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Trade Accounts Receivable Securitization and Sale Programs
 9 Months Ended
May 31, 2011
Trade Accounts Receivable Securitization and Sale Programs [Abstract]  
Trade Accounts Receivable Securitization and Sale Programs
Note 8. Trade Accounts Receivable Securitization and Sale Programs
The Company regularly sells designated pools of trade accounts receivable under two asset-backed securitization programs, two trade accounts receivable sale programs and a factoring program.
a. Asset-Backed Securitization Program
     In connection with the asset-backed securitization program, the Company regularly sells a designated pool of trade accounts receivable to a wholly-owned subsidiary, which in turn sells 100% of the eligible receivables to conduits, administered by unaffiliated financial institutions. This wholly-owned subsidiary is a separate bankruptcy-remote entity and its assets would be available first to satisfy the creditor claims of the conduits. As the receivables sold are collected, the wholly-owned subsidiary is able to sell additional receivables up to the maximum permitted amount under the program. Net cash proceeds of $300.0 million are available at any one time under the securitization program.
     Prior to September 1, 2010, the transactions in this program were accounted for as sales under applicable accounting guidance. Effective September 1, 2010, the Company adopted new accounting guidance that resulted in more stringent conditions for reporting the transfer of a financial asset as a sale. As a result of the adoption of this new guidance, the accounts receivable transferred under this program no longer qualified for sale treatment and as such were accounted for as secured borrowings. During the first quarter of fiscal year 2011, this program was amended to again account for the transfers of the applicable accounts receivable as sales. Under the amended program any portion of the purchase price for the receivables which is not paid in cash upon the sale taking place is recorded as a deferred purchase price receivable, which is paid by the conduits from available cash as payments on the receivables are collected. The securitization program requires compliance with several financial covenants including an interest coverage ratio and debt to EBITDA ratio, as defined in the securitization agreements. The securitization agreement, as amended on November 5, 2010, expires on November 4, 2011.
     Net receivables sold under this program are excluded from trade 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. The wholly-owned subsidiary is assessed (i) a fee on the unused portion of the program of 0.50% per annum based on the average daily unused aggregate receivables sold during the period and (ii) a usage fee on the utilized portion of the program is equal to 0.95% per annum (inclusive of the unused fee) on the average daily outstanding aggregate receivables sold during the immediately preceding calendar month. The securitization conduits and the investors in the conduits have no recourse to the Company’s assets for failure of debtors to pay when due.
     The Company continues servicing the receivables sold and in exchange receives a servicing fee. Servicing fees recognized during the three months and nine months ended May 31, 2011 and 2010 were not material and are included in other expense within the Condensed Consolidated Statements of Operations. The Company does not record a servicing asset or liability as the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value.
     The Company sold $1.4 billion and $4.3 billion of eligible trade accounts receivable during the three months and nine months ended May 31, 2011, respectively. In exchange, the Company received cash proceeds of $1.1 billion and $4.0 billion during the three months and nine months ended May 31, 2011, respectively, and a net deferred purchase price receivable. At May 31, 2011, the deferred purchase price receivable totaled approximately $280.1 million, which was recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. The deferred purchase price receivable was valued using unobservable inputs (Level 3 inputs), primarily discounted cash flows, and due to its credit quality and short-term maturity the fair value approximated book value.
     The Company sold $1.1 billion and $3.6 billion of eligible trade accounts receivable during the three months and nine months ended May 31, 2010, respectively. In exchange, the Company received cash proceeds of $0.9 billion and $3.4 billion during the three months and nine months ended May 31, 2010, respectively, and retained an interest in the receivables of approximately $144.6 million at May 31, 2010.
     The Company recognized pretax losses on the sales of receivables of approximately $0.8 million and $2.7 million during the three months and nine months ended May 31, 2011 compared to $0.9 million and $2.9 million during the three months and nine months ended May 31, 2010, respectively, which are recorded to other expense within the Condensed Consolidated Statements of Operations. Prior to execution of the previously discussed amendment, the Company recognized interest expense of approximately $0.5 million during the first quarter of fiscal year 2011 associated with the secured borrowings.
b. Foreign Asset-Backed Securitization Program
     In connection with the foreign asset-backed securitization program, prior to May 11, 2011, certain of the Company’s foreign subsidiaries sold, on an ongoing basis, an undivided interest in designated pools of trade accounts receivable to a special purpose entity, which in turn borrowed up to $100.0 million from an unaffiliated financial institution and granted a security interest in the accounts receivable as collateral for the borrowings. The securitization program was accounted for as a borrowing. The loan balance was calculated based on the terms of the securitization program agreements.
     Effective May 11, 2011, the securitization program was amended to provide for the sale of 100% of the designated trade accounts receivable of the Company’s foreign subsidiaries to the special purpose entity which in turn sells 100% of the receivables to an unaffiliated financial institution. Net cash proceeds of $200.0 million are available at any one time under the securitization program. As a result of the amendment, transfers of the receivables to the unaffiliated financial institution are accounted for as sales. Under the amended program, any portion of the purchase price for the receivables which is not paid in cash to the special purpose entity upon the sale taking place is recorded as a deferred purchase price receivable, which is paid to the special purpose entity as payments on the receivables are collected. The foreign-asset backed securitization program requires compliance with several covenants including limitations on certain corporate actions such as mergers and consolidations. The securitization agreement, as amended on May 11, 2011, expires on May 10, 2012.
     As the Company has the power to direct the activities of the special purpose entity and the obligation to absorb the majority of the expected losses or the right to receive benefits from the transfer of trade accounts receivable into the special purpose entity it is deemed the primary beneficiary. Accordingly, the Company consolidates the special purpose entity (which was also the case prior to the amendment on May 11, 2011).
     Net receivables sold under this program are excluded from trade 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. The special purpose entity is assessed (i) a fee in an amount equal to 0.45% per annum multiplied by the maximum aggregate invested amount during the period and (ii) a fee on the average amount outstanding under the program during the period multiplied by the applicable rate in effect for the period (i.e. LIBOR for U.S. dollars and EURIBOR for euros) plus a 0.45% per annum margin. The unaffiliated financial institution has no recourse to the Company’s assets for failure of debtors to pay when due.
     The Company continues servicing the receivables in the program and in exchange receives a servicing fee. Servicing fees recognized during the three months and nine months ended May 31, 2011 and 2010 were not material and are included in interest expense up through the amendment date of May 11, 2011 and in other expense subsequent to May 11, 2011 within the Condensed Consolidated Statements of Operations. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value.
     Subsequent to the amendment on May 11, 2011 through May 31, 2011, the Company sold (including amounts transferred into the program on the amendment date) $352.8 million of eligible trade accounts receivable. In exchange, the Company received cash proceeds of $258.9 million during the same period, and a net deferred purchase price receivable. At May 31, 2011, the deferred purchase price receivable totaled approximately $93.9 million, which was recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. The deferred purchase price receivable was valued using unobservable inputs (Level 3 inputs), primarily discounted cash flows, and due to its credit quality and short-term maturity the fair value approximated book value. The resulting losses on the sales of the receivables subsequent to the amendment on May 11, 2011 through May 31, 2011 were $0.5 million and were recorded to other expense within the Condensed Consolidated Statements of Operations.
Prior to execution of the previously discussed amendment, the Company recognized interest expense of approximately $0.3 million and $0.9 million for the three months and nine months ended May 31, 2011 associated with the secured borrowings.
          At May 31, 2010, the Company had $58.1 million of secured borrowings outstanding under the program. In addition, the Company incurred interest expense of $0.4 million and $1.8 million recorded in the Condensed Consolidated Statements of Operations during the three months and nine months ended May 31, 2010.
c. Trade Accounts Receivable Factoring Agreement
     In connection with a factoring agreement, the Company transfers ownership of eligible trade accounts receivable of a foreign subsidiary without recourse to a third party purchaser in exchange for cash. The factoring of trade accounts receivable under this agreement is accounted for as a sale. Proceeds on the transfer reflect the face value of the account less a discount. The discount is recorded as a loss to other expense within the Condensed Consolidated Statements of Operations in the period of the sale. In April 2011, the factoring agreement was extended through September 30, 2011, at which time it is expected to automatically renew for an additional six-month period.
     The receivables sold pursuant to this factoring agreement are excluded from trade 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. The Company continues to service, administer and collect the receivables sold under this program. Servicing fees recognized during the three months and nine months ended May 31, 2011 and 2010 were not material, and were recorded to other expense within the Condensed Consolidated Statements of Operations. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value. The third party purchaser has no recourse to the Company’s assets for failure of debtors to pay when due.
     The Company sold $14.4 million and $50.6 million of trade accounts receivable during the three months and nine months ended May 31, 2011, respectively, and in exchange, received cash proceeds of $14.3 million and $50.5 million, respectively. The resulting losses on the sales of trade accounts receivables sold under this factoring agreement for the three months and nine months ended May 31, 2011 were not material, and were recorded to other expense within the Condensed Consolidated Statements of Operations. The Company sold $20.8 million and $68.9 million of trade accounts during the three months and nine months ended May 31, 2010, respectively, and in exchange, received cash proceeds of $20.8 million and $68.8 million, respectively. The resulting losses on the sales of trade accounts receivables sold under this factoring agreement for the three months and nine months ended May 31, 2010 were not material, and were recorded to other expense within the Condensed Consolidated Statements of Operations.
d. Trade Accounts Receivable Sale Programs
     In fiscal year 2010, the Company entered into two separate uncommitted accounts receivable sale agreements with banks which originally allowed the Company and certain of its subsidiaries to elect to sell and the banks to elect to purchase at a discount, on an ongoing basis, up to a maximum of $150.0 million and $75.0 million of specific trade accounts receivable at any one time. The sale programs have been amended to increase the facility limits from $150.0 million to $200.0 million and from $75.0 million to $175.0 million of specific trade accounts receivable at any one time. The programs are accounted for as sales. Net receivables sold under the programs are excluded from trade 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. The $200.0 million sale program was amended on May 27, 2011. The terms of the agreement were amended such that the program no longer has a defined termination date and either party can elect to cancel the agreement at any time with notification. The $175.0 million sale program expires on August 24, 2011. The Company continues servicing the receivables in the program. Servicing fees recognized during the three months and nine months ended May 31, 2011 and 2010 were not material and are included in other expense within the Condensed Consolidated Statements of Operations. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value.
     During the three and nine months ended May 31, 2011, the Company sold $697.8 million and $1.8 billion of trade accounts receivable under these programs, respectively. In exchange, the Company received cash proceeds of $697.3 million and $1.8 billion, respectively. The resulting losses on the sales of trade accounts receivable for the three months and nine months ended May 31, 2011, were not material and were recorded to other expense within the Condensed Consolidated Statements of Operations. During the three and nine months ended May 31, 2010, the Company sold $43.5 million of trade accounts receivable under these programs. In exchange, the Company received cash proceeds of $43.5 million. The resulting losses on the sales of trade accounts receivable for the three months and nine months ended May 31, 2010, were not material and were recorded to other expense within the Condensed Consolidated Statements of Operations.