Trade Accounts Receivable Securitization and Sale Programs

The Company regularly sells designated pools of trade accounts receivable under a foreign asset-backed securitization program, a North American asset-backed securitization program and 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 fiscal years ended August 31, 2019, 2018 and 2017 were not material. The Company does not record a servicing asset or liability on the 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 Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Consolidated Statements of Cash Flows. The adoption of Accounting Standards Update No. 2016-15 (“ASU 2016-15”) described in Note 17, New Accounting Guidance, resulted in a reclassification of cash flows from operating activities to investing activities for all periods presented in the Company’s Consolidated Statement of Cash Flows for cash receipts related to collections on the deferred purchase price receivable (i.e. beneficial interest) on asset-backed securitization transactions. In addition, the beneficial interest of $162.2 million, $2.0 billion, and $2.8 billion for the fiscal years ended August 31, 2019, 2018, and 2017, respectively, obtained in exchange for securitized receivables are reported as non-cash investing activities.

Asset-Backed Securitization Programs

The Company continuously sells designated pools of trade accounts receivable, at a discount, under its foreign asset-backed securitization program to a special purpose entity, which in turn sells certain of the receivables to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution on a monthly basis. Effective October 1, 2018, the foreign asset-backed securitization program terms were amended and the program was extended to September 30, 2021. In connection with this amendment, there is no longer a deferred purchase price receivable for the foreign asset-backed securitization program as the entire purchase price is paid in cash when the receivables are sold.

As of October 1, 2018, approximately $734.2 million of accounts receivable sold under the foreign asset-backed securitization program was exchanged for the outstanding deferred purchase price receivable of $335.5 million. The remaining amount due to the financial institution of $398.7 million was subsequently settled for $25.2 million of cash and $373.5 million of trade accounts receivable sold to the financial institution. The previously sold trade accounts receivable were recorded at fair market value. Prior to the amendment, any portion of the purchase price for the receivables not paid in cash upon the sale occurring was recorded as a deferred purchase price receivable, which was paid from available cash as payments on the receivables were collected. The amended foreign asset-backed securitization program contains a guarantee of payment by the special purpose entity, in an amount equal to approximately the net cash proceeds under the program. No liability has been recorded for obligations under the guarantee as of August 31, 2019.

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 entity associated with the foreign asset-backed securitization program is included in the Company’s Consolidated Financial Statements.

The North American asset-backed securitization program was terminated on October 9, 2018 and as of this date approximately $500.0 million of accounts receivable sold under the program was exchanged for the outstanding deferred purchase price receivable of $300.0 million and $200.0 million of cash. The previously sold trade accounts receivable were recorded at fair market value.

On November 27, 2018, the Company entered into a new North American asset-backed securitization program. The Company continuously sells designated pools of trade accounts receivable, at a discount, under its new North American asset-backed securitization program to a special purpose entity, which in turn sells certain of the receivables to conduits administered by unaffiliated financial institutions on a monthly basis. The special purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in the Company’s Consolidated Financial Statements. There is no longer a deferred purchase price receivable for the North American asset-backed securitization program as the entire purchase price is paid in cash when the receivables are sold. Additionally, certain unsold receivables covering the maximum amount of net cash proceeds available under the program are pledged as collateral to the unaffiliated financial institution as of August 31, 2019.

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



	Maximum Amount of Net Cash Proceeds (in millions)⁽¹⁾		Expiration Date
North American	$	390.0	November 22, 2021
Foreign	$	400.0	September 30, 2021


⁽¹⁾	Maximum amount available at any one time.

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



	Fiscal Year Ended August 31,
	2019⁽³⁾		2018		2017
Trade accounts receivable sold	$	4,057	$	8,386	$	8,878
Cash proceeds received⁽¹⁾	$	4,031	$	7,838	$	8,300
Pre-tax losses on sale of receivables⁽²⁾	$	26	$	15	$	9
Deferred purchase price receivables as of August 31	$	—	$	533	$	569


⁽¹⁾	The amounts primarily represent proceeds from collections reinvested in revolving-period transfers.


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


⁽³⁾	Excludes $650.3 million of trade accounts receivable sold, $488.1 million of cash and $13.9 million of net cash received prior to the amendment of the foreign asset-backed securitization program and under the previous North American asset-backed securitization program.

The asset-backed securitization programs require compliance with several covenants. The North American asset-backed securitization program covenants include compliance with the interest ratio and debt to EBITDA ratio of the five-year unsecured credit facility amended as of November 8, 2017 (“the 2017 Credit Facility”). The foreign asset-backed securitization program covenants include limitations on certain corporate actions such as mergers and consolidations. As of August 31, 2019 and 2018, the Company was in compliance with all covenants under the asset-backed securitization programs.

Trade Accounts Receivable Sale Programs

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



Program	Maximum Amount (in millions)⁽¹⁾			Type of Facility	Expiration Date
A	$	800.0		Uncommitted	August 31, 2022	(2)
B	$	150.0		Uncommitted	November 30, 2019	(3)
C	800.0		CNY	Uncommitted	June 30, 2020
D	$	100.0		Uncommitted	May 4, 2023	(4)
E	$	50.0		Uncommitted	August 25, 2020
F	$	150.0		Uncommitted	January 25, 2020	(5)
G	$	50.0		Uncommitted	February 23, 2023	(2)
H	$	100.0		Uncommitted	August 10, 2020	(6)
I	$	100.0		Uncommitted	July 21, 2020	(7)
J	$	740.0		Uncommitted	February 28, 2020	(8)
K	$	110.0		Uncommitted	April 11, 2020	(9)


⁽¹⁾	Maximum amount available at any one time.


⁽²⁾	Any party may elect to terminate the agreement upon 15 days prior notice.


⁽³⁾	The program will automatically extend for one year at each expiration date unless either party provides 10 days notice of termination.


⁽⁴⁾	Any party may elect to terminate the agreement upon 30 days prior notice.


⁽⁵⁾	The program will be automatically extended through January 25, 2023 unless either party provides 30 days notice of termination.


⁽⁶⁾	The program will be automatically extended through August 10, 2023 unless either party provides 30 days notice of termination.


⁽⁷⁾	The program will be automatically extended through August 21, 2023 unless either party provides 30 days notice of termination.


⁽⁸⁾	The program will be automatically extended through February 28, 2024 unless either party provides 90 days notice of termination.


⁽⁹⁾	The program will be automatically extended each year through April 11, 2025 unless either party provides 30 days notice of termination.

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



	Fiscal Year Ended August 31,
	2019		2018		2017
Trade accounts receivable sold	$	6,751	$	5,480	$	2,968
Cash proceeds received	$	6,723	$	5,463	$	2,962
Pre-tax losses on sale of receivables⁽¹⁾	$	28	$	17	$	6


⁽¹⁾	Recorded to other expense within the Consolidated Statements of Operations.