before interest, taxes, depreciation and amortization and other items, net), cash flow and growth opportunity. The accounting policies of the segments are the same as those described in the Company's Annual Report on Form 10-K for the year ended March 31, 2003. 16 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 6. SEGMENT INFORMATION (continued) The table below presents information about the Company's segments (in thousands of dollars): THREE MONTHS ENDED JUNE 30, 2003 2002 ----------- ------------ REVENUE Route $ 117,595 $ 119,111 All other: Distribution 7,146 10,577 Rental 7,776 6,606 ----------- ----------- Subtotal All other 14,922 17,183 ----------- ----------- Total $ 132,517 $ 136,294 =========== =========== EBITDA Route $ 39,139 $ 40,900 All other 2,507 2,876 General and administrative expenses (2,209) (2,042) ----------- ----------- Total (1) $ 39,437 $ 41,734 =========== =========== (LOSS) INCOME BEFORE TAXES Route (2) $ 14,734 $ 17,184 All other (2) 535 1,119 General and administrative expenses (2,209) (2,042) Amortization of goodwill and depreciation (535) (421) Interest expense (14,316) (14,471) ----------- ----------- (Loss) income before taxes $ (1,791) $ 1,369 =========== =========== ______________ (1) See description of "Non-GAAP Financial Measures" immediately following this table for a reconciliation of EBITDA to net (loss) income for the periods indicated above. (2) Operating income before deducting general and administrative expenses. 17 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 6. SEGMENT INFORMATION (continued) Non-GAAP Financial Measures Management shows EBITDA (earnings from continuing operations before interest, taxes, depreciation and amortization and other items, net), a non-GAAP financial measure, in its financial reports and believes that EBITDA is useful as a means to evaluate the Company's ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. In addition, because the Company has historically provided EBITDA to investors, it believes that presenting this non-GAAP financial measure provides consistency in its financial reporting. EBITDA is also used to determine the Company's compliance with key financial covenants under its financing agreements, which, among other things, impacts the amount of indebtedness the Company is permitted to incur. Management's use of EBITDA, however, is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by GAAP) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by GAAP) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, EBITDA may not be comparable to other similarly titled measures of other companies. The following table reconciles the Company's EBITDA to net (loss) income for each period presented (in thousands): (dollars in millions) Three months ended June 30, --------------------------- 2003 2002 ----- ----- Net (loss) income $(1.1) $ 0.8 (Benefit) provision for income taxes (0.7) 0.5 Interest expense 14.3 14.5 Depreciation and amortization 26.9 25.9 ----- ----- EBITDA $39.4 $41.7 ===== ===== 18 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 7. INCOME TAXES The components of the Company's deferred tax liabilities and assets are as follows (in thousands): JUNE 30, March 31, 2003 2003 --------- --------- Deferred tax liabilities: Accelerated tax depreciation and contract rights $ 113,986 $ 113,436 Other, net 1,589 1,452 --------- --------- 115,575 114,888 --------- --------- Deferred tax assets: Interest rate swap 1,941 1,338 Net operating loss carryforwards 33,239 31,848 Covenant not to compete 1,116 1,081 Other 1,000 1,000 --------- --------- 37,296 35,267 --------- --------- Net deferred tax liability $ 78,279 $ 79,621 ========= ========= The net operating loss carryforwards of approximately $81.4 million, after a reduction to reflect the limitation imposed under the provisions of the Internal Revenue Code regarding change of ownership, expire between fiscal years 2003 through 2022. The majority of the Company's net operating loss carryforwards begin to expire after five years. In addition, the net operating losses are subject to annual limitations imposed under the provisions of the Internal Revenue Code regarding changes in ownership. The (benefit) provision for income taxes consists of (in thousands): (dollars in millions) Three months ended June 30, ---------------------------------- 2003 2002 ---------------- -------------- Federal $(576) $427 State (88) 121 ---------------- -------------- $(664) $548 ================ ============== 19 COINMACH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued) 7. INCOME TAXES (continued) The effective income tax rate differs from the amount computed by applying the U.S. federal statutory rate to loss before taxes as a result of state taxes and permanent book/tax differences as follows (in thousands): (dollars in millions) Three months ended June 30, ------------------------------------- 2003 2002 ----------------- ------------------ Expected tax (benefit) provision $(627) $479 State tax (benefit) provision, net of federal taxes (57) 79 Permanent book/tax differences 20 (10) ----------------- ------------------ Tax (benefit) provision $(664) $548 ================= ================== The formation of AWA and subsequent Restructuring Transactions created a tax gain for the Company. The gain is deferred and may only be recognized if AWA is deconsolidated in the future. AWA has recorded a $1 million deferred tax asset representing the benefit derived from the corresponding increase in the tax basis of the assets it received from the Company. 20 COINMACH CORPORATION 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 the Company's 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 year ended March 31, 2003. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's future performance and actual results of operations may differ materially from those expected or intended. The Company's primary financial objective is to increase its cash flow from operations. Cash flow from operations represents a source of funds available to service indebtedness and for investment in both internal growth and growth through acquisitions. The Company has experienced net losses during the past three fiscal years. Such net losses were attributable in part to significant non-cash charges associated with the Company's acquisitions and the related amortization of contract rights and goodwill accounted for under the purchase method of accounting. The Company is principally engaged in the business of supplying outsourced laundry services to multi-family housing properties. The Company's most significant revenue source is its route business, which over the last three fiscal years has accounted for approximately 90% of its revenue. Through its route operations, the Company provides outsourced laundry equipment services to locations by leasing laundry rooms from building owners and property management companies, typically on a long-term, renewable basis. In return for the exclusive right to provide these services, most of the Company's contracts provide for commission payments to the location owners. Commission expense (also referred to as rent expense), the Company's single largest expense item, is included in laundry operating expenses and represents payments to location owners. Commissions may be fixed amounts or percentages of revenues and are generally paid monthly. In addition to commission payments, many of the Company's leases require it to make advance location payments to location owners, which are capitalized and amortized over the life of the applicable leases. Through the Company's route business, the Company also currently operates and provides laundromat services at 164 retail laundromats throughout Texas and Arizona. The operation of retail laundromats involves leasing store locations in desirable geographic areas, maintaining an appropriate mix of washers and dryers at each store location and servicing the washers and dryers at such locations. Laundry operating expenses include, in addition to commission payments, (i) the cost of machine maintenance and revenue collection in the route business, including payroll, parts, insurance and other related expenses, (ii) costs and expenses incurred in maintaining the Company's retail laundromats, including utilities and related expenses, (iii) the cost of sales associated with the equipment distribution business and (iv) certain expenses related to the operation of the Company's rental business. 21 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) GENERAL (CONTINUED) In addition to its route business, the Company operates an equipment distribution business through Super Laundry Equipment Corporation ("Super Laundry"), its wholly-owned subsidiary. Super Laundry's business consists of constructing and designing complete turnkey retail laundromats, retrofitting existing retail laundromats, distributing exclusive lines of commercial coin and non-coin operated machines and parts, and selling service contracts. In addition, Super Laundry, through its wholly-owned subsidiary, American Laundry Franchising Corp. ("ALFC"), builds and develops laundromat facilities for sale as franchise locations. For each franchise laundromat facility, ALFC enters into a purchase agreement and a license agreement with the buyer whereby the buyer may use certain systems created by ALFC to operate such facility. ALFC receives revenue primarily from the sale price of the laundromat facility and, to a lesser extent, from an initial franchise fee and certain other fees based on the sales from such facility. The Company also operates an equipment rental business through Appliance Warehouse of America, Inc. ("AWA"), a recently formed subsidiary of the Company, jointly-owned by the Company and Coinmach Holdings, LLC, a Delaware limited liability company and the Company's ultimate parent ("Holdings"), which leases laundry equipment and other household appliances and electronic items to corporate relocation entities, owners and managers of multi-family housing properties, and to a lesser extent, individuals and corporate relocation entities. ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES The Company's financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. The Company believes that the following are some of the more critical judgment areas in the application of its accounting policies that currently affect its financial condition and results of operations. Revenue and cash and cash equivalents include an estimate of cash not yet collected at the end of a reporting period, which remained at laundry room locations. The Company is required to estimate the collectibility of its receivables. A considerable amount of judgment is required in assessing the ultimate realization of these receivables including the current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Allowance for doubtful accounts at June 30, 2003 was approximately $1.7 million. 22 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES (CONTINUED) The Company currently has significant deferred tax assets, which are subject to periodic recoverability assessments. Realization of the Company's deferred tax assets is principally dependent upon its achievement of projected future taxable income. Management's judgments regarding future profitability may change due to future market conditions and other factors. These changes, if any, may require possible material adjustments to these deferred tax asset balances. The Company has significant intangible assets related to goodwill and other acquired intangibles. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments. Changes in strategy and/or market conditions, including estimated future cash flows, could significantly impact these judgments and require adjustments to recorded asset balances. RESULTS OF OPERATIONS The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto and with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2003. COMPARISON OF THE THREE MONTH PERIODS ENDED JUNE 30, 2003 AND JUNE 30, 2002 The following table sets forth the Company's revenues for the periods indicated: (dollars in millions) Three months ended June 30, ---------------------------------------- 2003 2002 Change ----------- ------------- ------------ Route $ 117.6 $ 119.1 $ (1.5) Distribution 7.1 10.6 (3.5) Rental 7.8 6.6 1.2 ----------- ------------- ------------ $ 132.5 $ 136.3 $ (3.8) =========== ============= ============ Revenue decreased by approximately $3.8 million or 3% for the three-month period ended June 30, 2003, as compared to the prior year's corresponding period. 23 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) Route revenue for the three months ended June 30, 2003 decreased by approximately $1.5 million or 1% over the prior year's corresponding period. Management believes that the decrease in route revenue for the current quarter as compared to the prior year's corresponding period was primarily the result of increased vacancies, which management believes became apparent during the quarter ended September 30, 2002, related to locations in certain regions as well as, to a lesser extent, a transfer of approximately 6,500 rental machines to AWA in the prior year's corresponding period. This decrease was slightly offset by an improvement in revenue from the timing of price changes and internal growth in machine count during the prior and current year. Management believes that to the extent vacancy rates in certain of the Company's operating regions, principally in the Southeast and Texas, increase in the future, route revenue in these regions may continue to decrease. Any such decrease, however, may be mitigated by the Company's geographic diversity. Distribution revenue for the three months ended June 30, 2003 decreased by approximately $3.5 million or 33% from the prior year's corresponding period. Sales from the distribution business unit are sensitive to general market conditions and economic conditions and as a result have experienced downward pressure. Rental revenue for the three months ended June 30, 2003 increased by approximately $1.2 million or 18% over the prior year's corresponding period. This increase was primarily the result of internal growth of the machine base in existing areas of operations, as well as, to a lesser extent, the transfer of approximately 6,500 rental machines from the route business to AWA during the prior year's corresponding period. Laundry operating expenses decreased by approximately $1.6 million or 2% for the three-month period ended June 30, 2003, as compared to the prior year's corresponding period. This decrease in laundry operating expenses was due primarily to a reduction in cost of sales related to the decreased revenue experienced in the distribution business as discussed above. As a percentage of revenues, laundry operating expenses were approximately 68.6% and 67.9% for the three-month period ended June 30, 2003 and June 30, 2002, respectively. General and administrative expenses increased by approximately $0.2 million for the three-month period ended June 30, 2003, as compared to the prior year's corresponding period. As a percentage of revenues, general and administrative expenses were approximately 1.7% and 1.5% for the three-month period ended June 30, 2003 and June 30, 2002, respectively. 24 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) Depreciation and amortization expense increased by approximately 4% for the three-month period ended June 30, 2003, as compared to the prior year's corresponding period. The increase in depreciation and amortization expense was primarily due to depreciation expense relating to capital expenditures required by historical increases in the Company's installed base of machines. Operating income margins were approximately 9.5% for the three-month period ended June 30, 2003, as compared to approximately 11.6% for the prior year's corresponding period. The decrease in operating income margin was primarily due to the decreased revenue in the distribution business as discussed above, offset by internal growth of the machine base in the rental business. Interest expense, net, decreased by approximately 1% for the three-month period ended June 30, 2003, as compared to the prior year's corresponding period. The decrease in interest expense was primarily due to decreased borrowing levels under the Company's $355 million senior secured credit facility (the "Senior Credit Facility"), a decrease in variable interest rates payable under such facility resulting from a market decline in interest rates, offset by an increase in interest expense resulting from interest rate swap agreements entered into by the Company in September 2002 that are at a slightly higher fixed rate compared to variable rates. The benefit for income taxes for the three-month period ended June 30, 2003 was approximately $0.7 million as compared to a provision for income taxes of approximately $0.5 million for the prior year's corresponding period. The change for the three-month period is due to the corresponding decrease in pretax income from approximately $1.4 million for the three-month period ended June 30, 2002 to a pretax loss of approximately $1.8 million for the three-month period ended June 30, 2003. The effective tax rate for the three-month period ended June 30, 2003 was 37% as compared to 40% for the prior year's corresponding period. Net loss was approximately $1.1 million for the three-month period ended June 30, 2003, as compared to net income of approximately $0.8 million for the prior year's corresponding period. The increase in net loss was primarily the result of decreased revenue, as discussed above. 25 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) The following table sets forth EBITDA (before deducting general and administrative expenses) for each of the route, distribution and rental divisions for the years indicated: (dollars in millions) Three months ended June 30, ------------------------------ 2003 2002 Change ------ ------ ------ Route................................ $39.1 $40.9 $(1.8) Distribution......................... (0.7) 0.3 (1.0) Rental............................... 3.2 2.5 0.7 General and administrative expenses.. (2.2) (2.0) (0.2) ------ ------ ------ EBITDA............................... $39.4 $41.7 $(2.3) ====== ====== ====== EBITDA represents earnings from continuing operations before interest, taxes, depreciation and amortization and other items, net. Management believes that EBITDA is useful as a means to evaluate the Company's ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. Additionally, because the Company has historically provided EBITDA to investors, it believes that presenting this non-GAAP financial measure provides consistency in its financial reporting. EBITDA is also used to determine the Company's compliance with key financial covenants under its financing agreements, which, among other things, impacts the amount of indebtedness the Company is permitted to incur. Management's use of EBITDA, however, is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by accounting principles generally accepted in the United States) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by accounting principles generally accepted in the United States) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with accounting principles generally accepted in the United States and is thus susceptible to varying calculations, EBITDA may not be comparable to other similarly titled measures of other companies. See Note 6 to the Notes to Condensed Consolidated Financial Statements (Unaudited) for a reconciliation of EBITDA to net (loss) income for the periods indicated in the table immediately above. EBITDA was approximately $39.4 million for the three months ended June 30, 2003, as compared to approximately $41.7 million for the three months ended June 30, 2002. EBITDA margins declined to approximately 29.8% for the three months ended June 30, 2003, as compared to approximately 30.6% for the prior year's corresponding period. This decrease was primarily the result of decreased revenues in the route business, as discussed above. 26 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES The Company continues to have substantial indebtedness and debt service requirements. At June 30, 2003, the Company had outstanding debt of approximately $718.5 million, which included $450 million of its 9% Senior Notes due 2010 (the "9% Senior Notes") and $261.3 million of borrowings under its Senior Credit Facility. The Company's stockholder's equity was approximately $47.8 million as of June 30, 2003. The Company's liquidity requirements arise from capital expenditures, interest expense and, to a lesser extent, principal payments on its indebtedness and working capital requirements. The Company has met these requirements in each fiscal year since 1995 primarily from cash flow generated from operations. The Company's primary source of liquidity as of June 30, 2003 consisted of cash and cash equivalents of $36.3 million and available borrowings under its Senior Credit Facility of approximately $74.5 million. On January 25, 2002, the Company issued the 9% Senior Notes and entered into the Senior Credit Facility, which was comprised of: (i) $280 million in aggregate principal amount of term loans and (ii) a revolving credit facility with a maximum borrowing limit of $75 million. The Senior Credit Facility also provides for up to $10 million of letter of credit financings and short term borrowings under a swing line facility of up to $7.5 million. The Senior Credit Facility is secured by substantially all of the Company's assets. The term loans under the Senior Credit Facility, in aggregate principal amounts outstanding of approximately $18.3 million and $243.0 million as of June 30, 2003, are scheduled to be fully repaid by January 25, 2008 and July 25, 2009, respectively. As of June 30, 2003, the Company had no amounts outstanding under its revolving credit facility, which is scheduled to expire on January 25, 2008. Letters of credit outstanding at June 30, 2003 were approximately $0.5 million. The Company's working capital requirements are, and are expected to continue to be, minimal since a significant portion of the Company's operating expenses are not paid until after cash is collected from installed machines. Under the Company's existing financing arrangements, the Company is required to make (i) quarterly amortization payments under the Senior Credit Facility commencing on March 31, 2004 with respect to the $30 million (original principal amount) term loan and semi-annual amortization payments commencing on June 30, 2004 with respect to the $250 million (original principal amount) term loan, and (ii) semi-annual cash interest payments under the 9% Senior Notes on February 1 and August 1, commencing August 1, 2002. 27 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) On September 23, 2002, the Company entered into three separate interest rate swap agreements totaling $150 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 rate basis, thereby reducing the impact of interest rate changes on future interest expense. The three swap agreements consist of: (i) a $50 million notional amount interest rate swap transaction with JP Morgan effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.91% and expiring on February 1, 2006, (ii) a $50 million notional amount interest rate swap transaction with Credit Lyonnais effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.91% and expiring on February 1, 2006 and (iii) a $50 million notional amount interest rate swap transaction with Deutsche Bank AG effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.90% and expiring on February 1, 2006. These interest rate swaps used to hedge the variability of forecasted cash flows attributable to interest rate risk were designated as cash flow hedges. The Company recognized an accumulated other comprehensive loss in the stockholder's equity section included in the Consolidated Balance Sheet at June 30, 2003 of approximately $2.9 million, net of tax, relating to the interest rate swaps that qualify as cash flow hedges. As the Company has focused on increasing its cash flow from operating activities, it has made significant capital investments, primarily consisting of capital expenditures related to acquisitions, renewal and growth. The Company anticipates that it will continue to utilize cash flows from operations to finance its capital expenditures and working capital needs, including interest payments on its outstanding indebtedness. Capital expenditures consists of expenditures (i) on the Company's installed machine base and (ii) for other general corporate purposes. Capital expenditures for the three month period ended June 30, 2003 were approximately $23.7 million (excluding approximately $1.0 million relating to capital lease payments). The primary components of the Company's capital expenditures are (i) machine expenditures, (ii) advance location payments, and (iii) laundry room improvements. The Company's installed base of machines for the route business increased by approximately 2,000 machines for the three-month period ended June 30, 2003. The growth in the rental business machine base was approximately 5,500 for the three-month period ended June 30, 2003. The full impact on revenues and cash flow generated from capital expended on the net increase in the installed base of machines is not expected to be reflected in the Company's financial results until subsequent reporting periods, depending on certain factors, including the timing of the capital expended. While the Company estimates that it will generate sufficient cash flows from operations to finance anticipated capital expenditures, there can be no assurances that it will be able to do so. 28 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The following table sets forth the Company's capital expenditures (excluding payments for capital lease obligations and business acquisitions) for the periods indicated: (in millions of dollars) Three months ended June 30, ---------------------------------- 2003 2002 Change --------- --------- --------- Route............................... $21.3 $20.4 $ 0.9 Distribution........................ 0.2 - 0.2 Rental.............................. 2.2 3.0 (0.3) --------- --------- --------- $23.7 $23.4 $ 0.3 ========= ========= ========= The Company's level of indebtedness will have several important effects on its future operations including, but not limited to, the following: (i) a significant portion of the Company's cash flow from operations will be required to pay interest on its indebtedness; (ii) the financial covenants contained in certain of the agreements governing the Company's indebtedness will require the Company to meet certain financial tests and may limit its ability to borrow additional funds or to dispose of assets; (iii) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; and (iv) the Company's ability to adapt to changes in the outsourced laundry equipment services industry and to economic conditions in general could be limited. Management believes that the Company's future operating activities will generate sufficient cash flow to repay indebtedness outstanding under the 9% Senior Notes and borrowings under the Senior Credit Facility or to permit any necessary refinancings thereof. An inability of the Company, however, to comply with covenants or other conditions contained in the indenture governing the 9% Senior Notes or in the Senior Credit Facility could result in an acceleration of all amounts thereunder. If the Company is unable to meet its debt service obligations, it could be required to take certain actions such as reducing or delaying capital expenditures, selling assets, refinancing or restructuring its indebtedness, selling additional equity capital or other actions. There is no assurance that any of such actions could be effected on commercially reasonable terms or on terms permitted under the Senior Credit Facility or the indenture governing the 9% Senior Notes. 29 COINMACH CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CERTAIN ACCOUNTING TREATMENT The Company's depreciation and amortization expense, which aggregated approximately $26.9 million for the three months ended June 30, 2003, reduces the Company's net income, but not its cash flow from operations. In accordance with accounting principles generally accepted in the United States, a significant amount of the purchase price related to businesses acquired by the Company is allocated to "contract rights". Management evaluates the realizability of contract rights balances (if there are indicators of impairment) based upon the Company's forecasted undiscounted cash flows and operating income. Based upon present operations and strategic plans, management believes that no impairment of contract rights has occurred. INFLATION AND SEASONALITY In general, the Company's laundry operating expenses and general and administrative expenses are affected by inflation and the effects of inflation may be experienced by the Company in future periods. Management believes such effects will not be material to the Company. The Company's business generally is not seasonal. 30 COINMACH CORPORATION AND SUBSIDIARIES ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's principal exposure to market risk relates to changes in interest rates on its long-term borrowings. The Company's cash flow would be adversely affected by an increase in interest rates. As of June 30, 2003, the Company had approximately $111.3 million outstanding relating to its variable rate debt portfolio. The Company's future earnings, cash flow and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk is the risk of loss from adverse changes in market prices and interest rates. If market rates of interest on the Company's variable interest rate debt increased by 2.0% (or 200 basis points), the Company's annual interest expense on such variable interest rate debt would increase by approximately $2.2 million, assuming the total amount of variable interest rate debt outstanding was $111.3 million, the balance as of June 30, 2003. The Company enters into interest rate swap agreements from time to time to mitigate its exposure to adverse interest rate fluctuations. On September 23, 2002, the Company entered into three separate interest rate swap agreements totaling $150 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 rate basis, thereby reducing the impact of interest rate changes on future interest expense. The three swap agreements consist of: (i) a $50 million notional amount interest rate swap transaction with JP Morgan effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.91% and expiring on February 1, 2006, (ii) a $50 million notional amount interest rate swap transaction with Credit Lyonnais effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.91% and expiring on February 1, 2006 and (iii) a $50 million notional amount interest rate swap transaction with Deutsche Bank AG effectively fixing the three-month LIBOR interest rate (as determined therein) at 2.90% and expiring on February 1, 2006. These interest rate swaps used to hedge the variability of forecasted cash flows attributable to interest rate risk were designated as cash flow hedges. The Company's fixed debt instruments are not generally affected by a change in the market rates of interest, and therefore, such instruments generally do not have an impact on future earnings. However, as fixed rate debt matures, future earnings and cash flows may be impacted by changes in interest rates related to debt acquired to fund repayments under maturing facilities. The Company does not use derivative financial instruments for trading purposes and is not exposed to foreign currency exchange risk. 31 COINMACH CORPORATION AND SUBSIDIARIES ITEM 4. CONTROLS AND PROCEDURES. The Company's principal executive officer and principal financial officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within ninety days prior to the filing date of this report, have concluded that, as of such date, the Company's disclosure controls and procedures were effective to ensure that material information relating to the Company would be made known to them by others within the Company on a timely basis. In addition, there were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies or material weaknesses. 32 COINMACH CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to various legal proceedings arising in the ordinary course of business. Although the ultimate disposition of such proceedings is not presently determinable, management does not believe that adverse determinations in any or all such proceedings would have a material adverse effect upon the Company's financial condition, results of operations or cash flows. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 3.1 Restated Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Company's Form 10-K for the transition period from September 30, 1995 to March 29, 1996, file number 0-7694) 3.2 Bylaws of the Company (incorporated by reference from Exhibit 3.2 to the Company's Form 10-K for the transition period from September 30, 1995 to March 29, 1996, file number 0-7694) 31.1 Certificate of Chief Executive Officer pursuant to 18 United States Code, Section 1350, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002 31.2 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 (b) REPORTS ON FORM 8-K None. 33 COINMACH CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COINMACH CORPORATION Date: August 8, 2003 /S/ ROBERT M. DOYLE ----------------------------------------- Robert M. Doyle Senior Vice President and Chief Financial Officer (On behalf of registrant and as Principal Financial Officer) 34

THREE MONTHS ENDED DECEMBER 31, 2001 --------------------------------------------------------- COINMACH AND NON-GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ ------------ Revenues $ 126,326 $ 9,510 $ -- $ 135,836 Costs and expenses 116,436 9,397 -- 125,833 ---------- ---------- ---------- ---------- Operating income 9,890 113 -- 10,003 Interest expense 16,374 171 -- 16,545 ---------- ---------- ---------- ---------- (6,484) (58) -- (6,542) Income taxes (1,252) (8) -- (1,260) ---------- ---------- ---------- ---------- (5,232) (50) -- (5,282) Equity in loss of subsidiaries (50) -- 50 -- ---------- ---------- ---------- ---------- Net income (loss) $ (5,282) $ (50) $ 50 $ (5,282) ========== ========== ========== ==========

NINE MONTHS ENDED DECEMBER 31, 2002 -------------------------------------------------------- COINMACH AND NON-GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------- ------------ ------------ ------------ OPERATING ACTIVITIES Net income $ 2,444 $ 409 $ (488) $ 2,365 Noncash adjustments 71,398 6,422 -- 77,820 Change in operating assets and liabilities 12,893 (3,653) -- 9,240 --------- --------- --------- --------- Net cash provided by operating activities 86,735 3,178 (488) 89,425 --------- --------- --------- --------- INVESTING ACTIVITIES Investments in and advances to subsidiaries (488) -- 488 -- Capital expenditures (59,967) (7,450) -- (67,417) Acquisition of assets (1,641) (200) -- (1,841) Sale of investment 6,585 -- -- 6,585 Sale of property and equipment -- 727 -- 727 --------- --------- --------- --------- Net cash used in investing activities (55,511) (6,923) 488 (61,946) --------- --------- --------- --------- FINANCING ACTIVITIES Proceeds from debt 6,000 -- -- 6,000 Repayment of debt (24,750) -- -- (24,750) Other financing items (8,146) 4,316 -- (3,830) --------- --------- --------- --------- Net cash (used in) provided by financing activities (26,896) 4,316 -- (22,580) --------- --------- --------- --------- Net increase in cash and cash equivalents 4,328 571 -- 4,899 Cash and cash equivalents, beginning of period 27,703 117 -- 27,820 --------- --------- --------- --------- Cash and cash equivalents, end of period $ 32,031 $ 688 $ -- $ 32,719 ========= ========= ========= =========

NINE MONTHS ENDED DECEMBER 31, 2001 ------------------------------------------------------- COINMACH AND NON-GUARANTOR GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------- ------------ ------------ ------------ OPERATING ACTIVITIES Net loss $(17,514) $ (619) $ 619 $(17,514) Noncash adjustments 92,138 414 -- 92,552 Change in operating assets and liabilities (8,888) (2,578) -- (11,466) --------- --------- --------- --------- Net cash provided by (used in) operating activities 65,736 (2,783) 619 63,572 --------- --------- --------- --------- INVESTING ACTIVITIES Investments in and advances to subsidiaries 619 -- (619) -- Capital expenditures (61,398) (45) -- (61,443) Acquisition of assets (2,684) -- -- (2,684) Sale of property and equipment 1,141 -- -- 1,141 --------- --------- --------- --------- Net cash used in investing activities (62,322) (45) (619) (62,986) --------- --------- --------- --------- FINANCING ACTIVITIES Proceeds from debt 37,323 377 -- 37,700 Repayment of debt (32,783) (331) -- (33,114) Other financing items (6,917) 3,019 -- (3,898) --------- --------- --------- --------- Net cash (used in) provided by financing activities (2,377) 3,065 -- 688 --------- --------- --------- --------- Net increase in cash and cash equivalents 1,037 237 -- 1,274 Cash and cash equivalents, beginning of period 25,418 441 -- 25,859 --------- --------- --------- --------- Cash and cash equivalents, end of period $ 26,455 $ 678 $ -- $ 27,133 ========= ========= ========= =========

THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31, ------------------------------- ------------------------------ 2002 2001 2002 2001 ---------- ---------- ----------- ---------- Revenue: Route $ 119,926 $ 120,581 $ 354,656 $ 359,408 All other: Distribution 7,551 9,510 27,244 27,032 Rental 7,446 5,745 21,188 16,506 ----------- ---------- ----------- ----------- Subtotal All other 14,997 15,255 48,432 43,538 ----------- ---------- ----------- ----------- Total $ 134,923 $ 135,836 $ 403,088 $ 402,946 =========== ========== =========== =========== EBITDA: Route $ 40,441 $ 41,154 $ 120,924 $ 125,011 All other 2,844 2,772 8,722 6,732 Reconciling items: Corporate expenses (2,228) (2,339) (6,296) (6,546) ----------- ---------- ----------- ----------- Total $ 41,057 $ 41,587 $ 123,350 $ 125,197 =========== ========== =========== =========== Income before taxes: Route $ 16,637 $ 15,399 $ 49,607 $ 45,924 All other 1,087 1,117 3,452 1,790 ----------- ---------- ----------- ----------- Subtotal 17,724 16,516 53,059 47,714 Reconciling items: Corporate expenses (2,228) (2,339) (6,296) (6,546) Amortization of goodwill and depreciation (421) (4,174) (1,263) (12,520) Nonrecurring items, net 2,507 - 2,507 - Interest expense (14,717) (16,545) (43,665) (50,562) ----------- ---------- ----------- ----------- Income (loss) before taxes $ 2,865 $ (6,542) $ 4,342 $ (21,914) =========== ========== =========== ===========

December 31, 2002 March 31, 2002 ----------------- -------------- Deferred tax liabilities: Accelerated tax depreciation and contract rights $ 110,303 $ 110,864 Other, net 250 925 --------- --------- 110,553 111,789 --------- --------- Deferred tax assets: Net operating loss carryforwards 26,778 28,906 Covenant not to compete 1,253 1,033 --------- --------- 28,031 29,939 --------- --------- Net deferred tax liability $ 82,522 $ 81,850 ========= =========

Three Months ended Nine Months ended December 31, December 31, ---------------------- -------------------- 2002 2001 2002 2001 ------ ------ ------ ------ Expected tax provision (benefit) $ 1,003 $(2,400) $ 1,520 $(7,780) State tax provision (benefit), net of federal taxes 324 (172) 408 (557) Permanent book/tax differences 58 1,312 49 3,937 ------- -------- ------- -------- Tax provision (benefit) $ 1,385 $(1,260) $ 1,977 $(4,400) ======= ======== ======= ========

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