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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 DECEMBER 31, 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 FEBRUARY 13, 2004, 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
PART I.
FINANCIAL INFORMATION PAGE NO.
- --------------------- -------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 2003 (Unaudited) and March 31, 2003 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months and Nine Months Ended December 31, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended December 31, 2003 and 2002 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 35
Item 4. Controls and Procedures 36
PART II.
OTHER INFORMATION
- -----------------
Item 1. Legal Proceedings 37
Item 2. Changes in Securities 37
Item 3. Defaults Upon Senior Securities 37
Item 4. Submission of Matters to a Vote of Security Holders 37
Item 5. Other Information 37
Item 6. Exhibits and Reports on Form 8-K 37
SIGNATURE PAGE 38
2
COINMACH CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
December 31, 2003 March 31, 2003(1)
----------------- --------------
(Unaudited)
ASSETS:
Cash and cash equivalents $ 37,511 $ 27,428
Receivables, net 6,565 10,453
Inventories 13,728 14,125
Prepaid expenses 5,806 7,617
Advance location payments 73,274 70,911
Land, property and equipment, net of accumulated depreciation
of $236,222 and $182,474 287,168 286,686
Contract rights, net of accumulated amortization of $83,602
and $73,027 326,306 335,327
Goodwill 205,108 203,860
Other assets 18,800 19,754
----------- -----------
Total assets $ 974,266 $ 976,161
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable and accrued expenses $ 28,573 $ 36,843
Accrued rental payments 31,857 29,481
Accrued interest 17,733 8,094
Interest rate swap liability 2,730 3,345
Deferred income taxes 77,641 79,621
Long-term debt 719,409 718,112
Due to Parent 50,468 50,863
Stockholder's equity:
Common stock and capital in excess of par value 121,065 121,065
Accumulated other comprehensive loss, net of tax (1,493) (2,007)
Accumulated deficit (73,717) (69,256)
----------- -----------
Total stockholder's equity 45,855 49,802
----------- -----------
Total liabilities and stockholder's equity $ 974,266 $ 976,161
=========== ===========
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 NINE MONTHS ENDED
----------------------------- --------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
------------ ------------ ------------- ------------
REVENUES $ 135,740 $ 134,923 $ 398,208 $ 403,088
COSTS AND EXPENSES:
Laundry operating expenses 93,612 91,638 274,182 273,442
General and administrative 2,169 2,228 6,246 6,296
Depreciation and amortization 26,959 25,982 80,870 77,850
Other items, net 96 (2,507) 96 (2,507)
----------- ----------- ----------- -----------
122,836 117,341 361,394 355,081
----------- ----------- ----------- -----------
OPERATING INCOME 12,904 17,582 36,814 48,007
INTEREST EXPENSE, NET 14,424 14,717 43,132 43,665
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (1,520) 2,865 (6,318) 4,342
(BENEFIT) PROVISION FOR INCOME TAXES (583) 1,385 (1,857) 1,977
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (937) $ 1,480 $ (4,461) $ 2,365
=========== =========== =========== ===========
See accompanying notes.
4
COINMACH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars)
Nine Months Ended
----------------------------------
December 31, December 31,
2003 2002
------------ ------------
OPERATING ACTIVITIES:
Net (loss) income $ (4,461) $ 2,365
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 54,245 50,201
Amortization of advance location payments 15,312 16,439
Amortization of intangibles 11,313 11,210
Gain on sale of investment and equipment (1,091) (3,525)
Deferred income taxes (2,082) 1,666
Amortization of deferred issue costs 1,810 1,829
Change in operating assets and liabilities:
Other assets (1,638) (414)
Receivables, net 3,888 309
Inventories and prepaid expenses 2,228 (1,475)
Accounts payable and accrued expenses, net (7,539) 189
Accrued interest 9,639 10,631
------------ ------------
Net cash provided by operating activities 81,624 89,425
------------ ------------
INVESTING ACTIVITIES:
Additions to property and equipment (50,505) (51,127)
Advance location payments to location owners (16,029) (16,290)
Acquisition of assets (3,423) (1,841)
Proceeds from sale of investment 1,022 6,585
Proceeds from sale of property and equipment 334 727
------------ ------------
Net cash used in investing activities (68,601) (61,946)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from credit facility 8,200 6,000
Repayments to credit facility (8,200) (24,750)
Net repayments to Parent (395) (769)
Borrowings (repayments) of bank and other borrowings 548 (12)
Principal payments on capitalized lease obligations (3,093) (3,049)
------------ ------------
Net cash used in financing activities (2,940) (22,580)
------------ ------------
Net increase in cash and cash equivalents 10,083 4,899
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,428 27,820
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,511 $ 32,719
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net $ 31,722 $ 31,276
============ ============
Income taxes paid $ 274 $ 349
============ ============
NON-CASH FINANCING ACTIVITIES:
Acquisition of fixed assets through capital leases $ 3,842 $ 3,010
============ ============
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 condensed consolidated
financial statements of Coinmach include the accounts of all of its
subsidiaries. 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. 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 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 December 31, 2003, the Company owned and
operated approximately 875,000 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, through its wholly-owned subsidiary American Laundry Franchising
Corp. ("ALFC"), began to build and develop laundromat facilities for sale as
franchise locations.
The contribution by AWA and CLC of all of their respective outstanding
common stock to Holdings in exchange for substantially equivalent equity
interests in Holdings in March 2003 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.
6
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
1. BASIS OF PRESENTATION (CONTINUED)
The interim results presented herein are not necessarily indicative of the
results to be expected for the entire year.
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 nine months ended December 31, 2003
consists of the following (in thousands):
Goodwill - beginning of period $203,860
Acquisitions 1,248
--------
Goodwill - end of period $205,108
========
The Company completed its most recent goodwill impairment test as of
January 1, 2003. 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 the 2004 fiscal year 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
valuations. Such contract rights are amortized using accelerated methods over
periods ranging from 30-35 years. The Company does not record contract rights
relating to new locations signed in the ordinary course of business.
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 (remaining balance) $3.5
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):
December 31, March 31,
2003 2003
------------ ----------
9% Senior Notes due 2010 $ 450,000 $ 450,000
Credit facility indebtedness 261,250 261,250
Obligations under capital leases 7,577 6,828
Other 582 34
---------- ----------
$ 719,409 $ 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 December 31, 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 3.94% to 4.88%. The term loans under the Senior
Credit Facility, in aggregate principal amounts outstanding of $18.3 million and
$243.0 million as of December 31, 2003, are scheduled to be fully repaid by
January 25, 2008 and July 25, 2009, respectively. As of December 31, 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
December 31, 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 a financial institution 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 a financial
institution 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 a financial
institution 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 December 31,
2003 of approximately $1.5 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. 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 December 31, 2003 and March 31, 2003, the
condensed consolidating statements of operations for the three and nine months
ended December 31, 2003 and 2002, and the condensed consolidating statement of
cash flows for the nine months ended December 31, 2003 and 2002 include AWA,
Super Laundry and ALFC as Guarantor Subsidiaries.
10
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. 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)
DECEMBER 31, 2003
---------------------------------------------------------------
COINMACH
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
ASSETS
Cash, receivables, inventory and prepaid expenses $ 45,336 $ 18,274 $ - $ 63,610
Advance location payments 73,274 - - 73,274
Land, property and equipment, net 255,315 31,853 - 287,168
Intangible assets, net 521,660 9,754 - 531,414
Intercompany loans and advances 40,251 (40,251) - -
Investment in subsidiaries (27,505) - 27,505 -
Investment in preferred stock 16,371 - (16,371) -
Other assets 39,710 480 (21,390) 18,800
----------- ----------- ----------- -----------
Total assets $ 964,412 $ 20,110 $ (10,256) $ 974,266
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued expenses $ 72,802 $ 8,091 $ - $ 80,893
Deferred income taxes 75,451 2,190 - 77,641
Debt 719,065 21,734 (21,390) 719,409
Due to parent 50,468 - - 50,468
Preferred stock and dividends payable - 16,371 (16,371) -
Total stockholder's equity 46,626 (28,276) 27,505 45,855
----------- ----------- ----------- -----------
Total liabilities and stockholder's equity $ 964,412 $ 20,110 $ (10,256) $ 974,266
=========== =========== =========== ===========
11
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. GUARANTOR SUBSIDIARY (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
(CONTINUED)
MARCH 31, 2003
---------------------------------------------------------------
COINMACH
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
ASSETS
Cash, receivables, inventory and prepaid expenses $ 40,217 $ 19,406 $ - $ 59,623
Advance location payments 70,782 129 - 70,911
Land, property and equipment, net 255,814 30,872 - 286,686
Intangible assets, net 529,433 9,754 - 539,187
Intercompany loans and advances 36,729 (36,729) - -
Investment in subsidiaries (26,485) - 26,485 -
Investment in preferred stock 15,135 - (15,135) -
Other assets 39,634 243 (20,123) 19,754
----------- ----------- ------------ -----------
Total assets $ 961,259 $ 23,675 $ (8,773) $ 976,161
=========== =========== ============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued expenses $ 66,606 $ 11,157 $ - $ 77,763
Deferred income taxes 76,751 2,870 - 79,621
Debt 717,702 20,533 (20,123) 718,112
Due to parent 50,863 - - 50,863
Preferred stock and dividends payable - 15,135 (15,135) -
Total stockholder's equity 49,337 (26,020) 26,485 49,802
----------- ----------- ----------- -----------
Total liabilities and stockholder's equity $ 961,259 $ 23,675 $ (8,773) $ 976,161
=========== =========== =========== ===========
12
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. GUARANTOR SUBSIDIARY (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
THREE MONTHS ENDED DECEMBER 31, 2003
----------------------------------------------------------------
COINMACH AND
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
Revenues $ 119,173 $ 16,567 $ - $ 135,740
Costs and expenses 105,016 17,820 - 122,836
------------ ------------ ------------ ------------
Operating income 14,157 (1,253) - 12,904
Interest expense, net 13,981 443 - 14,424
------------ ------------ ------------ ------------
176 (1,696) - (1,520)
Income taxes 118 (701) - (583)
------------ ------------ ------------ ------------
58 (995) - (937)
Equity in loss of subsidiaries 995 - (995) -
------------ ------------ ------------ ------------
(937) (995) 995 (937)
Dividend income (364) - 364 -
------------ ------------ ------------ ------------
Net (loss) income $ (573) $ (995) $ 631 $ (937)
============ ============ ============ ============
THREE MONTHS ENDED DECEMBER 31, 2002
----------------------------------------------------------------
COINMACH AND
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
Revenues $ 119,926 $ 14,997 $ - $ 134,923
Costs and expenses 103,075 14,266 - 117,341
------------ ------------ ------------ ------------
Operating income 16,851 731 - 17,582
Interest expense, net 14,574 143 - 14,717
------------ ------------ ------------ ------------
2,277 588 - 2,865
Income taxes 1,036 349 - 1,385
------------ ------------ ------------ ------------
1,241 239 - 1,480
Equity in loss of subsidiaries (239) - 239 -
------------ ------------ ------------ ------------
1,480 239 (239) 1,480
Dividend income (141) - 141 -
------------ ------------ ------------ ------------
Net income $ 1,621 $ 239 $ (380) $ 1,480
============ ============ ============ ============
13
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. GUARANTOR SUBSIDIARY (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
NINE MONTHS ENDED DECEMBER 31, 2003
----------------------------------------------------------------
COINMACH AND
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
Revenues $ 351,529 $ 46,679 $ - $ 398,208
Costs and expenses 314,274 47,120 - 361,394
----------- ----------- ----------- -----------
Operating income 37,255 (441) - 36,814
Interest expense, net 41,834 1,298 - 43,132
----------- ----------- ----------- -----------
(4,579) (1,739) - (6,318)
Income taxes (1,138) (719) - (1,857)
----------- ----------- ----------- -----------
(3,441) (1,020) - (4,461)
Equity in loss of subsidiaries 1,020 - (1,020) -
----------- ----------- ----------- -----------
(4,461) (1,020) 1,020 (4,461)
Dividend income (1,236) - 1,236 -
----------- ----------- ----------- -----------
Net (loss) income $ (3,225) $ (1,020) $ (216) $ (4,461)
=========== =========== =========== ===========
NINE MONTHS ENDED DECEMBER 31, 2002
----------------------------------------------------------------
COINMACH AND
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
Revenues $ 354,656 $ 48,432 $ - $ 403,088
Costs and expenses 309,302 45,779 - 355,081
----------- ----------- ----------- -----------
Operating income 45,354 2,653 - 48,007
Interest expense, net 43,490 175 - 43,665
----------- ----------- ----------- -----------
1,864 2,478 - 4,342
Income taxes 849 1,128 - 1,977
----------- ----------- ----------- -----------
1,015 1,350 - 2,365
Equity in loss of subsidiaries (1,350) - 1,350 -
----------- ----------- ----------- -----------
2,365 1,350 (1,350) 2,365
Dividend income (141) - 141 -
----------- ----------- ----------- -----------
Net income $ 2,506 $ 1,350 $ (1,491) $ 2,365
=========== =========== =========== ===========
14
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. GUARANTOR SUBSIDIARY (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
NINE MONTHS ENDED DECEMBER 31, 2003
----------------------------------------------------------------
COINMACH AND
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
OPERATING ACTIVITIES
Net loss $ (3,225) $ (1,020) $ (216) $ (4,461)
Noncash adjustments 72,910 6,597 - 79,507
Change in operating assets and liabilities 5,629 949 - 6,578
------------ ------------ ------------ ------------
Net cash provided by operating activities 75,314 6,526 (216) 81,624
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Investment in and advances to subsidiaries (216) - 216 -
Capital expenditures (59,263) (7,271) - (66,534)
Acquisition of assets (3,423) - - (3,423)
Sale of investment 1,022 - - 1,022
Sale of property and equipment - 334 - 334
------------ ------------ ------------ ------------
Net cash used in investing activities (61,880) (6,937) 216 (68,601)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from debt 8,200 - - 8,200
Repayment of debt (8,200) - - (8,200)
Other financing items (6,396) 3,456 - (2,940)
------------ ------------ ------------ ------------
Net cash (used in) provided by financing activities (6,396) 3,456 - (2,940)
------------ ------------ ------------ ------------
Net increase in cash and cash equivalents 7,038 3,045 - 10,083
Cash and cash equivalents, beginning of period 26,054 1,374 - 27,428
------------ ------------ ------------ ------------
Cash and cash equivalents, end of period $ 33,092 $ 4,419 $ - $ 37,511
============ ============ ============ ============
15
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. GUARANTOR SUBSIDIARY (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
(CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 2002
----------------------------------------------------------------
COINMACH AND
AND NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
OPERATING ACTIVITIES
Net income $ 2,506 $ 1,350 $ (1,491) $ 2,365
Noncash adjustments 71,235 6,585 - 77,820
Change in operating assets and liabilities 13,377 (4,137) - 9,240
------------ ----------- ----------- -----------
Net cash provided by operating activities 87,118 3,798 (1,491) 89,425
------------ ----------- ----------- -----------
INVESTING ACTIVITIES
Investment in and advances to subsidiaries (1,491) - 1,491 -
Capital expenditures (59,966) (7,451) - (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 (56,513) (6,924) 1,491 (61,946)
------------ ----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from debt 6,000 - - 6,000
Repayment of debt (24,750) - - (24,750)
Other financing items (7,527) 3,697 - (3,830)
------------ ----------- ----------- -----------
Net cash (used in) provided by financing activities (26,277) 3,697 - (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
============ =========== =========== ===========
16
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
5. SEGMENT INFORMATION
The Company reports segment information for the route segment, its only
reportable segment. Information for the Company's other business operations are
reported 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 other business operations
reported in "All other" include 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 reportable segment and other businesses are the same as those described in
the Company's Annual Report on Form 10-K for the year ended March 31, 2003.
17
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
5. SEGMENT INFORMATION (CONTINUED)
The table below presents information about the Company's segments (in
thousands of dollars):
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
-------------------------------- -------------------------------
2003 2002 2003 2002
------------ ------------- ------------ -------------
Revenue:
Route $ 119,173 $ 119,926 $ 351,529 $ 354,656
All other:
Distribution 8,434 7,551 22,654 27,244
Rental 8,133 7,446 24,025 21,188
------------ ------------- ------------ -------------
Subtotal All other 16,567 14,997 46,679 48,432
------------ ------------- ------------ -------------
Total $ 135,740 $ 134,923 $ 398,208 $ 403,088
============ ============= ============ =============
EBITDA:
Route $ 39,249 $ 40,441 $ 115,900 $ 120,924
All other 2,879 2,844 8,126 8,722
General and administrative expenses (2,169) (2,228) (6,246) (6,296)
------------ ------------- ------------ -------------
Total(1) $ 39,959 $ 41,057 $ 117,780 $ 123,350
============ ============= ============ =============
(Loss) Income before taxes:
Route (2) $ 15,028 $ 16,637 $ 42,854 $ 49,607
All other (2) 771 1,087 2,048 3,452
General and administrative expenses (2,169) (2,228) (6,246) (6,296)
Depreciation and amortization (630) (421) (1,746) (1,263)
Other items, net (96) 2,507 (96) 2,507
Interest expense (14,424) (14,717) (43,132) (43,665)
------------ ------------- ------------ -------------
(Loss) income before taxes $ (1,520) $ 2,865 $ (6,318) $ 4,342
============ ============= ============ =============
_____________
(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
and other items, net.
18
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
5. 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 millions of dollars):
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
-------------------------------- ------------------------------
2003 2002 2003 2002
----------- ---------- ---------- ----------
Net (loss) income $ (0.9) $ 1.5 $ (4.5) $ 2.4
(Benefit) provision for income taxes (0.6) 1.4 (1.8) 1.9
Interest expense, net 14.4 14.7 43.1 43.7
Other items, net 0.1 (2.5) 0.1 (2.5)
Depreciation and amortization 27.0 26.0 80.9 77.8
---------- ---------- ---------- ----------
EBITDA $ 40.0 $ 41.1 $ 117.8 $ 123.3
========== ========== ========== ==========
19
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
6. INCOME TAXES
The components of the Company's deferred tax liabilities and assets are
as follows (in thousands):
DECEMBER 31, 2003 MARCH 31, 2003
----------------- --------------
Deferred tax liabilities:
Accelerated tax depreciation and contract rights $ 114,930 $ 113,436
Other, net 1,676 1,452
----------------- --------------
116,606 114,888
----------------- --------------
Deferred tax assets:
Interest rate swap 1,237 1,338
Net operating loss carryforwards 35,322 31,848
Covenant not to compete 1,406 1,081
Other 1,000 1,000
----------------- --------------
38,965 35,267
----------------- --------------
Net deferred tax liability $ 77,641 $ 79,621
================= ==============
The net operating loss carryforwards of approximately $86.5 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
2004 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 of
dollars):
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
------------------------------- -------------------------------
2003 2002 2003 2002
----------- ---------- ------------ -----------
Federal $ (513) $ 887 $ (1,623) $ 1,349
State (70) 498 (234) 628
----------- ---------- ------------ -----------
$ (583) $ 1,385 $ (1,857) $ 1,977
=========== ========== ============ ===========
20
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
6. 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 of
dollars):
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
------------------------------- ------------------------------
2003 2002 2003 2002
----------- ------------ ---------- ----------
Expected tax (benefit) provision $ (572) $ (2,400) $ (2,211) $ (7,780)
NOL valuation allowance - - 433 -
State tax (benefit) provision, net of
federal taxes (46) (172) (152) (557)
Permanent book/tax differences 35 1,312 73 3,937
----------- ------------ ---------- ----------
Tax (benefit) provision $ (583) $ (1,260) $ (1,857) $ (4,400)
========== =========== ========== ==========
The formation of AWA and related 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.
7. OTHER ITEMS, NET
In October 2002, CLC contributed its ownership interest in Resident
Data, Inc. ("RDI"), valued at approximately $2.7 million, to the Company.
Subsequently, the Company sold its interest in RDI pursuant to an agreement and
plan of merger between RDI and unrelated third parties (the "RDI Sale") for cash
proceeds of approximately $6.6 million before estimated expenses directly
related to such sale, resulting in a gain of approximately $3.3 million.
Offsetting this gain at October 2002 was approximately $0.8 million of various
expenses related to (i) professional fees incurred in connection with the
formation of AWA and related restructuring transactions, including the transfer
of the Appliance Warehouse division of the Company to AWA and the formation of
Holdings, (ii) organizational costs related to the formation of ALFC and (iii)
certain expenses associated with the consolidation of certain offices of Super
Laundry which was the result of several actions taken by the Company to reduce
operating costs at Super Laundry. These actions included, among other things,
the closing of operations in Northern California, New Jersey and Maryland, the
reassignment of various responsibilities among Super Laundry's remaining
management team, the write-off of inventory due to obsolescence and the
write-off of various receivable balances.
21
COINMACH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
7. OTHER ITEMS, NET (CONTINUED)
Under the terms of the RDI Sale, the Company is entitled to receive,
subject to the satisfaction of certain specified conditions, a portion of the
purchase price up to an aggregate amount of approximately $2.1 million. These
funds, if paid, are scheduled to be paid in two equal installments in October
2003 and October 2004. In October 2003, the Company received the first
installment of approximately $1.0 million. Based on the receipt of this first
installment and expectations with respect to the receipt of the balance of the
funds, the Company recorded income of approximately $1.7 million for the quarter
ended December 31, 2003. The Company is not certain as to whether it will
receive the remaining amount of such funds.
Offsetting the additional income related to the RDI Sale for the
quarter ended December 31, 2003 was approximately $1.8 million of various
expenses related to certain costs associated with the consolidation of certain
offices of Super Laundry. This consolidation was the result of several actions
taken by the Company to reduce operating costs at Super Laundry including, among
other things, the closing of distribution operations in Southern California, the
reassignment of various responsibilities among Super Laundry's remaining
management team and the write-off of inventory due to obsolescence.
22
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 (for all three fiscal years) and
goodwill (for only the fiscal years ended March 31, 2001 and 2002) 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.
23
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 Corp. ("Super Laundry"),
its wholly-owned subsidiary. Super Laundry's business consists of constructing
and designing complete 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, commencing in September 2002, through its wholly-owned subsidiary,
American Laundry Franchising Corp. ("ALFC"), began to build and develop
laundromat facilities for sale as franchise locations. For each franchise
laundromat facility, ALFC entered 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 subsidiary of the Company that
is 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 from laundry room locations at the end of a reporting period.
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 the Company's
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required. Allowance for doubtful
accounts at December 31, 2003 was approximately $2.5 million.
24
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- AND NINE-MONTH PERIODS ENDED DECEMBER 31, 2003
AND DECEMBER 31, 2002
The following table sets forth the Company's revenues for the periods
indicated (in millions of dollars):
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
---------------------------------- ----------------------------------
2003 2002 CHANGE 2003 2002 CHANGE
-------- -------- -------- -------- -------- --------
Route $ 119.2 $ 119.9 $ (0.7) $ 351.5 $ 354.7 $ (3.2)
Distribution 8.4 7.6 0.8 22.7 27.2 (4.5)
Rental 8.1 7.4 0.7 24.0 21.2 2.8
-------- -------- -------- -------- -------- --------
$ 135.7 $ 134.9 $ 0.8 $ 398.2 $ 403.1 $ (4.9)
======== ======== ======== ======== ======== ========
Revenue increased by approximately $0.8 million or less than 1% for the
three-month period ended December 31, 2003, as compared to the prior year's
corresponding period. Revenue decreased by approximately $4.9 million or 1% for
the nine-month period ended December 31, 2003, as compared to the prior year's
corresponding period.
25
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 December 31, 2003
decreased by approximately $0.7 million or less than 1% over the prior
year's corresponding period. Route revenue for the nine months ended
December 31, 2003 decreased by approximately $3.2 million or less than
1% from the prior year's corresponding period. Management believes that
the decrease in route revenue for the current periods as compared to
the prior year's corresponding periods 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, principally in the Southeast and Texas, as well as, to a
lesser extent, a transfer of approximately 9,000 rental machines to AWA
in the prior year's corresponding periods. This decrease was slightly
offset by an improvement in revenue due to 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 these regions
increase in the future, route revenue in such 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 December 31,
2003 increased by approximately $0.8 million or 11% from the prior
year's corresponding period. Distribution revenue for the nine months
ended December 31, 2003 decreased by approximately $4.5 million or 17%
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. The
Company does not expect the closing of operations in California, New
Jersey and Maryland to have a material impact on the Company's
consolidated results of operations.
Rental revenue for the three months ended December 31, 2003
increased by approximately $0.7 million or 9% over the prior year's
corresponding period. Rental revenue for the nine months ended December
31, 2003 increased by approximately $2.8 million or 13% 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 9,000 rental
machines from the route business to AWA during the prior year's
corresponding periods.
Laundry operating expenses increased by approximately $2.0 million or
2% for the three-month period ended December 31, 2003, as compared to the prior
year's corresponding period. Laundry operating expenses increased by
approximately $0.7 million or less than 1% for the nine months ended December
31, 2003, as compared to the prior year's corresponding period. The increase in
laundry operating expenses for the three-month period was due primarily to an
increase in cost of sales related to increased revenue in the distribution
business, as discussed above, costs associated with expansion into four new
markets in the rental business,
26
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
increased insurance premium costs related to both medical and general business
insurance coverage and increased utility costs in the Company's retail
laundromats caused by increased natural gas prices. The increase in laundry
operating expenses for the nine-month period was due primarily to increased
insurance premium costs related to both medical and general business insurance
coverage, costs associated with expansion into four new markets in the rental
business and increased utility costs in the Company's retail laundromats, offset
by a reduction in cost of sales related to decreased revenue in the distribution
business, as discussed above. As a percentage of revenues, laundry operating
expenses were approximately 69% for both the three- and nine-month periods ended
December 31, 2003, as compared to 68% for both the three- and nine-month periods
ended December 31, 2002.
General and administrative expenses decreased by less than $0.1 million
for the three-month period ended December 31, 2003, as compared to the prior
year's corresponding period. General and administrative expenses decreased by
less than $0.1 million for the nine-month period ended December 31, 2003, as
compared to the prior year's corresponding period. As a percentage of revenues,
general and administrative expenses were approximately 1.6% for both the three-
and nine-month periods ended December 31, 2003, as compared to approximately
1.7% for the three-month period ended December 31, 2002 and approximately 1.6%
for the nine-month period ended December 31, 2002.
Other items, net, for the three- and nine-month periods ended December
31, 2002 is comprised of a gain of approximately $2.5 million. In October 2002,
CLC contributed its ownership interest in Resident Data, Inc. ("RDI"), valued at
approximately $2.7 million, to the Company. Subsequently, the Company sold its
interest in RDI pursuant to an agreement and plan of merger between RDI and
unrelated third parties (the "RDI Sale") for cash proceeds of approximately $6.6
million before estimated expenses directly related to such sale, resulting in a
gain of approximately $3.3 million. Offsetting this gain at October 2002 was
approximately $0.8 million of various expenses related to (i) professional fees
incurred in connection with the formation of AWA and related restructuring
transactions, including the transfer of the Appliance Warehouse division of the
Company to AWA and the formation of Holdings, (ii) organizational costs related
to the formation of ALFC and (iii) certain expenses associated with the
consolidation of certain offices of Super Laundry which was the result of
several actions taken by the Company to reduce operating costs at Super Laundry.
These actions included, among other things, the closing of operations in
Northern California, New Jersey and Maryland, the reassignment of various
responsibilities among Super Laundry's remaining management team, the write-off
of inventory due to obsolescence and the write-off of various receivable
balances.
27
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Other items, net, for the three- and nine-month periods ended December
31, 2003 is comprised of a loss of approximately $0.1 million. Under the terms
of the RDI Sale, the Company is entitled to receive, subject to the satisfaction
of certain specified conditions, a portion of the purchase price up to an
aggregate amount of approximately $2.1 million. These funds, if paid, are
scheduled to be paid in two equal installments in October 2003 and October 2004.
In October 2003, the Company received the first installment of approximately
$1.0 million. Based on the receipt of this first installment and expectations
with respect to the receipt of the balance of the funds, the Company recorded
income of approximately $1.7 million for the quarter ended December 31, 2003.
The Company is not certain as to whether it will receive the remaining amount of
such funds.
Offsetting the additional income related to the RDI Sale for the
quarter ended December 31, 2003 was approximately $1.8 million of various
expenses related to certain costs associated with the consolidation of certain
offices of Super Laundry. This consolidation was the result of several actions
taken by the Company to reduce operating costs at Super Laundry including, among
other things, the closing of distribution operations in Southern California, the
reassignment of various responsibilities among Super Laundry's remaining
management team and the write-off of inventory due to obsolescence.
Depreciation and amortization expense increased by approximately 4% for
the three- and nine-month periods ended December 31, 2003, as compared to the
prior year's corresponding periods. 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.
28
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Operating income margins were approximately 9.5% for the three-month
period ended December 31, 2003, as compared to approximately 13.0% for the prior
year's corresponding period. Operating income margins were approximately 9.2%
for the nine-month period ended December 31, 2003, as compared to approximately
11.9% 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, as well as the gain realized on the RDI Sale
recorded in the quarter ended December 31, 2002.
Interest expense, net, decreased by approximately 2% for the
three-month period ended December 31, 2003, as compared to the prior year's
corresponding period. Interest expense, net, decreased by approximately 1% for
the nine-month period ended December 31, 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 nine-month period ended December
31, 2003 was approximately $1.8 million as compared to a provision for income
taxes of approximately $2.0 million for the prior year's corresponding period.
The change for the nine-month period is due to the corresponding pretax loss of
approximately $6.3 million for the nine-month period ended December 31, 2003 as
compared to a pretax income of approximately $4.3 million for the nine-month
period ended December 31, 2002. The effective tax rate for the nine-month period
ended December 31, 2003 was 29% as compared to 46% for the prior year's
corresponding period. The effective tax rate for the nine-month period ended
December 31, 2003 reflects changes in the amount of net operating loss
carryforwards that the Company will be able to utilize.
Net loss was approximately $4.5 million for the nine-month period ended
December 31, 2003, as compared to net income of approximately $2.4 million for
the prior year's corresponding period. The increase in net loss was primarily
the result of decreased revenue, as discussed above, as well as the gain
realized on the RDI Sale recorded in the quarter ended December 31, 2002.
29
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 (in millions of dollars):
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
---------------------------------- ----------------------------------
2003 2002 CHANGE 2003 2002 CHANGE
-------- -------- -------- -------- -------- --------
Route $ 39.3 $ 40.5 $ (1.2) $ 115.9 $ 120.9 $ (5.0)
Distribution (0.1) (0.2) 0.1 (1.1) 0.4 (1.5)
Rental 3.0 3.0 - 9.2 8.3 0.9
G&A (2.2) (2.2) - (6.2) (6.3) 0.1
-------- -------- -------- -------- -------- -------
$ 40.0 $ 41.1 $ (1.1) $ 117.8 $ 123.3 $ (5.5)
======== ======== ======== ======== ======== =======
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 5 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 $40.0 million for the three months ended
December 31, 2003, as compared to approximately $41.1 million for the three
months ended December 31, 2002. EBITDA margins declined to approximately 29.4%
for the three months ended December 31, 2003, as compared to approximately 30.4%
for the prior year's corresponding period. This decrease was primarily the
result of decreased revenues in the route and distribution businesses, increased
insurance premium costs related to both medical and general business insurance
coverage, costs associated with expansion into new markets in the rental
business and increased utility costs, as discussed above.
30
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
EBITDA was approximately $117.8 million for the nine months ended
December 31, 2003, as compared to approximately $123.3 million for the prior
year's corresponding period. EBITDA margins declined to approximately 29.6% for
the nine months ended December 31, 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, increased insurance premium costs
related to both medical and general business insurance coverage, costs
associated with expansion into new markets in the rental business and increased
utility costs, as previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial indebtedness and debt service
requirements. At December 31, 2003, the Company had outstanding debt of
approximately $719.4 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
$45.9 million as of December 31, 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 December 31, 2003 consisted of cash
and cash equivalents of $37.5 million and available borrowings under its Senior
Credit Facility of approximately $71.2 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 December 31, 2003, are
scheduled to be fully repaid by January 25, 2008 and July 25, 2009,
respectively. 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 December 31, 2003 were approximately $3.8 million.
31
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 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 of each year.
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 a financial institution 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 a financial
institution 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 a financial
institution 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 December 31,
2003 of approximately $1.5 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.
32
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Capital expenditures for the three-month period ended December 31, 2003
were approximately $17.7 million (excluding approximately $1.0 million relating
to capital lease payments and approximately $3.4 million relating to acquisition
capital expenditures). Capital expenditures for the nine-month period ended
December 31, 2003 were approximately $66.5 million (excluding approximately $3.1
million relating to capital lease payments and approximately $3.4 million
relating to acquisition capital expenditures). The primary components of the
Company's capital expenditures are (i) machine expenditures, (ii) advance
location payments, and (iii) laundry room improvements. Additionally, capital
expenditures for the nine months ended December 31, 2003 included approximately
$1.8 million attributable to technology upgrades. The Company's installed base
of machines for the route business increased by approximately 7,900 machines for
the nine-month period ended December 31, 2003. The growth in the rental business
machine base was approximately 18,900 for the nine-month period ended December
31, 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.
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 DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
---------------------------------- ----------------------------------
2003 2002 CHANGE 2003 2002 CHANGE
-------- -------- -------- -------- -------- --------
Route $ 16.0 $ 19.9 $ (3.9) $ 59.4 $ 60.0 $ (0.6)
Distribution 0.1 - 0.1 0.5 - 0.5
Rental 1.6 1.2 0.4 6.6 7.4 (0.8)
-------- -------- -------- -------- -------- --------
$ 17.7 $ 21.1 $ (3.4) $ 66.5 $ 67.4 $ (0.9)
======== ======== ======== ======== ======== ========
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.
33
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Management believes that cash generated by operations and from
borrowings under the Senior Credit Facility will be sufficient to meet the
Company's anticipated working capital, capital expenditures and debt service
requirements for at least the next 12 to 18 months. 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.
CERTAIN ACCOUNTING TREATMENT
The Company's depreciation and amortization expense, which aggregated
approximately $80.9 million for the nine months ended December 31, 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 indications 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.
34
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 December 31, 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 December 31, 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 a financial institution
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 a financial institution 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 a financial institution 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.
35
COINMACH CORPORATION AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
The Company's management, together with the participation of the
Company's principal executive officer and principal financial officer, evaluated
the effectiveness of the Company's disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this report. Based on that evaluation, the Company's principal
executive officer and principal financial officer have concluded that the
Company's disclosure controls and procedures are effective to ensure that
material information relating to the Company is made known to them by others
within the Company on a timely basis. However, there is no assurance that the
Company's disclosure controls and procedures will operate effectively under all
circumstances. 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.
36
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.
37
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: February 13, 2004 /S/ ROBERT M. DOYLE
-----------------------------------------
Robert M. Doyle
Senior Vice President and Chief Financial
Officer (On behalf of registrant and as
Principal Financial Officer)
38