Appendix C — Regulation S-X, Rule 13-01, Comprehensive Disclosure Example for Guaranteed Debt Securities

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Appendix C — Regulation S-X, Rule 13-01, Comprehensive Disclosure Example for Guaranteed Debt or Debt-Like Securities

The table below provides examples of required disclosures for guaranteed debt or debt-like securities along with the related SEC rule. Note that the disclosures are for illustrative purposes only. A registrant should carefully tailor these examples to its own facts and circumstances to ensure that it is responsive to the requirements of Regulation S-X, Rules 3-10 and 13-01, for guaranteed debt or debt-like securities.

Note also that the disclosures required for collateralized offerings may differ under Regulation S-X, Rules 3-16 and 13-02. For example, the combined summarized financial information for each affiliate whose equity is pledged as collateral would be reflected on a consolidated basis with its subsidiaries even if the stock of such subsidiaries was not pledged.

With respect to the periods presented below, preparers should be aware that the disclosure examples reflect the periods that would be required for a calendar-year-end company filing a quarterly report on Form 10-Q for the second quarter of 20X1. In such a quarterly report, an entity would generally present the most recent interim year-to-date period as well as the balance sheet as of the end of the interim period and the prior year-end. Note that in an annual report on Form 10-K (or Form 20-F), the financial information as of and for the most recent annual period would generally be presented.

Sample Disclosures

Related SEC Rule

Guarantor Information

On January 1, 2018, Company C’s consolidated subsidiary, Subsidiary A, issued debentures registered under the Securities Act of 1933 (the “Registered Debentures”). The Registered Debentures are fully and unconditionally guaranteed by Company C and certain of its consolidated subsidiaries on a joint and several basis. The Registered Debentures bear interest at 5 percent and mature in 2027. See note 5 of the consolidated financial statements for a description of the terms and conditions of the Registered Debentures, including covenants.

The guarantees are senior unsecured obligations of each guarantor, have equal rank with all existing and future senior debt of such guarantors, and are senior to all subordinated debt of such guarantors. The guarantees are effectively subordinated to any secured debt of such guarantors to the extent of the assets securing such debt. Each subsidiary guarantee is limited so that it does not constitute a fraudulent conveyance under applicable law, which may reduce the subsidiary’s obligation under the guarantee. There are no externally imposed restrictions on transfers of assets between Company C and its subsidiaries.

Rule 13-01(a)(1) — “A description of the issuers and guarantors of the guaranteed security.”

Rule 13-01(a)(2) — “A description of the terms and conditions of the guarantees, and how payments to holders of the guaranteed security may be affected by the composition of and relationships among the issuers, guarantors, and subsidiaries of the parent company that are not issuers or guarantors of the guaranteed security.”

Rule 13-01(a)(3) — “A description of other factors that may affect payments to holders of the guaranteed security, such as contractual or statutory restrictions on dividends, guarantee enforceability, or the rights of a noncontrolling interest holder.”

Basis of Preparation

The following summarized financial information reflects, on a combined basis, the assets, liabilities, and results of operations of Subsidiary A, Company C, and certain of Company C’s consolidated subsidiaries that guarantee the Registered Debentures (collectively, the “Obligor Group”). Intercompany balances and transactions among the Obligor Group have been eliminated. Amounts attributable to the Obligor Group’s investment in consolidated subsidiaries of Company C that have not issued or guaranteed the Registered Debentures (the “Nonobligor Subsidiaries”) have been excluded. Amounts due to, amounts due from, and transactions with (1) Nonobligor Subsidiaries and (2) related parties are separately disclosed, as applicable.

Income Statement Information

Year	Six Months Ended June 30, 20X1
Revenues	$ 7,000
Revenues from Nonobligor Subsidiaries	50
Revenues from related parties	75
Cost of revenues	4,000
Cost of revenues — Nonobligor Subsidiaries	30
Cost of revenues — related parties	60
Gross profit	3,035
Income from continuing operations	2,050
Net income	2,000
Net income attributable to Company C	1,950

Transactions with related parties are primarily related to sales to unconsolidated affiliates of Company C.

Balance Sheet Information

	As of June 30, 20X1	As of December 31, 20X0
Current assets	$ 5,000	$ 4,000
Current assets — due from Nonobligor Subsidiaries	45	40
Current assets — due from related parties	55	50
Noncurrent assets	9,000	8,000
Current liabilities	1,000	750
Noncurrent liabilities	1,750	1,600
Redeemable preferred stock	500	500
Noncontrolling interests	60	50

Rule 13-01(a)(4) — “Summarized financial information as specified in § 210.1-02(bb)(1) of each issuer and guarantor of the guaranteed security as follows, with an accompanying note that briefly describes the basis of presentation:

(i) The summarized financial information of each such issuer and guarantor consolidated in the parent company’s consolidated financial statements may be presented on a combined basis with the summarized financial information of the parent company;

(ii) Intercompany balances and transactions between issuers and guarantors whose summarized financial information is presented on a combined basis shall be eliminated;

(iii) The summarized financial information shall exclude subsidiaries that are not issuers or guarantors. An issuer’s or guarantor’s investment in a subsidiary that is not an issuer or guarantor shall not be presented. An issuer’s or guarantor’s amounts due from, amounts due to, and transactions with any of the following shall be presented in separate line items:

(A) Subsidiaries that are not issuers or guarantors; and

(B) Related parties;

(iv) If the information provided in response to the requirements of this section (e.g., factors that may affect payments to holders of the guaranteed security) is applicable to one or more, but not all, issuers and/or guarantors, separately disclose the summarized financial information applicable to those issuers and/or guarantors. In limited circumstances (i.e., where the separate financial information applicable to those issuers and/or guarantors can be easily explained and understood), narrative disclosure may be provided in lieu of the separate summarized financial information otherwise required by this paragraph (a)(4)(iv).”

Exhibit 22

List of Issuer(s) and Guarantor(s)

The following consolidated subsidiaries of Company C are issuer(s) or guarantor(s) of the Registered Debentures that bear interest at 5 percent and mature in 2027.

Entity	Role
Company C	Guarantor
Subsidiary A	Issuer
Subsidiary B	Guarantor
Subsidiary C	Guarantor
Subsidiary D	Guarantor
Subsidiary E	Guarantor
Subsidiary F	Guarantor

Regulation S-K, Item 601(b)(22) — “Subsidiary guarantors and issuers of guaranteed securities and affiliates whose securities collateralize securities of the registrant. List each of the entities in paragraphs (b)(22)(i) and (ii) of this section under an appropriately captioned heading that identifies the associated securities. An entity need not be listed more than once so long as its role as issuer, co-issuer, or guarantor of a guaranteed security and/or as affiliate whose security is pledged as collateral for a registrant’s security is clearly indicated with respect to each applicable security:

(i) For a registrant that is the parent company (as that term is defined in § 210.3-10(b)(1) of this chapter) and subject to § 210.13-01 of this chapter, each of the registrant’s subsidiaries that is a guarantor, issuer, or co-issuer of the guaranteed security subject to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the offer and sale of which is being registered under the Securities Act of 1933.”

Confidential and Proprietary — for Use Solely by Authorized Personnel

This SEC Reporting Interpretations manual provides comprehensive guidance; however, the manual does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.