[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR210.3-10]

[Page 238-243]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL STATEMENTS,
 
Sec. 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

[[Page 239]]

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.

    Note to paragraph (a)(2).
    Where paragraphs (b), (c), (d), (e) and (f) of this section specify 
the filing of financial statements of the parent company, the financial 
statements of an entity that is not an issuer or guarantor of the 
registered security cannot be substituted for those of the parent 
company.

    (3) Foreign private issuers. Where any provision of this section 
requires compliance with Secs. 210.3-01 and 3-02, a foreign private 
issuer may comply by providing financial statements for the periods 
specified by Item 8.A of Form 20-F (Sec. 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:
    (1) The issuer is 100% owned by the parent company guarantor;
    (2) The guarantee is full and unconditional;
    (3) No other subsidiary of the parent company guarantees the 
securities; and
    (4) The parent company's financial statements are filed for the 
periods specified by Secs. 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.

    Note to paragraph (b).
    Paragraph (b) is available if a subsidiary issuer satisfies the 
requirements of this paragraph but for the fact that, instead of the 
parent company guaranteeing the security, the subsidiary issuer co-
issued the security, jointly and severally, with the parent company. In 
this situation, the narrative information required by paragraph (b)(4) 
must be modified accordingly.

    (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:
    (1) The issuer is 100% owned by the parent company guarantor;
    (2) The guarantee is full and unconditional;
    (3) No other subsidiary of the parent company guarantees the 
securities; and
    (4) The parent company's financial statements are filed for the 
periods specified by Secs. 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:
    (i) The parent company;
    (ii) The subsidiary issuer;
    (iii) Any other subsidiaries of the parent company on a combined 
basis;
    (iv) Consolidating adjustments; and
    (v) The total consolidated amounts.

    Notes to paragraph (c).
      
    1. Instead of the condensed consolidating financial information 
required by paragraph (c)(4), the parent company's financial statements 
may include a footnote stating, if true, that the parent company has no 
independent assets or operations, the guarantee is full and 
unconditional, and any subsidiaries of the parent company other than the 
subsidiary issuer are minor. The footnote also must include the 
narrative disclosures specified in paragraphs (i)(9) and (i)(10) of this 
section.
    2. If the alternative disclosure permitted by Note 1 to this 
paragraph is not applicable because the parent company has independent 
assets or operations, the condensed consolidating financial information 
described in paragraph (c)(4) may omit the column for ``any other 
subsidiaries of the parent company on a combined basis'' if those other 
subsidiaries are minor.
    3. Paragraph (c) is available if a subsidiary issuer satisfies the 
requirements of this paragraph but for the fact that, instead of

[[Page 240]]

the parent company guaranteeing the security, the subsidiary issuer co-
issued the security, jointly and severally, with the parent company. In 
this situation, the narrative information required by paragraph (i)(8) 
of this section must be modified accordingly.

    (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:
    (1) The issuer and all subsidiary guarantors are 100% owned by the 
parent company guarantor;
    (2) The guarantees are full and unconditional;
    (3) The guarantees are joint and several; and
    (4) The parent company's financial statements are filed for the 
periods specified by Secs. 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:
    (i) The parent company;
    (ii) The subsidiary issuer;
    (iii) The guarantor subsidiaries of the parent company on a combined 
basis;
    (iv) Any other subsidiaries of the parent company on a combined 
basis;
    (v) Consolidating adjustments; and
    (vi) The total consolidated amounts.

    Notes to paragraph (d).
      
    1. Paragraph (d) applies in the same manner whether the issuer is a 
finance subsidiary or an operating subsidiary.
    2. The condensed consolidating financial information described in 
paragraph (d)(4) may omit the column for ``any other subsidiaries of the 
parent company on a combined basis'' if those other subsidiaries are 
minor.
    3. Paragraph (d) is available if a subsidiary issuer satisfies the 
requirements of this paragraph but for the fact that, instead of the 
parent company guaranteeing the security, the subsidiary issuer co-
issued the security, jointly and severally, with the parent company. In 
this situation, the narrative information required by paragraph (i)(8) 
of this section must be modified accordingly.
    4. If all of the requirements in paragraph (d) are satisfied except 
that the guarantee of a subsidiary is not joint and several with, as 
applicable, the parent company's guarantee or the guarantees of the 
parent company and the other subsidiaries, then each subsidiary 
guarantor whose guarantee is not joint and several need not include 
separate financial statements, but the condensed consolidating financial 
information should include a separate column for each guarantor whose 
guarantee is not joint and several.
    5. Instead of the condensed consolidating financial information 
required by paragraph (d)(4), the parent company's financial statements 
may include a footnote stating, if true, that the parent company has no 
independent assets or operations, the subsidiary issuer is a 100% owned 
finance subsidiary of the parent company, the parent company has 
guaranteed the securities, all of the parent company's subsidiaries 
other than the subsidiary issuer have guaranteed the securities, all of 
the guarantees are full and unconditional, and all of the guarantees are 
joint and several. The footnote also must include the narrative 
disclosures specified in paragraphs (i)(9) and (i)(10) of this section.

    (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:
    (1) The subsidiary guarantor is 100% owned by the parent company 
issuer;
    (2) The guarantee is full and unconditional;
    (3) No other subsidiary of that parent guarantees the securities; 
and
    (4) The parent company's financial statements are filed for the 
periods specified by Secs. 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:
    (i) The parent company;
    (ii) The subsidiary guarantor;
    (iii) Any other subsidiaries of the parent company on a combined 
basis;
    (iv) Consolidating adjustments; and
    (v) The total consolidated amounts.

    Notes to paragraph (e).
      
    1. Paragraph (e) applies in the same manner whether the guarantor is 
a finance subsidiary or an operating subsidiary.
    2. Instead of the condensed consolidating financial information 
required by paragraph (e)(4), the parent company's financial statements 
may include a footnote stating, if

[[Page 241]]

true, that the parent company has no independent assets or operations, 
the guarantee is full and unconditional, and any subsidiaries of the 
parent company other than the subsidiary guarantor are minor. The 
footnote also must include the narrative disclosures specified in 
paragraphs (i)(9) and (i)(10) of this section.
    3. If the alternative disclosure permitted by Note 2 to this 
paragraph is not applicable because the parent company has independent 
assets or operations, the condensed consolidating financial information 
described in paragraph (e)(4) may omit the column for ``any other 
subsidiaries of the parent company on a combined basis'' if those other 
subsidiaries are minor.
    4. If, instead of guaranteeing the subject security, a subsidiary 
co-issues the security jointly and severally with its parent company, 
this paragraph (e) does not apply. Instead, the appropriate financial 
information requirement would depend on whether the subsidiary is a 
finance subsidiary or an operating subsidiary. If the subsidiary is a 
finance subsidiary, paragraph (b) applies. If the subsidiary is an 
operating company, paragraph (c) applies.

    (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:
    (1) Each of the subsidiary guarantors is 100% owned by the parent 
company issuer;
    (2) The guarantees are full and unconditional;
    (3) The guarantees are joint and several; and
    (4) The parent company's financial statements are filed for the 
periods specified by Secs. 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:
    (i) The parent company;
    (ii) The subsidiary guarantors on a combined basis;
    (iii) Any other subsidiaries of the parent company on a combined 
basis;
    (iv) Consolidating adjustments; and
    (v) The total consolidated amounts.

    Notes to paragraph (f).
      
    1. Instead of the condensed consolidating financial information 
required by paragraph (f)(4), the parent company's financial statements 
may include a footnote stating, if true, that the parent company has no 
independent assets or operations, the guarantees are full and 
unconditional and joint and several, and any subsidiaries of the parent 
company other than the subsidiary guarantors are minor. The footnote 
also must include the narrative disclosures specified in paragraphs 
(i)(9) and (i)(10) of this section.
    2. If the alternative disclosure permitted by Note 1 to this 
paragraph is not applicable because the parent company has independent 
assets or operations, the condensed consolidating financial information 
described in paragraph (f)(4) may omit the column for ``any other 
subsidiaries of the parent company on a combined basis'' if those other 
subsidiaries are minor.
    3. If any of the subsidiary guarantees is not joint and several with 
the guarantees of the other subsidiaries, then each subsidiary guarantor 
whose guarantee is not joint and several need not include separate 
financial statements, but the condensed consolidating financial 
information must include a separate column for each subsidiary guarantor 
whose guarantee is not joint and several.

    (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.
    (2) Financial statements required.
    (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 
Secs. 210.3-01 and 210.3-02.
    (ii) The financial statements must conform to the requirements of 
Regulation S-X (Secs. 210.1-01 through 12-29), except that supporting 
schedules need

[[Page 242]]

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 (Sec. 249.220f) will satisfy this item.
    (3) Instructions to paragraph (g).
    (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:
    (A) They are under common control or management;
    (B) The acquisition of one subsidiary is conditioned on the 
acquisition of each subsidiary; or
    (C) The acquisition of each subsidiary is conditioned on a single 
common event.
    (h) Definitions. For the purposes of this section:
    (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, Form 10-
KSB, or Form 20-F (Secs. 249.310, 249.310b, or 249.220f of this 
chapter).
    (4) Quarterly report refers to a quarterly report on Form 10-Q or 
Form 10-QSB (Secs. 249.308a or 249.308b 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.

    Note to paragraph (h)(6).
    When considering a group of subsidiaries, the definition applies to 
each subsidiary in that group individually and to all subsidiaries in 
that group in the aggregate.

    (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.
    (8) A subsidiary is an operating subsidiary if it is not a finance 
subsidiary.
    (i) Instructions for preparation of the condensed consolidating 
financial information required by paragraphs (c), (d), (e) and (f) of 
this section.
    (1) Follow the general guidance in Sec. 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 under the equity method;
    (4) The parent company's basis shall be ``pushed down'' to the 
applicable

[[Page 243]]

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:
    (i) Non-guarantor subsidiaries;
    (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;
    (8) Include the following disclosure, if true:
    (i) Each subsidiary issuer or subsidiary guarantor is 100% owned by 
the parent company;
    (ii) All guarantees are full and unconditional; and
    (iii) Where there is more than one guarantor, all guarantees are 
joint and several;
    (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 Sec. 210.4-08(e)(3) with 
respect to the subsidiary issuers and subsidiary guarantors;
    (11) The disclosure:
    (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, 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 (Sec. 249.220f of this chapter). The reconciling information 
need not duplicate information included elsewhere in the reconciliation 
of the consolidated financial statements.

[65 FR 51707, Aug. 24, 2000]