UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2012

Commission File Number: 333-170143-07

RDA HOLDING CO.

(Exact name of registrant as specified in its charter)



Delaware		37-1537045
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

750 Third Avenue

New York, New York 10017

(Address of principal executive offices) (Zip Code)

(646) 293-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§203.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o

No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

As of ~~August~~November 112, 2012, there was no public trading market for the registrant’s common stock. There were 24,394,640 and 2,063,533 shares of the registrant’s Class A and Class B common stock, respectively, $0.001 par value per share, outstanding on ~~August~~November 112, 2012.

Table of Contents

RDA Holding Co., and Subsidiaries

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated Financial Statements
	Unaudited Consolidated Statements of Comprehensive Loss for the Three and Six months ended June 30, 2012 and 2011	2
	Unaudited Consolidated Statements of Comprehensive Loss for the Three and Nine months ended September 30, 2012 and 2011	2
	Unaudited Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011	3
	Unaudited Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011	3
	Unaudited Consolidated Statements of Cash Flows for the Six months ended June 30, 2012 and 2011	4
	Unaudited Consolidated Statements of Cash Flows for the Nine months ended September 30, 2012 and 2011	4
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3134
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4652
Item 4.	Controls and Procedures	4752
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	4753
Item 1A.	Risk Factors	4854
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4855
Item 6.	Exhibits	4956

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

RDA Holding Co., and Subsidiaries

Consolidated Statements of Comprehensive Loss

(in millions)

(unaudited)

	Successor Company
	Three months ended June 30,						Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Revenue	$	~~290~~230.51		$	~~375~~312.04		$	~~523~~753.89		$	~~647~~959.48
Product, distribution and editorial expenses	~~123~~109.5			~~160~~146.12			~~236~~346.95			~~293~~439.02
Promotion, marketing and administrative expenses	~~145~~134.90			~~197~~196.47			~~320~~454.0			~~384~~581.85
Impairment of assets	~~113~~85.40			~~227~~10.73			~~113~~203.47			~~227~~238.70
Other operating items, net	01.97			210.85			13.74			616.27
Operating loss	(93100.21		)	(~~213~~51.03		)	(~~148~~253.27		)	(~~264~~315.36		)
Interest expense	1514.4			1415.23			3247.82			2843.03
Gain on deconsolidation of subsidiary	~~(0.8~~—		)	~~(8.5~~—		)	(0.8		)	(8.5		)
Other income, net	(01.74		)	(2.23		)	(24.93		)	(02.47		)
Loss before income taxes and discontinued operations	(~~107~~113.1		)	(~~216~~64.53		)	(~~177~~295.38		)	(~~283~~347.47		)
Income tax (benefit) expense	(~~33.~~6.4		)	1.36			(4955.49		)	(1110.94		)
Loss from continued operations	(73.5		)	(217.8		)	(127.9		)	(271.5		)
Loss from continuing operations	(106.7		)	(65.9		)	(239.9		)	(337.3		)
(Loss) income from discontinued operations, net of taxes	(200.45		)	(2210.79		)	2616.25			(5061.7		)
Net loss	$	(93107.92	)	$	(~~240~~76.58	)	$	(~~101~~223.74	)	$	(~~322~~399.20	)
Comprehensive loss	$	(~~111~~102.4	)	$	(~~224~~121.27	)	$	(~~103~~220.50	)	$	(~~273~~394.07	)

See accompanying Notes to Consolidated Financial Statements

Table of Contents

RDA Holding Co., and Subsidiaries

Consolidated Balance Sheets

(in millions, except share and per share amounts)

(unaudited)

	Successor Company
	June 30, 2012			December 31, 2011
	September 30, 2012			December 31, 2011
Assets
Current assets:
Cash and cash equivalents	$	~~104~~88.01		$	112.3
Restricted cash	15.40			5.4
Accounts receivable, net	127.83			174.4
Inventories	6364.84			62.3
Prepaid and deferred promotion costs	2217.50			28.2
Prepaid expenses and other current assets	~~107~~112.8			99.3
Assets held for sale	3014.97			153.8
Total current assets	~~472~~439.23			635.7
Property and equipment, net	4944.43			51.1
Restricted cash	78.53			6.5
Goodwill	~~323~~256.61			388.7
Other intangible assets, net	~~230~~205.71			304.7
Prepaid pension assets	~~143~~148.1			135.4
Other noncurrent assets	44.56			42.0
Total assets	$	1,~~271~~145.08		$	1,564.1
Liabilities and stockholders’ equity
Liabilities and stockholders’ (deficit) equity
Current liabilities:
Current portion of long-term debt	$	058.50		$	—
Accounts payable	9896.56			133.2
Accrued expenses	~~120~~103.35			131.9
Income taxes payable	12.64			8.8
Unearned revenue	~~202~~220.20			227.8
Other current liabilities	2122.02			22.0
Liabilities held for sale	2711.32			36.8
Total current liabilities	~~471~~513.49			560.5
Long-term debt	~~511~~454.67			603.8
Unearned revenue	98106.35			89.6
Accrued pension	4.03			4.3
Postretirement and postemployment benefits other than pensions	8.62			9.2
Other noncurrent liabilities	~~136~~134.73			154.1
Total liabilities	1,~~230~~221.69			1,421.5
Common stock (Series A (voting) $0.001 par value: authorized - 39,000,000 shares; issued - 25,436,467 shares; outstanding - 24,378,151 shares)	—			—
Common stock (Series A (voting) $0.001 par value: authorized - 39,000,000 shares; issued - 25,436,467 shares; outstanding - 24,394,640 and 24,378,151 shares)	—			—
Common stock (Series B (non-voting) $0.001 par value: authorized - 3,000,000 shares; issued and outstanding - 2,063,533 shares)	—			—
Treasury stock, at cost: 1,058,316 shares	(30.7		)	(30.7		)
Treasury stock, at cost: 1,041,827 and 1,058,316 shares	(30.2		)	(30.7		)
Paid-in capital, including warrants	595.6			594.3
Accumulated deficit	(~~524~~646.56		)	(422.8		)
Accumulated other comprehensive income	—5.1			1.8
Total stockholders’ equity	40.4			142.6
Total stockholders’ (deficit) equity	(76.1		)	142.6
Total liabilities and stockholders’ equity	$	1,271.0		$	1,564.1
Total liabilities and stockholders’ (deficit) equity	$	1,145.8		$	1,564.1

See accompanying Notes to Consolidated Financial Statements

Table of Contents

RDA Holding Co., and SubsidiariesConsolidated Statements of Cash Flows(in millions)(unaudited)
	Successor Company
	Six months ended June 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(101.7	)	$	(322.2	)
Adjustments to reconcile net loss to operating cash flows:
(Income) loss from discontinued operations, net of taxes	(26.2		)	50.7
Depreciation and amortization	29.4			32.7
Benefit for deferred income taxes	(15.0		)	(18.5		)
Amortization of debt discounts	1.4			0.9
Amortization of debt issuance costs	3.1			1.4
Gain on deconsolidation of subsidiary	(0.8		)	(8.5		)
Impairment of assets	113.4			227.7
Gain on derivatives and warrants	(2.6		)	—
Equity-based compensation expense	5.4			16.5
Net gain on sale or disposal of certain assets	(1.0		)	(1.7		)
Changes in assets and liabilities, net of effects of dispositions:
Restricted cash	—			(0.5		)
Accounts receivable, net	43.2			27.7
Inventories	(2.9		)	(12.7		)
Prepaid and deferred promotion costs	5.7			(5.0		)
Other assets	(11.7		)	(19.6		)
Unearned revenue	(8.1		)	(17.0		)
Income taxes	(41.6		)	(2.2		)
Accounts payable and accrued expenses	(56.1		)	(3.0		)
Other liabilities	(4.4		)	(7.8		)
Net change in cash due to continuing operating activities	$	(70.5	)	$	(61.1	)
Net change in cash due to discontinued operating activities	(8.6		)	(8.9		)
Net change in cash due to operating activities	$	(79.1	)	$	(70.0	)
Cash flows from investing activities:
Capital expenditures	$	(4.9	)	$	(8.6	)
Purchase of a business	—			(2.3		)
Proceeds from sale of a business	175.0			—
Proceeds from sale of assets	1.6			9.3
Investing restricted cash	0.1			—
Net change in cash due to continuing investing activities	$	171.8		$	(1.6	)
Net change in cash due to discontinued investing activities	2.8			(0.7		)
Net change in cash due to investing activities	$	174.6		$	(2.3	)
See accompanying Notes to Consolidated Financial Statements

RDA Holding Co., and Subsidiaries

Consolidated Statements of Cash Flows

(in millions)

(unaudited)



	Successor Company
	Nine months ended September 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(223.4	)	$	(399.0	)
Adjustments to reconcile net loss to operating cash flows:
(Income) loss from discontinued operations, net of taxes	(16.5		)	61.7
Depreciation and amortization	43.2			50.2
Benefit for deferred income taxes	(13.4		)	(19.2		)
Amortization of debt discounts	2.1			1.4
Amortization of debt issuance costs	3.9			1.8
Gain on deconsolidation of subsidiary	(0.8		)	(8.5		)
Impairment of assets	203.7			238.0
Gain on derivatives and warrants	(3.2		)	(1.1		)
Equity-based compensation expense	0.4			16.7
Net gain on sale or disposal of certain assets	(1.0		)	(1.9		)
Changes in assets and liabilities, net of effects of dispositions:
Restricted cash	(0.1		)	(0.4		)
Accounts receivable, net	45.1			23.0
Inventories	(2.7		)	(18.0		)
Prepaid and deferred promotion costs	11.4			3.6
Other assets	(21.7		)	(35.4		)
Unearned revenue	16.8			20.0
Income taxes	(55.9		)	0.2
Accounts payable and accrued expenses	(59.4		)	(10.0		)
Other liabilities	(0.4		)	(8.0		)
Net change in cash due to continuing operating activities	$	(71.9	)	$	(84.9	)
Net change in cash due to discontinued operating activities	(19.6		)	(12.7		)
Net change in cash due to operating activities	$	(91.5	)	$	(97.6	)
Cash flows from investing activities:
Capital expenditures	$	(8.0	)	$	(11.3	)
Purchase of a business	—			(2.7		)
Proceeds from sale of a business	175.0			—
Proceeds from sale of assets	2.8			9.5
Investing restricted cash	0.1			—
Net change in cash due to continuing investing activities	$	169.9		$	(4.5	)
Net change in cash due to discontinued investing activities	2.3			(1.2		)
Net change in cash due to investing activities	$	172.2		$	(5.7	)


See accompanying Notes to Consolidated Financial Statements

Table of Contents

RDA Holding Co., and SubsidiariesConsolidated Statements of Cash Flows(in millions)(unaudited)
	Successor Company
	Six months ended June 30,
	2012			2011
Cash flows from financing activities:
Proceeds from borrowings	50.0			—
Debt payments	(57.6		)	—
Proceeds from long-term revolving credit facility	—			15.0
Repayments of long-term revolving credit facility	(35.0		)	(4.0		)
Debt payments to related parties	(45.0		)	—
Cash paid for financing fees	(2.6		)	(0.7		)
Cash used to net settle equity-based compensation	—			(5.6		)
Repurchase of Successor Company common stock	—			(43.3		)
Tax effect of equity-based compensation	1.1			—
Financing restricted cash	(11.0		)	—
Payment of prepayment penalty to related parties	(5.0		)	—
Net change in cash due to continuing financing activities	$	(105.1	)	$	(38.6	)
Net change in cash due to discontinued financing activities	(0.1		)	—
Net change in cash due to financing activities	$	(105.2	)	$	(38.6	)
Effect of exchange rate changes on cash and cash equivalents	1.4			4.9
Net change in cash and cash equivalents	(8.3		)	(106.0		)
Cash and cash equivalents at beginning of period	112.3			169.4
Cash and cash equivalents at end of period	$	104.0		$	63.4
Supplemental information
Cash paid for interest	$	28.2		$	25.1
Cash paid for income taxes	$	2.6		$	5.5

RDA Holding Co., and Subsidiaries

Consolidated Statements of Cash Flows

(in millions)

(unaudited)



	Successor Company
	Nine months ended September 30,
	2012			2011
Cash flows from financing activities:
Proceeds from borrowings	$	50.0		$	55.0
Debt payments	(57.7		)	—
Proceeds from long-term revolving credit facility	—			40.0
Repayments of long-term revolving credit facility	(35.0		)	(4.0		)
Debt payments to related parties	(45.0		)	—
Cash paid for financing fees	(2.6		)	(2.2		)
Cash used to net settle equity-based compensation	—			(7.6		)
Repurchase of Successor Company common stock	—			(43.3		)
Tax effect of equity-based compensation	1.1			—
Financing restricted cash	(11.0		)	—
Payment of prepayment penalty to related parties	(5.0		)	—
Net change in cash due to continuing financing activities	$	(105.2	)	$	37.9
Net change in cash due to discontinued financing activities	(0.2		)	(0.1		)
Net change in cash due to financing activities	$	(105.4	)	$	37.8
Effect of exchange rate changes on cash and cash equivalents	0.5			(0.5		)
Net change in cash and cash equivalents	(24.2		)	(66.0		)
Cash and cash equivalents at beginning of period	112.3			169.4
Cash and cash equivalents at end of period	$	88.1		$	103.4
Supplemental information
Cash paid for interest	$	40.9		$	38.1
Cash paid for income taxes	$	3.7		$	6.0

See accompanying Notes to Consolidated Financial Statements

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Note 1 Organization and Summary of Significant Accounting Policies

Organization and Business

RDA Holding Co. is principally a holding company. We conduct our operations primarily through our wholly-owned subsidiary, The Reader’s Digest Association, Inc. (“RDA”), and subsidiaries of RDA. RDA Holding Co.’s primary asset is its sole ownership of all issued and outstanding shares of common stock of RDA. References in the Notes to Consolidated Financial Statements to “we,” “us,” “our,” “HoldCo” and the “Company” are to RDA Holding Co., and its subsidiaries.

We are a global, multi-brand and multi-platform media and direct marketing company that educates, entertains and connects audiences around the world. We are dedicated to providing our customers with the inspiration, ideas and tools to simplify and enrich their lives. We produce and sell print and digital magazines, books, music and videos through multiple channels, such as direct mail (including catalogs), the Internet and retail. Through trusted partners and sourcing experts, we co-brand, market and sell other consumer goods and financial services.

OnAs ~~June~~of 15September 30, 2012, the Company ~~completed~~was ain ~~cash~~violation ~~tender~~of ~~offer~~the tofinancial ~~purchase~~covenant upunder ~~to $60.7 of~~ its Senior ~~Secured~~Credit ~~Notes~~Facility (as defined in Note 910, Debt),. We ~~using~~obtained ~~proceeds~~an amendment from ~~the~~our ~~sale~~lender, ofdated ~~its~~November ~~Allrecipes~~9, 2012, to modify certain covenants.~~com~~ However, management believes that based on current projections and given the impact of continued business declines and transformation activities currently underway, atour aoperating ~~purchase~~results ~~price~~will ofnot ~~95%~~be ofsufficient to satisfy the ~~principal~~financial ~~amount~~covenants ~~thereof~~in the 2012 Secured Term Loan for the next several quarters. Accordingly, ~~plus~~we ~~accrued~~have ~~and~~reclassified ~~unpaid~~the ~~interest~~$50.0 ~~thereon~~secured term loan ("2012 Secured Term Loan") from non-current to ~~the~~current, ~~date~~in our consolidated balance sheet, as of ~~purchase~~September 30, 2012. See Note 910, Debt, and Note 18, Subsequent Events, for further information.

On ~~March 30~~July 31, 2012, the Company ~~entered~~completed ~~into~~the asale ~~credit~~of 100% of the outstanding stock of its businesses in Spain and ~~guarantee~~Portugal. The financial impact of this transaction was immaterial. Concurrent with the sale agreement, ~~providing~~we ~~the~~entered ~~Company~~into a license agreement with athe ~~$50.0~~purchaser ~~secured~~to ~~term~~publish ~~loan~~the Spain and anPortugal ~~$11~~editions of Reader's Digest and sell other products under the Reader's Digest brand.0 These ~~letter~~businesses were categorized as held for sale and classified within discontinued operations as of ~~credit~~June ~~facility~~30, 2012. See Note 97, ~~Debt~~Discontinued Operations and Assets Held for Sale, for further information.

On ~~March 21~~July 2, 2012, the Company ~~repaid~~completed ~~and~~the ~~terminated~~sale ~~its~~of ~~Senior~~100% ~~Credit~~of ~~Facility~~the ~~(as~~outstanding ~~defined~~stock inof ~~Note~~its 9,Direct ~~Debt),~~Holdings ~~using $35~~U.0S. ofCorp ~~net~~and ~~proceeds~~Saguaro ~~from~~Road ~~our~~Records, ~~Allrecipes~~Inc.~~com~~ ~~sale. In addition~~subsidiaries, weand ~~cash-collateralized~~certain ~~our~~assets ~~letters~~ of ~~credit~~Direct Entertainment Media Group, ~~$11~~Inc.4, ascollectively ofconsidered ~~March 21,~~to ~~2012,~~be ~~which~~LED. LED ~~had~~was ~~been~~categorized ~~issued~~as ~~under~~a ~~the~~business ~~Senior~~held ~~Credit~~for ~~Facility~~sale and ~~which~~was weclassified ~~intend~~within todiscontinued ~~reissue~~operations ~~under~~as ~~our~~of June 30, 2012. The purchase price was $111.01 ~~letter~~and ofwas ~~credit~~paid ~~facility~~in cash. The sale of LED resulted in an immaterial loss. See Note 97, ~~Debt~~Discontinued Operations and Assets Held for Sale, for further information.

On ~~March 24~~June 15, 2012, wethe ~~amended~~Company ~~the~~completed ~~2011~~a ~~Unsecured~~cash ~~Term~~tender ~~Loan~~offer to ~~increase~~purchase up to $60.7 of its Senior Secured Notes (as defined in Note 10, Debt), using proceeds from the ~~senior~~sale ~~secured~~of ~~leverage~~our ~~ratio~~Allrecipes.com ~~for~~business, at a purchase price of 95% of the ~~quarter~~principal ~~ended~~amount ~~June 30~~thereof, ~~2012~~plus accrued and ~~thereafter~~unpaid interest thereon to the date of purchase. See Note 910, Debt, for further information.

On March 630, 2012, the Company ~~executed~~entered ~~repayment~~into ofa ~~the~~credit ~~2011~~and ~~Secured~~guarantee ~~Term Loan (as defined in Note 9~~agreement, ~~Debt),~~providing ~~using~~the ~~net~~Company ~~proceeds~~with ~~from~~a ~~our Allrecipes.com sale. Our repayment included~~ $4550.0 tosecured ~~satisfy~~term ~~the~~loan ~~principal~~and ~~debt,~~an ~~along with~~ $511.0 ~~due~~letter ~~under~~of ~~the~~credit ~~early repayment provisions~~facility. See Note 910, Debt, for further information.

On ~~February~~March 2921, 2012, the Company ~~sold~~repaid ~~Allrecipes.com~~and terminated its Senior Credit Facility (as defined in Note 10, ~~for~~Debt), using $~~175~~35.0 inof ~~cash. Allrecipes.com~~net ~~was~~proceeds ~~considered~~from toour beAllrecipes.com asale. In ~~business~~addition, ~~held~~we ~~for~~cash-collateralized ~~sale~~our ~~and~~letters ~~classified~~of ~~within~~credit, ~~discontinued~~$11.4 ~~operations~~ as of ~~December~~March 3121, ~~2011~~2012, which had been issued under the Senior Credit Facility. During ~~The~~the ~~sale~~third quarter of ~~Allrecipes.com~~2012, ~~resulted~~we inre-issued amost ~~gain~~of these standby letters of credit under our $5111.5,0 ~~net~~letter of ~~taxes~~credit facility. ~~See~~ We ~~Note~~expect 6to receive the cash, ~~Discontinued~~previously ~~Operations~~used ~~and~~to ~~Assets~~as ~~Held~~collateral, ~~for~~in ~~Sale~~the fourth quarter of 2012. See Note 10, Debt, for further information.

On ~~February~~March 824, 2012, ~~the~~we ~~Company~~amended ~~sold~~the ~~Weekly~~2011 ~~Reader~~Unsecured ~~for~~Term ~~$3.6,~~Loan ~~which~~to ~~was~~increase ~~paid~~the insenior ~~cash. Weekly~~secured ~~Reader~~leverage ~~was~~ratio ~~considered to be a business held~~ for ~~sale~~the ~~and~~quarter ~~classified~~ended ~~within discontinued operations as of December~~June 3130, ~~2011. The~~2012 ~~impact~~and ~~of this sale was not material~~thereafter. See Note 610, ~~Discontinued Operations and Assets Held for Sale~~Debt, for further information.

On March 6, 2012, the Company executed repayment of the 2011 Secured Term Loan (as defined in Note 10, Debt), using net proceeds from our Allrecipes.com sale. Our repayment included $45.0 to satisfy the principal debt, along with $5.0 due under the early repayment provisions. See Note 10, Debt, for further information.

On February 29, 2012, the Company sold Allrecipes.com, for $175.0 in cash. Allrecipes.com was considered to be a business held for sale and classified within discontinued operations as of December 31, 2011. The sale of Allrecipes.com resulted in a gain of $36.9, net of taxes. See Note 7, Discontinued Operations and Assets Held for Sale, for further information.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

On February 8, 2012, the Company sold Weekly Reader for $3.4, which was paid in cash. Weekly Reader was considered to be a business held for sale and classified within discontinued operations as of December 31, 2011. The impact of this sale was not material. See Note 7, Discontinued Operations and Assets Held for Sale, for further information.

Basis of Presentation

Our unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. These unaudited interim consolidated financial statements should be read in conjunction with the audited December 31, 2011 consolidated financial statements and accompanying notes, contained in our annual report filed on Form 10-K on March 29, 2012.

We typically generate our strongest revenue in the fourth calendar quarter due to consumer purchases during the holiday season. Within our North America segment, our revenue and profitability is strongest in the fourth quarter, followed by the second quarter, due to the increased number of magazine issues within each of those quarters, coupled with the timing of year end annual publications and consumer holiday purchases in the fourth quarter. Our international segments are also seasonal, with fluctuations in profits as a result of the timing of customer acquisition mailings (generally made in the first and third quarters, depressing profits in those quarters as a result), and revenue tends to be strongest in the fourth quarter due to holiday consumer purchases.

Our businesses are structured into the following three reportable segments: North America, Europe and Asia Pacific & Latin America (“APLA”). See Note 1516, Segments, for further information.

As discussed in Note 2, Reorganization and Emergence from Chapter 11, in our audited December 31, 2011 consolidated financial statements, the Company emerged from chapter 11 bankruptcy protection on February 19, 2010 (“Effective Date”), and adopted fresh start accounting in accordance with Accounting Standards Codification ("ASC") Topic 852, Reorganizations. The adoption of fresh start accounting resulted in our becoming a new entity for financial reporting purposes.

The Company, when used in reference to the period including and subsequent to February 20, 2010, refers to the “Successor Company”, and when used in reference to the period prior to February 20, 2010, refers to the “Predecessor Company”.

Principles of Consolidation

The consolidated financial statements include the consolidated accounts of RDA Holding Co., and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

These statements, in the opinion of management, have been prepared following the requirements of U.S. GAAP for interim reporting, applying certain assumptions and estimates, including all normal, recurring adjustments considered necessary to present such information fairly. Operating results for any interim period are not necessarily indicative of the results for an entire year due to, among other things, the seasonality of our business. In preparing the consolidated financial statements in conformity with U.S. GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates.

As discussed in Note 3, Fresh Start Accounting and Reorganization Items, in our audited December 31, 2011 consolidated financial statements, the basis to determine enterprise value and the values of various tangible and intangible assets were determined using a number of factors, including the use of certain valuation methodologies and certain operational assumptions and estimates. Due to the many variables inherent in the estimation of fair value, differences in assumptions and estimates may have a material effect on the result of our future goodwill and intangible asset impairment tests. We determined that an interim impairment test was necessary during the three months ended June 30, 2012. ~~The~~During ~~analysis~~the three months ended September 30, 2012, we finalized our second quarter 2012 interim test and determined a second interim impairment test was necessary. These analyses resulted in an ~~estimated~~ impairment charge of $~~113~~203.47 for goodwill, ~~and~~ other intangible assets, and property and equipment, net. See Note 23, Impairment of Assets, for further information.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which represents an update to ASC Topic 350, Intangibles—Goodwill and Other ("ASC 350"). ASU 2011-08 simplifies how entities test goodwill for impairment. ASU 2011-08 permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether to perform a two-step goodwill impairment test. ASU 2011-08 is effective for the Company in the first quarter of its fiscal year ending December 31, 2012. The Company adopted this guidance effective January 1, 2012, and it did not have any impact on our consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), which represents an update to ASC 220, Comprehensive Income (“ASC 220”). ASU 2011-05 provides new disclosure guidance for comprehensive income, requiring presentation of each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. An entity will have the option to present these items in one continuous statement or two separate but consecutive statements. An entity will no longer be permitted to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”), which represents an update to ASC 220. ASU 2011-12 defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. These updates are effective for fiscal years beginning after December 15, 2011 and for interim periods within those years. The Company adopted this guidance effective January 1, 2012, and it did not have a material impact on our consolidated financial statements.

Note 2 ~~Impairment~~Revision of ~~Assets~~Prior Period Consolidated Financial Statements

~~Goodwill~~In ~~and~~connection ~~other~~with ~~indefinite-lived~~the ~~intangible~~preparation ~~assets~~of ~~are~~our ~~reviewed~~consolidated financial statements for ~~impairment~~the ~~using~~three aand ~~fair~~nine ~~value~~months ~~based~~ended ~~approach~~September ~~annually~~30, or2012, ~~earlier~~we ~~upon~~identified certain errors in our consolidated financial statements relating to certain prior periods. In accordance with ASC Topic 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the ~~occurrence~~materiality of ~~events~~the orerrors ~~circumstances~~and concluded that ~~indicate~~the ~~there~~errors ~~may~~were benot anmaterial ~~impairment~~to ~~charge~~any of our previously issued consolidated financial statements. ~~Our~~In ~~annual~~accordance ~~impairment~~with ~~test~~ASC is250-10 ~~performed~~(SEC onStaff ~~October~~Accounting 1Bulletin No. ~~Asset~~ ~~impairments~~108, ~~related~~Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we have revised our previously issued financial statements to correct the ~~carrying~~effect ~~value~~ of ~~goodwill~~these errors. These corrections, ~~indefinite~~as summarized below, are non-~~lived~~cash ~~intangible~~in ~~assets~~nature and ~~certain~~do ~~long-lived~~not ~~assets~~impact ~~are~~our ~~calculated~~financial incovenants ~~accordance~~under ~~with~~our debt agreements. These non-cash revisions do not impact the ~~provisions~~net ofchange ~~ASC~~in ~~350~~cash due to operating activities, ~~Intangibles—Goodwill~~net ~~and~~change ~~Other~~in ~~and~~cash ~~ASC~~due ~~Topic~~to ~~360,~~investing ~~Property~~activities or net change in cash due to financing activities, ~~Plant~~in ~~and~~our ~~Equipment~~consolidated ~~(“ASC~~statements ~~360”)~~of cash flows, ~~respectively~~for any prior period.

~~Goodwill~~We isidentified ~~reviewed~~an ~~for~~error ~~impairment~~in at the ~~reporting~~three ~~unit~~months ~~level. A~~ended ~~reporting~~March ~~unit~~31, is2012 ~~equivalent~~of to$9.1 andue ~~operating~~to ~~segment,~~the orreversal ~~one~~of ~~level~~our ~~below~~valuation anallowance ~~operating~~related ~~segment. Our~~to ~~reporting~~the ~~units~~tax ~~represent~~impact ~~our~~cancellation ~~reportable~~of ~~segments~~indebtedness ~~except~~associated ~~for~~with ~~North~~certain ~~America,~~of ~~which~~our isinternational ~~comprised~~reorganizations ofestablished at the ~~United~~time ~~States~~of ~~and~~our ~~Canada~~emergence ~~reporting~~from ~~units~~chapter 11 proceedings. ~~Indefinite-lived~~As ~~intangible~~a ~~assets~~result, orwe ~~tradenames,~~should ~~are~~have ~~reviewed~~recorded ~~for~~less ~~impairment~~income ~~based~~from ondiscontinued ~~their~~operations, ~~lowest~~net ~~unit~~ of ~~accounting~~taxes orand bya ~~asset~~greater net loss of $9. 1.

~~During~~We ~~the~~identified ~~three~~an ~~months~~error ~~ended~~related ~~June 30,~~to ~~2012,~~our ~~we concluded that~~ interim impairment ~~tests~~analyses for ~~goodwill~~the ~~were~~second ~~necessary for our Europe~~ and ~~Canada~~third ~~reporting~~quarters ~~units. This~~of ~~conclusion~~2011, ~~was~~in ~~based~~calculating onthe ~~certain~~fair ~~indicators~~value of ~~impairment~~our reporting units, ~~including~~where ~~lower~~we ~~than~~omitted ~~expected~~an ~~results~~adjustment ~~and~~to athe ~~decline~~deferred intax ~~our~~liability ~~most~~associated ~~recent~~with ~~financial~~the ~~projections. Our~~fair ~~interim~~value ~~impairment~~of ~~test~~the ~~has~~intangible ~~been~~assets ~~impacted~~and bydeferred ~~declines~~revenue used in ~~market~~the ~~comparables~~implied ~~since~~fair ~~our~~value ~~last~~of ~~annual~~goodwill ~~impairment~~calculation under the Step 2 goodwill test. ~~Revenue~~As ~~declines~~a result, in ~~certain~~the ~~brands~~second inquarter ~~our~~of ~~North~~2011, ~~America~~we ~~businesses~~should ~~resulted~~have recorded $3.0 in ~~the~~additional ~~need~~impairment tocharges; ~~perform~~and anin ~~interim~~the ~~impairment~~third ~~analysis~~quarter onof ~~certain~~2011, ~~tradenames~~we should have recorded $2.3 in additional impairment charges.

~~Our~~These ~~results~~errors ~~in Europe~~ have ~~declined~~been asrevised wein ~~experience~~ the ~~continuing~~below ~~economic~~consolidated ~~activity~~financial ~~declines~~statement inline ~~Europe,~~items ~~softer~~as ~~response rates to our promotional campaigns, continuing declines in some~~ of and ~~our~~for ~~books~~the ~~and~~three ~~home~~months ~~entertainment~~ended ~~products~~March ~~and~~31, ~~transformational change~~2012, aswith wethe ~~implement~~corresponding ~~our~~impacts ~~strategy~~as ~~towards~~of ~~a more customer-centric marketing approach~~ and afor ~~digital-driven~~the ~~business~~six ~~model. The~~months ~~goal~~ended ofJune ~~this approach is a high-quality customer database~~30, ~~with higher-returns on a lower revenue base~~2012. ~~While~~The ~~our~~Company ~~financial~~will ~~projections~~revise ~~anticipated some decline in revenue related to this strategy,~~ the ~~actual~~prior ~~declines~~interim ~~have~~consolidated ~~occurred~~financial atstatements ~~rates higher than we predicted, and against factors that we were not able to predict, including continued challenging economic environments~~ in ~~our~~its ~~European~~future ~~markets. Our~~filings ~~efforts~~ to ~~preserve~~reflect ~~profitability through aggressive cost reductions and operating efficiencies have somewhat mitigated the declines. However,~~ these ~~factors led us to conclude that an interim impairment test was necessary for Europe~~revisions.

Our conclusion to perform an interim impairment test for our Canada reporting unit was also based on lower than expected results and a decline in our most recent financial projections. Recent headcount reduction initiatives in Canada have affected the business and will continue to do so in the near-term, as we transform our traditional direct marketing Canada business towards a more circulation and digital-driven business model.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

~~Our~~The ~~assets~~following ~~were~~tables ~~established~~present atthe ~~fair~~effect ~~value~~of ~~upon~~these ~~our~~corrections ~~emergence~~on ~~from~~the ~~bankruptcy~~Company's ~~and~~consolidated ~~application~~statements of ~~fresh~~comprehensive ~~start~~loss ~~accounting~~for onthe ~~February~~impacted 19periods. Additionally, ~~2010,~~for ~~based~~ease ~~upon~~of ~~facts~~comparison, ~~circumstances~~the ~~and~~column ~~market~~"Impact ~~conditions~~from ~~prevailing~~Discontinued atOperations" ~~that~~is ~~time~~provided below to bridge from previously reported amounts. Amounts in the "Adjustments" column may not total due to immaterial rounding.

The goodwill impairment analysis is a two-step process. The first step, used to identify potential impairment, is a comparison of the reporting unit's estimated fair value to its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying value, applicable goodwill is not considered to be impaired. If the carrying value exceeds the fair value, there is an indication of impairment and the second step is performed to measure the amount of the impairment. The second step requires the Company to calculate an implied fair value of goodwill based on a hypothetical purchase price allocation.



	Successor Company
	Three months ended March 31, 2012
	Previously Reported			Impact from Discontinued Operations			Adjustments			As Revised
Impairment of assets	$	—		$	—		$	5.3		$	5.3
Operating (loss) income	(56.8		)	1.7			(5.3		)	(60.4		)
(Loss) income from continuing operations	(55.6		)	1.2			(5.3		)	(59.7		)
Income (loss) from discontinued operations, net of taxes	47.8			(1.3		)	(9.1		)	37.4
Net loss	(7.8		)	—			(14.5		)	(22.3		)
Comprehensive income (loss)	7.9			—			(14.4		)	(6.5		)

We estimated the fair value of our reporting units based on a combination of the income and market multiple approaches. Our estimate of discounted cash flows for each reporting unit required significant judgment. Certain key assumptions utilized, including changes in revenue, operating expenses, working capital requirements and capital expenditures including pre-publication costs, are based on estimates related to strategic initiatives and current market conditions. The discounted cash flow analyses used a discount rate that corresponds to our weighted-average cost of capital. This assumed discount rate is consistent with that used for investment decisions and takes into account risk associated with the specific and detailed operating plans and strategies of the individual reporting units. The market data utilized included publicly-traded prices and transaction values of comparable companies with operations considered to be similar to those of the Company's reporting units. Collectively, these evaluations were management's best estimate of projected fair values.



	Successor Company
	Six months ended June 30, 2012
	Previously Reported			Adjustments			As Revised
Impairment of assets	$	113.4		$	5.3		$	118.7
Operating loss	(148.2		)	(5.4		)	(153.6		)
Loss from continuing operations	(127.9		)	(5.3		)	(133.2		)
Income (loss) from discontinued operations, net of taxes	26.2			(9.2		)	17.0
Net loss	(101.7		)	(14.5		)	(116.2		)
Comprehensive loss	(103.5		)	(14.1		)	(117.6		)

WeThe ~~estimated~~following ~~the~~tables ~~fair~~present ~~value~~the effect of ~~intangible~~these ~~assets~~corrections ~~using~~on the ~~relief~~Company's ~~from~~consolidated ~~royalty~~balance ~~method~~sheets ~~and~~for the ~~income~~impacted ~~approach~~periods. ~~The~~Amounts ~~following table summarizes the significant quantitative unobservable inputs and assumptions used~~ in the ~~fair~~"Adjustments" ~~value~~column ~~measurements~~may ofnot ~~our~~total ~~intangible~~due ~~assets~~to ~~for~~immaterial ~~the three and six months ended June 30, 2012:~~rounding.

	Range						Weighted Average
	Successor Company
Discount Rate	14.0	%	-	15.0	%		14.3%
	March 31, 2012
Growth Rates	(0.7	)%	-	5.1	%		2.7%
	Previously Reported				Impact from Discontinued Operations			Adjustments			As Revised
Perpetual Growth Rates	—	%	-	2.0	%		1.7%
Goodwill	$	396.5			$	(2.2	)	$	(5.3	)	$	389.0
Royalty Rate	0.5	%	-	5.0	%		2.6%
Total assets	1,546.5				—			(5.3		)	1,541.2
Other noncurrent liabilities	163.6				—			9.2			172.8
Total liabilities	1,394.7				—			9.1			1,403.8
Accumulated deficit	(430.6		)		—			(14.5		)	(445.1		)
Accumulated other comprehensive income	17.5				—			0.1			17.6
Total stockholders' equity	151.8				—			(14.4		)	137.4
Total liabilities and stockholders' equity	1,546.5				—			(5.3		)	1,541.2

Our Europe and Canada reporting units failed step one of the goodwill impairment test, which required us to proceed to the second step. During the three months ended June 30, 2012, we recorded an estimated impairment charge of $63.6 against goodwill, consisting of $36.8 and $26.8, for Canada and Europe, respectively.

We also had other intangible asset impairment charges of $25.2 and $24.6, in our Canada and United States, and Europe reporting units, respectively.

Based on our interim impairment tests, our North America reportable segment had goodwill and other intangible asset impairment charges related to our Canada reporting unit of $36.8 and $13.1, respectively; and other intangible asset impairment charges related to certain tradenames in our United States reporting unit of $12.1. Our Europe reportable segment had goodwill and other intangible asset impairment charges of $26.8 and $24.6, respectively.

We have not finalized our interim impairment test during the second quarter of 2012 due to the timing and complexity of the calculations required. During the third quarter of 2012, we intend to finalize the second quarter interim impairment analysis and will record any adjustments at such time. We will also continue to monitor the progress of the transformational changes to these businesses, the execution of performance against our financial projections and the impact on value.

While the Company believes the assumptions used in the interim impairment analyses are reasonable, our analysis is sensitive to adverse changes in the assumptions used in the valuations. In particular, changes in the projected cash flows, the discount rate, the terminal year growth rate and market multiple assumptions could produce significantly different results for the impairment analyses. Further, our long-term plan for the Europe and Canada reporting units currently reflects the stabilization and subsequent growth of our core business. Certain assumptions are particularly sensitive if changes arise due to new facts, given that our book value was written down to fair value during our second quarter of 2012 interim impairment test. While we believe we have appropriately risk-adjusted our long-term plan to reflect the risk of non-performance, given the minimal excess

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

of fair value over book value, any adverse changes in assumptions could result in further impairment charges. We also have significant strategic initiatives in place across the Company, which in some cases, include the sale and subsequent license of a portion of our business. While we expect these initiatives to result in the ultimate realization of the fair values reflected in our impairment analysis, changes in our plans or adverse changes in actual results could lead to further impairment charges.



	Successor Company
	June 30, 2012
	Previously Reported			Adjustments			As Revised
Goodwill	$	323.6		$	(5.0	)	$	318.6
Total assets	1,271.0			(5.1		)	1,265.9
Other noncurrent liabilities	136.7			9.1			145.8
Total liabilities	1,230.6			9.1			1,239.7
Accumulated deficit	(524.5		)	(14.5		)	(539.0		)
Accumulated other comprehensive income	—			0.3			0.3
Total stockholders' equity	40.4			(14.2		)	26.2
Total liabilities and stockholders' equity	1,271.0			(5.1		)	1,265.9

AsNote ~~part~~3 Impairment of ~~our~~Assets interim impairment test, we were required to perform an impairment assessment and measure certain assets at fair value. These fair value measurements are considered non-recurring under ASC Topic 820, Fair Value Measurements and Disclosures. The assets and liabilities measured during the period at fair value on a non-recurring basis were as follows:

	Successor Company
	At the End of the Period		Quoted Prices in Active Markets for Identical Assets(Level 1)		SignificantOther Observable Inputs(Level 2)		SignificantUnobservable Inputs(Level 3)		Total Loss
For the six months ended June 30, 2012
Goodwill	$	323.6	$	—	$	—	$	323.6	$	63.6
Other intangible assets, net	230.7		—		—		230.7		49.8
									$	113.4

Goodwill and other indefinite-lived intangible assets are reviewed for impairment using a fair value based approach annually or earlier upon the occurrence of events or circumstances that indicate there may be an impairment charge. Our annual impairment test is performed on October 1. Asset impairments related to the carrying value of goodwill, indefinite-lived intangible assets and certain long-lived assets are calculated in accordance with the provisions of ASC 350, Intangibles—Goodwill and Other and ASC Topic 360, Property, Plant and Equipment (“ASC 360”), respectively.

~~Note~~Goodwill ~~3 Other~~is ~~Operating~~reviewed ~~Items~~for impairment at the reporting unit level. A reporting unit is equivalent to an operating segment, ~~Net~~or one level below an operating segment. Our reporting units represent our reportable segments except for North America, which is comprised of the United States and Canada reporting units. Indefinite-lived intangible assets, or tradenames, are reviewed for impairment based on their lowest unit of accounting or by asset.

~~Items~~The ~~included~~goodwill inimpairment ~~other~~analysis, ~~operating~~after ~~items~~any qualitative analysis if applicable, ~~net~~is ~~consist~~a two-step process. The first step, used to identify potential impairment, is a comparison of the ~~following:~~reporting ~~(i) restructuring~~unit's ~~charges~~estimated fair value to its carrying value, ~~representing~~including goodwill. If the ~~streamlining~~fair value of ~~our~~the ~~organizational~~reporting ~~structure;~~unit ~~(ii) professional,~~exceeds ~~contractual~~its ~~charges~~carrying ~~and~~value, ~~other~~applicable ~~periodic~~goodwill ~~costs~~is ~~related~~not considered to be impaired. If the ~~strategic~~carrying ~~repositioning~~value ofexceeds ~~our~~the ~~businesses;~~fair ~~(iii) gain~~value, orthere ~~loss~~is onan indication of impairment and the ~~sale~~second orstep ~~disposal~~is ofperformed ~~assets;~~to ~~and~~measure ~~(iv) pension~~the ~~curtailments~~amount of the impairment. The ~~table~~second ~~below~~step ~~reflects~~requires ~~our~~the ~~other~~Company ~~operating~~to ~~items,~~compare ~~net:~~the carrying value of the reporting unit's goodwill to determine the amount of the impairment charges if any.

	Successor Company
	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Restructuring charges	$	0.8		$	1.4		$	1.9		$	4.0
Professional fees and contractual charges related to reorganization and restructuring	0.3			2.0			1.1			3.9
Sale or disposal of certain assets	—			(0.6		)	(1.0		)	(1.7		)
Pension curtailments	(0.2		)	—			(0.3		)	—
Total	$	0.9		$	2.8		$	1.7		$	6.2

~~Restructuring~~Three ~~Activities~~months ended March 31, 2012

~~Restructuring~~During ~~charges~~the ~~are~~three ~~recorded~~months inended ~~accordance~~March ~~with ASC Topic 712~~31, ~~Compensation - Nonretirement Postemployment Benefits (“ASC 712”) or ASC Topic 420~~2012, ~~Exit~~we orrecorded ~~Disposal~~impairment ~~Cost~~charges ~~Obligations~~for ~~(“ASC 420”). Employees~~goodwill ~~terminated as a result~~ of $3.4 ~~our~~and ~~restructuring~~$1.9 ~~activities~~for ~~were terminated under~~ our ~~pre-existing~~APLA ~~severance~~and ~~policy;~~Europe ~~therefore,~~reporting weunits ~~recognized~~related ~~severance amounts pursuant~~ to ~~ASC 712. Severance charges represent~~ the ~~cost~~revision toof ~~separate~~a ~~employees~~prior ~~from~~period ~~our operations to streamline the organization~~error. As See ~~such,~~Note ~~severance amounts are recorded when approved~~2, ~~including~~Revision ~~the identification~~ of ~~positions~~Prior toPeriod beConsolidated ~~separated,~~Financial ~~and when payment is probable and estimable. Other amounts related to restructuring actions~~Statements, ~~including~~for ~~charges~~further ~~to terminate contractual obligations in connection with streamlining activities, are recorded in accordance with ASC 420~~information.

~~Effective~~Three ~~April 2,~~months ~~2009,~~ended ~~our~~June ~~Reader’s Digest Association~~30, ~~Inc.~~ Retirement Plan (“U.S. Qualified Pension Plan” or “Retirement Plan”) was temporarily amended to provide additional benefits to employees involuntarily terminated. As a result, a portion of our severance obligation is being satisfied by payments from the U.S. Qualified Pension Plan. See Note 13, Benefit Plans, for further information.2012

~~For~~During the three months ended June 30, 2012, we ~~recorded~~concluded ~~new~~that ~~restructuring~~interim ~~activities~~impairment oftests ~~$2.3,~~for ~~primarily~~goodwill ~~related~~were tonecessary ~~severance,~~for ~~principally~~our ~~related~~Europe toand ~~continued~~Canada ~~headcount~~reporting ~~reductions~~units inand also for certain trade names within our North America; ~~along~~businesses. These ~~with~~conclusions anwere ~~adjustment~~based toon ~~sublease~~certain ~~assumptions~~indicators of impairment, including lower than expected results and a decline in our most recent financial projections.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

~~associated~~Our ~~with~~results in Europe have declined as we experience the ~~abandonment~~continuing ofeconomic ~~one~~activity ~~floor~~declines in Europe, softer response rates to our promotional campaigns, continuing declines in some of our ~~White~~books ~~Plains~~and home entertainment products and transformational change, ~~New~~as ~~York~~we ~~facility~~implement our strategy towards a more customer-centric marketing approach and a digital-driven business model. The ~~associated~~goal ~~employee~~of ~~severance~~this ~~payments~~approach ~~are~~is ~~expected~~a tohigh-quality becustomer ~~substantially~~database, ~~completed~~with byhigher-returns ~~the~~on ~~end~~a oflower ~~June~~revenue ~~2013~~base. ~~During~~While ~~the~~our ~~quarter,~~financial weprojections ~~also~~anticipated ~~reversed~~some ~~$2.2~~decline in ~~accrued~~revenue ~~severance~~related to this strategy, ~~primarily~~the ~~related~~actual todeclines ~~2011~~have ~~Successor~~occurred ~~Company~~at ~~initiatives~~rates higher than we predicted, ~~mainly~~and ~~due~~against factors that we were not able to ~~several~~predict, ~~employee~~including ~~resignations~~continued ~~and~~challenging ~~employees~~economic ~~who~~environments ~~are~~in ~~now~~our ~~expected~~European markets. Our efforts to ~~exit~~preserve profitability through aggressive cost reductions and operating efficiencies have somewhat mitigated the ~~business~~declines. However, ~~with~~these afactors ~~probable~~led ~~sale~~us to conclude that interim impairment tests were necessary for Europe at June 30, 2012.

~~For~~Our ~~the~~conclusion ~~six~~to ~~months~~perform ~~ended~~an ~~June 30,~~interim ~~2012,~~impairment wetest ~~recorded~~for ~~new~~our ~~restructuring~~Canada ~~activities~~reporting ofunit ~~$3.9,~~was ~~primarily~~also ~~related~~based toon ~~severance,~~lower ~~principally~~than ~~related~~expected toresults ~~continued~~and ~~headcount~~a ~~reductions~~decline in ~~North America; along with a $1.8 adjustment to sublease assumptions associated with the abandonment of one floor of~~ our ~~White~~most ~~Plains,~~recent ~~New~~financial ~~York facility~~projections. ~~The~~Recent ~~associated~~headcount ~~employee~~reduction ~~severance~~initiatives ~~payments~~in ~~are~~Canada ~~expected~~have toaffected bethe ~~substantially~~business ~~completed~~and bywill ~~the~~continue ~~end~~to ofdo ~~June~~so ~~2013. During~~in the ~~six months ended June 30~~near-term, ~~2012,~~as we ~~also~~transform ~~reversed~~our ~~$3.8~~traditional indirect ~~accrued~~marketing ~~severance,~~Canada ~~primarily~~business ~~related~~towards toa ~~2011~~more ~~Successor~~circulation ~~Company initiatives, mainly due to several employee resignations~~ and ~~employees~~digital-driven ~~who are now expected to exit the~~ business ~~with a probable sale~~model.

~~For~~Our ~~the~~Europe ~~three~~and ~~months~~Canada ~~ended~~reporting ~~June 30,~~units ~~2011,~~failed westep ~~recorded~~one ~~new restructuring activities~~ of ~~$1.5. This~~the ~~was~~goodwill ~~primarily~~impairment ~~related~~test tounder ~~$1.1~~our insecond ~~contractual~~quarter ~~charges~~2012 ininterim ~~Europe. Additionally~~impairment test, wewhich ~~recorded~~required ~~contractual~~us ~~charges~~to ~~related~~proceed to the ~~abandonment~~second ofstep. During ~~one~~the ~~floor~~three ofmonths ~~our~~ended ~~White Plains~~June 30, ~~New York facility~~2012, ~~due~~we torecorded ~~additional~~an ~~charges~~impairment tocharge ~~ready~~of ~~the~~$63.6 ~~space~~against ~~for~~goodwill, ~~sublease~~consisting ~~and adjustments.~~of ~~During~~$36.8 ~~the~~and ~~quarter~~$26.8, wefor ~~also~~Canada ~~reversed~~and ~~$0.4~~Europe, ~~in charges~~respectively.

~~For~~We ~~the~~also ~~six~~had ~~months~~other ~~ended~~intangible ~~June 30,~~asset ~~2011,~~impairment wecharges ~~recorded new restructuring activities~~ of $425.~~0. This~~2 ~~was~~and ~~primarily related to~~ $324.~~1 in severance~~6, ~~principally due to continued headcount reductions~~ in our ~~Europe~~Canada and ~~APLA~~United ~~regions. Additionally~~States, weand ~~recorded~~Europe ~~$1.2~~reporting ~~in contractual charges related to the abandonment of one floor of our White Plains~~units, ~~New York facility~~respectively, ~~due~~during ~~to additional charges to ready~~ the ~~space~~three ~~for sublease and adjustments to our expected sublease income; along with contractual terminations in Europe. During the six~~ months ended June 30, ~~2011, we also reversed $1~~2012.~~1 in severance related charges.~~

We estimated the fair value of our other intangible assets using the relief from royalty method and the income approach. The following table summarizes the significant quantitative unobservable inputs and assumptions used in the fair value measurements of our intangible assets for the three months ended June 30, 2012:

The table below reflects changes in our restructuring accruals, by type of initiative, for the Successor Company, for the six months ended June 30, 2012:



	Range					Weighted Average
Discount Rate	14.0	%	-	15.0	%	14.3%
Growth Rates	(0.7	)%	-	5.1	%	2.7%
Perpetual Growth Rates	—	%	-	2.0	%	1.7%
Royalty Rate	0.5	%	-	5.0	%	2.6%

	Successor Company
	Severance												Contracts
	2011			2010									2011			2010
	SuccessorCompanyInitiatives			SuccessorCompanyInitiatives			PredecessorCompanyInitiatives			TotalSeverance			SuccessorCompanyInitiatives			SuccessorCompanyInitiatives			PredecessorCompanyInitiatives			TotalContracts			GrandTotal
Balance at December 31, 2011	$	25.7		$	1.0		$	0.6		$	27.3		$	0.9		$	5.3		$	—		$	6.2		$	33.5
Accruals, net	0.4			(0.5		)	—			(0.1		)	0.2			1.8			—			2.0			1.9
Spending	(9.2		)	(0.4		)	—			(9.6		)	(0.1		)	(0.7		)	—			(0.8		)	(10.4		)
Balance at June 30, 2012	$	16.9		$	0.1		$	0.6		$	17.6		$	1.0		$	6.4		$	—		$	7.4		$	25.0
Cumulative Accounts
Predecessor Company’s liabilities assumed in fresh start accounting	$	—		$	—		$	14.3		$	14.3		$	—		$	—		$	0.3		$	0.3		$	14.6
Accruals, net	33.6			19.5			(6.4		)	46.7			1.6			8.0			(0.2		)	9.4			56.1
Spending	(16.7		)	(19.4		)	(7.3		)	(43.4		)	(0.6		)	(1.6		)	(0.1		)	(2.3		)	(45.7		)
Balance at June 30, 2012	$	16.9		$	0.1		$	0.6		$	17.6		$	1.0		$	6.4		$	—		$	7.4		$	25.0

Based on our June 30, 2012 interim impairment tests, our North America reportable segment had goodwill and other intangible asset impairment charges related to our Canada reporting unit of $36.8 and $13.1, respectively; and other intangible asset impairment charges related to certain tradenames in our United States reporting unit of $12.1. Our Europe reportable segment had goodwill and other intangible asset impairment charges of $26.8 and $24.6, respectively.

We finalized our second quarter 2012 interim impairment test during the three months ended September 30, 2012. We did not have any further adjustments to our second quarter interim impairment test.

Three months ended September 30, 2012

During the three months ended September 30, 2012, we concluded that an additional interim impairment test for goodwill was required for our Europe reporting unit, and for certain tradenames in our North America and Europe businesses.

Our results in Europe experienced further, unanticipated declines, based on continuing unfavorable economic environments, softer results to our promotional campaigns, continuing declines in some of our books and home entertainment products, particularly on our single sale book products. It continues to be difficult to forecast our business in this transformational environment and the actual declines have occurred at rates higher than we predicted. These factors led us to conclude that interim impairment tests were necessary for Europe at September 30, 2012.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

The table below reflects changes in our restructuring accruals, by reportable segment, for the Successor Company, for the six months ended June 30, 2012:



	Range					Weighted Average
Discount Rate	15.0	%	-	16.0	%	15.4%
Growth Rates	(21.2	)%	-	9.1	%	(4.0)%
Perpetual Growth Rates	—	%	-	2.0	%	1.7%
Royalty Rate	0.5	%	-	5.0	%	1.9%

	Successor Company
	Severance												Contracts
	NorthAmerica			Europe			APLA			TotalSeverance			NorthAmerica			Europe			APLA			TotalContracts			Grand Total
Balance at December 31, 2011	$	4.6		$	19.4		$	3.3		$	27.3		$	5.3		$	0.9		$	—		$	6.2		$	33.5
Accruals, net	2.2			(1.5		)	(0.8		)	(0.1		)	1.8			0.1			0.1			2.0			1.9
Spending	(2.9		)	(4.9		)	(1.8		)	(9.6		)	(0.7		)	(0.1		)	—			(0.8		)	(10.4		)
Balance at June 30, 2012	$	3.9		$	13.0		$	0.7		$	17.6		$	6.4		$	0.9		$	0.1		$	7.4		$	25.0
Cumulative Accounts
Predecessor Company’s liabilities assumed in fresh start accounting	$	1.7		$	11.3		$	1.3		$	14.3		$	—		$	—		$	0.3		$	0.3		$	14.6
Accruals, net	17.9			22.9			5.9			46.7			8.6			0.9			(0.1		)	9.4			56.1
Spending	(15.7		)	(21.2		)	(6.5		)	(43.4		)	(2.2		)	—			(0.1		)	(2.3		)	(45.7		)
Balance at June 30, 2012	$	3.9		$	13.0		$	0.7		$	17.6		$	6.4		$	0.9		$	0.1		$	7.4		$	25.0

Based on our third quarter 2012 interim impairment test, our Europe reportable segment had goodwill and other intangible asset impairment charges of $64.0 and $2.7, respectively. Further, our North America reportable segment had other intangible asset impairment charges related to certain tradenames in our United States and Canada reporting units of $13.5 and $1.1, respectively. Our North America segment had property and equipment impairment charges of $3.7, related to internally developed software.

As part of our interim impairment test, we were required to perform an impairment assessment and measure certain assets at fair value. These fair value measurements are considered non-recurring under ASC Topic 820, Fair Value Measurements and Disclosures. The assets and liabilities measured during the period at fair value on a non-recurring basis were as follows:

Note 4 Deconsolidation



	Successor Company
	At the End of the Period		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
For the nine months ended September 30, 2012
Goodwill	$	256.1	$	—	$	—	$	256.1	$	132.9
Other intangible assets, net	205.1		—		—		205.1		67.1
Property and equipment, net	44.3		—		—		44.3		3.7
									$	203.7

~~Effective~~While ~~February 17, 2010,~~ the Company ~~deconsolidated~~believes ~~our~~the ~~United~~assumptions ~~Kingdom~~used ~~subsidiary,~~in ~~Reader’s~~the ~~Digest~~interim ~~Association~~impairment ~~Limited~~analyses ~~(“RDA~~are ~~UK”)~~reasonable, asour aanalysis ~~result~~is ofsensitive ~~RDA~~to UKadverse ~~filing~~changes ~~for~~in ~~administration. As of~~ the ~~aforementioned~~assumptions ~~date,~~used in the ~~United~~valuations. In ~~Kingdom~~particular, ~~High~~changes ~~Court~~in ofthe ~~Justice~~projected ~~appointed~~cash anflows, ~~administrator~~the ~~who~~discount ~~replaced~~rate, ~~management and~~ the ~~Board~~terminal ofyear ~~Directors~~growth ofrate ~~RDA~~and ~~UK,~~market ~~and~~multiple isassumptions ~~responsible~~could ~~for~~produce ~~any~~significantly ~~decision~~different ~~making~~results ~~regarding~~for the ~~day-to-day~~impairment ~~operations~~analyses. Further, ~~assets,~~our ~~liabilities~~long-term ~~and~~plan ~~capital~~currently ofreflects ~~RDA~~the ~~UK. As~~stabilization aand ~~result,~~subsequent wegrowth ~~relinquished~~of our ~~controlling~~businesses. Certain ~~financial~~assumptions ~~interest~~are inparticularly ~~RDA~~sensitive ~~UK. Therefore,~~if inchanges ~~accordance~~arise ~~with~~due ~~ASC~~to ~~Topic~~new ~~810~~facts, ~~Consolidation,~~given ~~the~~that ~~financial~~our ~~results~~book ofvalue ~~RDA~~was UKwritten ~~are~~down noto ~~longer~~fair ~~included~~value induring our ~~consolidated~~2012 ~~financial~~interim ~~results~~impairment ~~for periods beginning after February 17, 2010~~tests. OnWhile ~~April~~we 9,believe ~~2010,~~we ~~the~~have ~~Company~~appropriately ~~entered~~risk-adjusted ~~into~~our along-term ~~license~~plan ~~agreement~~to ~~with~~reflect athe ~~third~~risk ~~party~~of tonon-performance, ~~publish~~given the ~~United~~minimal ~~Kingdom~~excess ~~edition~~ of ~~Reader’s~~fair ~~Digest~~value ~~magazine~~over ~~and~~book ~~sell~~value, ~~other~~any ~~products~~adverse ~~under~~changes ~~the~~in ~~Reader’s~~assumptions ~~Digest~~could ~~brand~~result in further impairment charges.

~~During~~We ~~the~~also ~~three~~have ~~and~~significant ~~six~~strategic ~~months~~initiatives ~~ended~~in ~~June~~place ~~30,~~across ~~2011~~the Company, wewhich ~~reduced~~in ~~the~~some ~~loss~~cases, ~~recorded~~include ~~upon~~ the ~~initial~~sale ~~deconsolidation~~and subsequent license of ~~RDA~~a UKportion byof $8our business.5, While ~~related~~we expect these initiatives to result in the ~~settlement~~ultimate realization of ~~remaining~~the ~~pre-petition~~fair ~~and~~values ~~post-petition~~reflected ~~liabilities~~in ~~resulting~~our ~~from~~impairment ~~the~~analysis, ~~RDA~~changes UKin ~~administration~~our ~~filing. In~~plans ~~the~~or ~~three~~adverse ~~and~~changes ~~six~~in ~~months~~actual ~~ended~~results ~~June~~could ~~30,~~lead ~~2012,~~to we further ~~reduced~~impairment charges. We will continue to monitor the ~~loss~~progress byof ~~$0.8,~~the ~~related~~transformational changes to ~~the~~these ~~final~~businesses, ~~settlement~~the execution of ~~pre-petition~~performance ~~and~~against ~~post-petition~~our ~~liabilities~~financial ~~resulting~~projections ~~from~~and the ~~RDA~~impact UKon ~~administration~~the ~~filing.~~value of our goodwill and other long-lived assets.

Note 5 Income Tax

For the six months ended June 30, 2012 and 2011, the Company recorded income tax benefits of $49.4 and $11.9, respectively, which were primarily driven by the Company's jurisdictional earnings mix of foreign earnings at a low taxed rate and domestic losses at a higher taxed rate. Included in the annual estimated effective tax rate used to determine the income tax benefit for the six months ended June 30, 2012 were the impairments to non-deductible goodwill and identified intangibles. The reported benefit for the six months ended June 30, 2012 also included a $15.8 tax benefit related to our domestic continuing operations which is supported by taxable income generated by the sale of Allrecipes.com, a component of discontinued operations, as well as a discrete tax benefit of $10.6 related to the reversal of reserves for uncertain tax positions as discussed below. The income tax benefit of $11.9 for the six months ended June 30, 2011 was impacted by the impairment charge of non-deductible goodwill and identified intangibles previously recorded in fresh start accounting. This was recorded as a discrete benefit. The income tax benefit was further impacted by the establishment of a valuation allowance on certain US tax assets, offset by the reversal of valuation allowance previously recorded on certain of our state net operating loss carryforward.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Note 64 ~~Discontinued~~Other ~~Operations~~Operating ~~and~~Items, ~~Assets~~Net ~~Held for Sale~~

Items included in other operating items, net consist of the following: (i) restructuring charges, representing the streamlining of our organizational structure; (ii) professional, contractual charges and other periodic costs related to the strategic repositioning of our businesses; (iii) gain or loss on the sale or disposal of assets; and (iv) pension curtailments. The table below reflects our other operating items, net:

During the three months ended June 30, 2012, we committed to a plan to sell our Reader's Digest Mexico and Argentina businesses, previously classified within our APLA segment; and our Reader's Digest Spain and Portugal businesses, previously classified within our Europe segment. We met the criteria under ASC 360 to classify these businesses as held for sale. There is no expectation of continuing cash flows (other than passive royalty income) or involvement in the operations after they are sold. The operating results for these businesses are included in discontinued operations for all periods presented. The assets and liabilities for these businesses are classified as held for sale for all periods presented. We believe that the sale of these businesses within the next twelve months is probable. See Note 17, Subsequent Events, for further information regarding our July 31, 2012 sale of the Spain and Portugal businesses.



	Successor Company
	Three months ended September 30,					Nine months ended September 30,
	2012		2011			2012			2011
Restructuring charges	$	0.6	$	9.1		$	2.5		$	13.1
Professional fees and contractual charges related to reorganization and restructuring	1.1		1.6			2.2			5.5
Sale or disposal of certain assets	—		(0.2		)	(1.0		)	(1.9		)
Pension curtailments	—		—			(0.3		)	—
Total	$	1.7	$	10.5		$	3.4		$	16.7

~~During~~Restructuring the three months ended June 30, 2012, we closed our Reader's Digest Ukraine, Kazakhstan and China businesses. Additionally, during the three months ended March 31, 2012, we closed our Worldwide Country Tours and Reader’s Digest Bulgaria businesses. These businesses met the criteria under ASC 205, Presentation of Financial Statements, for discontinued operations classification. There is no expectation of continuing cash flows or operations after the closure of these businesses.Activities

OnRestructuring ~~February 29~~charges are recorded in accordance with ASC Topic 712, ~~2012~~Compensation - Nonretirement Postemployment Benefits (“ASC 712”) or ASC Topic 420, ~~the~~Exit ~~Company~~or ~~sold~~Disposal ~~Allrecipes~~Cost Obligations (“ASC 420”).~~com~~ Employees terminated as a result of our restructuring activities were terminated under our pre-existing severance policy; therefore, ~~for~~we ~~$175~~recognized severance amounts pursuant to ASC 712.0 Severance incharges ~~cash~~represent the cost to separate employees from our operations to streamline the organization. ~~The~~ As ~~sale~~such, severance amounts are recorded when approved, including the identification of ~~Allrecipes~~positions to be separated, and when payment is probable and estimable.~~com~~ Other ~~resulted~~amounts related to restructuring actions, including charges to terminate contractual obligations in aconnection ~~gain~~with ofstreamlining ~~$51.5~~activities, ~~net~~are ofrecorded ~~taxes~~in accordance with ASC 420.

OnEffective ~~February~~April 82, ~~2012~~2009, ~~the~~our ~~Company~~Reader’s ~~sold~~Digest ~~Weekly~~Association, Inc. ~~Reader~~Retirement ~~for~~Plan $3(“U.6,S. ~~which~~Qualified Pension Plan” or “Retirement Plan”) was ~~paid~~temporarily inamended ~~cash. The~~to ~~sale~~provide ofadditional ~~Weekly~~benefits ~~Reader~~to ~~resulted~~employees ininvoluntarily terminated. As a ~~loss~~result, a portion of $1our severance obligation is being satisfied by payments from the U.6S. Qualified Pension Plan. See Note 14, ~~net~~Benefit ofPlans, ~~taxes~~for further information.

For the three months ended September 30, 2012, we recorded new restructuring activities of $3.2, primarily related to severance, principally related to continued headcount reductions in North America; along with an adjustment to sublease assumptions associated with the abandonment of one floor of our White Plains, New York facility. The ~~LED~~associated ~~business~~employee ~~remained~~severance ~~classified~~payments asare ~~held~~expected ~~for~~to ~~sale~~be atsubstantially completed by the end of June ~~30,~~ ~~2012~~2013. ~~See~~During ~~Note~~the 17quarter, ~~Subsequent~~we ~~Events~~also reversed $1.9 in accrued severance, ~~for~~primarily ~~further~~related ~~information~~to ~~regarding~~2011 ~~our~~Successor ~~July~~Company 2initiatives, ~~2012~~mainly ~~sale~~due ofto ~~the~~several ~~LED~~employee ~~business~~resignations, along with a $0.7 adjustment to sublease assumptions associated with the abandonment of one floor of our White Plains, New York facility.

WeFor ~~measured~~ the ~~discontinued~~nine ~~businesses~~months atended ~~fair~~September 30, ~~value~~2012, ~~less~~we ~~costs~~recorded new restructuring activities of $7.1, primarily related to ~~sell~~severance, ~~upon~~principally ~~initial~~related ~~classification~~to ascontinued ~~held~~headcount ~~for~~reductions ~~sale~~in ~~and~~North atAmerica; ~~each~~along ~~subsequent~~with ~~reporting~~a ~~period~~$1.1 adjustment to sublease assumptions associated with the abandonment of one floor of our White Plains, New York facility. ~~For~~The associated employee severance payments are expected to be substantially completed by the ~~three~~end ~~and~~of ~~six~~June 2013. During the nine months ended ~~June~~September 30, 2012, we ~~recorded~~also ~~estimated~~reversed ~~losses~~$5.7 onin ~~the~~accrued ~~sale~~severance, ofprimarily ~~these~~related ~~businesses~~to of2011 $6Successor Company initiatives, mainly due to several employee resignations and employees who are now expected to exit the business with a probable sale.6.

	Successor Company
	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Revenue	$	25.8		$	34.4		$	69.8		$	88.0
Loss from discontinued operations before income taxes and gain on sales	(18.3		)	(45.9		)	(24.6		)	(56.1		)
Income tax expense (benefit) on discontinued operations	2.4			(23.2		)	(0.9		)	(5.4		)
Loss from discontinued operations, net of taxes, before gain on sales	(20.7		)	(22.7		)	(23.7		)	(50.7		)
Gain on sales of divested businesses, net of taxes	0.3			—			49.9			—
(Loss) income from discontinued operations, net of taxes	$	(20.4	)	$	(22.7	)	$	26.2		$	(50.7	)

For the three months ended September 30, 2011, we recorded new restructuring activities of $9.1. This was primarily related to severance, principally related to continued headcount reductions in Europe and APLA.

For the nine months ended September 30, 2011, we recorded new restructuring activities of $13.1. This was primarily related to severance, principally due to continued headcount reductions in our Europe and APLA regions. Additionally, we recorded contractual charges related to the abandonment of one floor of our White Plains, New York facility, due to additional charges to ready the space for sublease and adjustments to our expected sublease income; contractual charges related to abandonment of leases in Europe, APLA and North America; and fees related to a contract termination in France. Employee severance payments related to these activities are expected to be substantially completed by the end of 2012.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

The table below reflects changes in our restructuring accruals, by type of initiative, for the nine months ended September 30, 2012:

Gain on the sales of divested businesses, net of taxes was as follows:



	Successor Company
	Severance												Contracts
	2011			2010									2011			2010
	Successor Company Initiatives			Successor Company Initiatives			Predecessor Company Initiatives			Total Severance			Successor Company Initiatives			Successor Company Initiatives			Predecessor Company Initiatives			Total Contracts			Grand Total
Balance at December 31, 2011	$	25.7		$	1.0		$	0.6		$	27.3		$	0.9		$	5.3		$	—		$	6.2		$	33.5
Accruals, net	2.2			(0.7		)	(0.2		)	1.3			—			1.2			—			1.2			2.5
Spending	(13.5		)	(0.3		)	—			(13.8		)	(0.2		)	(1.1		)	—			(1.3		)	(15.1		)
Balance at September 30, 2012	$	14.4		$	—		$	0.4		$	14.8		$	0.7		$	5.4		$	—		$	6.1		$	20.9
Cumulative Accounts
Predecessor Company’s liabilities assumed in fresh start accounting	$	—		$	—		$	14.3		$	14.3		$	—		$	—		$	0.3		$	0.3		$	14.6
Accruals, net	35.4			19.3			(6.6		)	48.1			1.4			7.4			(0.2		)	8.6			56.7
Spending	(21.0		)	(19.3		)	(7.3		)	(47.6		)	(0.7		)	(2.0		)	(0.1		)	(2.8		)	(50.4		)
Balance at September 30, 2012	$	14.4		$	—		$	0.4		$	14.8		$	0.7		$	5.4		$	—		$	6.1		$	20.9

The table below reflects changes in our restructuring accruals, by reportable segment, for the nine months ended September 30, 2012:

	Successor Company
	Three months ended June 30,			Six months ended June 30,
	Severance												Contracts
	2012			2012
	NorthAmerica			Europe			APLA			TotalSeverance			NorthAmerica			Europe			APLA			TotalContracts			Grand Total
Sales price	$	—		$	178.6
Balance at December 31, 2011	$	4.6		$	19.4		$	3.3		$	27.3		$	5.3		$	0.9		$	—		$	6.2		$	33.5
Less: cash on hand	—			—
Accruals, net	5.2			(3.0		)	(0.9		)	1.3			1.1			—			0.1			1.2			2.5
Net sales price	—			178.6
Spending	(4.2		)	(8.1		)	(1.5		)	(13.8		)	(1.0		)	(0.3		)	—			(1.3		)	(15.1		)
Net tangible assets	—			2.6
Balance at September 30, 2012	$	5.6		$	8.3		$	0.9		$	14.8		$	5.4		$	0.6		$	0.1		$	6.1		$	20.9
Associated intangible assets	—			88.6
Cumulative Accounts
Transaction costs	(0.3		)	5.5
Predecessor Company’s liabilities assumed in fresh start accounting	$	1.7		$	11.3		$	1.3		$	14.3		$	—		$	—		$	0.3		$	0.3		$	14.6
Gain on sales of divested businesses, before taxes	0.3			81.9
Accruals, net	20.9			21.4			5.8			48.1			7.9			0.8			(0.1		)	8.6			56.7
Income tax expense	—			32.0
Spending	(17.0		)	(24.4		)	(6.2		)	(47.6		)	(2.5		)	(0.2		)	(0.1		)	(2.8		)	(50.4		)
Gain on sales of divested businesses, net of taxes	$	0.3		$	49.9
Balance at September 30, 2012	$	5.6		$	8.3		$	0.9		$	14.8		$	5.4		$	0.6		$	0.1		$	6.1		$	20.9

Note 5 Deconsolidation

Effective February 17, 2010, the Company deconsolidated our United Kingdom subsidiary, Reader’s Digest Association Limited (“RDA UK”), as a result of RDA UK filing for administration. As of the aforementioned date, the United Kingdom High Court of Justice appointed an administrator who replaced management and the Board of Directors of RDA UK, and is responsible for any decision making regarding the day-to-day operations, assets, liabilities and capital of RDA UK. As a result, we relinquished our controlling financial interest in RDA UK. Therefore, in accordance with ASC Topic 810, Consolidation, the financial results of RDA UK are no longer included in our consolidated financial results for periods beginning after February 17, 2010. On April 9, 2010, the Company entered into a license agreement with a third party to publish the United Kingdom edition of Reader’s Digest magazine and sell other products under the Reader’s Digest brand.

During the nine months ended September 30, 2011, we reduced the loss recorded upon the initial deconsolidation of RDA UK by $8.5, related to the settlement of remaining pre-petition and post-petition liabilities resulting from the RDA UK administration filing. In the nine months ended September 30, 2012, we further reduced the loss by $0.8, related to the final settlement of pre-petition and post-petition liabilities resulting from the RDA UK administration filing.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

	Successor Company
	June 30, 2012		December 31, 2011
Assets held for sale
Accounts receivable, net	$	14.1	$	33.9
Inventories	5.5		7.1
Other current assets	9.0		11.7
Other non-current assets	2.3		5.9
Goodwill and other intangible assets, net	—		95.2
Total assets held for sale	$	30.9	$	153.8
Liabilities held for sale
Accounts payable	$	9.5	$	13.5
Accrued expenses	9.0		8.8
Deferred revenue	7.0		11.0
Other current liabilities	1.7		2.0
Other non-current liabilities	0.1		1.5
Total liabilities held for sale	$	27.3	$	36.8

Note 6 Income Tax

~~Note~~For ~~7 Accounts~~the ~~Receivable~~nine months ended September 30, ~~Net~~2012 and 2011, the Company recorded income tax benefits of $55.9 and $10.4, respectively, which were primarily driven by the Company's jurisdictional earnings mix. Included in the annual effective tax rate used to determine the income tax benefit for the nine months ended September 30, 2012 was the impact of impairment charges to non-deductible goodwill and identified other intangible assets, as they were no longer considered unusual in nature. The reported benefit for the nine months ended September 30, 2012 also included a $20.6 tax benefit related to our domestic continuing operations which is supported by taxable income generated by the sale of Allrecipes.com, a component of discontinued operations, as well as the discrete tax benefit for the settlement of tax audits and litigation discussed below. The income tax benefit of $10.4 for the nine months ended September 30, 2011 was impacted by the impairment charge in the quarter of non-deductible goodwill and identified other intangibles previously recorded in fresh start accounting. This was recorded as a discrete benefit. The income tax benefit was further impacted by the establishment of a valuation allowance on certain U.S. tax assets, offset by the reversal of valuation allowance previously recorded on certain of our state net operating loss carryforward.

We consider many factors when evaluating and estimating our uncertain tax positions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes. During the nine months ended September 30, 2012, we settled foreign tax audit and litigation related to the years 2007 through 2010, resulting in a $10.2 decrease in the amount of reserves for uncertain tax positions related to these items. We also increased our reserves by $9.1 for an uncertain tax position related to the tax impact of bankruptcy cancellation of indebtedness associated with certain of our international reorganizations. See Note 2, Revision of Prior Period Consolidated Financial Statements, for further information. The ~~components~~amount of ~~accounts~~unrecognized ~~receivable~~tax benefits, ~~net~~including ~~were~~interest asfrom ~~follows:~~uncertain tax positions at September 30, 2012 and December 31, 2011, were $26.3 and $26.9, respectively.

	Successor Company
	June 30, 2012			December 31, 2011
Gross trade accounts receivable	$	239.5		$	313.2
Reserve for returns	(43.5		)	(60.1		)
Reserve for bad debts and allowances	(68.2		)	(78.7		)
Total accounts receivable, net	$	127.8		$	174.4

Note 7 Discontinued Operations and Assets Held for Sale

~~Note~~We ~~8 Inventories~~have executed several transactions during 2012, related to the sale or exit of certain businesses.

On July 31, 2012, we sold the Reader's Digest Spain and Portugal businesses. The ~~components~~financial impact of ~~inventories~~the sale was immaterial. Concurrent with the sale agreement, we entered into a license agreement with the purchaser to publish the Spain and Portugal editions of Reader's Digest and sell other products under the Reader's Digest brand. These businesses were asclassified ~~follows:~~ within discontinued operations.

	Successor Company
	June 30, 2012		December 31, 2011
Raw materials	$	1.3	$	1.9
Work-in-progress	4.8		2.9
Finished goods	57.7		57.5
Total inventories	$	63.8	$	62.3

During the three months ended June 30, 2012, we committed to a plan to sell our Reader's Digest Mexico and Argentina businesses, previously classified within our APLA segment. We met the criteria under ASC 360 to classify these businesses as held for sale. There is no expectation of continuing cash flows (other than royalty income) or involvement in the operations after they are sold. The operating results for these businesses are included in discontinued operations for all periods presented. The assets and liabilities for these businesses are classified as held for sale for all periods presented. We believe that the sale of these businesses within the next twelve months is probable.

During the three months ended June 30, 2012, we closed our Reader's Digest Ukraine, Kazakhstan and China businesses. Additionally, during the three months ended March 31, 2012, we closed our Worldwide Country Tours and Reader’s Digest Bulgaria businesses. These businesses met the criteria under ASC 205, Presentation of Financial Statements, for discontinued operations classification. There is no expectation of continuing cash flows or operations after the closure of these businesses.

On July 2, 2012, the Company sold LED for $1.1, which was paid in cash. The sale of LED resulted in a loss of $0.9, net of taxes.

On February 29, 2012, the Company sold Allrecipes.com, for $175.0 in cash. The sale of Allrecipes.com resulted in a gain of $36.9, net of taxes.

On February 8, 2012, the Company sold Weekly Reader for $3.4, which was paid in cash. The sale of Weekly Reader resulted in a loss of $1.5, net of taxes.

We are currently exploring the options to license some of our operations within our Europe and APLA segments to third parties, and to exit unprofitable markets. Except as disclosed herein, these businesses have not met the applicable U.S. GAAP requirements for classification as assets held for sale at the balance sheet date of September 30, 2012, nor after the balance sheet date but before the issuance of the consolidated financial statements.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

~~Note~~We ~~9 Debt~~measured the assets held for sale at fair value, less costs to sell, upon initial classification as held for sale and at each subsequent reporting period. For the nine months ended September 30, 2012, we recorded a charge of $6.6, related to these businesses.

(Loss) income from discontinued operations, net of taxes, was as follows:

	Successor Company			~~Successor Company~~
	Interest Rate		Maturity	June 30, 2012			December 31, 2011
	Three months ended September 30,						Nine months ended September 30,
Senior Credit Facility	6.0%		February 2013	$	—		$	35.0
	2012			2011			2012			2011
2011 Secured Term Loan	7.0%		November 2013	—			45.0
Revenue	$	6.9		$	44.5		$	76.8		$	132.6
2011 Unsecured Term Loan	11.0%		May 2014	10.0			10.0
Loss from discontinued operations before income taxes and gain on sales	(0.6		)	(12.1		)	(25.2		)	(68.3		)
2012 Secured Term Loan	8.0%		March 2015	50.0			—
Income tax benefit on discontinued operations	(2.2		)	(1.2		)	(7.5		)	(6.6		)
Senior Secured Notes	9.5%		February 2017	464.4			525.0
Income (loss) from discontinued operations, net of taxes, before (loss) gain on sales	1.6			(10.9		)	(17.7		)	(61.7		)
Discount on 2011 Secured Term Loan				—			(1.5		)
(Loss) gain on sales of divested businesses, net of taxes	(2.1		)	—			34.2			—
Discount on 2011 Unsecured Term Loan				(2.1		)	(2.6		)
(Loss) income from discontinued operations, net of taxes	$	(0.5	)	$	(10.9	)	$	16.5		$	(61.7	)
Discount on Senior Secured Notes				(10.2		)	(12.5		)
Fair Value of Embedded Derivative				—			5.4
Total Debt				512.1			603.8
Less: Current portion of 2012 Secured Term Loan				0.5			—
Long-term debt				$	511.6		$	603.8

(Loss) gain on the sales of divested businesses, net of taxes was as follows:



	Successor Company
	Three months ended September 30,			Nine months ended September 30,
	2012			2012
Sales price	$	1.1		$	179.5
Less: cash on hand	—			—
Net sales price	1.1			179.5
Net tangible assets	0.9			4.5
Associated intangible assets	—			87.6
Transaction costs	1.3			6.6
(Loss) gain on sales of divested businesses, before taxes	(1.1		)	80.8
Income tax expense	1.0			46.6
(Loss) gain on sales of divested businesses, net of taxes	$	(2.1	)	$	34.2

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

The carrying amounts of major classes of assets and liabilities included in assets held for sale and liabilities held for sale, respectively, in the consolidated balance sheets, were as follows:



	Successor Company
	September 30, 2012		December 31, 2011
Assets held for sale
Accounts receivable, net	$	8.4	$	33.9
Inventories	1.7		7.1
Other current assets	3.5		11.7
Other non-current assets	0.6		5.9
Goodwill and other intangible assets, net	0.5		95.2
Total assets held for sale	$	14.7	$	153.8
Liabilities held for sale
Accounts payable	$	3.9	$	13.5
Accrued expenses	1.5		8.8
Deferred revenue	5.7		11.0
Other current liabilities	—		2.0
Other non-current liabilities	0.1		1.5
Total liabilities held for sale	$	11.2	$	36.8

Note 8 Accounts Receivable, Net

The components of accounts receivable, net were as follows:



	Successor Company
	September 30, 2012			December 31, 2011
Gross trade accounts receivable	$	237.0		$	313.2
Reserve for returns	(47.7		)	(60.1		)
Reserve for bad debts and allowances	(62.0		)	(78.7		)
Total accounts receivable, net	$	127.3		$	174.4

Note 9 Inventories

The components of inventories were as follows:



	Successor Company
	September 30, 2012		December 31, 2011
Raw materials	$	1.1	$	1.9
Work-in-progress	3.1		2.9
Finished goods	60.2		57.5
Total inventories	$	64.4	$	62.3

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Note 10 Debt

The components of debt were as follows:



			Successor Company
	Interest Rate	Maturity	September 30, 2012			December 31, 2011
Senior Credit Facility	6.0%	February 2013	$	—		$	35.0
2011 Secured Term Loan	7.0%	November 2013	—			45.0
2011 Unsecured Term Loan	11.0%	May 2014	10.0			10.0
2012 Secured Term Loan	8.0%	March 2015	49.9			—
Senior Secured Notes	9.5%	February 2017	464.4			525.0
Discount on 2011 Secured Term Loan			—			(1.5		)
Discount on 2011 Unsecured Term Loan			(1.8		)	(2.6		)
Discount on Senior Secured Notes			(9.8		)	(12.5		)
Fair Value of Embedded Derivative			—			5.4
Total Debt			512.7			603.8
Less: Current portion of long-term debt			58.0			—
Long-term debt			$	454.7		$	603.8

Interest Expense

Interest expense primarily attributable to our outstanding debt was $1514.4 and $1415.23 for the three months ended ~~June~~September 30, 2012 and 2011, respectively, including the amortization of deferred financing fees and ~~bond~~original issue discount of $1.45 and $10.29, respectively. The weighted average interest rates on our borrowings for the three months ended ~~June~~September 30, 2012 and 2011 were 9.4% and 9.53%, respectively.

Interest expense primarily attributable to our outstanding debt was $3247.82 and $2843.03 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively, including the amortization of deferred financing fees and ~~bond~~original issue discount of $46.50 and $2.3.2, respectively. The weighted average interest rates on our borrowings for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011 were 9.3% and 9.54%, respectively.

2012 Secured Credit Facility

On March 30, 2012, the Company entered into a credit and guarantee agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, the Guarantors (defined therein), Wells Fargo Principal Lending, LLC as issuing lender, and the lenders thereunder, providing the Company with a $50.0 million secured term loan (“2012 Secured Term Loan”) and an $11.0 million letter of credit facility (“Letter of Credit Facility” and together with the 2012 Secured Term Loan, the “2012 Secured Credit Facility”). The 2012 Secured Credit Facility matures on March 30, 2015. The 2012 Secured Term Loan has a short-term repayment of $0.125 due quarterly, which is recorded in current portion of long-term debt in our consolidated balance sheets. The term loans under the 2012 Secured Term Loan bear interest at a variable rate per annum, based upon the Company’s election of a prime rate or LIBOR (subject to a floor of 4.0% and 3.0%, respectively) plus 4.0% in the case of prime rate borrowings and 5.0% in the case of LIBOR borrowings. The drawn letters of credit under the Letter of Credit Facility bear an interest rate of 6.0% per annum and the Letter of Credit Facility includes a utilization fee of 1.0% per annum, which will accrue on the total undrawn amount of the Letter of Credit Facility.

The 2012 Secured Credit Facility is fully and unconditionally guaranteed on a first priority secured basis, jointly and severally by ourselves and by substantially all of our existing and future wholly-owned direct and indirect domestic subsidiaries. The obligations and guaranty under the 2012 Secured Credit Facility are secured by a first priority security interest in the same collateral that secures our Senior Secured Notes (as defined below). The 2012 Secured Credit Facility and the Senior Secured Notes are secured by the same collateral and rank pari passu with each other under the documentation governing such collateral; however, the 2012 Secured Credit Facility constitutes “Priority Payment Lien Obligations” under such documentation and enjoys priority (“first out”) treatment with respect to post-default dispositions and realizations of collateral thereunder.

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Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

The 2012 Secured Credit Facility contains mandatory prepayment provisions in the event of certain events, including certain asset sales (excluding the sale of the LED business). Subject to an exception for prepayments made from the Company’s Excess Cash Flow (as defined in the Credit Agreement), the Company will be required to pay a prepayment premium of 1.00% of the principal amount prepaid for any optional and mandatory prepayments prior to March 30, 2013.

We were in violation of the financial covenants under our 2012 Secured Credit Facility as of September 30, 2012. We obtained an amendment from our lender, dated November 9, 2012, to modify the covenant levels as follows, to prevent a default under the agreement governing the 2012 Secured Credit Facility: the total leverage ratio was modified from 6.25 to 7.50; the first-out first lien leverage ratio was modified from 0.70 to 0.85; and the cash interest coverage ratio was modified from 1.50 to 1.20. In addition, the amendment modified the variable rate per annum to plus 5.0% in the case of prime rate borrowings and 6.0% in the case of LIBOR borrowings. Management believes however, that based on current projections and given the impact of continued business declines and transformation activities currently underway, our operating results will not be sufficient to satisfy the financial covenants in the 2012 Secured Credit Facility for the next several quarters. Accordingly, we have reclassified the 2012 Secured Credit Facility from non-current to current, in our consolidated balance sheet, as of September 30, 2012. Additionally, we have reclassified the 2011 Unsecured Term Loan from non-current to current in our consolidated balance sheet, as of September 30, 2012, due to certain cross-default provisions. We continue to classify the Senior Secured Notes as non-current, in our consolidated balance sheet, as of September 30, 2012, as there is no expectation of a cross-default because the 2012 Secured Term Loan was not accelerated by the lender.

We are currently in negotiations with our lender to further amend the 2012 Secured Term Loan to revise the financial covenants to levels that are attainable based on our updated projections and strategic plan, inclusive of our transformation efforts described above (including assumptions regarding the successful sale and licensing of some international businesses). However, there can be no assurance that an agreement will be reached. The failure to comply with the financial covenants under the 2012 Secured Credit Facility would constitute an event of default, which would give the lenders under that facility the right to accelerate payment of their loans and which in turn could create an event of default under our 2011 Unsecured Term Loan and our Senior Secured Notes. Based on our relationships and ongoing discussions with our lenders, we believe it is reasonably likely that we would be successful in obtaining such waivers and/or amendments. It is possible that, as part of granting any such waivers or amendment, the lenders will require us to pay consent fees and/or insist on modifications to the loan agreement that could place additional restrictions on our operations and would restrict our ability to respond to future financial or operational challenges. However, we can provide no assurances that we would be able to obtain an amendment or waiver or repay the 2012 Secured Credit Facility. If we are unable to do so, our lender could declare all outstanding principal and interest under the 2012 Secured Credit Facility to be due and payable, which in turn could create an event of default under our 2011 Unsecured Term Loan and our Senior Secured Notes, and we would not be able to meet these obligations.

Our ability to meet our working capital, capital expenditure, restructuring costs, debt service and other funding requirements is dependent on our ability to successfully execute our strategic initiatives, including (i) licensing or exiting some or all of our international businesses; (ii) further reductions in our debt levels; (iii) continued reductions in direct costs and corporate overhead; and (iv) a stabilization in operating results in our North America business. If we are not able to successfully execute these initiatives in a timely manner or if we experience additional adverse impacts that we are unable to adequately anticipate, we believe that we will not have sufficient cash flow to meet our working capital, debt service and other liquidity requirements for the next twelve months, which would have a material adverse impact on our business.

We currently do not have any other sources of cash, other than our cash on hand and operating cash flows. If our cash on hand and cash flows from operations are not sufficient to fully fund our working capital and other liquidity requirements, we would need to obtain funding from other sources. However, we expect that, as a result of the factors described above, including current economic and market conditions, our current leverage and recent operating results, and our current credit ratings, it would be difficult for us to obtain additional debt or equity financing on terms that are acceptable to us, if at all. Also, our debt agreements contain covenants that limit our ability to incur additional debt, and those lenders may be unwilling to modify or waive those covenants if such modifications or waivers are necessary. In addition, while affiliates of certain of our shareholders provided us with funds in the past under the 2011 Secured Term Loan and the 2011 Unsecured Term Loan, neither they nor any other shareholders have agreed or are under any obligation to provide us with any further funding. If, under such circumstances we were unable to obtain additional financing, we would need to pursue one or more alternative solutions to generate cash and reduce our cash requirements, such as selling additional assets or restructuring our balance sheet through, among other things, amendments, modifications, tender or exchange offers or other negotiated transactions with our lenders, bondholders and other constituents. We cannot provide assurance that any such transactions will be successful.

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

2011 Credit Facilities

On August 12, 2011, the Company entered into a term loan and guarantee agreement with Luxor Capital Group, as administrative agent; the Guarantors (defined therein); and the lenders thereunder, consisting of funds affiliated with Luxor Capital Group and Point Lobos Capital, who are shareholders of the Company’s common stock, providing the Company with a $45.0 secured term loan (“2011 Secured Term Loan”). The 2011 Secured Term Loan would have matured in November 2013 and bore interest at the rate of 7.0% per annum.

On March 6, 2012, the Company executed repayment of the 2011 Secured Term Loan, using net proceeds from our Allrecipes.com sale. Our repayment included $45.0 to satisfy the principal debt, along with $5.0 due under the early repayment provisions.

Also on August 12, 2011, the Company entered into an unsecured term loan and guarantee agreement with Luxor Capital Group, as administrative agent; the Guarantors (defined therein) and the lenders thereunder, consisting of funds affiliated with Luxor Capital Group and Point Lobos Capital, who are shareholders of the Company’s common stock, providing the Company with a $10.0 unsecured term loan (“2011 Unsecured Term Loan” and, together with the 2011 Secured Term Loan, “2011 Credit Facilities”). The 2011 Unsecured Term Loan matures in May 2014 and bears interest at the rate of 11.0% per annum.

InOn ~~connection~~March ~~with~~24, ~~the~~2012, we amended our 2011 Unsecured Term Loan, ~~the~~to ~~Company~~increase ~~issued~~the ~~two~~senior ~~tranches~~secured ofleverage ~~warrants. See~~ratio ~~Note~~for ~~12,~~the ~~Common~~quarter ~~Stock~~ended ~~Warrants~~March 31, ~~for~~2012 ~~further~~and ~~information~~thereafter.

~~Luxor~~In ~~Capital~~connection ~~Group~~with ~~and~~the ~~Point~~2011 ~~Lobos~~Unsecured ~~Capital~~Term ~~and~~Loan, ~~their~~the ~~affiliated~~Company ~~funds~~issued ~~are~~two ~~considered~~tranches ~~related~~of ~~parties due to their equity interest in the Company~~warrants. See Note 1413, ~~Related~~Common ~~Party~~Stock ~~Transactions~~Warrants, for further information.

Luxor Capital Group and Point Lobos Capital and their affiliated funds are considered related parties due to their equity interest in the Company. See Note 15, Related Party Transactions, for further information.

Senior Secured Notes

On February 11, 2010, RD Escrow Corporation, a subsidiary of RDA, entered into an Indenture (“Indenture”) with RDA, RDA Holding Co., and substantially all of our existing wholly-owned direct and indirect domestic subsidiaries (collectively referred to as the “Guarantors”), Wells Fargo Bank, N.A., as Trustee, and Wilmington Trust FSB, as Collateral Agent, pursuant to which we issued the Floating Rate Senior Secured Notes due 2017 (“Senior Secured Notes”) in a private offering under the Securities Act of 1933. We issued the Senior Secured Notes at 97% of their face value. Financing fees of $16.0 related to the Senior Secured Notes were deferred and are amortized under the effective interest rate method over the life of the Senior Secured Notes.

In October 2010, RDA Holding Co. and its subsidiaries filed a Registration Statement on Form S-4 with the Securities and Exchange Commission, in connection with our offer to exchange up to $525.0 of our Senior Secured Notes for a like principal amount of Floating Rate Senior Secured Notes due 2017. Our Form S-4 filing became effective in February 2011.

The Senior Secured Notes mature on February 15, 2017. The Senior Secured Notes bear interest at a rate per annum equal to LIBOR (as defined, subject to a three month LIBOR floor of 3.0%) plus 6.5%. The LIBOR component of the interest rate will be reset quarterly and commenced on May 15, 2010.

On June 15, 2012, the Company completed a cash tender offer to purchase up to $60.7 of its Senior Secured Notes, using proceeds from the sale of our Allrecipes.com business, at a purchase price of 95% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. The Company received tenders of approximately $509.0 aggregate principal amount of Senior Secured Notes. Under the terms of the tender offer, holders who tendered Senior Secured Notes that were accepted for payment received approximately 95% principal amount of the Senior Secured Notes. On June 15, 2012, we accepted for purchase $60.6 aggregate principal amount on a pro rata basis, pursuant to the tender offer, at a total cost of $58.1, including principal of $57.6, along with accrued and unpaid interest to the date of purchase.

proceeds from the sale of its Allrecipes.com business, at a purchase price of 95% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. The Company received tenders of approximately $509.0 aggregate principal amount of Senior Secured Notes. Under the terms of the tender offer, holders who tendered Senior Secured Notes that were accepted for payment received approximately 95% principal amount of the Senior Secured Notes. On June 15, 2012, we accepted for purchase $60.6 aggregate principal amount on a pro rata basis, pursuant to the tender offer, at a total cost of $58.1, including principal of $57.6, along with accrued and unpaid interest to the date of purchase.20

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Senior Credit Facility

On February 19, 2010, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent; the Guarantors (which include us and are defined therein); J.P. Morgan Securities Inc., Bank of America Securities LLC, Credit Suisse Securities (U.S.A.) LLC and Goldman Sachs Credit Partners L.P., as joint lead arrangers and joint bookrunners; and JPMorgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG and Goldman Sachs Credit Partners L.P., as lenders, providing for a ~~three~~3 year revolving credit facility (“Senior Credit Facility”) of up to $50.0 with a $25.0 letter of credit sub-facility. On March 21, 2012, the Company repaid and terminated its Senior Credit Facility, using $35.0 of net proceeds from our Allrecipes.com sale and we cash-collateralized our letters of credit, $11.4 as of March 21, 2012, which had been issued under the Senior Credit Facility. During ~~and~~the ~~which~~third quarter of 2012, we ~~intend~~re-issued tomost ~~reissue~~of these standby letters of credit under our ~~Letter~~2012 ofSecured Credit Facility. We expect to receive the cash, previously used to as collateral, in the fourth quarter of 2012.

Letters of Credit

As discussed above, as of ~~June~~September 30, 2012, there was $10.5 in cash-collateralized letters of credit. ~~There~~As ~~was~~stated above, we re-issued $119.5 inof these standby letters of credit as of ~~December~~September 3130, ~~2011~~2012, ~~against~~under ~~the~~our ~~$25.0~~2012 ~~letter~~Secured ~~of credit sub-facility of the Senior~~ Credit Facility. The letters of credit served as security, primarily related to real estate leases entered into by RDA ~~and as security for surety bonds related to sweepstakes promotions and customs duties~~.

There was $11.5 in standby letters of credit as of December 31, 2011, against the $25.0 letter of credit sub-facility of the Senior Credit Facility. The letters of credit served as security, primarily related to real estate leases entered into by RDA and as security for surety bonds related to sweepstakes promotions and customs duties.

Fair Values

Our fair value measurements based on Level 2 of the fair value hierarchy included the Senior Secured Notes. Based on quoted prices in markets that are not active, we estimated that the fair value of our Senior Secured Notes was approximately $~~364~~264.67 and $388.5, as of ~~June~~September 30, 2012 and December 31, 2011, respectively.

Our fair value measurements based on Level 3 of the fair value hierarchy included the 2012 Secured Term Loan, Senior Credit Facility, 2011 Secured Term Loan and 2011 Unsecured Term Loan.

We estimated that the fair value of our 2012 Secured Term Loan was $4243.63 at ~~June~~September 30, 2012.

We estimated that the fair value of our Senior Credit Facility was approximately $33.0 at December 31, 2011. There was very limited trading activity on our Senior Credit Facility.

We estimated that the fair value of our 2011 Unsecured Term Loan was $9.01 and $8.8, as of ~~June~~September 30, 2012 and December 31, 2011, respectively. We estimated that the fair value of our 2011 Secured Term Loan was $40.7 at December 31, 2011. There has been no trading activity on the 2011 Credit Facilities.

Note 1011 Commitments and Contingencies

General Litigation

From time to time, we are involved in a variety of claims, lawsuits, investigations and proceedings that arise in the ordinary course of business.

As previously disclosed, we ~~are~~had ~~currently~~been involved in consent negotiations with the Federal Trade Commission ("FTC") following a Civil Investigative Demand it issued in April 2010, regarding the marketing of the Ab Circle Pro fitness product, to Direct Entertainment Media Group, Inc. ("DEMG"), a subsidiary of The Reader's Digest Association, Inc. (“RDA”), as well as certain third parties involved in the manufacture and promotion of the product. DEMG provided its initial responses by August 23, 2010 and had not heard from the FTC until June 2011, at which time the FTC indicated it would seek authority to enter into consent negotiations with DEMG regarding the terms of a Consent Order. On October 5, 2011, the FTC indicated that it had received authority from the Bureau of Consumer Protection to enter into consent negotiations in an effort to amicably resolve the investigation.

WeOn ~~have~~August ~~now~~23, ~~reached~~2012, anwe ~~agreement~~announced inthat ~~principle~~DEMG ~~with~~and ~~the~~Direct ~~FTC~~Holdings ~~staff~~Americas ~~and~~Inc. ~~have~~(“DHA”), ~~agreed~~a ~~upon~~former ~~the~~subsidiary ~~terms~~ of aRDA ~~proposed~~that ~~Consent~~was ~~Order~~sold ~~that~~on ~~provides~~July ~~for~~2, ~~injunctive~~2012, ~~relief~~had ~~and~~reached ~~consumer~~a ~~redress.~~settlement ~~Under~~of all legal proceedings with the ~~terms~~FTC ofon the ~~proposed~~FTC's ~~Consent~~allegations ~~Order,~~regarding ~~DEMG~~the ~~and~~marketing ~~Direct~~campaign ~~Holdings~~for ~~Americas,~~the ~~Inc.~~Ab ~~(“DHA”)~~Circle Pro fitness product, under a ~~former~~Consent ~~subsidiary~~Order ofthat ~~RDA~~provides ~~that~~for ~~was~~injunctive ~~sold~~relief onand ~~July~~consumer 2redress. RDA, ~~2012~~as the parent company, ~~are~~was ~~included~~named ~~among~~in the ~~named~~Consent ~~defendants. RDA,~~Order ~~however,~~as ~~will~~a berelief ~~subject~~defendant. Under ~~only~~the toterms of the ~~monetary~~settlement, ~~obligations~~none ~~for~~of ~~consumer~~the ~~redress~~parties ~~and~~have ~~not~~admitted toany ~~the~~wrongdoing or liability.

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Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

~~injunctive~~Pursuant ~~provisions.~~to ~~The~~the ~~proposed~~ Consent Order, ~~has~~RDA, ~~been~~DEMG ~~submitted~~and toDHA ~~the~~agreed ~~full~~to ~~Commission~~pay ~~for~~between ~~approval~~approximately $13. ~~The~~8 ~~terms~~and of$23.8 ~~the~~for ~~proposed~~consumer ~~Consent~~redress. As ~~Order, including~~ the ~~provisions~~parent ~~for~~company ~~consumer~~of ~~redress,~~DEMG ~~cannot~~and beformer ~~disclosed~~parent ~~until~~company ~~the~~of ~~proposed~~DHA, ~~Consent~~RDA ~~Order~~ is ~~approved. Assuming~~responsible ~~the~~for ~~Commission~~payment ~~approves~~of the ~~proposed~~settlement ~~Consent~~amount ~~Order,~~but weis ~~would~~not ~~expect~~subject it to ~~be finalized and announced in~~ the ~~third quarter of 2012. The~~ injunctive provisions of the ~~proposed~~ Consent Order. In ~~are not expected to materially impact the Company's future marketing activities in~~ light of the discontinuation of the operations of DEMG and the sale of DHA~~. In accordance with ASC Topic 450~~, ~~Contingencies,~~ the ~~Company~~injunctive ~~records~~provisions aof ~~liability in its consolidated financial statements for loss contingencies when a loss is known or considered probable and~~ the ~~amount~~Consent ~~can~~Order ~~be reasonably estimated. For this matter, we reserved an amount based on upon a reasonable range, in consultation with our external advisors. The Company believes that the amounts reserved~~ are ~~adequate~~not ~~based~~expected onto ~~currently~~materially ~~available~~impact ~~information,~~RDA's ~~including~~future ~~the~~marketing ~~terms of the proposed Consent Order~~activities.

OnThe ~~December 30,~~FTC ~~2011,~~Stipulated ~~the~~Final ~~Polish~~Judgment ~~Office~~was ~~for~~approved by the ~~Protection~~United ofStates ~~Consumers~~District ~~and~~Court ~~Competition~~for ~~("UOKiK")~~the ~~issued~~Southern aDistrict ~~decision~~of inFlorida ~~its~~and ~~consumer~~the ~~protection~~Consent ~~proceeding~~Order ~~against~~was ~~Reader's~~entered ~~Digest~~on ~~Przeglad~~August ~~Sp. z o.o. (Reader's Digest Poland~~28, ~~"RDP")~~2012. ~~UOKiK~~The ~~takes~~settlement ~~the~~required ~~position~~payment ~~that~~of ~~RDP's~~$5.0 ~~sweepstakes-based~~within ~~direct~~5 ~~mail~~days ~~marketing~~of ~~model~~the ~~makes~~entry ~~use~~ of ~~practices~~the ~~which~~consent ~~may~~order ~~mislead consumers~~ and~~/or~~ ~~fail~~requires toanother ~~provide~~payment ~~clear~~of ~~and~~$5.0 ~~complete~~within ~~information~~180 ondays of the ~~details~~entry of the ~~distance-selling~~consent ~~contracts~~order, ~~executed between RDP~~ and ~~the consumers~~$3. ~~The~~8 ~~decision~~within ~~requires~~270 ~~RDP~~days toof ~~(i) pay~~the aentry ~~fine~~ of ~~approximately~~the $1consent order.3 In addition, ~~(ii) announce~~ the ~~decision~~order onrequires ~~its~~a ~~website~~payment ~~and~~of inup ~~two~~to ~~national~~an ~~papers~~additional ~~and (iii) change certain of its promotional materials~~$10.0, ~~RDP~~payable ~~filed~~within an365 ~~appeal~~days onof ~~January 16,~~the ~~2012,~~entry ~~with~~of the ~~consumer~~consent ~~protection/competition~~order, ~~court. UOKiK's~~such ~~decision~~amount isto ~~not~~be ~~binding~~determined ~~prior~~based toon the consumer ~~protection/competition~~refund ~~court's~~claims ~~ruling~~received ~~on appeal. A ruling~~ by the ~~appellate court is expected in six to twelve months~~FTC. ~~Although~~Upon wea ~~cannot~~failure ~~predict~~to ~~the~~make ~~final~~any ~~outcome~~payment ofwhen ~~this matter~~due, ~~based~~a onjudgment in the ~~information~~amount ~~presently~~of ~~available~~$31.7 to(less ~~us,~~any ~~management~~amounts ~~does~~previously ~~not~~paid) ~~believe~~would ~~that~~become ~~the~~immediately ~~ultimate~~due ~~resolution~~and ofpayable. No ~~this~~cash ~~investigation~~reserve ~~will~~has ~~have~~been aestablished ~~material~~for ~~adverse~~the ~~effect~~settlement; onhowever, the ~~Company's~~liability ~~financial~~has ~~condition,~~been ~~results~~accrued ofin ~~operations~~accordance orwith ~~cash~~U.S. ~~flows~~GAAP.

On December 30, 2011, the Polish Office for the Protection of Consumers and Competition ("UOKiK") issued a decision in its consumer protection proceeding against Reader's Digest Przeglad Sp. z o.o. (Reader's Digest Poland, "RDP"). UOKiK takes the position that RDP's sweepstakes-based direct mail marketing model makes use of practices which may mislead consumers and/or fail to provide clear and complete information on the details of the distance-selling contracts executed between RDP and the consumers. The decision requires RDP to (i) pay a fine of approximately $1.3, (ii) announce the decision on its website and in two national papers and (iii) change certain of its promotional materials. RDP filed an appeal on January 16, 2012, with the consumer protection/competition court and UOKiK's decision is not binding prior to the consumer protection/competition court's ruling on appeal. A ruling by the appellate court is expected in six to twelve months. Although we cannot predict the final outcome of this matter, based on the information presently available to us, management does not believe that the ultimate resolution of this investigation will have a material adverse effect on the Company's financial condition, results of operations or cash flows.

In August 2011, an adverse decision against the Company was rendered in the Brazilian Federal Court of Appeals that overturned a favorable decision in the lower court that was rendered in 2007, in which the Company challenged the constitutionality of a 2004 law change in the method of determining the tax base and the applicable tax rate used to assess local operating taxes related to certain federal social contribution programs. The Court of Appeals ruled unfavorably on the issue of constitutionality of the tax rate, but did not address the tax base, and specifically the Company’s ability to claim certain offsets in the form of credits against the tax. The Company asked the Court of Appeals to clarify its ruling in respect of the tax base and in February 2012, the Court of Appeals issued an adverse ruling that prevents the Company from claiming the aforementioned tax credits. In May 2012, the Company appealed the decision to the Superior Court of Brazil, and together with local tax counsel, believes it is possible that it will ultimately prevail in this litigation, which is expected to take several years to resolve. Based on the facts and circumstances, in April 2012, the Company elected to pay approximately $4.5 related to prior year taxes in dispute. The Company also elected to continue to pay the tax, excluding the benefit of the aforementioned tax credits in dispute, until the litigation is resolved. Our April 2012 payment of $4.5, related to taxes in dispute, was accrued at December 31, 2011.

Note 1112 Equity-Based Compensation

For the three months ended ~~June~~September 30, 2012 ~~and 2011~~, we ~~recognized~~reversed stock-based compensation expense of $05.8,0 ~~and~~related ~~$14~~to the remeasurement of our liability-classified awards to reflect the estimated fair value of our common stock.9 For the three months ended September 30, ~~respectively~~2011, we recognized minimal stock-based compensation expense.

For the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, we recognized stock-based compensation expense of $50.4 and $16.57, respectively. The stock-based compensation expense in the ~~six~~nine months ended ~~June~~September 30, 2012 included the reversal of $5.0 related to the remeasurement of our liability-classified awards to reflect the estimated fair value of our common stock. The stock-based compensation expense in the nine months ended September 30, 2011 consisted of $12.4, net of forfeitures, specifically for the accelerated vesting due to our April 2011 Board Change, as discussed in Note 1, Organization and Summary of Significant Accounting Policies, in our audited December 31, 2011 consolidated financial statements; along with $2.68 for normal course vesting and $1.5 for the quarterly mark-to-market on liability-classified RSUs.

During the ~~six~~nine months ended ~~June~~September 30, 2012, there were ~~794~~904,000 RSUs granted to certain directors and employees of our Company. During the three months ended June 30, 2012, we had a modification to RSUs awarded to non-employee directors, which resulted in reclassification as liability instruments. RSUs awarded to non-employee directors and employee participants are accounted for as liability instruments and recorded in accrued expenses in our consolidated balance sheets.

~~There were no stock options granted in the six months ended June 30, 2012. Stock options awarded to employees or non-employee directors are accounted for as equity instruments.~~22

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RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

There were no stock options granted in the nine months ended September 30, 2012. Stock options awarded to employees or non-employee directors are accounted for as equity instruments.

In connection with the Successor Company grant of stock-based compensation awards, we perform a valuation of our common stock equity. Our valuation analysis consists of a combination of the income and market comparable approach, discounted for lack of marketability based on an options pricing method proposed by John Finnerty (“Finnerty Model”) under Level 3 of the fair value hierarchy. We also consider, but have not used, the market transaction approach due to the lack of relevant transactions. The income approach utilizes cash flows based on our long-term outlook through the valuation date. Terminal value was calculated using a modified Gordon growth formula. Market multiples of peer companies were calculated and utilized in application of a market comparable approach. We applied multiple ranges for revenue and EBITDA.

The table below sets forth the key assumptions utilized in the valuation of our common stock equity:

	Successor Company
	Valuation Date
	June 30, 2012			March 31, 2012
	September 30, 2012			June 30, 2012			March 31, 2012
Income approach
Discount rate	1619.0		%	16.0		%	16.0		%
Perpetual growth rate	2.0		%	2.0		%	2.0		%
Market comparable approach
EBITDA market multiples	5.00 to 5.50			5.5000 to 65.0050			5.50 to 6.00
Revenue market multiples	0.4535 to 0.5040			0.5045 to 0.5550			0.50 to 0.55
Finnerty model
Discount for lack of marketability	2030.0		%	20.0		%	20.0		%
Volatility (a)	65120.0		%	5065.0		%	50.0		%
Risk-free rate (b)	0.32		%	0.3		%	0.3		%
Dividend yield (c)	—		%	—		%	—		%
Estimated fair value of our common stock	$	60.0352		$	126.2703		$	12.27

(a) Volatility is calculated based on comparable public company volatilities and our Company's capital structure.

(b) Risk-free rate is calculated based on U.S. Treasury zero-coupon security yields.

A summary of RSUs activity under the 2010 Plan was as follows:



	Successor Company
	RSUs
	Shares (000’s)		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011	54		$	22.80
Granted	904		11.25
Vested	(388	)	12.96
Forfeited	(180	)	11.64
Nonvested at September 30, 2012	390		$	10.97

	Successor Company
	RSUs
	Shares(000’s)		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011	54		$	22.80
Granted	794		11.97
Vested	(388	)	12.96
Nonvested at June 30, 2012	460		$	12.41

Note 13 Common Stock Warrants

As discussed in Note 10, Debt, on August 12 ~~Common~~, ~~Stock~~2011, ~~Warrants~~the Company entered into the 2011 Credit Facilities. In connection with the 2011 Unsecured Term Loan, the Company issued two tranches of warrants to the lenders under the 2011 Unsecured Term Loan. The Company accounted for these warrants as derivative liabilities in accordance with ASC Topic 815, Derivatives and Hedging ("ASC 815").

AsThe ~~discussed~~Company inestimated ~~Note~~the 9,fair ~~Debt,~~value onof ~~August 12,~~these ~~2011~~warrants using a simulation approach, ~~the~~under ~~Company~~Level ~~entered~~3 ~~into~~of the ~~2011~~fair ~~Credit~~value ~~Facilities~~hierarchy. InThe ~~connection~~fair ~~with~~value ~~the~~is ~~2011~~recorded ~~Unsecured~~in ~~Term~~other ~~Loan,~~current ~~the~~liabilities ~~Company~~in ~~issued~~the ~~two~~consolidated ~~tranches~~balance ofsheets, ~~warrants~~with toadjustments ~~the~~recorded ~~lenders~~as ~~under~~other ~~the~~income, ~~2011 Unsecured Term Loan~~net. The ~~Company~~estimated ~~accounted~~fair ~~for~~value ~~these~~at ~~warrants~~September 30, as2012 ~~derivative~~and ~~liabilities~~at inthe ~~accordance~~issuance ~~with~~date ~~ASC~~was ~~Topic~~$0.3 ~~815, Derivatives~~ and ~~Hedging~~$2.9, ~~("ASC 815")~~respectively.

The Company estimated the fair value of these warrants using a simulation approach, under Level 3 of the fair value hierarchy. The fair value is recorded in other noncurrent liabilities in the consolidated balance sheets, with adjustments recorded as other income, net. The estimated fair value at June 30, 2012 and at the issuance date was $0.9 and $2.9, respectively.23

Separately, in connection with the Plan of Reorganization (“Plan”) executed upon our emergence from chapter 11 proceedings,

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Separately, in connection with the Plan of Reorganization (“Plan”) executed upon our emergence from chapter 11 proceedings, holders of the Predecessor Company’s Senior Subordinated Notes who voted in favor of the Plan received warrants, each eligible to purchase 1.04 shares, as adjusted, of Class A common stock of the Successor Company. The Company has accounted for these warrants as equity instruments in accordance with ASC 815, and as such, are classified in stockholders’ equity.

Note 1314 Benefit Plans

We sponsor various pension and postretirement benefit plans, including those for certain employees in the United States and internationally.

The components of net periodic pension benefit were as follows:

	Successor Company
	Three months ended June 30,						Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Service cost	$	1.1		$	1.1		$	23.23		$	23.23
Interest cost	5.5			6.21			1116.05			1218.34
Expected return on plan assets	(10.7		)	(10.4		)	(2132.41		)	(2031.71		)
Curtailments (a)	~~(0.2~~—		)	—			(0.3		)	—
Cost for special termination benefits (b)	~~0.5~~—			0.16			1.2			01.62
Net periodic pension benefit	$	(34.81	)	$	(32.06	)	$	(711.34	)	$	(58.62	)

(a) For the ~~three~~nine ~~and six~~ months ended ~~June~~ September 30, 2012, a curtailment occurred in France. This amount was recorded as other operating items, net as it is considered a restructuring item.


(b)	Cost for special termination benefits is included in other operating items, net. Our U.S. Qualified Pension Plan was temporarily amended to provide additional benefits to employees involuntarily terminated.

Our contributions to our various international pension plans were immaterial for all periods presented.

Our Retirement Plan in the United States is over funded; therefore, we made no contributions for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2011.

We also sponsor certain postretirement benefit plans in the United States and Canada. The expense for these plans is not material.

Note 1415 Related Party Transactions

Luxor Capital Group and Point Lobos Capital and their affiliated funds are considered related parties due to their equity interest in the Company. The 2011 Credit Facilities between the Company and Luxor Capital Group, Point Lobos Capital and their affiliated funds are described in Note 910, Debt. On March 6, 2012, we executed repayment of the 2011 Secured Term Loan, using net proceeds from our Allrecipes.com sale. Our repayment included $45.0 to satisfy principal debt, along with $5.0 due under early repayment provisions. ~~Additionally, for the three and six months ended June 30, 2012, we paid $0.3 and $0.5, respectively, in interest on the 2011 Unsecured Term Loan, to related parties.~~

~~Note~~For ~~15 Segments~~the three months ended September 30, 2012 and 2011, we paid $0.3 and $0.6, respectively, in interest on the 2011 Credit Facilities, to related parties.

For the nine months ended September 30, 2012 and 2011, we paid $1.4 and $0.6, respectively, in interest on the 2011 Credit Facilities, to related parties.

Note 16 Segments

Our reportable segments reflect the manner in which our chief operating decision maker reviews the business. Our Chief Executive Officer acts as our chief operating decision maker. Revenue and expense attributable to intercompany transaction are eliminated to reconcile our reportable segment amounts to consolidated amounts, as reported in our consolidated statements of comprehensive loss. In addition to the reportable segments, we separately report corporate unallocated expenses, which are expenses not directly attributable to business unit performance. Similarly, we separately report the effects of goodwill and intangible asset impairment charges, certain purchase accounting related fair value adjustments and other operating items, net because our chief operating decision maker does not factor these items when assessing business unit performance.

2124

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RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Reportable Segment Financial Information:



	Successor Company
	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Revenue
North America	$	105.0		$	133.8		$	359.3		$	459.2
Europe	85.5			130.9			281.2			388.0
Asia Pacific & Latin America	44.5			57.3			135.4			158.2
Intercompany eliminations	(2.7		)	(1.9		)	(5.5		)	(5.1		)
Fair value adjustments (a)	(2.2		)	(7.7		)	(16.5		)	(40.5		)
Total revenue	$	230.1		$	312.4		$	753.9		$	959.8
Operating (loss) profit
North America	$	(2.5	)	$	(6.0	)	$	18.0		$	34.9
Europe	(5.1		)	(4.5		)	(17.4		)	(0.9		)
Asia Pacific & Latin America	3.0			3.6			4.8			6.2
Corporate unallocated	(7.6		)	(19.8		)	(43.3		)	(75.7		)
Fair value adjustments (a)	(1.2		)	(3.8		)	(8.7		)	(25.4		)
Impairment of assets	(85.0		)	(10.3		)	(203.7		)	(238.0		)
Other operating items, net (b)	(1.7		)	(10.5		)	(3.4		)	(16.7		)
Operating loss	$	(100.1	)	$	(51.3	)	$	(253.7	)	$	(315.6	)

	Successor Company
	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Revenue
North America	$	150.9		$	194.5		$	254.3		$	325.4
Europe	102.1			140.0			195.7			257.2
Asia Pacific & Latin America	46.1			51.0			90.9			101.0
Intercompany eliminations	(1.4		)	(1.6		)	(2.8		)	(3.4		)
Fair value adjustments (a)	(7.2		)	(8.9		)	(14.3		)	(32.8		)
Total revenue	$	290.5		$	375.0		$	523.8		$	647.4
Operating profit (loss)
North America	$	26.9		$	40.3		$	20.5		$	40.9
Europe	5.2			14.4			(12.3		)	3.6
Asia Pacific & Latin America	3.4			0.5			1.8			2.6
Corporate unallocated	(10.6		)	(32.5		)	(35.6		)	(55.9		)
Fair value adjustments (a)	(3.8		)	(5.2		)	(7.5		)	(21.6		)
Impairment of assets	(113.4		)	(227.7		)	(113.4		)	(227.7		)
Other operating items, net (b)	(0.9		)	(2.8		)	(1.7		)	(6.2		)
Operating loss	$	(93.2	)	$	(213.0	)	$	(148.2	)	$	(264.3	)


(a)	Fair value adjustments include the amortization of the fair value reduction to unearned revenue and related deferred cost accounts, which resulted from the application of fresh start accounting upon our emergence from bankruptcy.


(b)	Items included in other operating items, net consist of the following: (i) restructuring charges, representing the streamlining of our organizational structure; (ii) professional, contractual charges and other periodic costs related to the strategic repositioning of our businesses; (iii) gain or loss on the sale or disposal of assets; and (iv) pension curtailments.

Note 1617 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~~fully 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 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.

22In the three months ended September 30, 2012, we revised our consolidated condensed statement of cash flows for the three months ended March 31, 2012 and six months ended June 30, 2012, to adjust the effect of exchange rate changes on cash and cash equivalents. The impact of this revision was to increase Issuer Parent-RDA by $1.0 and increase Non-Guarantor Subsidiaries by $0.1, with an offset to Eliminations in the three months ended March 31, 2012. In the six months ended June 30, 2012, the impact is to decrease Non-Guarantor Subsidiaries by $4.3, with an offset to Eliminations. This revision is not material to the related consolidated financial statements for any prior periods and had no impact on our consolidated statements of cash flows. As prior period financial information is presented in future filings, we will similarly revise the consolidated condensed statements of cash flows.

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RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Statements of Comprehensive (Loss) Income for the three months ended September 30, 2012 (Successor Company):

Consolidated Statements of Comprehensive (Loss) Income for the three months ended June 30, 2012 (Successor Company):



	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	12.9		$	73.5		$	146.4		$	(2.7	)	$	230.1
Product, distribution and editorial expenses	—			9.6			35.3			67.3			(2.7		)	109.5
Promotion, marketing and administrative expenses	—			12.8			37.9			83.3			—			134.0
Impairment of assets	—			—			17.2			67.8			—			85.0
Other operating items, net	—			2.1			0.8			(1.2		)	—			1.7
Operating loss	—			(11.6		)	(17.7		)	(70.8		)	—			(100.1		)
Interest expense	—			14.4			—			—			—			14.4
Loss from investment in subsidiaries	107.2			31.6			—			—			(138.8		)	—
Other expense (income), net	—			50.2			(45.3		)	(6.3		)	—			(1.4		)
(Loss) income before income taxes	(107.2		)	(107.8		)	27.6			(64.5		)	138.8			(113.1		)
Income tax benefit	—			(1.4		)	(3.6		)	(1.4		)	—			(6.4		)
(Loss) income from continuing operations	(107.2		)	(106.4		)	31.2			(63.1		)	138.8			(106.7		)
(Loss) income from discontinued operations, net of taxes	—			(0.8		)	0.3			—			—			(0.5		)
Net (loss) income	$	(107.2	)	$	(107.2	)	$	31.5		$	(63.1	)	$	138.8		$	(107.2	)
Comprehensive (loss) income	$	(102.4	)	$	(106.6	)	$	31.5		$	(58.7	)	$	133.8		$	(102.4	)

	GuarantorParent HoldCo			IssuerParent-RDA			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	—		$	15.8		$	108.2		$	169.4		$	(2.9	)	$	290.5
Product, distribution and editorial expenses	—			9.3			45.9			71.2			(2.9		)	123.5
Promotion, marketing and administrative expenses	—			18.8			41.1			86.0			—			145.9
Impairment of assets	—			—			12.1			101.3			—			113.4
Other operating items, net	—			1.9			(0.6		)	(0.4		)	—			0.9
Operating (loss) profit	—			(14.2		)	9.7			(88.7		)	—			(93.2		)
Interest expense	—			15.4			—			—			—			15.4
Gain on deconsolidation of subsidiary	—			—			(0.3		)	(0.5		)	—			(0.8		)
Loss (income) from investment in subsidiaries	93.9			58.9			(4.0		)	—			(148.8		)	—
Other expense (income), net	—			6.0			(7.9		)	1.2			—			(0.7		)
(Loss) income before income taxes	(93.9		)	(94.5		)	21.9			(89.4		)	148.8			(107.1		)
Income tax expense (benefit)	—			(0.6		)	(2.1		)	(30.9		)	—			(33.6		)
(Loss) income from continuing operations before discontinued operations	(93.9		)	(93.9		)	24.0			(58.5		)	148.8			(73.5		)
Income (loss) from discontinued operations, net of taxes	—			—			(13.2		)	(7.2		)	—			(20.4		)
Net (loss) income	$	(93.9	)	$	(93.9	)	$	10.8		$	(65.7	)	$	148.8		$	(93.9	)
Comprehensive (loss) income	$	(111.4	)	$	(118.9	)	$	10.8		$	(59.7	)	$	167.8		$	(111.4	)

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Statements of Comprehensive (Loss) Income for the nine months ended September 30, 2012 (Successor Company):

Consolidated Statements of Comprehensive (Loss) Income for the six months ended June 30, 2012 (Successor Company):



	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	44.8		$	244.8		$	471.5		$	(7.2	)	$	753.9
Product, distribution and editorial expenses	—			29.9			113.6			210.2			(7.2		)	346.5
Promotion, marketing and administrative expenses	—			60.0			116.3			277.7			—			454.0
Impairment of assets	—			—			29.2			174.5			—			203.7
Other operating items, net	—			5.0			1.7			(3.3		)	—			3.4
Operating loss	—			(50.1		)	(16.0		)	(187.6		)	—			(253.7		)
Interest expense	—			47.2			—			—			—			47.2
Gain on deconsolidation of subsidiary	—			—			(0.3		)	(0.5		)	—			(0.8		)
Loss from investment in subsidiaries	223.4			12.8			3.1			—			(239.3		)	—
Other expense (income), net	—			157.3			(148.8		)	(12.8		)	—			(4.3		)
(Loss) income before income taxes	(223.4		)	(267.4		)	130.0			(174.3		)	239.3			(295.8		)
Income tax (benefit) expense	—			(44.8		)	24.3			(35.4		)	—			(55.9		)
(Loss) income from continuing operations	(223.4		)	(222.6		)	105.7			(138.9		)	239.3			(239.9		)
(Loss) income from discontinued operations, net of taxes	—			(0.8		)	26.2			(8.9		)	—			16.5
Net (loss) income	$	(223.4	)	$	(223.4	)	$	131.9		$	(147.8	)	$	239.3		$	(223.4	)
Comprehensive (loss) income	$	(220.0	)	$	(231.2	)	$	131.9		$	(137.9	)	$	237.2		$	(220.0	)

	GuarantorParent HoldCo		IssuerParent-RDA		GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations		Consolidated
Revenue	—		31.9		171.3		325.1		(4.5	)	523.8
Product, distribution and editorial expenses	—		20.3		78.3		142.8		(4.5	)	236.9
Promotion, marketing and administrative expenses	—		47.2		78.4		194.4		—		320.0
Impairment of assets	—		—		12.1		101.3		—		113.4
Other operating items, net	—		2.9		0.9		(2.1	)	—		1.7
Operating (loss) profit	—		(38.5	)	1.6		(111.3	)	—		(148.2	)
Interest expense	—		32.8		—		—		—		32.8
Gain on deconsolidation of subsidiary	—		—		(0.3	)	(0.5	)	—		(0.8	)
Loss (income) from investment in subsidiaries	101.7		(33.3	)	2.9		—		(71.3	)	—
Other expense (income), net	—		107.1		(103.5	)	(6.5	)	—		(2.9	)
(Loss) income before income taxes	(101.7	)	(145.1	)	102.5		(104.3	)	71.3		(177.3	)
Income tax (benefit) expense	—		(43.4	)	27.9		(33.9	)	—		(49.4	)
(Loss) income from continuing operations before discontinued operations	(101.7	)	(101.7	)	74.6		(70.4	)	71.3		(127.9	)
Income (loss) from discontinued operations, net of taxes	—		—		35.0		(8.8	)	—		26.2
Net (loss) income	(101.7	)	(101.7	)	109.6		(79.2	)	71.3		(101.7	)
Comprehensive (loss) income	(103.5	)	(110.4	)	109.6		(73.7	)	74.5		(103.5	)

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Condensed Balance Sheet as of September 30, 2012 (Successor Company):

Consolidated Condensed Balance Sheet as of June 30, 2012 (Successor Company):



	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets	$	—		$	87.6		$	99.1	$	322.6	$	(70.0	)	$	439.3
Property and equipment, net	—			28.1			7.3		8.9		—			44.3
Restricted cash	—			1.8			—		6.5		—			8.3
Goodwill	—			—			243.5		12.6		—			256.1
Other intangible assets, net	—			—			100.8		104.3		—			205.1
Prepaid pension assets	—			124.7			—		23.4		—			148.1
Investments in subsidiaries	—			312.2			115.0		—		(427.2		)	—
Intercompany noncurrent receivables	—			14.0			—		8.7		(22.7		)	—
Other noncurrent assets	—			19.1			22.8		2.7		—			44.6
Total assets	$	—		$	587.5		$	588.5	$	489.7	$	(519.9	)	$	1,145.8
Liabilities and stockholders’ (deficit) equity
Current liabilities	$	—		$	122.1		$	213.3	$	248.5	$	(70.0	)	$	513.9
Long-term debt	—			454.7			—		—		—			454.7
Unearned revenue	—			—			105.2		1.3		—			106.5
Accrued pension	—			—			—		4.3		—			4.3
Postretirement and postemployment benefits other than pensions	—			6.9			—		1.3		—			8.2
Deficiency in excess of investments in subsidiaries	76.1			—			—		—		(76.1		)	—
Intercompany noncurrent payables	—			8.7			8.0		6.0		(22.7		)	—
Other noncurrent liabilities	—			71.2			24.9		38.2		—			134.3
Total liabilities	76.1			663.6			351.4		299.6		(168.8		)	1,221.9
Stockholders’ (deficit) equity	(76.1		)	(76.1		)	237.1		190.1		(351.1		)	(76.1		)
Total liabilities and stockholders’ (deficit) equity	$	—		$	587.5		$	588.5	$	489.7	$	(519.9	)	$	1,145.8

	GuarantorParent HoldCo		IssuerParent-RDA		GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations			Consolidated
Assets
Current assets	$	—	$	59.3	$	105.2	$	325.4	$	(17.7	)	$	472.2
Property and equipment, net	—		32.3		7.4		9.7		—			49.4
Restricted cash	—		1.8		—		5.7		—			7.5
Goodwill	—		—		243.5		80.1		—			323.6
Other intangible assets, net	—		—		118.4		112.3		—			230.7
Prepaid pension assets	—		120.8		—		22.3		—			143.1
Investments in subsidiaries	40.4		430.6		90.0		—		(561.0		)	—
Intercompany noncurrent receivables	—		78.9		—		8.3		(87.2		)	—
Other noncurrent assets	—		19.1		22.3		3.1		—			44.5
Total assets	$	40.4	$	742.8	$	586.8	$	566.9	$	(665.9	)	$	1,271.0
Liabilities and stockholders’ equity
Current liabilities	$	—	$	89.9	$	202.3	$	196.9	$	(17.7	)	$	471.4
Long-term debt	—		511.6		—		—		—			511.6
Unearned revenue	—		—		97.2		1.1		—			98.3
Accrued pension	—		—		—		4.0		—			4.0
Postretirement and postemployment benefits other than pensions	—		7.3		—		1.3		—			8.6
Intercompany noncurrent payables	—		8.3		8.0		70.9		(87.2		)	—
Other noncurrent liabilities	—		85.3		11.8		39.6		—			136.7
Total liabilities	—		702.4		319.3		313.8		(104.9		)	1,230.6
Stockholders’ equity	40.4		40.4		267.5		253.1		(561.0		)	40.4
Total liabilities and stockholders’ equity	$	40.4	$	742.8	$	586.8	$	566.9	$	(665.9	)	$	1,271.0

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Condensed Statement of Cash Flows for the nine months ended September 30, 2012 (Successor Company):

Consolidated Condensed Statement of Cash Flows for the six months ended June 30, 2012 (Successor Company):



	Guarantor Parent HoldCo		Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net change in cash due to continuing operating activities	$	—	$	(62.4	)	$	2.8		$	(12.3	)	$	—	$	(71.9	)
Net change in cash due to discontinued operating activities	—		(6.0		)	(11.0		)	(2.6		)	—		(19.6		)
Net change in cash due to operating activities	—		(68.4		)	(8.2		)	(14.9		)	—		(91.5		)
Cash flows from investing activities:
Capital expenditures	—		(6.1		)	(0.1		)	(1.8		)	—		(8.0		)
Proceeds from sale of a business	—		175.0			—			—			—		175.0
Proceeds from sale of assets	—		2.8			—			—			—		2.8
Investing restricted cash	—		0.1			—			—			—		0.1
Net change in cash due to continuing investing activities	—		171.8			(0.1		)	(1.8		)	—		169.9
Net change in cash due to discontinued investing activities	—		—			2.7			(0.4		)	—		2.3
Net change in cash due to investing activities	—		171.8			2.6			(2.2		)	—		172.2
Cash flows from financing activities:
Proceeds from borrowings	—		50.0			—			—			—		50.0
Debt payments	—		(57.7		)	—			—			—		(57.7		)
Repayments of long-term revolving credit facility	—		(35.0		)	—			—			—		(35.0		)
Debt payments to related parties	—		(45.0		)	—			—			—		(45.0		)
Cash paid for financing fees	—		(2.6		)	—			—			—		(2.6		)
Tax effect of equity-based compensation	—		1.1			—			—			—		1.1
Financing restricted cash	—		(11.0		)	—			—			—		(11.0		)
Payment of prepayment penalty to related parties	—		(5.0		)	—			—			—		(5.0		)
Net change in cash due to continuing financing activities	—		(105.2		)	—			—			—		(105.2		)
Net change in cash due to discontinued financing activities	—		—			(0.2		)	—			—		(0.2		)
Net change in cash due to financing activities	—		(105.2		)	(0.2		)	—			—		(105.4		)
Effect of exchange rate changes on cash and cash equivalents	—		—			—			0.5			—		0.5
Net change in cash and cash equivalents	—		(1.8		)	(5.8		)	(16.6		)	—		(24.2		)
Cash and cash equivalents at beginning of the period	—		21.4			7.4			83.5			—		112.3
Cash and cash equivalents at end of the period	$	—	$	19.6		$	1.6		$	66.9		$	—	$	88.1

	GuarantorParent HoldCo		IssuerParent-RDA			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Net change in cash due to continuing operating activities	$	—	$	(51.7	)	$	(1.8	)	$	(21.4	)	$	4.4		$	(70.5	)
Net change in cash due to discontinued operating activities	—		—			(6.6		)	(2.0		)	—			(8.6		)
Net change in cash due to operating activities	—		(51.7		)	(8.4		)	(23.4		)	4.4			(79.1		)
Net change in cash due to continuing investing activities	—		173.5			(0.1		)	(1.6		)	—			171.8
Net change in cash due to discontinued investing activities	—		—			2.8			—			—			2.8
Net change in cash due to investing activities	—		173.5			2.7			(1.6		)	—			174.6
Net change in cash due to continuing financing activities	—		(105.1		)	—			—			—			(105.1		)
Net change in cash due to discontinued financing activities	—		—			(0.1		)	—			—			(0.1		)
Net change in cash due to financing activities	—		(105.1		)	(0.1		)	—			—			(105.2		)
Effect of exchange rate changes on cash and cash equivalents	—		—			—			5.7			(4.3		)	1.4
Net change in cash and cash equivalents	—		16.7			(5.8		)	(19.3		)	0.1			(8.3		)
Cash and cash equivalents at beginning of the period	—		21.4			7.4			83.5			—			112.3
Cash and cash equivalents at end of the period	$	—	$	38.1		$	1.6		$	64.2		$	0.1		$	104.0

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Statements of Comprehensive Loss for the three months ended September 30, 2011 (Successor Company):

Consolidated Statements of Comprehensive (Loss) Income for the three months ended June 30, 2011 (Successor Company):



	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	16.5		$	87.2		$	210.7		$	(2.0	)	$	312.4
Product, distribution and editorial expenses	—			12.1			45.3			90.8			(2.0		)	146.2
Promotion, marketing and administrative expenses	—			34.4			46.0			116.3			—			196.7
Impairment of assets	—			—			—			10.3			—			10.3
Other operating items, net	—			2.2			1.6			6.7			—			10.5
Operating loss	—			(32.2		)	(5.7		)	(13.4		)	—			(51.3		)
Interest expense	—			15.3			—			—			—			15.3
Other (income) expense, net	—			(36.0		)	(1.1		)	34.8			—			(2.3		)
Loss (income) from investment in subsidiaries	76.8			61.0			(10.9		)	—			(126.9		)	—
(Loss) income before income taxes and discontinued operations	(76.8		)	(72.5		)	6.3			(48.2		)	126.9			(64.3		)
Income tax expense (benefit)	—			4.4			0.9			(3.7		)	—			1.6
(Loss) income from continuing operations	(76.8		)	(76.9		)	5.4			(44.5		)	126.9			(65.9		)
Income (loss) from discontinued operations, net of taxes	—			0.1			(9.1		)	(1.9		)	—			(10.9		)
Net loss	$	(76.8	)	$	(76.8	)	$	(3.7	)	$	(46.4	)	$	126.9		$	(76.8	)
Comprehensive loss	$	(121.7	)	$	(113.8	)	$	(3.8	)	$	(55.0	)	$	172.6		$	(121.7	)

	GuarantorParent HoldCo			IssuerParent-RDA			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	—		$	14.6		$	143.8		$	218.2		$	(1.6	)	$	375.0
Product, distribution and editorial expenses	—			14.6			57.0			90.1			(1.6		)	160.1
Promotion, marketing and administrative expenses	—			33.3			51.8			112.3			—			197.4
Impairment of assets	—			0.1			—			227.6			—			227.7
Other operating items, net	—			1.9			1.4			(0.5		)	—			2.8
Operating (loss) profit	—			(35.3		)	33.6			(211.3		)	—			(213.0		)
Interest expense	—			14.2			—			—			—			14.2
Gain on deconsolidation of subsidiary	—			(8.5		)	—			—			—			(8.5		)
Other (income) expense, net	—			(2.7		)	(0.3		)	0.8			—			(2.2		)
Loss (income) from investment in subsidiaries	240.5			210.5			5.3			—			(456.3		)	—
(Loss) income before income taxes and discontinued operations	(240.5		)	(248.8		)	28.6			(212.1		)	456.3			(216.5		)
Income tax (benefit) expense	—			(8.9		)	17.1			(6.9		)	—			1.3
(Loss) income from continuing operations	(240.5		)	(239.9		)	11.5			(205.2		)	456.3			(217.8		)
Loss from discontinued operations, net of taxes	—			(0.6		)	(9.1		)	(13.0		)	—			(22.7		)
Net (loss) income	$	(240.5	)	$	(240.5	)	$	2.4		$	(218.2	)	$	456.3		$	(240.5	)
Comprehensive (loss) income	$	(224.2	)	$	(226.0	)	$	2.6		$	(218.4	)	$	441.8		$	(224.2	)

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2011 (Successor Company):

Consolidated Statements of Comprehensive Loss for the six months ended June 30, 2011 (Successor Company):



	Guarantor Parent HoldCo			Issuer Parent-RDA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	47.9		$	304.4		$	612.9		$	(5.4	)	$	959.8
Product, distribution and editorial expenses	—			37.7			143.7			263.2			(5.4		)	439.2
Promotion, marketing and administrative expenses	—			94.2			139.5			347.8			—			581.5
Impairment of assets	—			0.1			—			237.9			—			238.0
Other operating items, net	—			8.3			1.4			7.0			—			16.7
Operating (loss) profit	—			(92.4		)	19.8			(243.0		)	—			(315.6		)
Interest expense	—			43.3			—			—			—			43.3
Gain on deconsolidation of subsidiary	—			(8.5		)	—			—			—			(8.5		)
Other (income) expense, net	—			(45.0		)	0.1			42.2			—			(2.7		)
Loss (income) from investment in subsidiaries	399.0			319.1			(5.9		)	—			(712.2		)	—
(Loss) income before income taxes and discontinued operations	(399.0		)	(401.3		)	25.6			(285.2		)	712.2			(347.7		)
Income tax (benefit) expense	—			(2.8		)	4.5			(12.1		)	—			(10.4		)
(Loss) income from continuing operations	(399.0		)	(398.5		)	21.1			(273.1		)	712.2			(337.3		)
Loss from discontinued operations, net of taxes	—			(0.5		)	(40.8		)	(20.4		)	—			(61.7		)
Net loss	$	(399.0	)	$	(399.0	)	$	(19.7	)	$	(293.5	)	$	712.2		$	(399.0	)
Comprehensive loss	$	(394.7	)	$	(388.7	)	$	(19.7	)	$	(301.8	)	$	710.2		$	(394.7	)

	GuarantorParent HoldCo			IssuerParent-RDA			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	—		$	31.4		$	217.2		$	402.2		$	(3.4	)	$	647.4
Product, distribution and editorial expenses	—			25.6			98.4			172.4			(3.4		)	293.0
Promotion, marketing and administrative expenses	—			59.8			93.5			231.5			—			384.8
Impairment of assets	—			0.1			—			227.6			—			227.7
Other operating items, net	—			6.1			(0.2		)	0.3			—			6.2
Operating (loss) profit	—			(60.2		)	25.5			(229.6		)	—			(264.3		)
Interest expense	—			28.0			—			—			—			28.0
Gain on deconsolidation of subsidiary	—			(8.5		)	—			—			—			(8.5		)
Other (income) expense, net	—			(9.0		)	1.2			7.4			—			(0.4		)
Loss (income) from investment in subsidiaries	322.2			258.1			5.0			—			(585.3		)	—
(Loss) income before income taxes and discontinued operations	(322.2		)	(328.8		)	19.3			(237.0		)	585.3			(283.4		)
Income tax (benefit) expense	—			(7.2		)	3.7			(8.4		)	—			(11.9		)
(Loss) income from continuing operations	(322.2		)	(321.6		)	15.6			(228.6		)	585.3			(271.5		)
Loss from discontinued operations, net of taxes	—			(0.6		)	(31.6		)	(18.5		)	—			(50.7		)
Net loss	$	(322.2	)	$	(322.2	)	$	(16.0	)	$	(247.1	)	$	585.3		$	(322.2	)
Comprehensive loss	$	(273.0	)	$	(274.9	)	$	(15.9	)	$	(246.8	)	$	537.6		$	(273.0	)

Table of Contents

RDA Holding Co., and Subsidiaries

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

(unaudited)

Consolidated Condensed Balance Sheet as of December 31, 2011 (Successor Company):



	Guarantor Parent HoldCo		Issuer Parent-RDA		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets	$	—	$	38.9	$	241.2	$	370.3	$	(14.7	)	$	635.7
Property and equipment, net	—		33.2		8.0		9.9		—			51.1
Restricted cash	—		1.7		—		4.8		—			6.5
Goodwill	—		—		243.5		145.2		—			388.7
Other intangible assets, net	—		—		139.4		165.3		—			304.7
Prepaid pension assets	—		114.0		—		21.4		—			135.4
Investments in subsidiaries	142.6		617.1		202.4		—		(962.1		)	—
Intercompany noncurrent receivables	—		84.1		—		8.1

Filing Compare · RDA Holding Co.