the cmi story, page-20

Thanks GP,
what is your assessment of the businesses ? they seem to be about flat, but other similar companies are reporting a pick up in the last few months.
l get the impression that manaagement is not exactly on the ball as there should be evident a pick up in sales.

did you read the waffle on item 14 re: the debt write off ?

l find this a nonsense - how can they justify it ??

"Associated with the sale of the engineering business was a loan provided by CMI Limited to the purchaser to
purchase the business with a $17 million face value. The loan instrument has embedded early repayment
discount features that allow for discounts of up to $3 million. This discount decreases in proportion to the
amount of early repayments until the expiry of the three year term of the loan. The $17 million loan had been
recorded by CMI at its fair value of $14 million at 30 June 2008 and classed as a current financial asset as it
was expected to be repaid in the following 12 month period. The loan bears interest on normal terms. The loan
is secured by a second ranking fixed and floating charge over CMI Industrial Pty Ltd behind the National
Australia Bank and a personal guarantee from M.J. Hofmeister of $2.5 million. On recognition the directors
assessed the fair value of this loan to be $14 million and not its face value of $17 million. Any premium
received above $14 million was to be recorded as interest income.
As at 30 June 2009 two discount repayment periods had expired and the directors expected the third, fourth and
fifth discount periods to expire in October 2009, April and October 2010. The loan was carried at $16.5 million
at 30 June 2009.
On a regular basis the Board of CMI has assessed the recoverable value of the loan by assessing if there is any
objective evidence of impairment as a result of one or more events that have occurred. On 24 June 2010 the
Board determined that objective evidence of impairment in the loan balance existed (based on information
provided by the borrower and other external sources) and again re-assessed the estimated future cash flows
from this asset. As a result of this the loans carrying value exceeded its recoverable value by $8 million and an
impairment expense and provision for this amount was recorded.
In forming the accounts at 30 June 2010 and subsequent to this date the Boards assessment of the loans
recoverable value has not changed with respect to this loan."