Free Instructions for Periodic Report Concerning Related Entities - Arizona

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. 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. 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. 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. The source of the information contained in each Periodic Report shall be indicated.

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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.

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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. 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

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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 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 Year to date Prior Fiscal Year _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

Liabilities and Shareholders'/Partners' Equity Accounts and notes payable (non-affiliates) Payables to affiliates Other current liabilities Total current liabilities

Year to date

Prior Fiscal Year ______________ ______________ ______________ ______________

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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.

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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

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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.

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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

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Beginning of period End of period

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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 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 Prior Fiscal Year _____________ _____________ ___________ ___________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

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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. 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.

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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.