Trade Accounts Receivable Securitization and Sale Programs

3 Months Ended

Nov. 30, 2017

Trade Accounts Receivable Securitization and Sale Programs [Abstract]

Trade Accounts Receivable Securitization and Sale Programs

7. Trade Accounts Receivable Securitization and Sale Programs

The Company regularly sells designated pools of trade accounts receivable under two asset-backed securitization programs and five uncommitted trade accounts receivable sale programs (collectively referred to herein as the “programs”). The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the programs. Servicing fees related to each of the programs recognized during the three months ended November 30, 2017 and 2016 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.

Transfers of the receivables under the programs are accounted for as sales and, accordingly, net receivables sold under the programs are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.

Asset-Backed Securitization Programs

The Company continuously sells designated pools of trade accounts receivable, at a discount, under its North American asset-backed securitization program and its foreign asset-backed securitization program (collectively referred to herein as the “asset-backed securitization programs”) to special purpose entities, which in turn sell 100% of the receivables to: (i) conduits administered by unaffiliated financial institutions for the North American asset-backed securitization program and (ii) to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution for the foreign asset-backed securitization program. Any portion of the purchase price for the receivables not paid in cash upon the sale occurring is recorded as a deferred purchase price receivable, which is paid from available cash as payments on the receivables are collected.

The special purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the Company. The special purpose entity in the foreign asset-backed securitization program is a separate bankruptcy-remote entity whose assets would be first available to satisfy the creditor claims of the unaffiliated financial institution. The Company is deemed the primary beneficiary of this special purpose entity as the Company has both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, the special purpose entities associated with these asset-backed securitization programs are included in the Company’s Condensed Consolidated Financial Statements.

Following is a summary of the asset-backed securitization programs and key terms:

	Maximum Amount of		Expiration
	Net Cash Proceeds (in millions)⁽¹⁾		Date
North American	$	200.0		October 20, 2020⁽²⁾
Foreign	$	400.0		May 7, 2018

(1)

Maximum amount available at any one time.

(2)

On November 9, 2017, the program was extended to October 20, 2020.

In connection with the asset-backed securitization programs, the Company recognized the following (in millions):


	November 30, 2017		November 30, 2016
Eligible trade accounts receivable sold during the three months ended	$	2,392	$	2,343
Cash proceeds received during the three months ended⁽¹⁾	$	1,628	$	1,575
Pre-tax losses on sale of receivables during the three months ended⁽²⁾	$	4	$	2
Deferred purchase price receivables as of November 30⁽³⁾	$	760	$	766

(1) For the three months ended November 30, 2017 and 2016, the amount represented proceeds from collections reinvested in revolving-period transfers as there were no new transfers during the period.

(2) Recorded to other expense within the Condensed Consolidated Statements of Operations.

(3) Recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets and are valued using unobservable inputs (Level 3 inputs), primarily discounted cash flows, and due to their credit quality and short-term maturity the fair values approximated book values. The unobservable inputs consist of estimated credit losses and estimated discount rates, which both have an immaterial impact on the fair value calculations.

Trade Accounts Receivable Sale Programs

The following is a summary of the five trade accounts receivable sale programs with unaffiliated financial institutions where the Company may elect to sell receivables, at a discount, on an ongoing basis:


	Maximum	Type of	Expiration
Program	Amount (in millions)⁽¹⁾	Facility	Date
A	$756.5 ⁽²⁾	Uncommitted		August 31, 2022⁽³⁾
B	$150.0	Uncommitted		August 31, 2018
C	800.0 CNY	Uncommitted		February 15, 2018
D	$100.0	Uncommitted		November 1, 2018⁽³⁾
E	$50.0	Uncommitted		August 25, 2018

(1)

Maximum amount available at any one time.

(2)

The maximum amount under the program will be reduced to $650.0 million on February 1, 2018.

(3)

Any party may elect to terminate the agreement upon 15 days prior notice.

In connection with the trade accounts receivable sale programs, the Company recognized the following (in millions):

		Three months ended
		November 30, 2017		November 30, 2016
	Trade accounts receivable sold⁽¹⁾	$	1,095	$	944
	Cash proceeds received	$	1,092	$	943

(1)

The resulting losses on the sales of trade accounts receivable during the three months ended November 30, 2017 and 2016 were not material and were recorded to other expense within the Condensed Consolidated Statements of Operations.

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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