210.3-10—Financial statements of guarantors and issuers of guaranteed securities registered or being registered.
(a)
(1) General rule.
Every issuer of a registered security that is guaranteed and every guarantor of a registered security must file the financial statements required for a registrant by Regulation S-X.
(2) Operation of this rule.
Paragraphs (b), (c), (d), (e) and (f) of this section are exceptions to the general rule of paragraph (a)(1) of this section. Only one of these paragraphs can apply to a single issuer or guarantor. Paragraph (g) of this section is a special rule for recently acquired issuers or guarantors that overrides each of these exceptions for a specific issuer or guarantor. Paragraph (h) of this section defines the following terms used in this section: 100% owned, full and unconditional, annual report, quarterly report, no independent assets or operations, minor, finance subsidiary and operating subsidiary. Paragraph (i) of this section states the requirements for preparing the condensed consolidating financial information required by paragraphs (c), (d), (e) and (f) of this section.
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(3) Foreign private issuers.
Where any provision of this section requires compliance with §§ 210.3-01 and , a foreign private issuer may comply by providing financial statements for the periods specified by Item 8.A of Form 20-F ( § 249.220f of this chapter ).
(b) Finance subsidiary issuer of securities guaranteed by its parent company.
When a finance subsidiary issues securities and its parent company guarantees those securities, the registration statement, parent company annual report, or parent company quarterly report need not include financial statements of the issuer if:
(4)
The parent company's financial statements are filed for the periods specified by §§ 210.3-01 and 210.3-02 and include a footnote stating that the issuer is a 100%-owned finance subsidiary of the parent company and the parent company has fully and unconditionally guaranteed the securities. The footnote also must include the narrative disclosures specified in paragraphs (i)(9) and (i)(10) of this section.
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(c) Operating subsidiary issuer of securities guaranteed by its parent company.
When an operating subsidiary issues securities and its parent company guarantees those securities, the registration statement, parent company annual report, or parent company quarterly report need not include financial statements of the issuer if:
(4)
The parent company's financial statements are filed for the periods specified by §§ 210.3-01 and 210.3-02 and include, in a footnote, condensed consolidating financial information for the same periods with a separate column for:
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(d) Subsidiary issuer of securities guaranteed by its parent company and one or more other subsidiaries of that parent company.
When a subsidiary issues securities and both its parent company and one or more other subsidiaries of that parent company guarantee those securities, the registration statement, parent company annual report, or parent company quarterly report need not include financial statements of the issuer or any subsidiary guarantor if:
(4)
The parent company's financial statements are filed for the periods specified by §§ 210.3-01 and 210.3-02 and include, in a footnote, condensed consolidating financial information for the same periods with a separate column for:
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(e) Single subsidiary guarantor of securities issued by the parent company of that subsidiary.
When a parent company issues securities and one of its subsidiaries guarantees those securities, the registration statement, parent company annual report, or parent company quarterly report need not include financial statements of the subsidiary guarantor if:
(4)
The parent company's financial statements are filed for the periods specified by §§ 210.3-01 and 210.3-02 and include, in a footnote, condensed consolidating financial information for the same periods with a separate column for:
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(f) Multiple subsidiary guarantors of securities issued by the parent company of those subsidiaries.
When a parent company issues securities and more than one of its subsidiaries guarantee those securities, the registration statement, parent company annual report, or parent company quarterly report need not include financial statements of the subsidiary guarantors if:
(4)
The parent company's financial statements are filed for the periods specified by §§ 210.3-01 and 210.3-02 and include, in a footnote, condensed consolidating financial information for the same periods with a separate column for:
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(g) Recently acquired subsidiary issuers or subsidiary guarantors.
(1)
The Securities Act registration statement of the parent company must include the financial statements specified in paragraph (g)(2) of this section for any subsidiary that otherwise meets the conditions in paragraph (c), (d), (e) or (f) of this section for omission of separate financial statements if:
(i)
The subsidiary has not been included in the audited consolidated results of the parent company for at least nine months of the most recent fiscal year; and
(ii)
The net book value or purchase price, whichever is greater, of the subsidiary is 20% or more of the principal amount of the securities being registered.
(i)
Audited financial statements for a subsidiary described in paragraph (g)(1) of this section must be filed for the subsidiary's most recent fiscal year preceding the acquisition. In addition, unaudited financial statements must be filed for any interim periods specified in §§ 210.3-01 and 210.3-02.
(ii)
The financial statements must conform to the requirements of Regulation S-X ( §§ 210.1-01 through 12-29), except that supporting schedules need not be filed. If the subsidiary is a foreign business, financial statements of the subsidiary meeting the requirements of Item 17 of Form 20-F ( § 249.220f) will satisfy this item.
(i)
The significance test of paragraph (g)(1)(ii) of this section should be computed using net book value of the subsidiary as of the most recent fiscal year end preceding the acquisition.
(ii)
Information required by this paragraph (g) is not required to be included in an annual report or quarterly report.
(iii)
Acquisitions of a group of subsidiary issuers or subsidiary guarantors that are related prior to their acquisition shall be aggregated for purposes of applying the 20% test in paragraph (g)(1)(ii) of this section. Subsidiaries shall be deemed to be related prior to their acquisition if:
(1)
A subsidiary is “100% owned” if all of its outstanding voting shares are owned, either directly or indirectly, by its parent company. A subsidiary not in corporate form is 100% owned if the sum of all interests are owned, either directly or indirectly, by its parent company other than:
(i)
Securities that are guaranteed by its parent and, if applicable, other 100%-owned subsidiaries of its parent; and
(ii)
Securities that guarantee securities issued by its parent and, if applicable, other 100%-owned subsidiaries of its parent.
(2)
A guarantee is “full and unconditional,” if, when an issuer of a guaranteed security has failed to make a scheduled payment, the guarantor is obligated to make the scheduled payment immediately and, if it doesn't, any holder of the guaranteed security may immediately bring suit directly against the guarantor for payment of all amounts due and payable.
(3)
Annual report refers to an annual report on Form 10-K or Form 20-F ( § 249.310 or § 249.220f of this chapter ).
(5)
A parent company has no independent assets or operations if each of its total assets, revenues, income from continuing operations before income taxes, and cash flows from operating activities (excluding amounts related to its investment in its consolidated subsidiaries) is less than 3% of the corresponding consolidated amount.
(6)
A subsidiary is minor if each of its total assets, stockholders' equity, revenues, income from continuing operations before income taxes, and cash flows from operating activities is less than 3% of the parent company's corresponding consolidated amount.
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(7)
A subsidiary is a finance subsidiary if it has no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the security being registered and any other securities guaranteed by its parent company.
(i)
Instructions for preparation of condensed consolidating financial information required by paragraphs (c), (d), (e) and (f) of this section.
(1)
Follow the general guidance in § 210.10-01 for the form and content for condensed financial statements and present the financial information in sufficient detail to allow investors to determine the assets, results of operations and cash flows of each of the consolidating groups;
(2)
The financial information should be audited for the same periods that the parent company financial statements are required to be audited;
(3)
The parent company column should present investments in all subsidiaries based upon their proportionate share of the subsidiary's net assets;
(4)
The parent company's basis shall be “pushed down” to the applicable subsidiary columns to the extent that push down would be required or permitted in separate financial statements of the subsidiary;
(5)
All subsidiary issuer or subsidiary guarantor columns should present the following investments in subsidiaries under the equity method:
(ii)
Subsidiary issuers or subsidiary guarantors that are not 100% owned or whose guarantee is not full and unconditional;
(iii)
Subsidiary guarantors whose guarantee is not joint and several with the guarantees of the other subsidiaries; and
(iv)
Subsidiary guarantors with differences in domestic or foreign laws that affect the enforceability of the guarantees;
(6)
Provide a separate column for each subsidiary issuer or subsidiary guarantor that is not 100% owned, whose guarantee is not full and unconditional, or whose guarantee is not joint and several with the guarantees of other subsidiaries. Inclusion of a separate column does not relieve that issuer or guarantor from the requirement to file separate financial statements under paragraph (a) of this section. However, paragraphs (b) through (f) of this section will provide this relief if the particular paragraph is satisfied except that the guarantee is not joint and several;
(7)
Provide separate columns for each guarantor by legal jurisdiction if differences in domestic or foreign laws affect the enforceability of the guarantees;
(9)
Disclose any significant restrictions on the ability of the parent company or any guarantor to obtain funds from its subsidiaries by dividend or loan;
(10)
Provide the disclosures prescribed by § 210.4-08(e)(3) with respect to the subsidiary issuers and subsidiary guarantors;
(i)
May not omit any financial and narrative information about each guarantor if the information would be material for investors to evaluate the sufficiency of the guarantee;
(ii)
Shall include sufficient information so as to make the financial information presented not misleading; and
(iii)
Need not repeat information that would substantially duplicate disclosure elsewhere in the parent company's consolidated financial statements; and
(12)
Where the parent company's consolidated financial statements are prepared on a comprehensive basis other than U.S. Generally Accepted Accounting Principles or International Financial Reporting Standards as issued by the International Accounting Standards Board, reconcile the information in each column to U.S. Generally Accepted Accounting Principles to the extent necessary to allow investors to evaluate the sufficiency of the guarantees. The reconciliation may be limited to the information specified by Item 17 of Form 20-F ( § 249.220f of this chapter ). The reconciling information need not duplicate information included elsewhere in the reconciliation of the consolidated financial statements.