Regulation S-X
Rule 3-10 - Appendix B

Recently Acquired Subsidiary Issuers or Subsidiary Guarantors

The following examples illustrate the application of Rule 3-10(g) in determining the financial statements to be provided for recently acquired subsidiary issuers or subsidiary guarantors. For ease of use, we have included only subsidiary guarantor examples in this appendix. You should note, however, that Rule 3-10(g) applies equally to subsidiary issuers and subsidiary guarantors.

Each example is independent of the others. In each of the following examples, assume, unless stated otherwise, that:

• Parent company registers an offering of its debt securities under the Securities Act. The securities are guaranteed by one or more of its subsidiaries.
• Parent company and all acquired subsidiary guarantors have December 31 fiscal year ends and, unless otherwise specified, the parent company has filed its audited consolidated financial statements for the fiscal year in which the subsidiary was acquired.
• All subsidiaries are 100% owned.
• All guarantees are full and unconditional.
• All guarantees are joint and several.
• Each subsidiary's purchase price exceeds its net book value at its fiscal year end preceding the date of acquisition. The purchase price is used for testing significance.

This Appendix addresses only the requirements of Rule 3-10(g) of Regulation S-X. In each example, audited financial statements for additional periods may be required by Rule 3-05 of Regulation S-X.

Example No. 1: Significant acquired guarantor included more than nine months .

Subsidiary A was acquired on March 1, and has been included in its parent company's audited consolidated financial statements for ten months of the most recent fiscal year. Subsidiary A's purchase price exceeds 20% of the principal amount of the debt being registered.

Required financial information: No pre-acquisition financial statements of Subsidiary A are required. Although Subsidiary A's purchase price exceeds 20% of the principal amount of the debt being registered, financial statements may be omitted because Subsidiary A has been included in its parent company's audited consolidated financial statements for more than nine months of the most recent fiscal year.

Example No. 2: Significant acquired guarantor included less than nine months.

Subsidiary B was acquired on September 1, and has been included in its parent company's audited consolidated financial statements for four months of the most recent fiscal year. Subsidiary B's purchase price exceeds 20% of the principal amount of the debt being registered.

Required financial information: Pre-acquisition financial statements of Subsidiary B are required. Subsidiary B is significant and has been included in its parent company's audited consolidated financial statements for less than nine months of the most recent fiscal year. Audited financial statements of Subsidiary B for its most recent fiscal year preceding the acquisition and subsequent unaudited interim financial statements are required.

Example No. 3: Insignificant acquired guarantor. Subsidiary C was acquired on July 1, and has been included in its parent company's audited consolidated financial statements for six months of the most recent fiscal year. Subsidiary C's purchase price is less than 20% of the principal amount of the debt being registered.

Required financial information: Pre-acquisition financial statements of Subsidiary C are not required because Subsidiary C's purchase price is less than 20% of the principal amount of the debt being registered.

Example No. 4: Acquisition of significant business by pre-existing guarantor.

The assets and operations of Business D were acquired on October 1, and have been included in its parent company's audited consolidated financial statements for three months of the most recent fiscal year. Upon acquisition, the assets and operations of Business D were transferred to pre-existing Subsidiary Guarantor X, which had little or no assets or operations. Business D's purchase price exceeds 20% of the principal amount of the debt being registered.

Required financial information: Pre-acquisition financial statements of Business D are required. Although Subsidiary Guarantor X has been included in the consolidated financial statements for more than nine months of the most recent fiscal year, Business D is considered a predecessor of Subsidiary Guarantor X. Audited financial statements of Business D for its most recent fiscal year preceding the acquisition and subsequent unaudited interim financial statements are required.

Example No. 5: Acquisition of multiple related guarantors.

Subsidiaries E and F were acquired on August 1, and have been included in their parent company's audited consolidated financial statements for five months of the most recent fiscal year. Consummation of each acquisition was conditioned upon the other.

Subsidiary E and F's purchase prices were 12% and 17% of the principal amount of the debt being registered, respectively.

Required financial information: Pre-acquisition financial statements of Subsidiaries E and F are required. Because the acquisitions are related, their individual significance levels must be aggregated. Their aggregate purchase price exceeds 20% of the principal amount of the debt being registered. If Subsidiaries E and F were under common control or management before their acquisition, combined financial statements may be presented. Otherwise, separate financial statements are required. Audited financial statements of Subsidiaries E and F for their most recent fiscal years preceding the acquisition and subsequent unaudited interim financial statements are required.

Example No. 6: Acquisition of multiple unrelated guarantors.

Subsidiary G was acquired on May 1, and Subsidiary H was acquired on June 1. Subsidiaries G and H have been included in their parent company's audited consolidated financial statements for eight and seven months of the most recent fiscal year, respectively. The acquisitions are not related by common ownership, common management, or common conditions to consummation. Subsidiary G and H's purchase prices were 11% and 18% of the principal amount of the debt being registered, respectively.

Required financial information: Pre-acquisition financial statements of Subsidiaries G and H are not required. Because the acquisitions are unrelated, their significance levels are assessed individually. Each subsidiary is less than 20% of the principal amount of the debt being registered.

Example No. 7: Very Recent Acquisition of Significant Guarantor.

Subsidiary I was acquired on April 1, after the end of the parent company's most recent fiscal year. Subsidiary I is not yet included in the parent company's audited consolidated financial statements. Subsidiary I's purchase price exceeds 20% of the principal amount of the debt being registered. Parent Company files a Securities Act registration statement on April 2.

Required Financial Information: Pre-acquisition financial statements of Subsidiary I are required. Subsidiary I is significant and has not been included in its parent company's consolidated financial statements for nine months of the most recent fiscal year. Audited financial statements of Subsidiary I for its most recent fiscal year preceding the acquisition are required. The 75 day post-consummation period generally available to a recently acquired business under Rule 3-05 is not applicable to Rule 3-10(g).

Example No. 8: Acquisition of Significant Guarantor Not Yet Consummated.

Parent company contemplates the acquisition of Business J. If acquired, Business J will become a subsidiary guarantor of the debt securities being registered. Consummation has not occurred at the time of effectiveness of the registration statement. Business J's purchase price would exceed 20% of the principal amount of the debt being registered.

Required Financial Information: Pre-acquisition financial statements of Business J are not required under Rule 3-10(g). Business J is not a guarantor at the time of effectiveness of the registration statement. However, as for all businesses to be acquired, the parent company must separately evaluate whether pre-acquisition financial statements of Business J are required by Rule 3-05.

Example No. 9: Significant Guarantor in a Pooling of Interests.

Subsidiary K became a subsidiary on December 1 in a pooling of interests transaction. As a result of application of the pooling of interests method, Subsidiary K is included retroactively in its parent company's audited consolidated financial statements for all three years. Subsidiary K's net book value exceeds 20% of the principal amount of the debt being registered.

Required Financial Information: Pre-acquisition financial statements of Subsidiary K are not required. Inclusion of Subsidiary K in its parent company's condensed consolidating financial information under Rule 3-10 for all periods presented satisfies the requirements of Rule 3-10(g).