This excerpt taken from the XIDE 10-K filed Mar 1, 2005.
Receivables Securitization Programs
In the past, the Company maintained receivables securitization programs in the United States (the U.S. program) and Europe (the European program). Cash generated from these programs was used to provide liquidity requirements to the Company.
On May 31, 2002, the Company entered into a $177,500 European receivable securitization facility. A special purpose entity was established in connection with this securitization facility which the Company has determined is a variable interest entity in accordance with the provisions of FIN 46. This entity is consolidated by the Company, such that the new facility is accounted for as a secured borrowing in accordance with the requirements of SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, whereby the accounts receivable and related borrowings are recorded on the Companys consolidated balance sheet. This facility replaced the Companys then existing European securitization program.
Under the previous European securitization program, certain of the Companys European subsidiaries sold selected receivables to a wholly owned bankruptcy-remote subsidiary of the Company, Exide Europe Funding Ltd., which in turn established a multi-currency receivable sale facility (collectively, the European Agreement) with a financial institution, whereby the financial institution committed to purchase on a continuous basis, with limited recourse, all right, title and interest in these receivables up to a maximum net investment of $175,000.
The Company also entered into a receivables sale agreement (the U.S. Agreement) with certain banks, and under this agreement, the banks committed to purchase, with limited recourse, all right, title and interest in selected accounts receivable of the U.S. Company, up to a maximum net investment of $200,000. In connection with the U.S. Agreement, the Company established a wholly owned, bankruptcy-remote subsidiary, Exide U.S. Funding Corporation, to purchase accounts receivable at a discount from the Company on a continuous basis, subject to certain limitations as described in the U.S. Agreement. Exide U.S. Funding Corporation simultaneously sold the accounts receivable to the banks.
During fiscal 2003, the Company terminated and repurchased uncollected securitized accounts receivable under the U.S. program and previous European securitization program for $117,455 and $124,793, respectively.
On February 13, 2004, the May 2002 European securitization program was refinanced by the Companys Replacement DIP Credit Facility.
Losses and expenses related to receivables sold under or pledged to these agreements for fiscal years 2004, 2003 and 2002 were $11,260, $11,989 and $14,635, respectively, and are included in other (income) expense, net in the consolidated statements of operations.
Except for the May 2002 European securitization program, the above transactions qualified as sales under the provisions of SFAS 140. The Company adopted SFAS 140 in the beginning of fiscal 2002 for transfers of receivables after March 31, 2001.