Accounts Receivable Sales Agreement

6 Months Ended

Jun. 30, 2020

On May 29, 2020 the Company entered into an agreement (the “A/R Sales Agreement”) to sell short-term receivables from certain customer trade accounts to an unaffiliated financial institution. The A/R Sales Agreement has a 364 day term, which the Company intends to renew each year. The terms of the A/R Sales Agreement limit the total principal amount outstanding of receivables sold to approximately $500,000 at any point in time.

As part of the A/R Sales Agreement, the Company continuously sells designated pools of trade accounts receivable to a separate bankruptcy-remote special purpose entity whose assets would be first available to satisfy the creditor claims of the unaffiliated financial institution. The Company controls and therefore consolidates the special purpose entity in its condensed consolidated financial statements. The special purpose entity in turn sells certain of the receivables to the unaffiliated financial institution on a monthly basis. These sales to the unaffiliated financial institution are accounted for as sales because control over the receivables is transferred to the unaffiliated financial institution under the terms of the agreement.

The following table represents a summary of the activity under the A/R Sales Agreement since its inception:


	June 30, 2020
Receivables sold to the financial institution and derecognized	$	902,326
Cash collected on sold receivables	$	402,302
Receivables pledged as collateral on sold receivables as of period-end	$	342,636

Cash proceeds related to the receivables sold are included in cash from operating activities in the condensed consolidated statement of cash flows. The fees recorded in connection with the sales are immaterial and are recorded within other non-operating (income) expenses in the condensed consolidated statements of income. The future amount may fluctuate based on the level of activity and other factors. The Company maintains continuing involvement with the sold receivables by providing collection services. The associated servicing liability is not material given the high quality of the customers underlying the receivables and the anticipated short collection period. The Company may incur a recourse obligation in limited circumstances. Separate accruals for recourse obligations are immaterial.