NOTE 3. SALES OF ACCOUNTS RECEIVABLE

During the fourth quarter of fiscal 2016, CMC entered into a fifth amended $200.0 million U.S. sale of trade accounts receivable program which expires on August 15, 2019. Under the program, CMC contributes, and several of its subsidiaries sell without recourse, certain eligible trade accounts receivable to CMC Receivables, Inc. ("CMCRV"), a wholly owned subsidiary of CMC. CMCRV is structured to be a bankruptcy-remote entity formed for the sole purpose of buying and selling trade accounts receivable generated by CMC. CMCRV sells the trade accounts receivable in their entirety to two financial institutions. Under the amended U.S. sale of trade accounts receivable program, with the consent of both CMCRV and the program's administrative agent, the amount advanced by the financial institutions can be increased to a maximum of $300.0 million for all trade accounts receivable sold. The remaining portion of the purchase price of the trade accounts receivable takes the form of subordinated notes from the respective financial institutions. These notes will be satisfied from the ultimate collection of the trade accounts receivable after payment of certain fees and other costs. The Company accounts for sales of the trade accounts receivable as true sales, and the trade accounts receivable balances that are sold are removed from the consolidated balance sheets. The cash advances received are reflected as cash provided by operating activities on the Company's consolidated statements of cash flows. Additionally, the U.S. sale of trade accounts receivable program contains certain cross-default provisions whereby a termination event could occur if the Company defaults under certain of its credit arrangements. The covenants contained in the receivables purchase agreement are consistent with the Credit Agreement described in Note 7, Credit Arrangements.

At February 28, 2017 and August 31, 2016, under its U.S. sale of trade accounts receivable program, the Company had sold $262.3 million and $215.9 million of trade accounts receivable, respectively, to the financial institutions. At February 28, 2017 and August 31, 2016, the Company had no advance payments outstanding on the sale of its trade accounts receivable.

In addition to the U.S. sale of trade accounts receivable program described above, the Company's international subsidiaries in Poland and Australia have sold trade accounts receivable to financial institutions without recourse. These arrangements constitute true sales, and once the trade accounts receivable are sold, they are no longer available to the Company's creditors in the event of bankruptcy and are removed from the consolidated balance sheets. The Polish program has a facility limit of 220.0 million Polish zloty ($54.0 million as of February 28, 2017) and allows the Company's Polish subsidiaries to obtain an advance of up to 90% of eligible trade accounts receivable sold under the terms of the arrangement. Under the Polish and Australian programs, the cash advances received were reflected as cash provided by operating activities on the Company's unaudited condensed consolidated statements of cash flows. In October 2016, the Company's existing Australian program expired and the Company did not enter into a new program.

At February 28, 2017, under its Polish program, the Company had sold $56.9 million of trade accounts receivable to the third-party financial institution. At August 31, 2016, under its Polish and Australian programs, the Company had sold $85.7 million of trade accounts receivable to third-party financial institutions. At February 28, 2017 and August 31, 2016, $3.2 million and $8.3 million in advance payments had been received, respectively.

During the six months ended February 28, 2017 and February 29, 2016, cash proceeds from the U.S. and international sale of trade accounts receivable programs were $178.8 million and $202.1 million, respectively, and cash payments to the owners of trade accounts receivable were $183.9 million and $190.6 million, respectively. For a nominal servicing fee, the Company is responsible for servicing the trade accounts receivable for the U.S. and Australian programs. Discounts on U.S. and international sales of trade accounts receivable were $0.2 million and $0.4 million for the three and six months ended February 28, 2017, respectively, and $0.5 million and $0.9 million for the three and six months ended February 29, 2016, respectively, and are included in selling, general and administrative expenses in the Company's unaudited condensed consolidated statements of earnings.

As of February 28, 2017 and August 31, 2016, the deferred purchase price on the Company's U.S. and international sale of trade accounts receivable programs is included in accounts receivable on the Company's unaudited condensed consolidated balance sheets. The following tables summarize the activity of the deferred purchase price receivables for the U.S. and international sale of trade accounts receivable programs.



	Three Months Ended February 28, 2017
(in thousands)	Total			U.S.			Poland
Beginning balance	$	261,521		$	215,717		$	45,804
Transfers of accounts receivable	643,478			561,010			82,468
Collections	(592,553		)	(518,008		)	(74,545		)
Ending balance	$	312,446		$	258,719		$	53,727



	Six Months Ended February 28, 2017
(in thousands)	Total			U.S.			Australia*			Poland
Beginning balance	$	289,748		$	212,762		$	26,662		$	50,324
Transfers of accounts receivable	1,200,442			1,031,155			16,914			152,373
Collections	(1,143,827		)	(985,198		)	(9,659		)	(148,970		)
Program termination	(33,917		)	—			(33,917		)	—
Ending balance	$	312,446		$	258,719		$	—		$	53,727

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* Includes the sales of trade accounts receivable activities related to discontinued operations and businesses sold. For the six months ended February 28, 2017, there were no transfers of trade accounts receivable, collections of $3.7 million and program termination of $1.6 million.



	Three Months Ended February 29, 2016
(in thousands)	Total			U.S.			Australia**			Poland
Beginning balance	$	228,862		$	196,130		$	15,286		$	17,446
Transfers of accounts receivable	537,774			432,900			37,256			67,618
Collections	(534,762		)	(435,995		)	(39,159		)	(59,608		)
Ending balance	$	231,874		$	193,035		$	13,383		$	25,456

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** Includes the sales of accounts receivable activities related to businesses held for sale (transfers of accounts receivable of $11.1 million and collections of $11.9 million for the three months ended February 29, 2016).



	Six Months Ended February 29, 2016
(in thousands)	Total			U.S.			Australia***			Poland
Beginning balance	$	339,547		$	269,778		$	18,038		$	51,731
Transfers of accounts receivable	1,126,193			919,423			83,330			123,440
Collections	(1,233,866		)	(996,166		)	(87,985		)	(149,715		)
Ending balance	$	231,874		$	193,035		$	13,383		$	25,456

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*** Includes the sales of trade accounts receivable activities related to discontinued operations and businesses held for sale. For the six months ended February 29, 2016, transfers of trade accounts receivable were $23.4 million and collections were $36.8 million.