Instructions for Periodic Report Concerning Related Entities
Form B26, Instructions (12/1/08)
Instructions for Periodic Report Concerning Related Entities
General Instructions
1.
This form periodic report ("Periodic Report") on value, profitability, and operations of
entities in which the estate holds a substantial or controlling interest (the "Form")
implements § 419 of the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005, Pub. L. No. 19-8, 119 Stat. 23 (April 20, 2005)("BAPCPA"). This Form should be
used when required by Fed. R. Bankr. P. 2015.3, with such variations as may be
approved by the court pursuant to subdivisions (d) and (e) of that rule.
2.
In a chapter 11 case, the trustee or debtor in possession shall file Periodic Reports of the
value, operations, and profitability of each entity that is not also a debtor in a case under
title 11, and in which the estate holds a substantial or controlling interest. The reports
shall be prepared as prescribed by this Form, and shall be based upon the most recent
information reasonably available to the trustee or debtor in possession.
3.
Rule 2015.3 provides that, where the estate controls or owns at least a 20 percent interest
of an entity, the estate's interest is presumed to be substantial or controlling. Where the
estate controls or owns less than a 20 percent interest, the rule presumes that the estate's
interest is not substantial or controlling. The question of substantial or controlling
interest is, however, a factual one to be decided in each case.
4.
The first Periodic Report required by subdivision (a) of Rule 2015.3 shall be filed no later
than five days before the first date set for the meeting of creditors under § 341 of the
Code. Subsequent Periodic Reports shall be filed no less frequently than every six
months thereafter, until a plan of reorganization becomes effective or the case is closed,
dismissed, or converted. Copies of the Periodic Report shall be served on the U.S.
Trustee, any committee appointed under § 1102 of the Code, and any other party in
interest that has filed a request therefor.
5.
The source of the information contained in each Periodic Report shall be indicated.
Specific Instructions
6.
Each entity subject to the reporting requirement of Rule 2015.3 shall be listed in the table
contained on the first page of the form. Reports for each such entity shall be placed
behind separate tabs, and each such report shall consist of three exhibits. Exhibit A shall
provide valuation information; Exhibit B shall provide financial statements; and Exhibit
C shall provide a description of operations.
Form 26 Instr. (12/08) Cont.
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Instructions for Exhibit A Valuation
7.
Provide a statement of the entity's value and the value of the estate's interest in the entity,
including a description of the basis for the valuation, the date of the valuation, the
valuation method used and the source or preparer of the information. This valuation must
be no more than two years old.
Instructions for Exhibit B Financial Statements and Profitability
8.
The financial statements may be unaudited. The financial statements should be prepared
in accordance with generally accepted accounting principles in the United States
("USGAAP"); deviations, if any from USGAAP, shall be disclosed. Indicate the source
or preparer of the information.
9.
Exhibit B shall include the following financial statements, and shall indicate the source of
the information presented:
(a) A balance sheet dated as of the end of the most recent six-month period of the current
fiscal year and as of the end of the preceding fiscal year.
(b) A statement of income (loss) for the following periods:
(i) For the initial report:
a. the period between the end of the preceding fiscal year and the end of
the most recent six-month period of the current fiscal year; and
b. the prior fiscal year.
(ii) For subsequent reports, since the closing date of the last report.
(c) A statement of changes in cash flows for the following periods:
(i) For the initial report:
a. the period between the end of the preceding fiscal year and the end of
the most recent six-month period of the current fiscal year; and
b. the prior fiscal year.
(ii) For subsequent reports, since the closing date of the last report.
(d) A statement of changes in shareholders'/partners' equity (deficit) for the following
periods:
(i) For the initial report:
a. the period between the end of the preceding fiscal year and the end of
the most recent six-month period of the current fiscal year; and
b. the prior fiscal year.
(ii) For subsequent reports, since the closing date of the last report.
10. The balance sheet contained in Exhibit B-1 may include only major captions with the
exception of inventories. Data as to raw materials, work in process, and finished goods
inventories should be included either on the face of the balance sheet or in the notes to
Form 26 Instr. (12/08) Cont.
3
the financial statements, if applicable. Where any major balance sheet caption is less than
10% of total assets, the caption may be combined with others. An illustrative example of
such a balance sheet is set forth below:
XYZ Company
Balance Sheet
As of__________
Assets
Year to date
Prior Fiscal Year
Cash and cash items
_____________
Marketable securities
_____________
Accounts and notes receivable
(non-affiliates), net of allowances
_____________
Accounts due from affiliates
_____________
Inventories
Raw materials
_____________
Work in Process
_____________
Finished goods
_____________
Long-term contract costs
_____________
Supplies
_____________
LIFO reserve
_____________
Total inventories
_____________
Prepaid expenses
_____________
Other current assets
_____________
Total current assets
_____________
Securities of affiliates
_____________
Indebtedness of affiliates (non-current)
_____________
Other investments
_____________
Property, plant and equipment, net of
accumulated depreciation and amortization
_____________
Intangible assets
_____________
Other assets
_____________
Total Assets
_____________
Liabilities and Shareholders'/Partners' Equity
Year to date
Prior Fiscal Year
Accounts and notes payable (non-affiliates)
______________
Payables to affiliates
______________
Other current liabilities
______________
Total current liabilities
______________
Form 26 Instr. (12/08) Cont.
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Bonds, mortgages, and other long-term debt,
including
capitalized
leases
_____________
Indebtedness to affiliates (non-current)
_____________
Other liabilities
_____________
Commitments and contingencies
_____________
Deferred credits
_____________
Minority interests in consolidated subsidiaries
_____________
Preferred stock subject to mandatory redemption
or whose redemption is outside the control
of the issuer
_____________
Total liabilities
_____________
Shareholders' equity
_____________
Total liabilities and shareholders'/partners' equity
_____________
11.
The statement of income (loss) contained in Exhibit B-2 should also include major
captions. When any major statement of income (loss) caption is less than 15% of net
income (loss) for the most recent fiscal year, the caption may be combined with others.
Notwithstanding these tests, de minimis amounts need not be shown separately. An
illustrative example of such a statement of income (loss) is set forth below:
XYZ
Company
Statement of income (loss)
For the periods ending__________
Year to date
Prior Fiscal Year
Net sales and gross revenues
_____________
Costs and expenses applicable to sales and revenues
_____________
Gross profit
_____________
Selling, general, and administrative expenses
_____________
Provision for doubtful accounts
_____________
Other general expenses
_____________
Operating income (loss)
_____________
Non-operating income (loss)
_____________
Interest and amortization of debt discount
_____________
Non-operating expenses
_____________
Income or loss before income tax expense
_____________
Income tax expense
_____________
Minority interest in income of
consolidated subsidiaries
_____________
Equity in earnings of unconsolidated subsidiaries
Form 26 Instr. (12/08) Cont.
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and 50 per cent or less owned persons
_____________
Income or loss from continuing operations
_____________
Discontinued operations
_____________
Income or loss before extraordinary items and
cumulative effects of changes in
accounting principles
_____________
Extraordinary items, net of tax
_____________
Cumulative effects of changes in
accounting principles
_____________
Net income (loss)
_____________
Earnings per share data
_____________
12.
The statement of cash flows in Exhibit B-3 may be abbreviated, starting with a single
figure of funds provided by operations and showing other changes individually only
when they exceed 10% of the average of funds provided by operations for the most recent
fiscal year. Notwithstanding this test, de minimis amounts need not be shown separately.
An illustrative example of such a statement of cash flows is set forth below:
XYZ
Company
Statement of cash flows
For the periods ending__________
Year to date
Prior Fiscal Year
Net cash provided (used) by operating activities
_____________
Cash flows from investing activities
Capital expenditures
_____________
Sale of ___________
_____________
Other (describe)
_____________
Net cash provided (used) in investing
activities
_____________
Cash flows provided (used) by financing activities
Net borrowings under line-of-credit
_____________
Principal payments under capital leases
_____________
Proceeds from issuance of long-term debt
_____________
Proceeds from sale of stock
_____________
Dividends paid/Partner Distributions
_____________
Net cash provided (used)
in financing activities
_____________
Net increase (decrease) in cash and cash equivalents
_____________
Cash and cash equivalents
Form 26 Instr. (12/08) Cont.
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Beginning of period
_____________
End of period
_____________
13. Subject to paragraph 11 above, an illustrative example of such a statement of changes in
shareholders'/partners' equity in Exhibit B-4 is set forth below:
XYZ Company
Statement of changes in shareholders'/partners' equity (deficit)
For the periods ending
Year to date
Prior Fiscal Year
Balance, beginning of period
_____________
Comprehensive
net
income
Net income
_____________
Other comprehensive
income, net of tax
___________
_____________
Unrealized gains (losses) on
securities
___________
_____________
Foreign translation adjustments
_____________
Minimum pension liability
adjustment
_____________
Issuance of stock
_____________
Dividends paid
_____________
Balance, end of period
_____________
14.
The financial information in the financial statements shall include disclosures either on
the face of the statements or in accompanying footnotes sufficient to make the
information not misleading. Disclosures should encompass, but not be limited to, for
example, accounting principles and practices; estimates inherent in the preparation of
financial statements; status of long-term contracts; capitalization including significant
borrowings or modification of existing financing arrangements; and the reporting entity
resulting from business combinations or dispositions. Where material contingencies exist,
disclosure of such matters shall be provided.
15.
If appropriate, the statement of income (loss) should show earnings (loss) per share and
dividends declared per share applicable to common stock. The basis of the earnings per
share computation should be stated together with the number of shares used in the
computation.
Form 26 Instr. (12/08) Cont.
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16. In addition to the financial statements required above, entities in the development stage
should provide the cumulative financial statements (condensed to the same degree as
allowed above) and disclosures required by Statement of Financial Accounting Standards
No. 7, "Accounting and Reporting by Development Stage Enterprises," to the date of the
latest balance sheet presented.
Instructions for Exhibit C Description of Operations
17.
The description of operations contained in Exhibit C of this Form should describe the
nature and extent of the estate's interest in the entity, as well as the business conducted
by and intended to be conducted by the entity, focusing on the entity's dominant business
segment(s) including, but not limited to the following as applicable:
· Principal product produced or services rendered and methods of distribution
· Description of the status of a new product or segment if a public announcement has
been made or information publicly disseminated
· Sources and availability of raw materials
· Any significant patents, trademarks, licenses, franchises, and concessions held
· Seasonality of the business
· Dependence upon a single customer or a few customers
· Dollar amount of backlog orders believed to be firm
· Exposure to renegotiation or redetermination or termination of significant contracts
· Competitive conditions facing the entity
. Description of properties owned
. Significant
legal
proceedings
. Material purchase commitments
. Identified trends events or uncertainties that are likely to have a material impact on the
entity's short-term liquidity, net sales, or income from continuing operations
18.
The source preparer of the information should be indicated.