Guarantor and Non-Guarantor Financial Information

9 Months Ended

Sep. 30, 2011

Guarantor and Non-Guarantor Financial Information

Guarantor and Non-Guarantor Financial Information

Note 18 Guarantor and Non-Guarantor Financial Information

RDA Holding Co., and our domestic subsidiaries guarantee the Senior Secured Notes issued by RDA (collectively, the “Guarantor Subsidiaries”) jointly and severally, irrevocably and unconditionally.  The Guarantor Subsidiaries do not include foreign subsidiaries, domestic subsidiaries whose assets substantially consist of voting stock of one or more foreign subsidiaries or non-wholly-owned subsidiaries (subject to certain limited exceptions such as in the event that such non-wholly-owned subsidiary guarantees debt issued in a capital markets transaction).  Our subsidiaries that are not Guarantor Subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) are not guarantors of the Senior Secured Notes.

The following tables present, for RDA Holding Co. (the parent) and RDA (the issuer), both of which are presented on a stand-alone basis, Guarantor Subsidiaries on a combined basis and Non-Guarantor Subsidiaries on a combined basis, the consolidated statements of operations for the three and nine months ended September 30, 2011, the three months ended September 30, 2010 and the periods February 20 to September 30, 2010 (Successor Company), and January 1 to February 19, 2010 (Predecessor Company).  The consolidated condensed balance sheets for the same entities are presented as of September 30, 2011 and December 31, 2010 (Successor Company).  The consolidated condensed statements of cash flows for the same entities are presented for the nine months ended September 30, 2011 and the period February 20 to September 30, 2010 (Successor Company), and January 1 to February 19, 2010 (Predecessor Company).

Consolidated Statement of Operations for the three months ended September 30, 2011 (Successor Company):

	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	17.2		$	118.9		$	222.9		$	(2.0	)	$	357.0
Product, distribution and editorial expenses	—			12.1			60.3			96.3			(2.0		)	166.7
Promotion, marketing and administrative expenses	—			24.0			77.0			131.2			—			232.2
Impairment of assets	—			—			—			11.2			—			11.2
Other operating items, net	—			2.1			1.6			6.8			—			10.5
Operating loss	—			(21.0		)	(20.0		)	(22.6		)	—			(63.6		)
Interest expense	—			15.2			—			—			—			15.2
Loss (income) from investment in subsidiaries	76.8			72.5			(10.9		)	—			(138.4		)	—
Other (income) expense, net	—			(36.2		)	(0.8		)	34.7			—			(2.3		)
Loss before income taxes	(76.8		)	(72.5		)	(8.3		)	(57.3		)	138.4			(76.5		)
Income tax expense (benefit)	—			4.3			(1.2		)	(2.8		)	—			0.3
Loss from continuing operations before discontinued operations	(76.8		)	(76.8		)	(7.1		)	(54.5		)	138.4			(76.8		)
(Loss) income from discontinued operations, net of taxes	—			—			(0.1		)	0.1			—			—
Net loss	$	(76.8	)	$	(76.8	)	$	(7.2	)	$	(54.4	)	$	138.4		$	(76.8	)

Consolidated Statement of Operations for the nine months ended September 30, 2011 (Successor Company):

	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	48.6		$	398.8		$	650.4		$	(5.4	)	$	1,092.4
Product, distribution and editorial expenses	—			37.7			190.5			279.3			(5.4		)	502.1
Promotion, marketing and administrative expenses	—			83.8			226.0			378.7			—			688.5
Impairment of assets	—			0.1			20.5			247.3			—			267.9
Other operating items, net	—			8.2			1.5			8.6			—			18.3
Operating loss	—			(81.2		)	(39.7		)	(263.5		)	—			(384.4		)
Interest expense	—			43.3			—			—			—			43.3
Gain on deconsolidation of subsidiary	—			(8.5		)	—			—			—			(8.5		)
Loss (income) from investment in subsidiaries	399.0			330.6			(5.9		)	—			(723.7		)	—
Other (income) expense, net	—			(45.3		)	—			42.1			—			(3.2		)
Loss before income taxes and discontinued operations	(399.0		)	(401.3		)	(33.8		)	(305.6		)	723.7			(416.0		)
Income tax benefit	—			(2.9		)	(2.4		)	(11.7		)	—			(17.0		)
Loss from continuing operations before discontinued operations	(399.0		)	(398.4		)	(31.4		)	(293.9		)	723.7			(399.0		)
(Loss) income from discontinued operations, net of taxes	—			(0.6		)	8.2			(7.6		)	—			—
Net loss	$	(399.0	)	$	(399.0	)	$	(23.2	)	$	(301.5	)	$	723.7		$	(399.0	)

Consolidated Condensed Balance Sheet as of September 30, 2011 (Successor Company):

	Guarantor Parent HoldCo		Issuer Parent-RDA		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets	$	—	$	65.6	$	151.1	$	326.3	$	(5.4	)	$	537.6
Property and equipment, net	—		35.6		12.5		11.6		—			59.7
Restricted cash	—		2.4		—		6.0		—			8.4
Goodwill	—		—		310.0		149.5		—			459.5
Other intangible assets, net	—		—		176.2		188.8		—			365.0
Prepaid pension assets	—		145.9		—		27.7		—			173.6
Investments in subsidiaries	163.6		559.1		135.6		—		(858.3		)	—
Intercompany noncurrent receivables	—		91.2		—		19.1		(110.3		)	—
Other noncurrent assets	—		19.7		21.5		2.7		—			43.9
Total assets	$	163.6	$	919.5	$	806.9	$	731.7	$	(974.0	)	$	1,647.7
Liabilities and stockholders’ equity
Current liabilities	$	—	$	51.2	$	289.0	$	255.6	$	(5.4	)	$	590.4
Long-term debt	—		598.9		—		—		—			598.9
Unearned revenue	—		—		106.3		1.9		—			108.2
Accrued pension	—		—		—		3.3		—			3.3
Postretirement and postemployment benefits other than pensions	—		10.0		—		1.3		—			11.3
Intercompany noncurrent payables	—		19.1		8.0		83.2		(110.3		)	—
Other noncurrent liabilities	—		76.7		27.9		67.4		—			172.0
Total liabilities	—		755.9		431.2		412.7		(115.7		)	1,484.1
Stockholders’ equity	163.6		163.6		375.7		319.0		(858.3		)	163.6
Total liabilities and stockholders’ equity	$	163.6	$	919.5	$	806.9	$	731.7	$	(974.0	)	$	1,647.7

Consolidated Condensed Statement of Cash Flows for the nine months ended September 30, 2011 (Successor Company):

	Guarantor Parent HoldCo		Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net change in cash due to operating activities	$	—	$	(46.0	)	$	4.0		$	(46.0	)	$	(9.6	)	$	(97.6	)
Net change in cash due to investing activities	—		(8.0		)	(4.3		)	6.6			—			(5.7		)
Net change in cash due to financing activities	—		37.9			(0.1		)	—			—			37.8
Effect of exchange rate changes on cash and cash equivalents	—		(1.8		)	—			(8.3		)	9.6			(0.5		)
Net change in cash and cash equivalents	—		(17.9		)	(0.4		)	(47.7		)	—			(66.0		)
Cash and cash equivalents at beginning of the period	—		64.8			3.8			100.8			—			169.4
Cash and cash equivalents at end of the period	$	—	$	46.9		$	3.4		$	53.1		$	—		$	103.4

Consolidated Statement of Operations for the three months ended September 30, 2010 (Successor Company):

	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	15.8		$	126.9		$	200.3		$	(1.2	)	$	341.8
Product, distribution and editorial expenses	—			32.8			41.3			87.9			(1.2		)	160.8
Promotion, marketing and administrative expenses	—			27.6			67.5			130.2			—			225.3
Impairment of assets				3.0			26.4			11.7			—			41.1
Other operating items, net	—			4.3			(1.9		)	(2.8		)	—			(0.4		)
Operating loss	—			(51.9		)	(6.4		)	(26.7		)	—			(85.0		)
Interest expense	—			14.4			—			0.1			—			14.5
Gain on deconsolidation of subsidiary	—			(1.0		)	—			—			—			(1.0		)
Other (income) expense, net	—			(14.8		)	5.5			7.7			—			(1.6		)
Loss (income) from equity investment	86.8			39.7			(0.2		)	—			(126.3		)	—
Loss before income taxes and discontinued operations	(86.8		)	(90.2		)	(11.7		)	(34.5		)	126.3			(96.9		)
Income tax (benefit) expense	—			(3.4		)	(6.8		)	0.8			—			(9.4		)
Loss from continuing operations before discontinued operations	(86.8		)	(86.8		)	(4.9		)	(35.3		)	126.3			(87.5		)
Income from discontinued operations, net of taxes	—			—			—			0.7			—			0.7
Net loss	$	(86.8	)	$	(86.8	)	$	(4.9	)	$	(34.6	)	$	126.3		$	(86.8	)

Consolidated Statement of Operations for the period February 20 to September 30, 2010 (Successor Company):

	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	42.0		$	375.2		$	520.5		$	(3.2	)	$	934.5
Product, distribution and editorial expenses	—			25.2			173.6			221.1			(3.2		)	416.7
Promotion, marketing and administrative expenses	—			84.0			168.6			283.7			—			536.3
Impairment of assets	—			3.0			26.4			11.7			—			41.1
Other operating items, net	—			19.8			2.6			10.5			—			32.9
Operating (loss) income	—			(90.0		)	4.0			(6.5		)	—			(92.5		)
Interest expense	—			39.0			—			0.9			—			39.9
Gain on deconsolidation of subsidiary	—			(2.4		)	—			—			—			(2.4		)
Other (income) expense, net	—			(8.7		)	(0.4		)	7.9			—			(1.2		)
Loss (income) from equity investment	88.1			(25.7		)	—			—			(62.4		)	—
(Loss) income before income taxes and discontinued operations	(88.1		)	(92.2		)	4.4			(15.3		)	62.4			(128.8		)
Income tax (benefit) expense	—			(4.0		)	(37.8		)	2.2			—			(39.6		)
(Loss) income from continuing operations before discontinued operations	(88.1		)	(88.2		)	42.2			(17.5		)	62.4			(89.2		)
Income (loss) from discontinued operations, net of taxes	—			0.1			(0.3		)	1.3			—			1.1
Net (loss) income	$	(88.1	)	$	(88.1	)	$	41.9		$	(16.2	)	$	62.4		$	(88.1	)

Consolidated Statement of Operations for the period January 1 to February 19, 2010 (Predecessor Company):

	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	8.4		$	107.5		$	142.4		$	(0.6	)	$	257.7
Product, distribution and editorial expenses	—			2.6			50.0			60.9			(0.6		)	112.9
Promotion, marketing and administrative expenses	—			19.7			47.0			88.4			—			155.1
Other operating items, net	—			(2.0		)	2.9			13.1			—			14.0
Operating (loss) income	—			(11.9		)	7.6			(20.0		)	—			(24.3		)
Interest expense	—			7.9			—			0.9			—			8.8
Loss (gain) on deconsolidation of subsidiary	—			64.3			—			(14.6		)	—			49.7
Other expense (income), net	—			8.1			(11.0		)	12.5			—			9.6
Reorganization items	193.2			(1,801.5		)	(221.5		)	(76.8		)	—			(1,906.6		)
Income from investment in subsidiaries	(1,986.8		)	(206.9		)	(0.1		)	—			2,193.8			—
Income before income taxes and discontinued operations	1,793.6			1,916.2			240.2			58.0			(2,193.8		)	1,814.2
Income tax (benefit) expense	—			(70.6		)	90.8			33.8			—			54.0
Income from continuing operations before discontinued operations	1,793.6			1,986.8			149.4			24.2			(2,193.8		)	1,760.2
Income from discontinued operations, net of taxes	—			—			32.8			0.6			—			33.4
Net income	$	1,793.6		$	1,986.8		$	182.2		$	24.8		$	(2,193.8	)	$	1,793.6

Consolidated Condensed Balance Sheet as of December 31, 2010 (Successor Company):

	Guarantor Parent HoldCo		Issuer Parent-RDA		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets	$	—	$	103.6	$	464.1	$	384.4	$	(315.6	)	$		636.5
Property and equipment, net	—		32.4		13.4		13.5		—			59.3
Restricted cash	—		1.4		—		7.0		—			8.4
Goodwill	—		—		329.3		343.1		—			672.4
Other intangible assets, net	—		—		192.9		258.5		—			451.4
Prepaid pension assets	—		137.6		—		28.4		—			166.0
Investments in subsidiaries	592.6		1,189.1		23.1		—		(1,804.8		)	—
Intercompany noncurrent receivables	—		110.4		0.4		33.4		(144.2		)	—
Other noncurrent assets	—		19.5		10.8		4.5		—			34.8
Total assets	$	592.6	$	1,594.0	$	1,034.0	$	1,072.8	$	(2,264.6	)	$		2,028.8
Liabilities and stockholders’ equity
Current liabilities	$	—	$	369.4	$	271.6	$	287.8	$	(315.6	)	$		613.2
Long-term debt	—		510.7		—		—		—			510.7
Unearned revenue	—		—		92.3		2.0		—			94.3
Accrued pension	—		—		—		5.7		—			5.7
Postretirement and postemployment benefits other than pensions	—		11.5		—		1.4		—			12.9
Intercompany noncurrent payables	—		33.4		11.7		99.1		(144.2		)	—
Other noncurrent liabilities	—		76.4		43.9		79.1		—			199.4
Total liabilities	—		1,001.4		419.5		475.1		(459.8		)	1,436.2
Stockholders’ equity	592.6		592.6		614.5		597.7		(1,804.8		)	592.6
Total liabilities and stockholders’ equity	$	592.6	$	1,594.0	$	1,034.0	$	1,072.8	$	(2,264.6	)	$	2,028.8

Consolidated Condensed Statement of Cash Flows for the period February 20 to September 30, 2010 (Successor Company):

	Guarantor Parent HoldCo		Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net change in cash due to continuing operating activities	$	—	$	(64.0	)	$	(21.1	)	$	25.7		$	(1.6	)	$	(61.0	)
Net change in cash due to discontinued operating activities	—		0.1			(1.5		)	(4.4		)	—			(5.8		)
Net change in cash due to operating activities	—		(63.9		)	(22.6		)	21.3			(1.6		)	(66.8		)
Net change in cash due to investing activities	—		(17.6		)	21.5			(1.5		)	—			2.4
Net change in cash due to financing activities	—		(57.5		)	—			—			—			(57.5		)
Effect of exchange rate changes on cash and cash equivalents	—		—			—			0.6			1.6			2.2
Net change in cash and cash equivalents	—		(139.0		)	(1.1		)	20.4			—			(119.7		)
Cash and cash equivalents at beginning of the period	—		177.1			4.9			87.6			—			269.6
Cash and cash equivalents at end of the period	$	—	$	38.1		$	3.8		$	108.0		$	—		$	149.9

Consolidated Condensed Statement of Cash Flows for the period January 1 to February 19, 2010  (Predecessor Company):

	Guarantor Parent HoldCo		Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net change in cash due to continuing operating activities	$	—	$	(23.5	)	$	(9.6	)	$	9.5		$	8.0		$	(15.6	)
Net change in cash due to discontinued operating activities	—		3.4			(2.1		)	4.5			—			5.8
Net change in cash due to operating activities	—		(20.1		)	(11.7		)	14.0			8.0			(9.8		)
Net change in cash due to investing activities	—		(1.6		)	9.8			(16.9		)	—			(8.7		)
Net change in cash due to financing activities	—		(9.5		)	—			—			—			(9.5		)
Effect of exchange rate changes on cash and cash equivalents	—		3.1			—			5.1			(8.0		)	0.2
Net change in cash and cash equivalents	—		(28.1		)	(1.9		)	2.2			—			(27.8		)
Cash and cash equivalents at beginning of the period	—		205.1			6.9			85.4			—			297.4
Cash and cash equivalents at end of the period	$	—	$	177.0		$	5.0		$	87.6		$	—		$	269.6