Accounts Receivable Securitization

12 Months Ended

Dec. 31, 2017

Accounts Receivable Securitization [Abstract]

Accounts Receivable Securitization

7. Accounts Receivable Securitization

In October 2016, the Company entered into an accounts receivable securitization program with a commitment size of $40 million, whereby transactions under the program are accounted for as sales of trade receivables in accordance with ASC Topic 860, Transfers and Servicing. Sales of trade receivables under the program are recorded as a reduction of accounts receivable in the Consolidated Balance Sheet. Proceeds received, including collections on the deferred purchase price receivable, are included in cash flows from operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.

The initial trade receivables sold to the third-party financial institution, Wells Fargo, in October 2016, totaled $60.6 million, for which $40 million in proceeds was received. The fair value of the receivables sold equaled the carrying cost at the time of sale and no gain or loss was recorded as a result of the sale. The sale also resulted in the recording of a deferred purchase price amount which represents the retained interest in the sold receivables. This amount is adjusted each month based on collections and other activity. The fair value of the deferred purchase price receivable recorded on the initial sale in October 2016 was $20.6 million. The Company estimates the fair value of the deferred purchase price receivable based on historical performance of similar receivables including an allowance for doubtful accounts, as well as estimated cash discounts to be taken by customers and potential credits issued to customers. The Company deems the interest rate risk related to the deferred purchase price receivable to be de minimis primarily due to the short average collection cycle of the related receivables.

In October 2017, the Company expanded the commitment size of the program to a total of $60 million. The Company has sold trade receivables of $102.0 million to Wells Fargo for $60 million in proceeds in the aggregate.

As of December 31, 2017 and December 31, 2016, the trade receivables sold to Wells Fargo totaled $96.4 million and $58.7 million, respectively. The fair value of the deferred purchase price receivable was $36.4 million as of December 31, 2017 and $18.7 million as of December 31, 2016.  These amounts are recorded in Trade Accounts Receivable in the Company’s Consolidated Balance Sheet.