Sales of Accounts Receivable

3 Months Ended

Nov. 30, 2011

Sales of Accounts Receivable [Abstract]

SALES OF ACCOUNTS RECEIVABLE

NOTE 2 — SALES OF ACCOUNTS RECEIVABLE

The Company periodically contributes, and several of its subsidiaries periodically sell without recourse, certain eligible trade accounts receivable to the Company’s wholly-owned consolidated special purpose subsidiary, CMC Receivables, Inc. (“CMCRV”). CMCRV is structured to be a bankruptcy-remote entity and was formed for the sole purpose of buying and selling receivables generated by the Company. Depending on the Company’s level of financing needs, CMCRV will sell the trade accounts receivable in their entirety to a third party financial institution. The third party financial institution will advance up to a maximum of $100 million for all receivables and the remaining portion due to the Company will be deferred until the ultimate collection of the underlying receivables. On December 28, 2011, the Company amended its domestic sales of receivable facility which increased the capacity to $200 million and extended the maturity date to December 26, 2014. The Company accounts for sales to the financial institution as true sales and the cash advances for receivables are removed from the consolidated balance sheets and reflected as cash provided by operating activities. Additionally, the receivables program contains certain cross-default provisions whereby a termination event could occur if the Company defaulted under one of its credit arrangements. The covenants contained in this agreement are consistent with the credit facility fully described in Note 8, Credit Arrangements.

At November 30, 2011 and August 31, 2011, the Company sold $524.9 million and $557.0 million of receivables, respectively, to the third party financial institution, of which $50.0 million was received as advance payments in both periods. The remaining amounts of $474.9 million and $507.0 million, respectively, are the deferred purchase prices. The fair value of the deferred purchase prices at November 30, 2011 and August 31, 2011 were $463.7 million and $494.7 million, respectively, and are included as trade receivables on the consolidated balance sheets. The carrying value of the deferred purchase price approximates fair value due to the short-term nature of the underlying financial assets.

In addition to the domestic sale of accounts receivable program described above, the Company’s international subsidiaries in Europe and Australia periodically sell accounts receivable without recourse. These arrangements constitute true sales, and once the accounts are sold, they are no longer available to satisfy the Company’s creditors in the event of bankruptcy. Uncollected accounts receivable sold under these arrangements and removed from the consolidated balance sheets were $180.0 million and $132.2 million at November 30, 2011 and August 31, 2011, respectively. The Australian program contains financial covenants in which the subsidiary must meet certain coverage and tangible net worth levels, as defined. At November 30, 2011, the Australian subsidiary was not in compliance with these covenants. Commercial Metals Company provided a guarantee of the Australian subsidiary’s performance resulting in the financial covenants being waived at November 30, 2011. The guarantee will cease to be effective when the Australian subsidiary is in compliance with the financial covenants for two consecutive quarters.

During the three months ended November 30, 2011 and 2010, proceeds from the domestic and international sales of receivables were $528.9 million and $285.5 million, respectively, and cash payments to the owners of receivables were $481.1 million and $263.5 million, respectively. The Company is responsible for servicing the receivables for a nominal servicing fee. Discounts on domestic and international sales of accounts receivable were $1.7 million and $1.2 million for the three months ended November 30, 2011 and 2010, respectively. These discounts primarily represented the costs of funds and were included in selling, general and administrative expenses.