Boart Longyear®
AnnuAl RepoRt 2009
Executive Leadership Team
20
Financial Statements
2
4
6
8
Financial Report
Directors’ Report
Independent Auditor’s Report
18
Directors’ Declaration
21
Supplementary Information
23
Corporate information
50
52
Contents
Chairman's letter
Chief Executive Officer's report
Results summary
Business review
Board of Directors
Financial Calendar
2009 Full Year Financial results
Annual General Meeting
Financial Half Year End
Interim results
Financial Year End
Annual General Meeting
The Annual General Meeting of Boart Longyear will be held at
Museum of Sydney – AGL Theatre
Corner Bridge and Phillip Streets
Sydney, NSW 2000, Australia
Commencing at 10.00am on 11 May 2010
Telephone +61 2 9251 5988
Boart Longyear Limited
ACN. 123 052 728
53
131
IBC
19 February 2010
11 May 2010
30 June 2010
August 2010
31 December 2010
Forward-Looking Statements
Statements in this report that are
not historical are forward-looking
statements. These statements are
based on management’s current belief
and their expectations. The forward-
looking statements in this report are
subject to uncertainty and changes
in circumstances and involve risks
and uncertainties that may affect
our operations, markets, products,
services, prices and other factors as
discussed in our filings with the Australian
Securities Exchange. Significant risks
and uncertainties may relate to, but
are not limited to, financial, economic,
competitive, environmental, political, legal,
regulatory and technological factors.
In addition, completion of transactions
of the type described in this report are
subject to a number of uncertainties and
to negotiation and execution of definitive
agreements among the parties and
closing will be subject to approvals and
other customary conditions. Accordingly,
there can be no assurance that the
transactions will be completed or that
our expectations will be realised. We
assume no obligations to provide revision
to any forward-looking statements
should circumstances change, except as
otherwise required by securities and other
applicable laws.
Corporate information
Headquarters
Principal Administrative Office
10808 South Riverfront Parkway #600
South Jordan, Utah 84095
Tel: +1 801 972 6430
Fax: +1 801 977 3374
Registered Office
919-929 Marion Road
Mitchell Park,
South Australia 5043
Tel: +61 8 8375 8375
Fax: +61 8 8377 0539
Auditors
Deloitte Touche Tohmatsu
Company Secretaries
Fabrizio Rasetti
Paul Blewett
Shareholder Enquiries
Boart Longyear
Investor Relations
10808 South Riverfront Parkway
South Jordan, Utah 84095
Australia: +61 8 8375 8300
Others: +1 801 952 8513
email: ir@boartlongyear.com
Listing
Boart Longyear is listed on the
Australian Securities Exchange
under the symbol “BLY”
Share Registry
Link Market Services Limited
Level 12680 George Street
Sydney NSW 2000
Tel: +61 2 8280 7111
Annual Meeting
The third Annual General Meeting of
Shareholders of Boart Longyear Limited
will be held at the Museum of Sydney,
located at the corner of Bridge and Phillip
Streets, Sydney NSW 2000 on Tuesday,
11 May 2010, commencing at 10:00 a.m.
(Sydney time).
Website
www.boartlongyear.com
www.precinct.com.au
Boart Longyear® is the leading provider of
mineral exploration drilling services and
drilling products for the global mining industry.
We are the only integrated drilling services
and products provider, combining engineering
excellence, global manufacturing facilities and
the most experienced drilling services group
in the business. Our customers rely on our
unique ability to develop, field test, and deliver
any combination of drilling consumables,
capital equipment, and expertise direct to
any corner of the world. We have provided
this service for over 120 years.
Chairman’s letter
2
I am pleased to present our 2009 Annual
Report. The past year was the most
challenging operating environment our
Company has experienced for many years.
The global financial crisis in late 2008 led to
tight credit market conditions that endured
for most of 2009. This, in turn, reduced
demand worldwide across many industries,
including the mining industry that we serve.
The Company’s management reacted swiftly
to the changed circumstances by reducing
manufacturing capacity and headcount,
lowering overhead and operating costs,
and cutting back capital expenditure.
As a result, the Company maintained
positive cash generation throughout the
year and ample interest cover.
Chair man
Boart Longyear Annual Report 2009
3
In May, we announced our intention to
renegotiate our banking arrangements
prior to year‑end 2009. After an
exhaustive review of all available options,
the Board decided in August to undertake
a comprehensive recapitalisation of the
Company. A placement to institutional
investors, coupled with a one‑for‑one
rights issue and a share purchase plan
for retail shareholders, raised a total
(before expenses) of US$698 million.
This was accomplished through the
issue of over three billion new shares
at the price of AU$0.27 cents per
share, a discount of 18 percent on the
theoretical ex‑rights price for the 30 days
prior to the recapitalisation program
announcement. All elements of the
recapitalisation were oversubscribed,
and we thank our shareholders for their
support for this program.
The net proceeds raised were used
to repay, in full, the Company’s
US$585 million term debt facility due
to mature in April 2010. A portion of
the Company’s bank revolver facility
was also paid down. Accordingly, following
the recapitalisation program, the Company
ended 2009 with a strong balance sheet,
including net debt of US$48 million and
undrawn facilities totalling US$133 million.
The Company made a statutory
loss in 2009 of US$15 million after
tax (US$157 million profit in 2008).
Adjusting to remove restructuring
charges, the net loss on the disposal
of businesses, debt restructuring
charges and related tax charges,
our underlying profit after tax was
US$7 million. Both revenue and EBITDA
were substantially down on the prior
record year.
In 2009 our EBITDA was US$111 million
(US$356 million in 2008) on revenues of
US$978 million (US$1.8 billion in 2008).
Adjusting to remove restructuring charges
of US$12 million and a US$4 million
loss on the disposal of businesses, our
underlying EBITDA was US$128 million.
Despite significantly lower revenues
and EBITDA, the Company generated
adjusted net operating cash during
the year of US$129 million through
tight management of working capital
and reduced capital expenditure
(US$37 million, down from
US$146 million in 2008).
In light of our trading results, the Board
has decided to pay no final dividend for
2009. The Board expects to resume
dividend payments as business
conditions improve.
Chair man
Although the priority in 2009 was
operational cost efficiency and cash
conservation, I am pleased to report
that the Company maintained its strong
commitment to safety and to new
product development during the year.
Improvements were made in our already
industry‑leading safety performance, and
our Lost Time Incident Rate declined by
over 40 percent during the year. During
2009 we launched over 10 new products
and our ongoing R&D program remains
on track to launch over a dozen new
products in 2010. These products will
provide increased safety, productivity
and reliability to our customers and will
continue to strengthen our brand and
market position in the years ahead.
Looking forward, we are confident that
our markets are improving in 2010.
Moreover, we are well‑placed to capture
our full share of increased demand,
for both drilling services and products.
Our focus will remain on meeting our
customers’ needs with quality products
and services and a steadfast commitment
to safe operations. I take this opportunity
to thank our customers and suppliers for
their support during 2009.
I would also like to thank my fellow
Board members for their exceptional
contribution during 2009. The Board met
on seven occasions and also participated
in 35 special meetings. All directors
contributed with dedication and
commitment. I would also like to thank
our Chief Executive Officer, Craig Kipp,
and his executive team for their leadership
and dedication during a difficult year.
On behalf of the Board, I thank all of our
6,500 employees around the world for
their efforts and achievements.
Graham Bradley AM
Chairman
Chief Executive Officer’s report
4
2009 was a tough year for global business.
Boart Longyear was not immune from these
conditions. In last year’s letter to shareholders,
I stated: “We will come out of this current
global downturn stronger, leaner and more
focused.” I am happy to report that we
have done just that. Boart Longyear now
enters 2010 in a good position: stronger,
smarter, more disciplined and optimistic.
C E
Over a three‑month period starting in
late 2008, we experienced close to
a 50 percent decline in revenue. This
coincided with the looming April 2010
maturity of most of our debt and the
virtual closure of the global financial
markets. For us, this resulted in a
balance sheet that needed to be
improved and an urgent need for
cost restructuring. Our leaders stayed
focused and got to work.
We moved quickly, taking out 34 percent
of SG&A and reducing head count by
40 percent, while our operating teams
continued to deliver on global customer
commitments and also improved our
safety performance. In mid‑year both
existing and new shareholders supported
our necessary equity raising, allowing us
to retire US$585 million of debt.
As we put 2009 in the corporate history
books, there are a couple of key lessons
worth reflecting upon that will serve
Boart Longyear in the future. The first
is the “speed premium”. The world will
continue to get smaller, more connected,
and yet more “local”. We were able to
react quickly and stay in front of the cost
curve during this financial crisis because
our global leaders in over 40 countries
remained connected to their regional
customers and also the global market.
We will continue to invest in a new
ERP platform so our teams will be
supported with up‑to‑date, real time
market information, allowing our global
teams to have the ability to take decisive
action on the spot.
Boart Longyear Annual Report 2009
5
Second, despite severe cost constraints
and rapid global restructuring efforts, we
continued a very robust R&D program,
resulting in an exciting pipeline of
new products and drilling technology
for 2010. Our planned new product
launches and drilling technology are
the best they have ever been!
Fulfilling Boart Longyear’s potential
remains an exciting challenge. Our focus
remains on driving exploration technology,
building relationships with key mining
and drilling customers, and leveraging
our unique products and services mix.
However, feedback from our customers
has also reminded us that we must
build a “consistent Boart Longyear”.
As I travel the mining world, I often hear,
“I wish I could deal with the same Boart
Longyear, everywhere”. This means that
our teams must provide the same training,
processes, equipment and delivery in
every region, mine site and operating
environment. This is our mission, but it
is a tough challenge as we operate over
1,100 drill rigs in 40 countries and sell
products in over 100 countries.
I believe we have a global leadership team
that is up to the challenge, and we are
upgrading our management information
systems to work around the globe,
24 hours a day, in real time.
Closing where I started, we used 2009 to
create a stronger balance sheet and leaner
cost structure, and strengthen the focus
on our customers. We will continue to
monitor the fundamentals of our business
on a regular basis. We are already well into
executing the demanding 2010 plans for
each region and business. As this market
turns around, Boart Longyear’s goal is
to remain positioned as the strongest
and most agile player in the market.
Finally, I would like to thank our Board,
executive team, and regional teams for
their drive and positive energy. Our leaders
worked long hours, at reduced pay, to
make swift and difficult decisions in a very
uncertain market. The results have allowed
us to enter 2010 stronger and smarter.
I am looking forward to an exciting year.
Our entire leadership team could not be
more energised.
Craig Kipp
Chief Executive Officer
The second lesson is the “variable
cost premium”. The mining industry
is a cyclical industry. However, Boart
Longyear proved again that, when our
revenues decline, our variable cost
structure allows management to lower
costs quickly when faced with lower
revenues. In 2009, despite revenues
that declined close to 50 percent, we
generated US$129 million of adjusted
cash from operations and US$128 million
of adjusted EBITDA.
Fortunately, during the last five years,
Boart Longyear was preparing for
tough times. We closed or divested
over 15 factories, consolidated regional
operations, streamlined our product
offerings and sold many non‑core
businesses. Ultimately, this provided
the difference in 2009. These actions
allowed us to stay focused on our core
expertise of exploration drilling and
drilling products.
Challenges also provide opportunities.
There are two key 2009 accomplishments
of which I am most proud. First, our safety
performance continued to improve.
Our safety metrics showed a 43 percent
improvement in Lost Time Incident Rate
and a 17 percent improvement in Total
Case Incident Rate. More importantly,
many positive “safety culture” comments
from our customers verified these results.
Safety continues to be a hallmark of the
Boart Longyear brand and a cornerstone
of our corporate culture.
O
Results summary
6
2009 COnsOlidatEd OvErviEw
US$M
Revenue
Gross Margin
Gross Margin %
EBITDA
EBITDA Margin %
Adjusted EBITDA 1
Adjusted EBITDA Margin %
NPAT
Adjusted NPAT 2
Adjusted NPAT Margin %
Cash from Operations
Adjusted Cash from Operations 3
Adjusted Cash from Operations %
2008
1,839
578
31%
356
19%
367
20%
157
163
9%
144
149
8%
Revenue (US$M) Down 47%
Adjusted EBITDA1 (US$M) Down 65%
2008
2009
978
1,839
2008
2009
128
2009
Change
978
234
24%
111
11%
128
13%
(15)
7
1%
117
129
13%
–47%
–60%
–69%
–110%
–19%
367
Adjusted Cash Flow from Operations3 (US$M) Down 13%
Net Debt (US$M) Down 94%
2008
2009
149
129
2008
(Due April 2010) 585
179 764
2009
(Due April 2012) 48
Discretionary Cash Trends (US$M)
Capex
Acquisitions – net
Dividends
2007
0
2008
2009 0
0
57
37
124
120
119
146
1
Adjusted EBITDA: Adjusted to remove restructuring
charges and the (gain)/loss on the disposal
of businesses. Restructuring charges in 2008
and 2009 were $20.3 million and $12.6 million,
respectively. Losses/(gains) on business disposals
in 2008 and 2009 were ($9.1 million) and $4.2 million
respectively.
2
Adjusted NPAT: Adjusted to remove restructuring
charges, the (gain)/loss on the disposal of
businesses, debt restructuring charges and related
tax charges. Restructuring charges net of tax in
2008 and 2009 were $13.8 million and $8.3 million
respectively. Losses/(gains) on business disposals
in 2008 and 2009 were ($7.8 million) and $3.0 million
respectively. Debt restructuring charges related
to the write‑down of swaps was $11.0 million.
3
Adusted cash from operations: Adjusted to
remove cash flows related to restructuring charges,
the (gain)/loss on the disposal of businesses
and related tax charges. Restructuring cash flows
net of tax in 2008 and 2009 were $4.7 million and
$10.5 million respectively. Cash flows net of tax
related to business disposals in 2008 and 2009
were $1.0 million and $1.3 million respectively.
rEsults
summary
Boart Longyear Annual Report 2009
7
GlObal drillinG sErviCEs
US$M
Revenue
EBITDA
EBITDA margin %
GlObal prOduCts
US$M
Revenue
EBITDA
EBITDA margin %
2008
1,241
295
24%
2008
598
129
22%
2009
737
142
19%
2009
241
26
11%
Change
–41%
–52%
Change
–60%
–80%
tOtal COmpany rEvEnuE
Total Company 2009 Revenue
Products and Services
Over 30% of revenue
was derived from
production mining and
non-mining end markets
Percussive Products
Percussive Drilling
Underground Drilling
Non‑mining Drilling
Surface Core Drilling
Rotary Drilling
Other Products
Other
8%
4%
8%
13%
29%
20%
17%
1%
rEsults
summary
Business review
8
a
b
l
D r illing ProDucts
g l o
drillinG
COnsumablEs
drillinG Capital
EquipmEnt
drillinG
sErviCEs
global Drillin g s E
r
V i c E s
FOCusEd On
+ safety
+ experience
+ reliability
+ innovation
= productivity
Our
innOvatiOn
CyClE
a
b
l
D r illing ProDucts
g l o
global Drillin g s E
r
V i c E s
Boart Longyear Annual Report 2009
9
The innovation cycle begins with our Global Products
team working in close collaboration with our Global Drilling
Services division. In turn, we incorporate our experience
in the field into our innovation cycle. This results in
sharing field data, challenges, safety requirements
and best practices, ultimately driving innovation that
increases productivity in the field. This integrated
business model gives Boart Longyear the advantage
of bringing new technology to the market with speed.
Our
innOvatiOn
CyClE
10
Quick Descent®
Head Assembly.
Improves productivity by
reducing drag and allowing
fluid to pass easily through
the core barrel – increasing
drop speed. Provides
a more reliable latch
indication system, allowing
the drillers to know when a
positive latch has occurred.
●
●
◆
▲
●
▼
■
Business review
Boart Longyear is a trusted
partner and global leader in
providing world-class drilling
services and products to our
customers. We do something
no one else can do. Our unique
ability to manufacture and deliver
any combination of consumables,
capital equipment and expertise
direct to our customers in any
corner of the world puts us in
a class of our own. Our global
engineering groups are combined
into “Centres of Expertise”,
offering round-the-clock sharing
of data, best practices and ideas.
This 24-hour stream of information
significantly shortens our product
development cycle, leading
to new product introductions.
Sonic Rig.
Sonic drilling provides
a continuous, relatively
undisturbed core sample
and accuracy through any
type of formation. Sonic
drilling reduces waste by
up to 80 percent, drills two
to three times faster than
conventional overburden
drilling methods and
allows more flexibility
within a single bore hole.
GlObal
innOvatiOn
Stage Bit®.
Increasing productivity
with the largest crown
height in the industry
partnered up with a
patented window design
that allows superior
flushing capability for
higher penetration
rates and longer life.
11
DeltaBase 95 Drill Rig.
A high powered, light
weight anchor rig
designed for double-head
drilling systems, rotary/
rotary or rotary/percussive
drilling systems built
on a compact footprint.
Mobile Drill Rig.
A heavy duty rig that is
easily maintained with a
self-diagnosing CAN-bus
(controller area network)
system and designed for
quick set up and easy
movement hole to hole.
This rig was designed
with safety in mind.
Centres of Expertise
◆ Coring Consumables
● Coring/RC Rig
▲ Percussive
▼ Sonic/Delta Base
■ Diamond Products
SC11 Drill Rig.
A modular rig designed
to be easily broken down
into flyable sections
for heliportable work in
remote locations. The
compact footprint makes
adapting a shack easy.
▼
▼
◆
▲
●
●
SC9 Drill Rig.
A new approach to surface
exploration drills. Features
a completely hands-free
rod management system
and CAN-bus (controller
area network) technology
for self-monitoring and
efficient rig operation.
VWall® Rods.
An innovative coring
rod with internally upset
wall feature that lightens
the overall weight by
up to 30 percent,
increasing worksite
safety and rig depth
capacity while increasing
drilling productivity
through decreased
core retrieval time.
GLOBAL
INNOVATION
Business review
With over 120 years of drilling experience,
our Drilling Services business is
experienced in, and equipped for, all
types of drilling, including surface coring,
underground, multi‑purpose, reverse
circulation, conventional air/mud rotary,
flooded reverse, directional, sonic, and
percussive production. Always leading the
way, our teams are constantly developing
tomorrow’s solutions and applying
emerging technologies to the services
we provide our customers.
Our competitive strengths include:
– Global reach and longstanding
relationships with a global
customer base
– Developing equipment and
consumables to enhance
drilling productivity
– Full suite of drilling services
technologies
– Industry‑leading safety and training
programs
Safety
We operate with a “safety first” approach
to drilling. The Company’s drillers are
known for taking on the largest, most
technical and difficult drilling projects
and completing them safely and with
accurate results.
Experience
With the broadest array of specialised
services in the drilling industry, we can
accommodate specific needs for any
application on a worldwide basis. With
seasoned crews and first‑hand experience
in virtually every major global market, we
understand no site is the same and have
the ability to quickly mobilise equipment
and crews to nearly any location around
the world.
Reliability
Our global network of service and repair
facilities provides the infrastructure and
experienced personnel to customise each
rig for a given job for optimal performance.
Customers trust that Boart Longyear’s
trained employees and our modernised
fleet of drill rigs will protect the safety of
all employees every day, everywhere, on
every job.
Mining and Minerals
We are the leading drilling services
provider for the exploration, development
and production of copper, gold, iron ore,
nickel and other metals and minerals.
The rock core chips and samples we
extract provide mining companies
with critical information over the life of a
mining project, rom exploration through
closure of the mine.
12
Environment and Infrastructure
We have the largest sonic rig fleet in
the world. This technology is better than
any other at providing our customers
the best subsurface sample, while
minimising waste. In addition to sonic, our
diversified fleet of auger, probe and rotary
rigs further enables us to serve a wide
variety of markets (i.e., environmental,
construction and water) and drill in
diversified locations such as factories,
dams and city work. By positioning
our fleet this way we can serve a large
customer base that ranges from private
businesses to government agencies.
Innovation
Boart Longyear designs and
manufactures much of the equipment that
our drilling teams use, bringing our job
sites world‑class products designed with
the experience gained year after year by
our teams in the field. We are dedicated
to understanding and exceeding our
customers’ production, cost, safety and
environmental goals. Our drilling services
solutions are based upon proven and
time‑tested processes that have been
perfected in the widest variety of
drilling applications around the globe.
Our customers know we deliver
performance they can count on.
drillinG
sErviCEs
Boart Longyear Annual Report 2009
13
Our Drilling Services division operates in more
than 40 countries across North America,
South America, Asia and the Pacific Rim,
Europe and Africa. We have an international
network of more than 50 zone locations that
maintain and mobilise equipment close to key
geographic markets.
drillinG
sErviCEs
Business review
14
drillinG
prOduCts
The Boart Longyear Products division
maintains an extensive patent portfolio and
leverages its technology to clearly distinguish
itself as the innovative products leader in the
drilling industry. Products offered include
drilling equipment, drill rods, diamond bits,
wireline core extraction systems, reverse
circulation pipe and accessories, overburden
tooling, rock drills, rock drilling rods, and bits.
Boart Longyear Annual Report 2009
15
Top. Robotic arm used in
production of percussive rods
Above. Salt Lake City diamond bit plant
Environmental and
Infrastructure Drilling
Our products are put to work around the
globe and provide solutions to the most
demanding geo‑technical and geo‑
construction drilling challenges. Whether
locating a safe source of potable water
in a rural village or stabilising the ground
underneath a transportation system in
a major metropolis, our customers rely
on Boart Longyear products every day.
Our precision engineered drill rig line and
tooling offering provide our customers
with reliable solutions for any situation.
Production and Development Mining
We design, manufacture and supply
pneumatic and hydraulic rock drills
and rock drilling tools using the most
technically advanced materials and
systems in the industry. From hand‑
held pneumatic rock drills to percussive
bits, shanks and rods, we offer drilling
equipment and drilling consumable
products to perform on any job.
The Global Products division designs,
manufactures and sells drilling equipment
such as drills and support systems, as
well as drilling consumables including
bits, rods and all requisite tooling. These
products are used in industries such
as mineral exploration, mining, energy,
environmental sampling and remediation,
as well as infrastructure reinforcement
and development. In conjunction with
these products, Boart Longyear offers
its customers professional aftermarket
service and support, including drill
equipment commissioning, training,
maintenance programs, spare parts
and emergency parts kits.
Mineral and
Energy Exploration Drilling
Our coring exploration products are well
known and trusted among exploration
drilling contractors. Since revolutionising
the industry more than 50 years ago
with the genuine Q® coring system, we
have continued to develop innovative
drilling consumables such as our Stage®
diamond drill bits, high productivity Q®
wireline system, RQ® threaded drill rods,
upset V‑Wall® drill rods and the LF®
platform of modular drill rigs. Each Boart
Longyear product brought to market is
designed with the operator in mind and
focuses on delivering safe and repeatable
productivity in every drilling condition.
Business review
Our drillers in the field are a world‑class
team with a wealth of operating
knowledge. Ready to match the logistics
and conditions of each job, we bring best‑
in‑industry technology and expertise to get
the job done right. While ever in search of
better solutions and greater productivity,
we know that people come first. Internally
as well as externally, safety and integrity
are part of our business culture.
Safety First
Boart Longyear has demonstrated
commitment to the safety of our employees
and customers and to protecting the
environment, as shown by our proudly
earned safety and environmental
certifications of ISO and OHSAS.
Safety is an integral part of the Boart
Longyear corporate culture. In 2009, we
kicked off our “Drilling to Zero” program.
Our goal is zero workplace injuries,
zero new cases of occupational illnesses,
and zero environmental incidents.
Ethics and Good Citizenship
We take pride in upholding the
highest standards of behaviour.
We operate ethically and contribute
to the communities in which we
operate so our employees and
shareholders can be proud of their
association with the Company.
16
1,430
3.26
0.34
Exceptional Results
We are focused on delivering exceptional
results to our customers and shareholders
every day. For Boart Longyear, this
necessitates more than consistently
delivering on our promises. We strive
to achieve results through exceptional
execution, an unwavering commitment
to our customers and the dedication to
finding new and innovative ways to beat
the competition.
Dedication to Our Clients’ Success
We are dedicated to providing the
products, services and support our
clients need to succeed. This is a
passion we manifest through our focus
on the customer, building strong client
relationships and our non‑negotiable
approach to quality.
Mutual Trust and Respect
People are our most important asset.
We know that the best ideas develop as
a result of collaborative efforts between
individuals with diverse backgrounds,
opinions and perspectives. We value
the diversity that is Boart Longyear and
demonstrate mutual trust and respect
for one another.
Lost Days Count
2007
2008
520
2009
377
Total Case Incident Rate1
2007
2008
2009
2.15
1.78
Lost Time Incident Rate1
2007
2008
2009
0.14
0.08
S A F E T Y E X
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S . ZERO ILLNESSES . ZER O E N V I R O N M
Our COrE
valuEs
1
Incident rates are
calculated using
the U.S. Occupational
Safety and Health
Administration formula –
200,000 man hours.
Boart Longyear Annual Report 2009
17
People are the very foundation of our success.
With over 120 years of experience behind
us, our employees have joined a team with a
proven past and an exciting future. We believe
we have more than just great employees, we
have the know-how, vision and commitment
to design and implement the best and most
innovative solutions in the industry.
Board of Directors
18
Craig Kipp
Mr. Kipp was appointed a director of
the Company on 28 June 2008. He
was appointed the Company’s Chief
Executive Officer on 1 January 2009,
prior to which time he was President and
Chief Operating Officer. Mr. Kipp joined
the Company in 2005 after 22 years
with General Electric, where he was
employed in various capacities, including
as President and Chief Operating Officer
of the Global Nuclear Fuel division
and General Manager of operations
in Hungary and China.
Mr. Kipp received his BS and MS
in Mechanical Engineering from the
University of North Dakota and an
MBA from the University of Chicago.
Graham Bradley AM
Mr. Bradley was appointed a director of
the Company on 21 February 2007 and is
currently Chairman of the Company. He is
also Chairman of Stockland Corporation
Limited (appointed February 2004) and
Po Valley Energy Limited (appointed
September 2004) and a director of
Singapore Telecommunications Limited
(appointed March 2004). He is also
chairman of the unlisted local subsidiaries
of HSBC plc and Anglo American plc.
He was elected president of the Business
Council of Australia in October of 2009.
In addition, Mr. Bradley is a director
of a number of non‑profit philanthropic
organisations.
From 1995 to 2003, Mr. Bradley was
the Chief Executive Officer of the listed
investment management group Perpetual
Limited. He also spent four years as the
Chief Executive Officer of the law firm
Blake Dawson. Previously, he spent
12 years at McKinsey & Company,
an international firm of management
consultants.
Mr. Bradley resigned as Chairman
of Proteome Systems Limited on
29 November 2007 and Film Finance
Corporation Australia Limited on
30 June 2008.
Mr. Bradley received a BA and LLB
(Hons 1) from Sydney University and
an LLM from Harvard Law School.
He is a member of the Remuneration
& Nomination Committee.
Bruce Brook
Mr. Brook was appointed a director of
the Company on 21 February 2007. He
is currently a director and Chairman of
the Audit Committee of Lihir Gold Limited
(appointed December 2005), director
of Snowy Hydro Limited (appointed
May 2006) and Chairman of Energy
Developments Limited (appointed
April 2009). As of 1 March 2010, he
was appointed a director of the Export
Finance and Insurance Corporation.
He is a member of the Financial Reporting
Council, a member of the Finance
Committee of the University of Melbourne
and a member of the Audit Committee of
the Salvation Army (Southern Territory).
Mr. Brook was the Chief Financial
Officer of WMC Resources Limited from
2002 to 2005 and has approximately
30 years’ experience in various roles,
including Deputy Chief Financial Officer
of ANZ Banking Group Limited, Group
Chief Accountant of Pacific Dunlop
Limited, General Manager, Group
Accounting at CRA Limited and General
Manager, Accounting and Services at
Pasminco Limited.
Mr. Brook resigned as a director and
the Chairman of the Board of Directors
of Energy Developments Limited on
17 February 2010 (appointed a director
in April 2009 and Chairman in September
2009) and as a director of Consolidated
Minerals Limited on 20 February 2008
(appointed December 2005).
Mr. Brook gained his B.Comm and
B.Accounting at the University of
Witwatersrand and is a fellow of the
Institute of Chartered Accountants
in Australia.
He is Chairman of the Audit, Compliance
& Risk Committee and a member of the
Environment Health & Safety Committee.
Boart Longyear Annual Report 2009
19
David Grzelak
Mr. Grzelak was appointed a director of
the Company on 13 November 2008. He
is currently Chairman and Chief Executive
Officer of Komatsu America Corp. and
has held a variety of senior executive
positions with Komatsu since joining
the company in 1991. Prior to joining
Komatsu, he worked in General Electric’s
Transportation Systems business for
approximately 20 years. Mr. Grzelak
has served as a director of the Alamo
Group Inc. (listed on the New York Stock
Exchange) and member of its Audit,
Compensation & Nomination committees
since 2006.
Mr. Grzelak earned his BS in industrial
engineering from Penn State University
and an MBA from Gannon University.
He is a member of the Audit, Compliance
& Risk Committee and the Environment,
Health & Safety Committee.
David Mclemore
Mr. McLemore was appointed a director
of the Company on 21 February 2007.
He has 35 years of industrial and broad
operational experience. He has held a
number of positions with various Advent
International portfolio companies for
more than ten years and was involved
with Advent International’s acquisition of
the Boart Longyear Group from Anglo
American plc in 2005.
Mr. McLemore served at various times
as Chairman, Deputy Chairman and Vice
Chairman of the Boart Longyear Group
from 2005 until 2007. Mr. McLemore also
served as a General Manager of a General
Electric’s Power Systems division from
1985 to 1997.
Mr. McLemore received his BS from
Oklahoma State University.
He is Chairman of the Environmental
Health & Safety Committee and was
appointed it’s Chairman effective
15 November 2008. He is also
Chairman of the Remuneration &
Nomination Committee and was
appointed it's Chairman effective
22 March 2010.
Peter St George
Mr. St George was appointed a director
of the Company on 21 February 2007.
He also has been a director of First
Quantum Minerals Limited (listed on the
Toronto Stock Exchange) since October
2003. Mr. St George was a director of
Spark Infrastructure Group, Powercor
Australia Limited, Citipower Pty Limited
and CHEDHA Holdings Pty Limited from
December 2005 until 31 December
2008. He also served as a director and
Chairman of Walter Turnbull, an Australian
accounting and financial services firm,
from August 2002 until 31 October 2008
and was a director of SFE Corporation
Limited from 2000 until its merger with
ASX Limited in July 2006.
Mr. St George served as Chief Executive/
Co‑Chief Executive of Salomon Smith
Barney Australia/NatWest Markets
Australia from 1995 to 2001. In addition,
he has more than 20 years’ experience
in senior corporate advisory roles within
NatWest Markets and Hill Samuel & Co
in London.
Mr. St George qualified as a Chartered
Accountant in South Africa and
received an MBA from the University
of Cape Town.
He is a member of the Remuneration &
Nomination Committee and the Audit,
Compliance & Risk Committee.
Executive Leadership Team
20
Craig Kipp
See Page 18.
Brad Baker
Mr. Baker was appointed as Senior Vice
President, Human Resources in 2008.
Prior to joining Boart Longyear he worked
for Milacron Inc. for 17 years in a variety
of operational, divisional and global
human resources roles including Vice
President of Human Resources.
Mr. Baker received his BA in Business
from Bowling Green State University
and his MBA from Xavier University.
Michael Birch
Mr. Birch was appointed as Vice President
of Global Drilling Services effective
January 2010, after leading the Global
Products division since May 2006. Prior
to joining Boart Longyear, he worked
for Black & Decker Corporation for
15 years across various business units
in both North America and Europe.
Past roles include Vice President and
General Manager for Baldwin Hardware
and Director of Marketing and Product
Development for the DeWalt Industrial
Power Tools, both divisions of Black &
Decker Corporation.
Mr. Birch received his B.A. in
Business Management from Brigham
Young University.
Ira Kane
Mr. Kane joined Boart Longyear in 2006
through the acquisition of the Prosonic
Corporation, the nation’s largest provider
of sonic drilling services, where he served
as its President and COO. Prior to this,
he served for nine years as President
& COO of MPW Industrial Services Co.
He also held the position of Executive
Vice‑President of OHM corporation
and was a practicing attorney in
Columbus, Ohio.
Mr. Kane received his BA from Hofstra
University and his JD from Cleveland‑
State University.
Joe Moody
Mr. Moody was appointed as Vice
President of Global IT in April 2009
alongside his role of Vice President,
Global Engineering he has held since
2007. Prior to that, he held the role of
Group Vice President and Chief Technical
Officer for Teleflex, Inc. Past roles include
serving in several managerial positions
with Motorola, Inc. and General Motors.
Mr. Moody received his BS in Electrical
Engineering from GMI Engineering &
Management Institute (now Kettering
University), and an MBA from the
University of Michigan.
Joe Ragan
Mr. Ragan was appointed Chief Financial
Officer in 2008. Prior to joining Boart
Longyear, he held the position of Chief
Financial Officer for GTSI Corp., a leading
technology solutions provider for the
public sector listed on NASDAQ. He
also held the position of Chief Financial
Officer of U.S. Operations for Winstar
Communications Inc., an international
telecommunications company.
Mr. Ragan received his BS in Accounting
from The University of the State of New
York his MS in Accounting from George
Mason University and his CPA in the
Commonwealth of Virginia.
Fabrizio Rasetti
Mr. Rasetti was appointed Senior Vice
President, General Counsel and Secretary
in 2006. Prior to joining Boart Longyear,
he was a Segment General Counsel and
Segment Vice‑President for Business
Development for NYSE‑listed SPX
Corporation and served in various other
management roles during his nine‑years
there. Prior to SPX Corporation, he
worked in the private law firms of Howrey
& Simon and Towey & Associates in
Washington, DC.
Mr. Rasetti received his BS in
Foreign Service and JD from
Georgetown University.
Boart Longyear Annual Report 2009
Financial report
Contents
Directors’ Report
Auditor’s Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
Consolidated Statement of Comprehensive Income (Loss)
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
21
23
49
50
52
53
54
55
56
58
This page has been left blank intentionally.
22
23
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
DIRECTORS’ REPORT
The directors present their report together with the financial report of Boart Longyear Limited (“Boart Longyear” or the
"Company") and its controlled entities (collectively the “Group” or the “Consolidated Entity”) for the financial year ended
31 December 2009 (“financial year”) and the Independent Auditor’s Report thereon.
Financial results and information contained herein are presented in United States (“US”) dollars unless otherwise noted.
DIRECTORS
The directors of the Company in office during the financial year and as of the date of this report are set out below.
� Graham Bradley
� Bruce Brook
� David Grzelak
� Craig Kipp
� David McLemore
� Peter St George
DIRECTORS’ MEETINGS
Appointed 21 February 2007
Appointed 21 February 2007
Appointed 13 November 2008
Appointed 28 June 2008
Appointed 21 February 2007
Appointed 21 February 2007
The following table sets out for each director the number of directors’ meetings (including meetings of committees of
directors) held and the number of meetings attended by each director during the financial year while he was a director or
committee member. The table does not reflect the directors’ attendance at committee meetings in an “ex-officio” capacity.
Directors
Remuneration &
Audit, Compliance
Environment,
Graham Bradley
Bruce Brook
Craig Kipp
David McLemore
Peter St. George
David Grzelak
Board of Directors
Nominations
Committee
Held
7
Attended
7
Held
6
Attended
6
& Risk Committee
Health &
Held
Attended
Held
Attended
Safety Committee
7
7
7
7
7
7
7
7
7
7
6
6
6
6
7
7
7
7
7
7
4
4
4
4
4
4
In addition to the seven regular meetings of the Board, 35 special meetings were held during the course of the year.
COMPANY SECRETARIES
Fabrizio Rasetti was appointed Company Secretary on 26 February 2007. A summary of his work experience and
qualifications is found on page 20.
Paul Blewett was appointed Company Secretary on 21 October 2008. Prior to joining Boart Longyear he was General
Counsel and Company Secretary for Hills Industries Limited (ASX:HIL). Prior to Hills Industries, he held a number of
positions with other Australian Securities Exchange listed companies, following private legal practice for 8 years with
Lynch Meyer, Adelaide, South Australia. Mr. Blewett received his LLB from the University of Adelaide in 1983.
_______________________________________________________________________________________
23
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
24
PRINCIPAL ACTIVITIES
The Company is a leading integrated provider of drilling services, capital equipment and consumable products for
customers in the mining and minerals exploration, environmental and infrastructure, and energy industries. The Group
conducts these activities through two operating divisions, known as the Global Drilling Services and Global Products
divisions.
The Global Drilling Services division operates in over 40 countries. It provides services to a diverse customer base and
offers a broad range of drilling technologies, including, but not limited to, diamond core, underground, reverse circulation,
rotary and sonic drilling.
The Global Products division manufactures and sells capital equipment and consumables primarily to customers in the
drilling services and mining industries globally. These products include rigs and products such as bits, rods and in-hole
tools for exploration drilling, rock drilling and environmental, infrastructure and construction applications. The division also
distributes a wide variety of products and supplies through its network of retail drill stores in the United States.
Financial performance
Financial performance across all business lines and geographic regions has been negatively affected by the global credit
crisis and economic downturn. Results for the twelve months ended 31 December 2009 reflect a decrease in revenue and
profits as a result of these and other causes.
Total revenue for the twelve months ended 31 December 2009 was $978 million, a decrease of approximately 47%
compared to $1,839 million for the prior year. Of the $860 million decrease in revenue during 2009, $503 million was
attributable to a decrease in revenues in the Global Drilling Services division and $357 million was due to the Global
Products division. Revenues were lower in each of the five geographic regions.
In 2009, the Global Drilling Services division generated revenue of $737 million, down approximately 41% from the prior
year. In particular, drill rig utilisation decreased and pricing was lower, but lower revenues were partially offset by lower
operating costs and improved efficiency.
In 2009, the Global Products division generated revenue of $241 million, down 60% from the prior year. The decrease
was driven by lower sales volume caused by adverse market conditions that reduced the number of mineral drilling
projects. Management aggressively cut costs to offset the steep decline in revenue.
The Group continued the initiative begun late in 2008 to reduce operating costs through a series of restructuring activities.
During the financial year, the Group incurred costs of $8 million for employee separation costs, as well as costs of $5
million related to occupancy reductions and other initiatives. 2009 general and administrative expenses of $117 million
were down 35% from the prior year. Selling and marketing expenses of $71 million were down 40% from the prior year.
Net profit (loss) after tax for the twelve months ended 31 December 2009 was a loss of ($15) million compared to a profit
of $157 million in the prior twelve months ended 31 December 2008. The 2009 losses include restructuring expenses of
$13 million and $17 million in one-time expenses (primarily non-cash) related to the capital raising program undertaken
during the financial year.
Tax benefit for the twelve months ended 31 December 2009 was $8 million compared to an expense of $75 million for the
prior twelve months ended 31 December 2008. The 34.2% tax benefit compares favorably to the 32.2% tax expense
reported in 2008, and takes into account the tax weighting of the corporate structure.
Earnings (loss) per share in 2009 was (0.6) cents per share on a basic and diluted basis, compared to earnings per share
on a basic and diluted basis of 10.4 cents for the prior year.
DIVIDENDS
No dividends have been paid or declared during the financial year.
_______________________________________________________________________________________
24
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
25
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Capital Raising and Debt Repayment
During the financial year, the Group executed a capital raising program that raised approximately $698 million. Proceeds
from the capital raising were used to repay and retire the Group’s $585 million Term Loan A debt facility, to repay
approximately $62 million of amounts previously drawn on its existing revolver facility, and to pay approximately $50
million of costs directly related to the capital raising. The Group recorded a pre-tax, one-time (primarily non-cash) charge
of $17 million related to the capital raising, largely related to certain floating-to-fixed interest rate obligations.
Divestiture of Operations
During the financial year, the Group completed the sale of its Sub Saharan African manufacturing operations in
Roodepoort, South Africa. The sale also included the buyer’s exclusive right to manufacture and sell certain of the
Group’s percussive rock drills and hard rock tools in Sub Saharan Africa. The Group recognised a loss on the disposal of
approximately $4 million.
Other than the Company’s capital raising, debt retirement and divestiture listed above, in the opinion of the directors, there
were no other significant changes in the state of affairs of the Group during the financial year.
Enterprise Resource Planning System Implementation
The Company has initiated a project to implement a new Enterprise Resource Planning (“ERP”) system. The ERP system
will be an integral element of the Company’s management, reporting and control systems. The Company will transition to
the new ERP system in a series of conversions scheduled to occur in 2010 and 2011.
EVENTS SUBSEQUENT TO REPORTING DATE
In the opinion of the directors, there has not arisen in the interval between the end of the financial year and the date of the
report any matter or circumstance that has significantly affected, or may significantly affect, the Group’s operations, results
or state of affairs in future financial years.
FUTURE DEVELOPMENTS
The Group intends to continue its principal activities related to providing drilling services and selling drilling capital
equipment and consumable products while focusing on operating improvements, product development, cost management,
cash generation and debt reduction. The Group may also elect to expand its product or service offerings through organic
growth initiatives or strategic acquisitions.
Further information about likely developments in the operations of the Group in future years, expected results of those
operations, and strategies of the Group and its prospects for future financial years has been omitted from this report
because disclosure of the information is likely to result in unreasonable prejudice to the Group.
CORPORATE GOVERNANCE STATEMENT
The Board believes that high standards of corporate governance are an essential prerequisite for creating sustainable
value for shareholders. This statement summarises the main corporate governance policies and practices in place within
the Group. Unless otherwise noted, the Company has followed the best practice recommendations set out in the ASX
Corporate Governance Council’s Principles and Recommendations (the “ASX Guidelines”).
The Company’s most significant governance policies, including Board and committee charters, may be found on the
Company’s website at www.boartlongyear.com.
_______________________________________________________________________________________
25
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
26
Role of the Board
The Board charter sets out the powers and responsibilities of the Board. These include:
providing strategic direction for, and approving, the Company’s business plans and objectives;
�
� monitoring the operational and financial position and performance of the Company;
�
establishing a sound risk management framework for the Company and ensuring that management takes
reasonable steps to implement appropriate controls and otherwise mitigate risks;
requiring that robust financial and other reporting mechanisms are put in place to provide adequate, accurate and
timely information to the Board and shareholders regarding all material developments;
appointing and evaluating the performance of the Chief Executive Officer, approving other key executive
appointments and planning for executive succession;
reviewing and approving remuneration for senior executives;
approving the Company’s annual operating budget and business plans and monitoring the management of the
Company’s capital, including any material capital expenditures, acquisitions or divestitures;
�
�
�
�
� monitoring procedures to ensure compliance with legal and regulatory requirements and accounting standards;
and
determining the level of authority delegated to the Chief Executive Officer and Company management.
�
The Board has delegated to the Chief Executive Officer and to the Company’s Executive Management Committee
(“EXCO”) responsibility for managing the business of the Company in compliance with Board policies, legal requirements
and the fundamental standards of ethics and integrity reflected in the Group’s Code of Business Conduct. The Board
policies and charters set clear thresholds for management authority and ensure accountability to, and oversight by, the
Board or its committees for the approval of specific matters, including remuneration of senior executives, changes to the
Company’s share capitalisation, declaration of dividends, the Company’s annual operating budget, material acquisitions
and divestitures and changes to corporate strategy. Delegations are regularly reviewed by the Board and may be
changed by the Board at any time.
Composition of the Board
At the date of this report, the Company has one executive director and five non-executive directors.
Boart Longyear recognises that the ability of its Board to fulfill its role properly requires that the directors collectively have
an appropriate range of skills, experience and expertise, including experience in accounting and financial reporting,
operational expertise and experience in the markets the Group serves, and that a majority of the directors are
independent. In assessing the independence of non-executive directors, the Board has considered the criteria detailed in
the Board charter, including, whether a director:
�
�
�
�
�
�
is a substantial shareholder of the Company, or otherwise is associated directly or indirectly with a substantial
shareholder;
has been employed in an executive capacity by the Company or Group within the last three years and did not
become a director within three years of being so employed;
has been a principal of a material professional advisor or a material consultant to the Company or Group within
the last three years;
is a partner in, or material shareholder or officer of, a material supplier or customer of the Company or Group;
has a material contractual relationship with the Company or Group other than as a director; and
has received more than A$100,000 from the Company or Group during the past year other than as compensation
for the director fulfilling his duties as a director.
The charter also defines materiality as being an amount in excess of 5% of Boart Longyear’s or the advisor’s, supplier’s or
customer’s revenues or expenses, as the case may be.
The Board meets the requirements of the charter and the recommendations of the ASX Guidelines as a majority of the
Board is comprised of non-executive directors and all non-executive directors, including the Chairman, meet the
independence criteria listed above.
_______________________________________________________________________________________
26
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
27
Board Processes
The Board meets at least six times a year and convenes additional meetings as required. The agenda for Board meetings
is prepared by the Chief Executive Officer and other senior management in conjunction with the Chairman and, along with
supporting papers, is distributed to directors prior to each meeting. Certain senior executives participate in Board and
committee meetings, thus providing the directors with access to key operating, financial and compliance personnel on a
regular basis. In addition, the directors have access to other Company employees in Board and committee meetings,
during visits to operations and in other settings.
Board Committees
The Board has three permanent committees to assist it in discharging its responsibilities. These are the:
� Audit, Compliance & Risk Committee;
� Remuneration & Nominations Committee; and
� Environment, Health & Safety Committee.
These committees have written charters that are reviewed annually. All non-executive directors may attend any
committee meeting. The Chairman of each committee reports on committee proceedings at the next Board meeting and
minutes of committee meetings are circulated to directors in the Board papers.
Audit, Compliance & Risk Committee
The Audit, Compliance & Risk Committee assists the Board to fulfill its governance and disclosure responsibilities in
relation to the quality and integrity of the Company’s financial reports, internal controls, risk management framework and
external audits. The committee also monitors compliance with laws and regulations. The committee makes
recommendations to the Board regarding the appointment, performance and independence of the external auditor and
must approve all non-audit services performed by the external auditor.
The committee is comprised of three non-executive directors, all of whom are independent directors and at least one of
whom has relevant accounting qualifications or experience. The members of the committee during and since the financial
year are:
� Bruce Brook – Chairman
� Peter St George
� David Grzelak
Remuneration & Nominations Committee
The Remuneration & Nominations Committee supports the Board by overseeing matters related to executive and director
remuneration and the composition and performance of the Board. The committee’s responsibilities include:
�
�
�
�
developing and reviewing remuneration plans, including annual bonus plans and long term incentive plans,
including equity-based incentive plans;
developing performance objectives for the Chief Executive Officer and his direct reports and reviewing
performance against those objectives;
overseeing policies for recruitment, retention and succession planning for directors and key executive positions;
and
reviewing the composition of the Board and monitoring the performance of the Board and the directors.
The committee consists of the following three non-executive directors:
� Peter St George – Chairman
� Graham Bradley
� David McLemore
_______________________________________________________________________________________
27
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
28
Environment, Health & Safety Committee
Boart Longyear places a high priority on safety, management of operational risks and compliance with environmental laws
and regulations. The Environment, Health & Safety Committee assists the Board in the effective discharge of its
responsibilities in relation to these matters and has authority to investigate any matter within the scope of the committee’s
charter.
Among its responsibilities, the committee:
�
�
�
ensures that the Company has effective systems and processes for monitoring and mitigating operational risks;
reviews and assesses the Company’s policies and practices to ensure compliance with environmental and
operational regulatory requirements, including through internal and external audits; and
reviews the results of investigations of any major health, safety or environmental incidents occurring in the
Company’s operations.
The committee consists of the following three non-executive directors:
� David McLemore – Chairman
� Bruce Brook
� David Grzelak
Board and Director Performance
The Board has a formal annual assessment process that includes performance assessments of the Board committees and
individual directors. As part of the assessment process, each director completes a questionnaire on the operation of the
Board and its committees and the performance and contributions of the directors. The results of the questionnaires are
compiled by the Chairman and discussed with each director individually. The Chairman also holds a further discussion
about the Board’s effectiveness with the Board as a whole. The Board effectiveness evaluation took place this year
between June and December 2009.
New directors undergo an induction process to inform them of the nature of the Company’s business, strategies, risks and
issues, and expectations about director performance, including awareness of continuous disclosure principles. The terms
of a non-executive director’s appointment are set out in a letter to the director from the Company. The letter details the
director’s obligations, including to:
�
�
�
�
�
�
�
act in the best interests of the Company at all times;
submit to re-election from time-to-time as required by the Company’s constitution;
notify the Chairman of any change in circumstances that might prevent the director from being regarded as
independent;
comply with the Company’s constitution, governance policies and all applicable legal requirements, including the
Company’s Securities Trading Policy;
devote sufficient time to prepare for and attend Board meetings and otherwise to discharge the director’s duties;
keep confidential, and not use for the benefit of any person or party other than the Company, any confidential
information of the Company or Group; and
disclose any directorships, business interests or circumstances that might represent conflicts of interests or
reasonably be perceived to interfere with the exercise of the director’s independent judgment, or have an adverse
impact on the Company’s reputation or public profile.
The appointment letter also confers certain benefits and rights upon the director, including indemnities and insurance
coverage for liabilities arising out of the discharge of the director’s duties and unfettered access to papers, information and
employees of the Company. In addition, directors may, with the approval of the Chairman, consult with professional
advisors.
Executive Performance
The Company employs a structured performance evaluation process to ensure that senior executives are motivated to
deliver shareholder value and are accountable to the Board at all times. The process commences early each financial
year when the Board establishes and approves corporate performance objectives as well as individual performance
objectives for the most senior managers of the Company. As detailed more fully in the Remuneration Report,
performance against those objectives determines the potential incentive the executive may receive under the Company’s
annual bonus plan. The Chief Executive Officer’s annual incentive is based 100% on the achievement of the annual
corporate performance objectives approved by the Board. Other senior managers of the Company have individual
_______________________________________________________________________________________
28
29
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
performance objectives that account for 50% of the total annual bonus for which they are eligible and the annual corporate
performance objectives account for the balance. The Company’s executive performance assessment process for 2009
and goal-setting process for 2009 commenced in January 2009 and was completed in March 2009.
Risk Management
The Board recognises that risk management and internal controls are fundamental to good corporate governance, and the
Board and senior management accept their responsibility to identify and manage risk on an ongoing basis. The
Company’s risk management framework consists of a number of controls, including:
�
�
�
�
documented systems, procedures, authorities and delegations for the orderly management of the Company;
policies and ethical standards, and ensuring that employees understand such obligations;
risk-based internal audits to test the Company’s controls and assist management with the enforcement of
Company policies; and
certifications from management and process owners throughout the Company regarding the design and
operation of risk management systems, internal controls and compliance.
The Board is assisted and advised in its oversight of the Company’s risk management system by two of its committees:
the Environment, Health & Safety Committee with respect to operational risks generally and the Audit, Compliance & Risk
Committee with respect to financial, compliance and other risks. Those committees review the annual audit plan of the
Company’s internal audit function and Environment, Health & Safety group, and, along with senior management, consider
the findings of those audits. The Audit, Compliance & Risk Committee also monitors compliance programs managed by
the Company’s legal function and reviews the significant findings of any compliance reviews or investigations.
The Company also has implemented a formal risk management system based on a written risk management policy and
the findings of Company audits and investigations. The system is managed by the corporate Director of Risk
Management, who, among other tasks, directs regular regional and corporate risk identification and mitigation reviews and
assists in tracking corrective actions.
Integrity of Financial Reporting
In accordance with the ASX Guidelines, the Chief Executive Officer and Chief Financial Officer have certified the following
(among other detailed certifications) to the Board in writing:
1)
in their opinion, after having made appropriate enquiries, with regard to the integrity of the financial statements of
the Company for the year ended 31 December 2009:
(i)
(ii)
the financial statements of the Company and Consolidated Entity for the financial year comply with
Accounting Standards and have been properly maintained in accordance with section 286 of the
Corporations Act 2001;
the financial reports of the Company and Consolidated Entity, and notes thereto, present a true and fair
view, in all material respects, of the financial position and performance of the Company and of the
Consolidated Entity in accordance with section 297 of the Corporations Act 2001; and
(iii)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2)
to the best of their knowledge and belief after having made appropriate enquiries, with regard to risk
management and internal control systems of the Company for the year ended 31 December 2009:
(i)
(ii)
the statements made in (1) above regarding the integrity of the financial statements are founded on a
sound system of risk management and internal compliance which, in all material respects, implements
the policies adopted by the Board of Directors;
the risk management and internal compliance system, to the extent it relates to financial reporting, is
operating effectively in all material respects based on the risk management model adopted by the
Company; and
(iii)
nothing has come to management’s attention since 31 December 2009 that would indicate any material
change to the statements made in 2(i) and 2(ii) above.
_______________________________________________________________________________________
29
30
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
These statements are supported by certifications made to the Chief Executive Officer and Chief Financial Officer by the
financial managers of each of the Company’s divisions and regions and by other managers globally. They provide a
reasonable but not absolute level of assurance and do not imply a guarantee against adverse events or more volatile
outcomes arising in the future. A number of internal control deficiencies relating to financial reporting have been identified
during the financial year, and in such cases, where deemed appropriate, additional tests of procedures or tests of resulting
account balances included in the financial statements have confirmed that there has been no material impact on the
financial reports. Management also has reported to the Board as to the effectiveness of the Company’s management of
material business risks.
Code of Business Conduct and Ethical Standards
Boart Longyear’s directors, management and employees are required to act with integrity at all times and maintain high
ethical standards. The Company has adopted a Code of Business Conduct that covers a broad range of matters,
including:
�
�
�
�
�
�
�
�
conflicts of interest and the preservation and proper use of Company assets;
protection of confidential and commercially sensitive information;
employment legislation;
competition law and fair dealing;
environmental, health and safety considerations;
improper payments, bribery and money laundering, including transactions with government officials;
financial reporting and record-keeping; and
each employee’s affirmative duty to report violations of policy or law.
The Code of Business Conduct is available on the Company’s website at www.boartlongyear.com. The Company
supplements the Code of Business Conduct with additional policies that provide more detailed guidance on substantive
legal requirements and other principles and requires employees to successfully complete assigned compliance training
courses on an ongoing basis.
Environmental Performance
Boart Longyear is committed to achieving a high standard of environmental performance. The Company’s operations are
subject to various environmental laws and regulations in the many jurisdictions in which it operates, including regulations
under both Commonwealth and state legislation in Australia. The Board, with the assistance of the Environment, Health &
Safety Committee, monitors environmental performance against relevant legislation and Company objectives and monitors
remedial action when required.
The directors are not aware of any business unit operating in breach of environmental regulations during the financial year
and to the date of this report under any applicable law of the Commonwealth or of a State or Territory.
Continuous Disclosure
The Board aims to ensure that all of its shareholders and the market in general are kept fully and promptly informed of all
major developments and changes that are likely to materially affect its operations, financial results and business
prospects. The Company’s External Communications Policy specifies how the Company will meet its continuous
disclosure obligations under ASX Listing Rule 3.1 and sets out procedures for Company employees to report potentially
price-sensitive information to management and the Board.
The Company produces financial statements for its shareholders and other interested parties twice per year.
Shareholders have the right to attend the Annual General Meeting in May and are provided with an explanatory
memorandum on the resolutions proposed through the Notice of Meeting. The Company also has an investor relations
function to manage and assure prompt and relevant communications with shareholders and the market generally, and the
Company posts material information for its shareholders, such as ASX announcements and financial results, on its
website at www.boartlongyear.com.
Donations
Boart Longyear contributes to the communities in which it works with donations, sponsorship and practical support. The
Company does not make political donations.
_______________________________________________________________________________________
30
31
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
DIRECTORS’ SHAREHOLDINGS
The following table sets out each director’s relevant interest in shares, debentures, and rights or options over shares or
debentures of the Company or a related body corporate as at the date of this report.
Directors
Graham Bradley
Bruce Brook
David Grzelak
David McLemore
Peter St. George
Craig Kipp
Fully paid
ordinary shares
4,552,146
Restricted shares, 1
rights and options
491,891
998,272
10,000
1,158,609
1,001,515
5,214,626
45,945
-
-
72,972
5,694,710
2
Total
5,044,037
1,044,217
10,000
1,158,609
1,074,487
10,909,336
(1) The non-executive directors’ restricted shares as listed in the table above, although fully paid ordinary shares, are
subject to a vesting condition of three years’ service by the directors. Certain of the 5,694,710 restricted shares and
options listed for Mr. Kipp are performance share rights granted under the Long-Term Incentive Plan and thus are
subject to a performance condition as well as a service condition
(2) Mr. Kipp was awarded 900,000 share options on 18 June 2009 by the Board, subject to shareholder approval.
Should shareholder approval not be received, the Company is legally committed to provide other compensation of
equal value to Mr. Kipp.
GRANTS OF SHARES, RIGHTS OVER SHARES AND OPTIONS GRANTED TO DIRECTORS AND EXECUTIVES
The shares or rights over shares of the Company that have been granted to directors or executives of the Group are
included in the Remuneration Report. Options over unissued shares of the Company have been granted to the Chief
Executive Officer, Mr. Kipp, and certain other executives, as detailed in the Remuneration Report. No shares or interests
have been issued during or since the end of the financial year as a result of exercise of an option.
DIRECTORS' AND OFFICERS’ INTERESTS IN CONTRACTS
Except as noted herein, no contracts involving directors' or officers’ interests existed during, or were entered into since the
end of the financial year other than the transactions detailed in Note 34 to the financial statements.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to
which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the financial year.
_______________________________________________________________________________________
31
32
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
REMUNERATION REPORT
The information provided in this Remuneration Report is that required under Section 300A of the Corporations Act.
This Report sets out the remuneration arrangements for the Key Management Personnel (KMP), who are those persons
having authority and responsibility for planning, directing and controlling the activities of the Company, directly or
indirectly, including any director (whether executive or otherwise). The KMP include the top five highest-paid executives.
The remuneration policy and programs detailed in this report also apply to senior Company management not included as
KMP.
The following individuals have been included as KMP during the financial year:
� Graham Bradley - Chairman, Non-executive director
� Bruce Brook - Non-executive director
� David McLemore - Non-executive director
� Peter St George - Non-executive director
� Craig Kipp - Chief Executive Officer and Executive director
�
� Brad Baker - Senior Vice President, Human Resources
�
� Scott Alexander - Vice President of Global Drilling Services (employment ended 31 December 2009)
� Michael Birch - Vice President of Global Products
Fabrizio Rasetti - Senior Vice President, General Counsel and Company Secretary
Joseph Ragan III - Chief Financial Officer
Remuneration Policies and Practices
The Board has ultimate responsibility for remuneration issues, including policies and procedures to ensure that the
Company remunerates fairly and responsibly. The Remuneration & Nominations Committee (“Remuneration Committee”)
has been established to assist the Board with remuneration issues and is responsible for ensuring that the Company
compensates appropriately and consistently with market practices. It also seeks to ensure that the Company’s
remuneration programs and policies will attract and retain high-calibre directors, executives and employees and will
motivate them to maximise the Company’s long-term business, create value for shareholders and support the Company’s
goals and values. The role and responsibilities of the Remuneration Committee are set out in its charter. The Chief
Executive Officer, the Senior Vice President for Human Resources and other members of senior management attend
meetings of the committee, as appropriate, to provide information necessary for the committee to discharge its duties. In
addition, the committee also has access to external consultants as it sees fit to provide advice, market data and other
information required.
Overall, the structure, quantum and mix of components of the Company’s remuneration program, detailed below, are
designed to meet the specific needs of the business and be consistent with good market practice. The Company and
Remuneration Committee will regularly review all elements of its remuneration framework to ensure that they remain
appropriate to the business strategy and are competitive and consistent with contemporary market practice.
Non-Executive Director Remuneration
Non-executive directors are remunerated by a fixed base fee with additional amounts paid for serving on Board
committees. Non-executive director fees are determined within an aggregate directors’ fee pool limit that periodically will
be approved by shareholders in general meeting. The current approved limit is A$2.0 million. Fees are set to reflect the
responsibility and time commitments required of non-executive directors and are reviewed annually to ensure that they
remain fair and consistent with market practice.
_______________________________________________________________________________________
32
33
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
The base fee for non-executive directors during the financial year was US$100,000 per annum, while the Chairman
received a base fee of US$300,000 per annum. Non-executive directors (other than the Chairman) receives an additional
10% of the base fee for each Board committee on which they sit or 20% of the base fee for each committee they chair.
Compulsory superannuation payments for Australian-resident non-executive directors are included in the base fee and
additional committee fees. In 2009, given the financial difficulties the Company faced as a result of the economic
downturn, the directors elected to reduce their compensation by 10% from 1 March 2009 through 31 December 2009.
Effective 1 January 2010, the directors’ fees were restored to the pre-reduced amounts indicated above. During the
financial year, $746,912 of the pool was utilised for non-executive director fees, being approximately 48% of the fee pool
limit.
Non-executive directors also are reimbursed for all reasonable out-of-pocket expenses incurred in carrying out their duties,
including travel costs and office and secretarial support. They do not receive any retirement benefits other than statutory
superannuation contributions or any performance-related remuneration, such as management short-term and long-term
incentive awards.
Non-Executive Director Share Acquisition Plan
In February 2008, the Committee recommended, and the Board approved, the establishment of a Non-Executive Director
Share Acquisition Plan (NEDSAP) as foreshadowed in the Company’s prospectus. The NEDSAP is a fee sacrifice plan in
which only non-executive directors may participate. Participation in the NEDSAP is voluntary, and non-executive directors
may elect to sacrifice up to 100% of pre-tax fees to acquire ordinary shares at the prevailing market price. Shares
acquired under the NEDSAP will be subject to a holding lock for up to ten years. The holding lock may be removed in
certain circumstances, including a cessation of directorship. There have been no shares purchased under this plan during
the financial year ended 31 December 2009. During the year ended 31 December 2008 there were 200,985 shares
purchased under this plan.
Executive Remuneration
There are several components of remuneration provided to reward executives, presenting a balance of fixed and at-risk
pay, as well as short and longer term rewards. Consistent with market practice, the proportion of remuneration attributable
to each component depends on the executive’s seniority. These components are as follows:
Fixed Remuneration
Base Salary
At-risk Remuneration
Short-Term Incentive - Corporate Bonus Plan (“CBP”);
and
Long-Term Incentive Plan (“LTIP”) - share rights, cash
rights and share options
The Company’s executive remuneration has been structured to ensure that it:
�
�
�
�
is reasonable;
provides a competitive compensation program to retain, attract and reward key employees;
achieves clear alignment between total remuneration and delivered business and personal performance over the
short and long terms; and
is an appropriately balanced mix of fixed and at-risk compensation.
The Company places great importance on the need to retain key employees, thereby avoiding disruption to operations.
Accordingly, the use of both time-based and performance-based rewards is designed to ensure the Company’s leadership
is retained and delivers sustainable, long-term shareholder returns. The directors believe that the at-risk components of
the remuneration framework will effectively align senior management’s interests with those of shareholders.
_______________________________________________________________________________________
33
34
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
The Directors believe that the achievement of certain performance objectives by executives of the Company links the
remuneration policy to the Company achieving its targeted performance objectives. The Company has only been a public
company since 11 April 2007 and therefore does not have a five-year history to present. An analysis of the past three
years’ remuneration and performance achievement has demonstrated the correlation between the short-term incentives
(CBP) and the Company’s achievement of its targeted performance objectives. For the 2009 plan year, the executive
KMP will receive between 85% and 100% of their target bonus amount. For the 2008 plan year, the executive KMP
received between 79% and 90% of their target bonus amount. Mr. Ragan received 100% for the 2008 year due to a one-
time commitment made in his employment agreement. In both years, management remuneration under the CBP directly
tracked to corporate financial targets established for those years, which represented between 50% of the bonus payable to
senior executives and 100% of the bonus payable to the Chief Executive Officer.
The table below shows summary information about the Company’s earnings and movements in shareholder wealth for the
last three years to 31 December 2009:
2009
US$'000
2008
US$'000
2007
US$'000
Revenue
Net profit (loss) after tax
Share price at start of period
Share price at end of year
Basic and diluted earnings (loss) per share
Dividends per share
978,177
(14,883)
A$0.20
A$0.35
(0.6) cents
None
1,838,538
156,724
A$2.35
A$0.20
10.4 cents
3.8 cents
1,575,737
81,115
A$1.87
A$2.35
5.4 cents
None
The relative proportions in 2009 of the elements of executive compensation that are fixed and incentive based are:
Executive Management
Craig Kipp
Short-term 1
37%
Long-term 2
11%
Short-term 3
43%
Long-term 4
9%
incentive based
52%
Fixed
Incentive
Total
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
48%
49%
67%
48%
49%
10%
16%
4%
16%
16%
35%
23%
29%
25%
24%
7%
12%
0%
11%
11%
42%
35%
29%
36%
35%
(1) Short-term fixed compensation includes salary and other benefits such as automotive allowances. One-time items
such as sign-on bonuses and special cash awards are excluded from the calculations. Mr. Alexander’s termination
benefits were a one-time item and are therefore excluded from the table.
(2) Long-term fixed compensation includes post-employment benefits and the 50% of the LTIP compensation that vests
only based on service. For Mr. Kipp, the 2,500,000 share options granted to him in conjunction with his acceptance of
the chief executive officer position were one-time grants and are therefore excluded from long-term compensation.
(3) Short-term incentive compensation includes the annual bonuses under the Corporate Bonus Plan.
(4) Long-term incentive compensation includes the 50% of the LTIP awards that vest based on both performance and
service conditions.
_______________________________________________________________________________________
34
35
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Fixed Remuneration
The fixed component of executive compensation consists primarily of base salary. The executive KPMs also receive other
benefits, such as a vehicle allowance. In addition, the Company contributes to retirement programs, such as Australia’s
Superannuation Guarantee system and the United States’ 401(k) plans. The level of fixed compensation paid to
employees is based on market standards and also takes into account a variety of factors, including an individual’s
experience, the unique skills required to perform their role and their particular contribution to the Company.
In 2009, given the financial difficulties the Company faced as a result of the global economic downturn, the Group’s
executives, including the KMPs, elected to voluntarily reduce their base salaries by 10% from 1 March 2009 through 31
December 2009. The CEO elected to reduce his base salary by 15% from 1 January 2009 through 31 December 2009.
Effective 1 January 2010 all executives’ base salaries were restored to their pre-reduced amounts.
At-risk Remuneration
At-risk remuneration includes both short-term and long-term incentives.
Short-term Incentives
The Company has established its Corporate Bonus Plan (“CBP”) to provide incentives for certain of its employees to
achieve specific annual objectives that are determined by the Board on an annual basis. The CBP aims to:
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�
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focus employees on achieving key financial, safety and operational targets;
align individual efforts with annual operating performance objectives; and
reward superior individual and Company performance.
The CBP rewards senior executives and other participants for their achievement during a financial year of specific key
performance indicators for the Company as well as for the achievement of performance goals specific to the business unit
or function for which they are responsible. The incentive earned under the CBP, if any, will vary depending on relative
performance against a variety of targets, as detailed more fully below. Except in certain circumstances, all participants in
the CBP must remain employed with the Company on the date incentives are paid to receive any award.
The potential incentives available under the CBP range between 10% and 100% of an employee’s base salary depending
on the employee’s role. Of that potential incentive, 50% is linked to the Company’s financial performance, and 50% is
linked to operational or functional objectives relevant to the employee’s business unit or function, such as meeting sales
targets, staying within expense budget or meeting other individual commitments. Additionally, certain conditions may
reduce, but not increase, incentives under the CBP, including failure by a participant’s business unit to achieve target
safety metrics (which can reduce the overall incentive payable under the CBP by up to 10%) and a participant’s failure to
adhere to corporate leadership values, such as legal compliance (which can reduce the incentive payable under the CBP
by up to 100%).
The Remuneration and Nominations Committee approves the Company’s annual financial targets for the CBP. Targets
are set at both “threshold” and “stretch” levels. The committee also reviews non-financial targets for the CEO and his
direct reports. The committee’s philosophy in setting financial targets is to establish “threshold” targets that represent the
desired minimum outcome for each goal and “stretch” targets that are realistically achievable with excellent execution of
the Company’s annual plan. At the end of the financial year, the committee assesses the level of achievement against
financial and non-financial targets. The final determination of performance measures is determined after reviewing the
Company’s audited financial results.
The financial performance indicators adopted by the Board in 2009 as the most appropriate measures in the financial year
for determining the incentives payable under the CBP were earnings before interest, taxes and depreciation and
amortisation (EBITDA), sales, general and administrative expenses (SG&A) and cash generation. These performance
metrics and targets were selected in order to focus executives on strict and aggressive management of expenses and
cash generation which is critical during a severe economic and market segment downturn. Faced with rapidly declining
revenues brought on by the market decline, it was determined that establishing the EBITDA and SG&A metrics as a
percentage of sales was the most appropriate measure. In addition, it was critical that the Group generate cash in order to
finance the ongoing needs of the business during the decline. Therefore, the cash target was set as an absolute dollar
measure. For 2009, all stretch financial targets were exceeded. Achievement of individual operating or functional
objectives were evaluated and determined on an individual functional, divisional or regional basis.
_______________________________________________________________________________________
35
36
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Long-term Incentives
The Company has established a Long-term Incentive Plan (“LTIP”) to assist in retaining key executives, encouraging
superior performance on a sustained basis, and providing such executives with an opportunity to share in the growth and
value of the Company. The incentive provided under the LTIP in 2009 was an annual grant of rights (“Rights”) that vest
based on the satisfaction of performance-based and/or time-based conditions. Rights can be granted in the form of
shares (“Share Rights”), cash (“Cash Rights”) or a combination thereof. Share Rights convert to ordinary, fully paid shares
on a one-for-one basis.
The executives eligible to participate in the LTIP are senior divisional, regional and corporate executives. The target value
of annual LTIP grants varies depending on the participant’s position. The target amounts are based on market averages
for comparable roles at similarly-sized companies. The Company made grants to approximately 110 participants in 2009.
Under the terms of the LTIP in 2009, participants received a specified number of Share Rights and/or Cash Rights that
will, when vested, result in the participant receiving ordinary shares in the Company and/or cash at no cost to the
participant. The Company may acquire shares underlying the share grants, and the price paid by the Company will be the
prevailing market price of the shares at the time of acquisition. The acquired shares will be held in trust, and the participant
will receive dividends paid on those shares from the time of acquisition until vesting. Shares acquired in respect of grants
which do not vest will be held by the trustee and will be available for issue in respect of future grants for the Australian
trust. Under the US trust, shares held in respect of grants which do not vest, or are forfeited, must be sold within 60 days
of forfeiture.
In 2009, the Board of Directors amended the LTIP to allow for the grant of Cash Rights. The primary reason for
introducing this feature was to allow LTIP grants to continue to provide market competitive incentives despite the
Company’s depressed share price. Otherwise, LTIP grants would have involved excessively large grants of Share Rights
to provide appropriately valued long-term incentive awards. Also in 2009, the Board revised the terms of the 2008
Performance Share Rights to permit, at the discretion of the Board, a fourth “retesting” year in measuring cumulative EPS
performance achievement. The revision applies to the 2008 Performance Share Rights and will only be exercised if the
Company has not achieved its cumulative EPS performance threshold for the 2008 awards after the initial three year
measurement period.
The tranches of Rights granted under the LTIP and the vesting conditions attaching to each are as follows:
Tranche
Performance
Share Rights
or
Performance
Cash Rights
Percentage
of Grant
50% for
CEO and
executives
who report
directly to
the CEO
Retention
Share Rights
or
Retention
Cash Rights
50% for
CEO and
executives
who report
directly to
the CEO
Vesting Condition
Partial Vesting
Achievement of the cumulative earnings per
share (“EPS”) targets set by the Board at a level
the Board considers demanding. The targets
include a “threshold” EPS target and a “stretch”
EPS target for each financial year during the
three-year performance period. Vesting will be
determined by the Company’s performance
against cumulative EPS targets for the
performance period.
plus
Continuation of employment during the
performance period and until the third
anniversary of the grant date.
Continuous employment from the grant date and
until the third anniversary of the grant date.
Yes. Vesting occurs on a pro-rata
basis if the cumulative three-year
minimum EPS threshold is
surpassed. At the minimum
cumulative EPS threshold, 50% of
Performance Share and/or
Performance Cash Rights will vest.
Full vesting occurs only if the
Company’s cumulative EPS meets
or exceeds the cumulative “stretch”
EPS target for the performance
period.
No, except in certain special
circumstances such as death,
redundancy, retirement, change of
control or other circumstances
considered by the Board in its
absolute discretion to be
extraordinary. In such
circumstances, the Board will
determine whether all or some
portion of the outstanding rights will
vest.
_______________________________________________________________________________________
36
37
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
The following table shows the threshold and target performance requirements as well as the actual performance achieved
for the EPS performance metric associated with the LTIP performance share rights.
2008
2009
Threshold EPS
Performance
3.68 cents
0.00 cents
Target EPS
Performance
4.27 cents
0.68 cents
Actual EPS 1
Performance
3.60 cents
0.003 cents
(1) Earnings adjusted to exclude impact of restructuring, recapitalisation and related charges, as well as gains/losses related to the sale
of businesses.
The above targets and thresholds have been realigned from those originally set to reflect the new number of outstanding
shares in issue.
Stock Options
In 2009, the Board approved the Boart Longyear Limited 2009 Option Plan (“2009 Plan”) to bolster executive retention.
The 2009 Plan authorised the grant of no more than 5,000,000 options as was intended as a one-time benefit.
Under the 2009 Plan, the company awarded non-qualified share options to the CEO and granted non-qualified share
options to senior executives, including the KMPs. The options were granted on 18 June 2009 at an original exercise price
of A$0.30 per option. The exercise price was set at a premium of 22.5% to the prevailing market price for the Company’s
shares on the date of the grant. The options will vest in full and become exercisable on 18 June 2012 if the executive
remains continuously employed with the Company until that date. Unexercised options will expire on 18 June 2014 and
no longer be exercisable. Details of individual option awards under the 2009 Plan can be found on page 44.
Subsequent to the original grant date and in accordance with the ASX listing rules, the Company’s Board of Directors
modified the share option exercise price to reflect the dilution impact resulting from the Company’s 2009 capital raising
program and the related issuance of additional shares subsequent to the original grant date. Refer to page 45.
Employee and Director Trading in Company Securities
The Company has adopted a Securities Trading Policy for its directors and employees. The policy prohibits trading in the
Company’s stock at any time if a person is in possession of material, non-public information. In addition, it prohibits short-
term trading and dealing in derivative securities and establishes “black-out” periods from 1 July and 1 January of each
year until such time as the Company’s half-year and full-year results are made public. The policy prohibits any director or
employee from entering into transactions that limit the economic risk of participating in unvested entitlements under the
Company’s equity-based remuneration schemes and it also requires directors to immediately disclose any Company
shares purchased on margin if a director were likely to sell Company shares in response to the financier’s demand for
repayment.
Further, when trades are allowed under the policy, non-executive directors and the Chief Executive Officer may only trade
in the Company’s shares with the consent of the Chairman, and executive officers and other designated employees must
obtain the consent of the Company’s General Counsel prior to any trade. The Chairman must obtain the consent of the
Chairman of the Audit, Risk & Compliance Committee to trade in the Company’s shares.
_______________________________________________________________________________________
37
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42
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Analysis of Annual Bonuses Included in Remuneration
Included as
2009
Remuneration
% Vested in
% Forfeited in
Target STI % for
US$
Year
Year
Financial Year
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
1,000,000
280,000
146,250
126,512
200,000
142,500
100.0
100.0
90.0
85.0
100.0
100.0
-
-
10.0
15.0
-
-
100.0
70.0
50.0
50.0
50.0
50.0
The Board elected to award to a limited number of employees, including Mr. Ragan and Mr. Rasetti, a one-time cash
award in 2009 in recognition of their extraordinary efforts in executing the Company’s 2009 capital raising program. These
employees were deemed to be instrumental in the successful capital raising efforts. Details of these awards are included
in the 2009 Remuneration Summary on page 38.
Included as
2008
Remuneration
% Vested in
% Forfeited in
Target STI % for
US$
Year
Year
Financial Year
Paul Brunner
Craig Kipp
Joseph Ragan III 1
Scott Alexander
Michael Birch
Terrance Dolan
Patrick Johnson
Fabrizio Rasetti
Brad Baker 1
725,603
504,693
72,154
123,542
151,659
-
-
145,001
74,148
79.0
79.0
100.0
83.2
86.3
-
-
89.5
83.2
21.0
21.0
-
16.8
13.7
100.0
100.0
10.5
16.8
100
75/85
70
50
50
50
50
50
50
(1) The accrued bonuses for Messrs. Ragan and Baker have been calculated on a pro-rata basis since these executives were not
employed by the Company for the full calendar year.
_______________________________________________________________________________________
42
43
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Rights, Options and Shares Granted as Compensation to Key Management Personnel
Share Rights and Shares
Details of the rights under the LTIP and restricted shares that were granted as compensation to the KMP during the
reporting period, and details of those that were exercised, vested, or lapsed during the financial year, are as follows:
Held at the
Vested and
Held at the
Exercisable
beginning of
Granted as
Vested
Forfeited
end of the
as at
Name
Graham Bradley
Bruce Brook
David Grzelak
David McLemore
Peter St George
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
the Financial
Year
No.
Remun-
eration
No. 1
491,891
45,945
-
-
72,972
494,710
300,000
178,500
85,000
200,000
150,000
-
-
-
-
-
1,800,000
750,000
550,000
550,000
550,000
550,000
during the
during the
Financial
31 December
year
No.
year
No.
Year
No.
491,891
45,945
-
-
72,972
2,294,710
1,050,000
728,500
-
-
-
-
-
-
-
-
(635,000)
-
-
-
750,000
700,000
-
-
-
-
-
-
-
-
-
-
-
2009
No.
-
-
-
-
-
-
-
-
-
-
-
(1) The fair value of the rights at the grant date is the closing price on the 25 March 2009 date of grant (US$0.07), the rights vest over a
three-year period from the grant date, with 50% subject to certain performance conditions.
The rights under the LTIP and the restricted shares were provided at no cost to the recipient.
Cash Rights
Details of the cash rights that were granted to the KMP during the reporting period, and details of those that were
exercised, vested or forfeited during the financial year, are as follows:
Held at the
beginning of
Granted as
Vested
Forfeited
the Financial
Remun-
during the
during the
Year
US$
eration
US$ 1
year
US$
year
US$
Held at the
end of the
Financial
Year
US$
Vested and
Exercisable
as at
31 December
2009
US$
-
-
-
-
-
-
550,000
275,000
225,000
225,000
225,000
225,000
-
-
-
-
-
-
-
-
-
(225,000)
-
-
550,000
275,000
225,000
-
225,000
225,000
-
-
-
-
-
-
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
(1) The cash rights vest over a three-year period from the grant date, with 50% subject to certain performance conditions.
_______________________________________________________________________________________
43
44
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Options
Details of the options that were granted as compensation to the KMP during the reporting period, and details of those that
were exercised, vested, or lapsed during the financial year, are as follows:
Held at the
Vested and
Held at the
Exercisable
beginning of
Granted as
Vested
Forfeited
end of the
as at
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
the Financial
Year
No.
2,500,000
-
-
-
-
-
Remun-
eration
No.
900,000
375,000
275,000
275,000
275,000
275,000
during the
during the
Financial
31 December
year
No.
year
No.
2009
No.
Year
No.
3,400,000
375,000
275,000
-
-
-
-
-
-
-
-
-
(275,000)
-
-
-
275,000
275,000
-
-
-
-
-
-
On 18 June 2009, the Board awarded Mr. Kipp 900,000 options under the 2009 Plan subject to shareholder approval. In
addition to the options granted to Mr. Kipp, on 18 June 2009, the Board granted a total 1,475,000 stock options to other
KMPs. All options granted on 18 June 2009 will vest in full and become exercisable on 18 June 2012 if the executive
remains continuously employed with the Company until that date. At the date of grant, the options had an exercise price
of A$0.30 per option and a fair market value of US$0.143 per option. On 15 December 2009, in accordance with the ASX
listing rules, the Board adjusted the exercise price from A$0.30 per option to A$0.245 per option to reflect the impact of the
Company’s 2009 capital raising program and the related issuance of additional shares subsequent thereunder.
In regards to the 900,000 stock options awarded to Mr. Kipp on 18 June 2009, should shareholder approval not be
received, the Company is legally committed to provide other compensation of equal value to Mr. Kipp.
Except as described above, no options or other rights over shares in the Company have been granted to KMP during or
since the end of the financial year.
During the reporting period, no shares were issued on the exercise of options or rights previously granted as
compensation.
Analysis of Movements in Rights, Options and Shares
The movement during the reporting period, by value of the relevant rights, options and shares in the Company held by
KMP is detailed below:
Value granted in year
Value forfeited in year
Entitlement to
Entitlement to
share rights
cash rights
US$
US$
Share
options
US$
Entitlement to
Entitlement to
share rights
cash rights
US$
US$
Share
options
US$
132,911
55,380
40,612
40,612
40,612
40,612
550,000
275,000
225,000
225,000
225,000
225,000
128,675
53,615
39,317
39,317
39,317
39,317
-
-
-
-
-
-
-
-
-
227,335
225,000
39,317
-
-
-
-
-
-
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
_______________________________________________________________________________________
44
45
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
The value (based upon historic valuations) of outstanding rights, options and shares in the company held by KMP as at 31
December 2009 is detailed below:
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
Share rights
Cash rights
value
US$
value
US$
Options
value
US$
Total rights and
option value
US$
1,008,548
175,380
356,557
-
424,147
306,112
550,000
275,000
225,000
-
225,000
225,000
2,990,983
53,615
39,317
-
39,317
39,317
4,549,531
503,994
620,874
-
688,464
570,429
The following table shows the share-based payment arrangements in which KMP’s participate that were in existence at 31
December 2009:
Series
(1) Issued 12 April 2007
(2) Issued 17 September 2007
(3) Issued 11 April 2008
(4) Issued 28 April 2008 *
(5) Issued 28 April 2008 *
(6) Issued 26 June 2008
(7) Issued 23 July 2008
(8) Issued 23 October 2008
(9) Issued 25 March 2009
(10) Issued 18 June 2009 *
(11) Issued 18 June 2009 *
Grant Date
12-Apr-07
17-Sep-07
11-Apr-08
28-Apr-08
28-Apr-08
26-Jun-08
23-Jul-08
23-Oct-08
25-Mar-09
18-Jun-09
18-Jun-09
Vesting
Date
12-Apr-10
1-Jul-10
11-Apr-11
1-Jan-13
1-Jan-14
11-Apr-11
23-Jul-11
23-Oct-11
25-Mar-12
18-Jun-12
18-Jun-12
Fair Value at
Expiry Date
Grant Date
N/A
1-Jul-10
11-Apr-11
31-Dec-15
31-Dec-15
11-Apr-11
23-Jul-11
23-Oct-11
25-Mar-12
18-Jun-14
18-Jun-14
1.53
1.81
1.77
0.69
1.45
2.10
2.05
0.40
0.07
0.14
0.14
* Subsequent to the original grant date, the Company’s Board of Directors modified the share options exercise price to reflect the
dilution impact resulting from the Company’s 2009 capital raising program and the related issuance of additional shares subsequent
to the original grant date as follows:
Original
Exercise
Price
A$1.95
A$0.21
A$0.30
A$0.30
Modified
Exercise
Price
A$1.895
A$0.155
A$0.245
A$0.245
Series 4
Series 5
Series 10
Series 11
_______________________________________________________________________________________
45
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Service Agreements and Summary of Key Contract Terms
Summary of specific terms of the contracts between the Company and Key Management Personnel are set out below.
46
Name and position
held at the end of
Financial Year
Craig Kipp
Chief Executive Officer
President
Scott Alexander 1
Vice President, Global
Drilling Services
Notice
Notice
Termination payments
Duration of
Period by
Period by
(where these are in addition to
contract
None Specified
Company
None Specified
Executive
180 Days
statutory entitlements)
• For termination with cause, statutory
entitlements only
• For termination without cause
• 12 months' salary
• Pro-rata bonus to termination date
• Waiver of medical insurance
premiums for 12 months
or until 31 December 2010,
whichever is later
• Up to $100,000 relocation expense
reimbursement
• Tax gross-up payment should any
termination or other contractual
payment be deemed subject to an
excise tax under the US tax code
None Specified
None Specified
90 days
• For termination with cause, statutory
entitlements only
• For termination without cause
• 12 months' salary
• Pro-rata bonus to termination date
• Waiver of medical insurance
premiums for 12 months
Brad Baker
None Specified
None Specified
90 days
• For termination with cause, statutory
Senior Vice President, Human
Resources
Michael Birch 1
Vice President, Global Products
entitlements only
• For termination without cause
• 12 months' salary
• Pro-rata bonus to termination date
• Waiver of medical insurance
premiums for 12 months
None Specified
None Specified
90 days
• For termination with cause, statutory
entitlements only
• For termination without cause
• 12 months' salary
• Pro-rata bonus to termination date
• Waiver of medical insurance
premiums for 12 months
(1) Effective 31 December 2009, Mr. Alexander resigned his position as Vice President, Global Drilling Services. Effective 1 January
2010, Michael Birch assumed the role of Vice President, Global Drilling Services.
_______________________________________________________________________________________
46
47
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
Name and position
held at the end of
Financial Year
Fabrizio Rasetti
Senior Vice President,
General Counsel
and Secretary
Joseph Ragan, III
Chief Financial Officer
Notice
Notice
Termination payments
Duration of
Period by
Period by
(where these are in addition to
contract
None Specified
Company
None Specified
Executive
90 days
statutory entitlements)
• For termination with cause, statutory
entitlements only
• For termination without cause
• 12 months' salary
• Pro-rata bonus to termination date
• Waiver of medical insurance
premiums for 12 months
None Specified
None Specified
90 days
• For termination with cause, statutory
entitlements only
• For termination without cause
• 12 months' salary
• Pro-rata bonus to termination date
• Waiver of medical insurance
premiums for 12 months
NON-AUDIT SERVICES
Details of amounts paid or payable for non-audit services provided during the year by the auditor are outlined in Note 35 to
the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or
firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services, as disclosed in Note 35 to the financial statements, do not compromise
the external auditor’s independence, based on advice received from the Audit, Compliance & Risk Committee, for the
following reasons:
�
�
all non-audit services have been reviewed and approved by the Audit, Compliance & Risk Committee to ensure
that they do not impact the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in Code of
Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-
making capacity for the company, acting as an advocate for the company or jointly sharing economic risks and
rewards.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND AUDITORS
The directors and officers of the Company are indemnified by the Company to the maximum extent permitted by law
against liabilities incurred in their respective capacities as directors or officers. In addition, during the financial year the
Company paid premiums in respect of contracts insuring directors and officers of the Company and any related body
corporate against liabilities incurred by them to the extent permitted by the Corporations Act 2001. The insurance
contracts prohibit disclosure of the nature of the liability and the amount of the premium.
The Company has not paid any premiums in respect of any contract insuring Deloitte Touche Tohmatsu, against a liability
incurred in the role as an auditor of the Company.
_______________________________________________________________________________________
47
48
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 49 of the annual financial report.
ROUNDING OF AMOUNTS
Boart Longyear Limited is a company of a kind referred to in Class Order 98/100, issued by the Australian Securities and
Investments Commission, relating to the “rounding off” of amounts in the directors’ report and financial report. Amounts in
the directors’ report and the financial report are presented in US dollars and have been rounded off to the nearest
thousand dollars in accordance with that Class Order, unless otherwise indicated.
Signed in accordance with a resolution of the directors.
On behalf of the Directors
Graham Bradley
Chairman
Sydney, 19 February 2010
Craig Kipp
Chief Executive Officer
Sydney, 19 February 2010
_______________________________________________________________________________________
48
49
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Directors
Boart Longyear Limited
919-929 Marion Road
Mitchell Park SA 5043
Australia
19 February 2010
Dear Directors
Boart Longyear Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Boart Longyear Limited.
As lead audit partner for the audit of the financial statements of Boart Longyear Limited for the financial year
ended 31 December 2009, I declare that to the best of my knowledge and belief, there have been no contraventions
of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
A V Griffiths
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
_______________________________________________________________________________________
49
50
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the members of Boart Longyear Limited
Report on the Financial Report
We have audited the accompanying financial report of Boart Longyear Limited, which comprises the
statement of financial position as at 31 December 2009, and the statement of comprehensive income
(loss), the statement of cash flows and the statement of changes in equity for the year ended on that date,
notes comprising a summary of significant accounting policies and other explanatory information, and the
directors’ declaration of the consolidated entity comprising the company and the entities it controlled at
the year’s end or from time to time during the financial year as set out on pages 52 to 130.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal control relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances. In Note 3, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with the Australian equivalents to International Financial Reporting
Standards ensures that the financial report, comprising the financial statements and notes, comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
_______________________________________________________________________________________
50
51
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Boart Longyear Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December
2009 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 3.
Report on Remuneration Report
We have audited the Remuneration Report included on pages 32 to 47 of the directors’ report for the year ended 31
December 2009. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Boart Longyear Limited for the year ended 31 December 2009, complies
with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
A V Griffiths
Partner
Chartered Accountants
Sydney, 19 February 2010
_______________________________________________________________________________________
51
52
Annual Financial Report
31 DECEMBER 2009 BOART LONGYEAR LIMITED
DIRECTORS’ DECLARATION
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the
financial position and performance of the consolidated entity; and
(c) the directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001.
Graham Bradley
Chairman
Sydney, 19 February 2010
Craig Kipp
Chief Executive Officer
Sydney, 19 February 2010
_______________________________________________________________________________________
52
Consolidated Statement of Comprehensive Income (Loss)
For the financial year ended 31 December 2009 BOART LONGYEAR LIMITED
53
Consolidated
Parent
Note
2009
US$'000
5
5
7
9
5
6
8
978,177
(744,670)
233,507
-
4,365
(117,260)
(70,549)
(12,643)
(14,890)
22,530
1,616
(46,752)
(22,606)
7,723
2008
US$'000
1,838,538
(1,260,620)
577,918
-
18,427
(181,695)
(118,295)
(20,328)
(6,697)
269,330
1,637
(39,688)
231,279
(74,555)
2009
US$'000
2008
US$'000
-
-
-
-
-
(2,560)
-
-
(109)
(2,669)
12,545
-
9,876
(3,023)
-
-
-
55,110
-
(1,753)
-
-
(2,118)
51,239
603
-
51,842
(1,751)
(14,883)
156,724
6,853
50,091
Revenue
Cost of goods sold
Gross margin
Other revenue
Other income
General and administrative expenses
Selling and marketing expenses
Restructuring expenses and related impairments
Other expenses
Operating profit (loss)
Interest income
Finance costs
Profit (loss) before taxation
Income tax (expense) benefit
Profit (loss) for the year attributable
to equity holders of the parent
Earnings (loss) per share:
Basic and diluted earnings (loss) per share
25
(0.6) cents
10.4 cents
Other comprehensive income (loss)
Profit (loss) for the year attributable
to equity holders of the parent
Losses on cash flow hedges recorded in equity
Transfer to profit or loss on cash flow hedges
Interest rate swap expense - ineffective hedge
Exchange differences on translation of foreign operations
Actuarial losses related to defined benefit plans
Income tax on income and expense
recognised directly through equity
Other comprehensive income (loss) for the year (net of tax)
Total comprehensive income (loss) for the year
attributed to equity holders of the parent
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
(14,883)
156,724
6,853
50,091
(2,007)
12,976
15,242
26,211
121,179
(3,113)
(9,805)
134,472
(20,359)
6,147
-
(14,212)
(133,764)
(31,680)
12,162
(167,494)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
119,589
(10,770)
6,853
50,091
_______________________________________________________________________________________
See accompanying notes to the financial statements.
See accompanying notes to the financial statements.
53
Consolidated Statement of Financial Position
As at 31 December 2009 BOART LONGYEAR LIMITED
54
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax receivable
Prepaid expenses
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Other financial assets
Other assets
Defined benefit plan asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Other financial liabilities
Current tax payable
Loans and borrowings
Total current liabilities
Non-current liabilities
Trade and other payables
Loans and borrowings
Other financial liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Other equity
Retained earnings (accumulated losses)
Total equity
Note
31a
10
11
12
8
13
14
15
8
12
19
16
18
12
8
17
16
17
12
8
18
20
21
22
23
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
87,557
198,598
144,990
1,818
21,215
28,045
482,223
380,515
276,956
84,287
122,100
-
1,799
17,958
50,603
234,578
177,296
306
10,161
26,166
499,110
403,693
234,571
73,456
68,537
-
1,609
13,031
883,615
1,365,838
794,897
1,294,007
170,118
13,973
11,835
41,221
3,133
240,280
-
132,486
4,822
5,323
44,890
187,521
427,801
938,037
1,136,347
23,038
(137,182)
(84,166)
938,037
195,597
23,109
-
32,378
1,148
252,232
1,293
813,770
27,197
2,130
45,037
889,427
1,141,659
152,348
478,036
(118,319)
(141,539)
(65,830)
152,348
148
650,702
-
-
11,018
-
661,868
-
-
-
17,661
2,226,378
-
-
2,244,039
2,905,907
108
28,323
-
-
6,583
-
35,014
-
-
-
11,614
2,186,106
-
-
2,197,720
2,232,734
1,041
1,511
-
-
-
-
-
-
-
-
1,041
1,511
-
-
-
-
690
690
1,731
2,904,176
-
-
-
-
-
-
1,511
2,231,223
2,890,807
2,228,139
6,024
-
7,345
2,592
-
492
2,904,176
2,231,223
_______________________________________________________________________________________
See accompanying notes to the financial statements.
See accompanying notes to the financial statements.
54
55
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2009 BOART LONGYEAR LIMITED
Consolidated
Foreign
Currency
Equity Settled
Total
Attributible
Issued
Capital
US$'000
Translation
Compensation
Hedging
Reserve
US$'000
Reserve
US$'000
Reserve
US$'000
Other
Equity
US$'000
Accumulated
to Owners of
Losses
US$'000
the Parent
US$'000
Balance at 1 January 2008
Profit for the period
Other comprehensive income
for the period
Payment of dividends
Purchase of shares for LTIP
Share-based compensation expense
479,673
30,215
368
(8,050)
(141,539)
(141,028)
-
-
-
(1,637)
-
-
(133,764)
-
-
-
-
-
-
-
2,224
-
(9,312)
-
-
-
-
-
-
-
-
156,724
(24,418)
(57,108)
-
-
219,639
156,724
(167,494)
(57,108)
(1,637)
2,224
Balance at 31 December 2008
478,036
(103,549)
2,592
(17,362)
(141,539)
(65,830)
152,348
Balance at 1 January 2009
Loss for the period
Other comprehensive income
for the period
Issued under Capital Raising Program
Purchase of shares for LTIP
Share-based compensation expense
Capitalised transaction costs - GST refund *
478,036
(103,549)
2,592
(17,362)
(141,539)
-
-
662,297
(3,986)
-
-
-
121,179
-
-
-
-
-
-
-
-
3,432
-
-
16,746
-
-
-
-
-
-
-
-
-
4,357
(65,830)
(14,883)
(3,453)
-
-
-
-
152,348
(14,883)
134,472
662,297
(3,986)
3,432
4,357
Balance at 31 December 2009
1,136,347
17,630
6,024
(616)
(137,182)
(84,166)
938,037
* During the period, a GST refund was received relating to the IPO transaction costs that were capitalised in 2007.
PARENT
Issued
Capital
US$'000
Equity Settled
Compensation
Reserve
US$'000
Retained
Earnings
US$'000
Total
Attributible
to Owners of
the Parent
US$'000
Balance at 1 January 2008
2,229,776
Profit for the period
Payment of dividends
Purchase of shares for LTIP
Share-based compensation expense
-
-
(1,637)
-
Balance at 31 December 2008
2,228,139
Balance at 1 January 2009
Profit for the period
Issued under Capital Raising Program
Purchase of shares for LTIP
GST refund on capitalized IPO costs
Share-based compensation expense
2,228,139
-
662,297
(3,986)
4,357
-
Balance at 31 December 2009
2,890,807
368
-
-
-
2,224
2,592
2,592
-
-
3,432
6,024
7,509
50,091
(57,108)
-
-
2,237,653
50,091
(57,108)
(1,637)
2,224
492
2,231,223
492
6,853
-
-
2,231,223
6,853
662,297
(3,986)
4,357
3,432
7,345
2,904,176
_______________________________________________________________________________________
See accompanying notes to the financial statements.
See accompanying notes to the financial statements.
55
Consolidated Statement of Cash Flows
For the financial year ended 31 December 2009 BOART LONGYEAR LIMITED
56
Consolidated
Parent
Note
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Cash flows from operating activities
Profit (loss) for the year
Adjustments provided by operating activities:
Income tax expense (benefit) recognised in profit
Finance costs recognised in profit
Depreciation and amortisation
Investment revenue recognised in profit
Loss on sale or disposal of non-current assets
(Gain) loss on disposal of businesses
Impairment of current and non-current assets
Foreign exchange gain (loss)
Share-based compensation
Long term compensation - cash rights
Non-operating expenses
Changes in net assets and liabilities, net of effects
from acquisition and disposal of businesses:
(Increase) decrease in assets:
Trade and other receivables
Inventories
Other assets
Increase (decrease) in liabilities:
Trade and other payables
Provisions
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash flows from operating activities
6
7
5
7
7
21
5
(14,883)
156,724
(7,723)
46,752
88,507
(1,616)
49
4,130
1,318
(1,712)
3,432
690
-
58,163
56,114
608
(35,882)
(16,233)
181,714
(28,396)
1,616
(37,781)
117,153
74,555
39,688
86,347
(1,637)
1,018
(9,131)
6,577
6,462
2,224
-
(536)
(16,213)
(48,559)
(2,222)
(29,505)
5,058
270,850
(38,023)
1,637
(91,593)
142,871
6,853
3,023
-
-
(12,545)
-
-
-
-
311
-
-
(621,304)
-
6,396
(3,492)
-
(620,758)
-
12,545
-
(608,213)
50,091
1,751
-
-
(603)
-
-
-
-
-
-
-
28,516
-
4,385
(16,051)
-
68,089
-
603
-
68,692
_______________________________________________________________________________________
See accompanying notes to the financial statements.
See accompanying notes to the financial statements.
56
Consolidated Statement of Cash Flows (continued)
For the financial year ended 31 December 2009 BOART LONGYEAR LIMITED
57
Consolidated
Parent
Note
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of rods and casings
Proceeds from sale of property, plant and equipment
Development costs paid
Software costs paid
Payments for acquisitions of businesses
Proceeds on disposal of subsidiary,
net of cash disposed
Payments for investments
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issuance of shares
Payments for share issuance costs
Payments for share buy-back for LTIP
Payments for debt issuance costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid
31b
31c
24
GST refund on capitalized IPO costs
Net cash flows (used in) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance
of cash held in foreign currencies
Cash and cash equivalents at the end of the year
31a
(30,850)
(5,979)
6,350
(5,064)
(10,294)
(403)
5,126
-
(41,114)
697,702
(49,549)
(3,986)
(503)
29,229
(710,861)
-
4,357
(33,611)
42,428
50,603
(5,474)
87,557
(137,668)
(8,242)
3,484
(5,081)
(15,890)
(138,426)
19,624
-
(282,199)
-
-
(1,637)
(523)
287,079
(133,128)
(57,108)
-
94,683
(44,645)
87,548
7,700
50,603
-
-
-
-
-
-
-
(40,271)
(40,271)
697,702
(49,549)
(3,986)
-
-
-
-
4,357
648,524
40
108
-
148
-
-
-
-
-
-
-
(10,926)
(10,926)
-
-
(1,637)
-
-
-
(57,108)
-
(58,745)
(979)
1,087
-
108
_______________________________________________________________________________________
See accompanying notes to the financial statements.
See accompanying notes to the financial statements.
57
58
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
1.
GENERAL INFORMATION
Boart Longyear Limited (the “Parent” or the “Company”) is a public company listed on the Australian Securities
Exchange Limited (“ASX”) and is incorporated in Australia. Boart Longyear Limited and subsidiaries (collectively
referred to as the “Boart Longyear Group” or the “Group”) operate in five geographic regions, which are defined
as North America, Latin America, Europe, Asia Pacific, and Africa.
Boart Longyear Limited’s registered office and its principal place of business are as follows:
Registered office
919-929 Marion Road
Mitchell Park South Australia 5043
Australia
Tel: +61 (8) 8375 8375
Principal place of business
Riverpark Corporate Center #14 Suite 600
10808 South River Front Parkway
South Jordan , Utah 84095
United States of America
Tel: +1 (801) 972 6430
2.
ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual
reporting period. Details of the impact of these new accounting standards are set out in the individual accounting
policy notes set out below. These Standards and Interpretations include:
Presentation of Financial Statements
AASB 101 ‘Presentation of Financial Statements (revised September 2007)’, AASB 2007-8 ‘Amendments to
Australian Accounting Standards arising from AASB 101’. The adoption of these standards requires the
disclosure of “total comprehensive income”, changes the titles on some of the financial statements, requires a
statement of financial position at the beginning of the earliest comparative period when comparatives are
“restated” or retrospective adjustments are made, and requires disclosure of income tax relating to each
component of other comprehensive income. Other than changing the presentation of certain disclosures, the
adoption of this standard did not have a significant impact on the Group’s financial results or statement of
financial position.
Borrowing Costs
AASB 123 ‘Borrowing Costs’ (revised), AASB 2007-6 ‘Amendments to Australian Accounting Standards arising
from AASB 123’ makes a number of amendments to other accounting standards as a result of the revised AASB
123 and must be adopted at the same time. This revised version requires an entity to capitalise borrowing costs
that are directly attributable to the acquisition, construction or production of a qualifying asset. The adoption of
this standard did not have a significant impact on the Group’s financial results or statement of financial position.
Share-based Payments
AASB 2008-1 ‘Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions
and Cancellations’ amends AASB 2 ‘Share-based Payment’ to introduce equivalent amendments made to IFRS 2
‘Share-based Payment’ to:
�
�
�
�
clarify that vesting conditions are those conditions that determine whether the entity receives the
services that result in the counterparty’s entitlement
restrict the definition of vesting conditions to include only service conditions and performance conditions
amend the definition of performance conditions to require the completion of a service period in addition
to specified performance targets
specify that all cancellations, whether by the entity or by other parties, should receive the same
accounting treatment.
The adoption of this standard did not have a significant impact on the Group’s financial results or statement of
financial position.
Business Combinations
AASB 3 ‘Business Combinations (2008)’, AASB 127 ‘Consolidated and Separate Financial Statements’ and
AASB 2008-3 ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127’ alter the
manner in which business combinations and changes in ownership interests in subsidiaries are accounted for.
There are also consequential amendments to other standards affected through AASB 2008-2, most notably
AASB 128 ‘Investments in Associates’ and AASB 131 ‘Interests in Joint Ventures’. The adoption of this standard
did not have a significant impact on the Group’s financial results or statement of financial position.
_______________________________________________________________________________________
58
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
2.
ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)
59
Financial Instruments Disclosure
AASB 2009-2 ‘Amendments to Australian Accounting Standards – Improving Disclosures about Financial
Instruments’ amends AASB 7 ‘Financial Instruments: Disclosures’ to require enhanced disclosures about fair
value measurements and liquidity risk. Among other things the amendments:
�
�
�
�
clarify that the existing AASB 7 fair value disclosures must be made separately for each class of
financial instrument
add disclosure of any change in the method of determining fair value and the reasons for the change
establish a three-level hierarchy for making fair value measurements used in the disclosures
clarify that the current maturity analysis for non-derivative financial instruments should include issued
financial guarantee contracts and disclosure of a maturity analysis for derivative financial liabilities.
Comparative information is not required to be provided in the first year the amendments are applied. The
adoption of this standard did not have a significant impact on the Group’s financial results or statement of
financial position.
Standards and Interpretations issued not yet effective
The accounting standards and AASB Interpretations that will be applicable to the Group in future reporting
periods are detailed below. Apart from these standards and interpretations, management has considered other
accounting standards that will be applicable in future periods, however they have been considered insignificant to
the Group.
Amendments to Australian Accounting Standards
AASB 2009-4 ‘Amendments to Australian Accounting Standards arising from the Annual Improvement Process’ is
effective for annual reporting periods beginning on or after 1 July 2009. The standard introduces amendments
into Accounting Standards that are equivalent to those made by the IASB under its program of annual
improvements to its standards. A number of the amendments are technical changes to other pronouncements as
the result of AASB 3 ‘Business Combinations’ (2008), to align the scope of the pronouncements or to implement
other consequential amendments. Management has not yet assessed the impact of adopting this standard.
Further Amendments to Australian Accounting Standards
AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements
Process’ is effective for annual reporting periods beginning on or after 1 January 2010. The standard introduces
amendments into Accounting Standards that are equivalent to those made by the IASB under its program of
annual improvements to its standards. A number of the amendments are largely technical, clarifying particular
items, or eliminating unintended consequences. Other changes are more substantial, such as the current/non-
current classification of convertible instruments, the classification of expenditures on unrecognised assets in the
statement of cash flows and the classification of leases of land and buildings. Management has not yet assessed
the impact of adopting this standard.
Group cash-settled share-based payments
AASB 2009-8 ‘Amendments to Australian Accounting Standards – Group Cash-Settled Share-based Payment
Transactions’ amends AASB2 ‘Share-based Payment’ to clarify the accounting for group cash-settled share-
based payment transactions. An entity receiving goods or services in a share-based payment arrangement must
account for those goods or services no matter which entity in the group settles the transaction, and no matter
whether the transaction is settled in shares or cash. Management has not yet assessed the impact of adopting
this standard.
Related party disclosures
AASB 2009-12 ‘Amendments to Australian Accounting Standards – Related Party Disclosures” amends the
requirements of the previous version of AASB 124 ‘ Related Party Disclosures’ to clarify the definition of a related
party and includes an explicit requirement to disclose commitment involving related parties. Management has
not yet assessed the impact of adoption of this standard.
_______________________________________________________________________________________
59
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
2.
ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)
60
Classification of Rights Issues
AASB 2009-10 ‘Amendments to Australian Accounting Standards – Classification of Rights Issues’ is effective for
annual reporting periods beginning on or after 1 February 2010. The standard amends AASB 132 ‘Financial
Instruments: Presentation’ to require a financial instrument that gives the holder the right to acquire a fixed
number of the entity's own equity instruments for a fixed amount of any currency to be classified as an equity
instrument if, and only if, the entity offers the financial instrument pro rata to all of its existing owners of the same
class of its own non-derivative equity instruments. Prior to this amendment, rights issues (rights, options, or
warrants) denominated in a currency other than the functional currency of the issuer were accounted for as
derivative instruments. Management has not yet assessed the impact of adoption of this standard.
Financial instruments
AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9 ‘Financial Instruments’
introduces new requirement s for classifying and measuring financial assets, as follows:
� Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are
measured at amortised cost (the use of fair value is optional in some limited circumstances)
Investments in equity instruments can be designated as 'fair value through other comprehensive income'
with only dividends being recognised in profit or loss
�
� All other instruments (including all derivatives) are measured at fair value with changes recognised in
�
the profit or loss
The concept of 'embedded derivatives' does not apply to financial assets within the scope of the
Standard and the entire instrument must be classified and measured in accordance with the above
guidelines.
Management has not yet assessed the impact of adoption of this standard.
Prepayments of a Minimum Funding Requirement
AASB 2009-14 ‘Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement’ is
effective for annual reporting periods beginning on or after 1 January 2001. The standard makes limited-
application amendments to Interpretation 14 ‘AASB 119 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction’. The amendments apply when an entity is subject to minimum
funding requirements and makes an early payment of contributions to cover those requirements, permitting the
benefit of such an early payment to be recognised as an asset. Management has not yet assessed the impact of
adoption of this standard.
3.
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
This financial report is a general purpose financial report which has been prepared in accordance with the
requirements of applicable Accounting Standards including Australian Interpretations and the Corporations Act
2001. The financial report includes the separate financial statements of the Parent and the consolidated financial
statements of the Group.
Accounting Standards include Australian equivalents to International Financial Reporting Standards (“A-IFRS”).
Compliance with A-IFRS ensures that the financial statements and notes of the Parent and the Group comply
with IFRS.
The financial report is presented in United States dollars which is Boart Longyear Limited’s functional and
presentation currency. The financial statements were authorised for issue by the directors on 19 February 2010.
_______________________________________________________________________________________
60
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
61
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of preparation
The financial report has been prepared on a historical cost basis, except for the revaluation of certain financial
instruments that are stated at fair value. Cost is based on fair values of the consideration given in exchange for
assets.
In applying A-IFRS, management is required to make judgments, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making judgments
about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current and future periods.
Judgments made by management in the application of A-IFRS that have significant effects on the financial
statements and estimates with a significant risk of material adjustments in the next year are disclosed, where
applicable, in the relevant notes to the financial statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information
satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying
transactions or other events is reported. These accounting policies have been consistently applied by each entity
in the Group.
The consolidated financial statements are prepared by combining the financial statements of all of the entities
that comprise the consolidated entity, Boart Longyear Limited and subsidiaries as defined in AASB 127
‘Consolidated and Separate Financial Statements’. Consistent accounting policies are applied by each entity and
in the preparation and presentation of the consolidated financial statements.
Subsidiaries are all entities for which the Group has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group until such time as the Group ceases to
control such entity. Where necessary, adjustments are made to the financial statements of subsidiaries to make
their accounting policies consistent with the Group accounting policies.
In preparing the consolidated financial statements, all inter-company balances and transactions, and unrealised
income and expenses arising from inter-company transactions, are eliminated. Unrealised losses are eliminated
in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
The accounting policies and methods of computation are the same as those in the prior annual financial report.
Comparative figures have been adjusted to conform to the changes in presentation in the current reporting
period, where necessary.
The significant accounting policies set out below have been applied in the preparation and presentation of the
financial report for the year ended 31 December 2009 and the comparative information.
(a)
Presentation currency
Results of the major operating businesses are recorded in their functional currencies, which are
generally their local currency. The Group’s US dollar denominated revenue represents the most
predominant currency. Accordingly, under A-IFRS, management believes that US dollar reporting
represents the best indicator of the results of the Group and therefore the consolidated financial
information is presented in US dollars.
(b)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and deposits repayable on demand with a financial
institution. Cash balances and overdrafts in the balance sheet are stated at gross amounts within
current assets and current liabilities, unless there is a legal right of offset at the bank. The cash and
cash equivalents balance primarily consists of demand deposits, money market funds and bank term
deposits with original maturity at time of purchase of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
_______________________________________________________________________________________
61
62
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c)
Trade and other receivables
Trade receivables are recorded at amortised cost. The Group reviews collectability of trade receivables
on an ongoing basis and makes judgments as to its ability to collect outstanding receivables and
provides an allowance for credit losses when there is objective evidence that the Group will not be able
to collect the debt. The amount of the loss is recognised in the income statement within operating
expenses. When a trade receivable is determined to be uncollectible, it is written off against the
allowance account for doubtful debts. Subsequent recoveries of amounts previously written off are
recorded in other income in the income statement.
(d)
Inventories
Products
Inventories are measured at the lower of cost or net realisable value. The cost of inventories is based
on a standard cost method, which approximates actual cost on a first-in first-out basis, and includes
expenditures incurred in acquiring the inventories and bringing them to their existing location and
condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads (including depreciation) based on normal operating capacity. Net
realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses.
Drilling Services
The Group maintains an inventory of core drilling rods and casings and certain consumables for use in
the rendering of services. Such inventories are measured at the lower of cost or net realisable value.
Core drilling rods and casings are initially recognised at cost and are expensed as utilised.
A regular and ongoing review is undertaken to establish whether any items are obsolete or damaged,
and if so their carrying amount is written down to its net realisable value. Allowances are recorded for
inventory considered to be excess or obsolete.
(e)
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset, including
the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a
working condition for its intended use, and the present value at acquisition of the costs of dismantling
and removing the items and restoring the site on which they are located. Purchased software that is
integral to the functionality of the related equipment is capitalised as part of that equipment. When parts
of an item of property, plant and equipment have different useful lives, they are accounted for as
separate assets.
Subsequent costs are recognised in the carrying amount of an item of property, plant and equipment, as
appropriate, only when it is probable that the future economic benefits embodied within the item will flow
to the consolidated entity and the cost of the item can be measured reliably. All other costs, including
repairs and maintenance, are recognised in the income statement as an expense as incurred.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the
lease term or their useful lives. Land and properties in the course of construction are not depreciated.
The following useful lives are used in the calculation of depreciation:
Buildings
Plant and machinery
Drilling rigs
Other drilling equipment
Office equipment
Computer equipment:
Hardware
Software
20-40 years
5-10 years
5-12 years
1-5 years
5-10 years
3-5 years
1-7 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
_______________________________________________________________________________________
62
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
63
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Goodwill and other intangible assets
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired
(the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously
held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable
assets acquired and the liabilities assumed.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of
impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to
benefit from the synergies of the combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently when there is an indication that the unit
may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount,
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Trademarks and trade names
Trademarks and trade names recognised by the Group that are considered to have indefinite useful
lives are not amortised. Each period, the useful life of each of these assets is reviewed to determine
whether events and circumstances continue to support an indefinite useful life assessment for the asset.
Trademarks and trade names that are considered to have a finite useful life are carried at cost less
accumulated amortisation and accumulated impairment losses and have an average useful life of 3
years. Such assets are tested for impairment at least annually or more frequently if events or
circumstances indicate that the asset might be impaired.
Contractual customer relationships
Contractual customer relationships acquired in a business combination are identified and recognised
separately from goodwill where they satisfy the definition of an intangible asset and their fair values can
be measured reliably. Contractual customer relationships have a finite useful life and are carried at cost
less accumulated amortisation and accumulated impairment losses.
Contractual customer relationships are amortised over 10 – 15 year periods on a straight line basis.
The estimated useful life and amortisation method is reviewed at the end of each annual reporting
period, with any changes being recognised as a change in accounting estimate.
Patents
Patents are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is charged on a straight line basis over their estimated useful lives of 10 - 20 years. The
estimated useful life and amortisation method is reviewed at the end of each annual reporting period,
with any changes being recognised as a change in accounting estimate.
Research and development costs
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in profit or loss when incurred.
_______________________________________________________________________________________
63
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
64
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Goodwill and other intangible assets (continued)
Development activities involve a plan or design for the production of new or substantially improved
products and processes. Development expenditure is capitalised only if development costs can be
measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and the Group intends to and has sufficient resources to complete development
and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour
and overhead costs that are directly attributable to preparing the asset for its intended use. Other
development expenditure is recognised in profit or loss when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised in profit or loss on a straight line basis over
the estimated useful lives, which on average is 15 years.
Subsequent expenditure on intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure
on internally generated goodwill and brands, is recognised in profit or loss when incurred.
(g)
Assets classified as held for sale
Non-current assets (and disposal groups) classified as held for sale and liabilities directly associated are
measured at the lower of carrying amount or fair value less costs to sell.
The Group classifies non-current assets and disposal groups as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the asset (or disposal group) is available for immediate sale in its present
condition subject only to terms that are usual and customary for such a sale and the sale is highly
probable. The sale of the asset (or disposal group) must be expected to be completed within one year
from the date of classification, except in the circumstances where sale is delayed by events or
circumstances outside the Group’s control but it remains committed to a sale.
The Group discloses the results of these disposal groups as discontinued operations on the face of the
income statement only if they meet the following requirements:
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represent a separate major line of business or geographical area of operations;
are part of a single coordinated plan to dispose of a separate major line of business or geographical
area of operations; or
are a subsidiary acquired exclusively with a view to resale.
(h)
Leased assets
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks
and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal
to the present value of the minimum lease payments, each determined at the inception of the lease.
The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Finance lease payments are apportioned between finance charges and reduction of the lease obligation
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges
are charged directly against income, unless they are directly attributable to qualifying assets, in which
case they are capitalised in accordance with the Group’s general policy on borrowing costs. Refer to
Note 3(o). Contingent rentals are recognised as expenses in the periods in which they are incurred.
Finance leased assets are amortised on a straight-line basis over the shorter of the lease term or the
estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
_______________________________________________________________________________________
64
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
65
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h)
Leased assets (continued)
Lease incentives
In the event that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental
expense on a straight-line basis over the term of the lease, except where another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are
consumed.
(i)
Current and deferred taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or
loss except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity or where it arises as part of a business combination, in which case it is recognised
in goodwill.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is recognised using the balance sheet method, in respect of all temporary differences that
have originated but not reversed at the balance sheet date where transactions or events that result in an
obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the
balance sheet date. Temporary differences are differences between the Group’s taxable profits and its
results as stated in the financial statements that arise from the inclusion of gains and losses in tax
assessments in periods different from those in which they are recognised in the financial statements.
Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill,
the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to
the extent that they probably will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the reporting
date.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all
available evidence, it can be regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying temporary differences can be deducted. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as
the liability to pay the related dividend is recognised.
Tax consolidation
The Group includes tax consolidated groups for the entities incorporated in Australia and the United
States. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary
differences of the members of each tax-consolidated group are recognised in the separate financial
statements of the members of that tax-consolidated group using the ‘separate taxpayer within group’
approach by reference to the carrying amounts in the separate financial statements of each entity. Tax
values arising from the unused tax losses and relevant tax credits of each members of the tax-
consolidated group are recognised by the head entity in that tax-consolidated group.
Entities within the various tax-consolidated groups will enter into tax funding arrangements and tax-
sharing agreements with the head entities. Under the terms of the tax funding arrangements, the
relevant head entity and each of the entities in that tax-consolidated group will agree to pay a tax
equivalent payment to or from the head entity, based on the current tax liability or current tax asset of
the entity.
_______________________________________________________________________________________
65
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
66
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j)
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest
rate and foreign exchange rate risk, including foreign exchange forward contracts and interest rate
swaps.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is
recognised in profit or loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
The Group designates certain derivatives as either hedges of the fair value of recognised assets or
liabilities or firm commitments (fair value hedges), or hedges of highly probable forecast transactions or
hedges of foreign currency risk of firm commitments (cash flow hedges).
The fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the
remaining maturity of the hedge relationship is more than 12 months and as a current asset or a current
liability if the remaining maturity of the hedge relationship is less than 12 months.
Derivatives not designated into an effective hedge relationship are classified as a current asset or a
current liability regardless of their remaining maturities.
Hedge accounting
The Group designates certain hedging instruments, which include derivatives, embedded derivatives
and non-derivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges.
Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging
instrument and hedged item, along with its risk management objectives and its strategy for undertaking
various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the
hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair
values or cash flows of the hedged item.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that
is attributable to the hedged risk.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging
instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. The
adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit
or loss from that date.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss as part of other expenses or other income, or interest expense if
appropriate.
Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is
recognised in profit or loss. However, when the forecast transaction that is hedged results in the
recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred
in equity are transferred from equity and included in the initial measurement of the cost of the asset or
liability.
_______________________________________________________________________________________
66
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
67
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash flow hedge (continued)
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging
instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any
cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in
profit or loss.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host contracts and
the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.
(k)
Impairment
Non-financial assets
The Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have
indefinite lives or that are not yet available for use, a recoverable amount is estimated at each reporting
date.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds
its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates
cash flows that largely are independent from other assets and groups. Impairment losses are
recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the
carrying amount of the other assets in the unit or group of units on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use or its fair
value, less costs to sell. In assessing value in use, the estimated future cash flows are discounted to
their present value using a post-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses
recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment loss is not recognised directly for trade
receivables because the carrying amount is reduced through the use of an allowance account. When a
trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries
of amounts previously written off are recorded in other income in the income statement. Changes in the
carrying amount of the allowance account are recognised in profit or loss.
Individually significant financial assets are tested for impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can
be related objectively to an event occurring after the impairment loss was recognised. For financial
assets measured at amortised cost, the reversal is recognised in profit or loss.
_______________________________________________________________________________________
67
68
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l)
Trade and other payables
Trade payables and other payables are carried at amortised cost. They represent unsecured liabilities
for goods and services provided to the Group prior to the end of the financial period that are unpaid and
arise when the Group becomes obligated to make future payments.
(m)
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability.
Warranties
The Group maintains warranty reserves for products manufactured by its various companies. A
provision is recognised when the following conditions are met: 1) the Company has an obligation as a
result of an implied or contractual warranty; 2) it is probable that an outflow of resources will be required
to settle the warranty claim; and 3) the amount of the claim can be reliably estimated.
Restructuring
A provision for restructuring is recognised when the Group has approved a detailed and formal
restructuring plan, and the Group starts to implement the restructuring plan or announces the main
features of the restructuring plan to those affected by the plan in a sufficiently specific manner to raise a
valid expectation of those affected that the restructuring will be carried out. The Group’s restructuring
accruals include only the direct expenditures arising from the restructuring, which are those that are both
necessarily incurred by the restructuring and not associated with the ongoing activities.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group
from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The
provision is measured at the present value of the lower of the expected cost of terminating the contract
and the expected net cost of continuing with the contract. Before a provision is established, the Group
recognises any impairment loss on the assets associated with that contract.
(n)
Employee benefits
Liabilities for employee benefits for wages, salaries, annual leave, long service leave, and sick leave
represent present obligations resulting from employees’ services provided to the reporting date and are
calculated at discounted amounts based on remuneration wage and salary rates that the Group expects
to pay as at reporting date including related on-costs, such as workers compensation insurance and
payroll tax, when it is probable that settlement will be required and they are capable of being measured
reliably.
Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are
measured at their nominal values using the remuneration rate expected to apply at the time of
settlement.
Liabilities recognised in respect of employee benefits which are not expected to be settled within 12
months are measured as the present value of the estimated future cash outflows to be made by the
Group in respect of services provided by employees up to reporting date.
Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised
goods and services, are expensed based on the net marginal cost to the Group as the benefits are
taken by the employees.
A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-
sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation can be estimated reliably.
_______________________________________________________________________________________
68
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
69
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n)
Employee benefits (continued)
Defined contribution pension plans and post-retirement benefits
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a
separate entity. The Group has no legal or constructive obligation to pay further contributions if the fund
does not hold sufficient assets to pay all employees the benefits relating to employee service in the
current and prior periods. The amount recognised as an expense in the income statement in respect of
pension costs and other post-retirement benefits is the contributions payable in the year. Differences
between contributions payable in the year and contributions actually paid are shown as either accruals
or prepayments in the balance sheet.
Defined benefit pension plans
The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by
estimating the amount of future benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present value, and the fair value of
any fund assets is deducted.
The discount rate is the yield at the balance sheet date on high quality corporate bonds that have
maturity dates approximating to the terms of the Group’s defined benefit obligations. Where there is no
deep market in such bonds, the market yields at the reporting date on government bonds are used.
The calculation is performed by a qualified actuary using the projected unit credit method. Actuarial
gains and losses arising from experience adjustments and related changes in actuarial assumptions are
charged or credited to retained earnings.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by
employees is recognised as an expense in the profit or loss on a straight-line basis over the average
period until the benefits become vested. To the extent that the benefits vest immediately, the expense is
recognised immediately in profit or loss.
Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of
any unrecognised past service costs and the present value of any future refunds from the plan or
reductions in future contributions to the plan. Past service cost is the increase in the present value of the
defined benefit obligation for employee services in prior periods, resulting in the current period from the
introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past
service costs may either be positive (increase the benefit obligation where benefits are introduced or
improved) or negative (decrease the benefit obligation where existing benefits are reduced).
Share-based payment transactions
Equity-settled share-based payments with employees and others providing similar services are
measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a
Black-Scholes-Merton model, which requires the input of highly subjective assumptions.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually
vest.
Equity-settled share-based payment transactions with other parties are measured at the fair value of the
goods and services received, except where the fair value cannot be estimated reliably, in which case
they are measured at the fair value of the equity instruments granted, measured at the date the entity
obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability equal to the portion of the goods or services received
is recognised at the current fair value determined at each reporting date.
When determining expense related to long-term incentive plans, the Company considers the probability
of shares vesting due to achievement of performance metrics established by the Board of Directors
related to long-term incentives that include a performance vesting condition. The Company also
estimates the portion of share and cash rights that will ultimately be forfeited. A forfeiture rate over the
vesting period has been estimated, based upon extrapolation of historic forfeiture rates.
_______________________________________________________________________________________
69
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
70
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n)
Employee benefits (continued)
Earn-out and bonus agreements
In certain circumstances, previous owners of acquired businesses may become employees of the
Group. A business combination agreement may include earn-out or bonus clauses which provide for an
adjustment to the cost of the combination contingent upon future events. If contingent consideration is,
in substance, compensation for services or profit sharing (e.g., clauses requiring that the individual
remain employed by the Group), those payments are recognised as an expense over the period of
services provided.
(o)
Loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less
directly attributable transaction costs. Debt issuance costs are amortised using the effective interest
rate method over the life of the borrowing. For refinancing or restructuring of liabilities which are not
considered a substantial modification, all costs incurred related to the refinancing or restructuring are
amortised to profit and loss over the remaining period of the borrowings. For refinancing or restructuring
of liabilities which are considered a substantial modification, a gain (loss) is recognised and the initial
issue costs are written off, while any issuance costs related to the refinancing are recorded against the
liabilities.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the balance sheet date.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(p)
Financial instruments
Debt and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangement.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the
higher of the amount recognised as a provision and the amount initially recognised less cumulative
amortisation in accordance with the revenue recognition policies described in Note 3(r).
Financial assets
Investments are recognised and derecognised on trade date where the purchase or sale of an
investment is under a contract whose terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at fair value, net of transaction costs
except for those financial assets classified as fair value through profit or loss which are initially
measured at fair value.
Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Group financial
statements. Subsequent to initial recognition, investments in associates are accounted for under the
equity method in the consolidated financial statements and the cost method in the Group financial
statements.
_______________________________________________________________________________________
70
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
71
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p)
Financial instruments (continued)
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as ‘loans and receivables’. Non-current loans and receivables
are measured at amortised cost using the effective interest rate method less impairment. Interest is
recognised by applying the effective interest rate. Current trade receivables are recorded at the
invoiced amount and do not bear interest.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other
financial liabilities.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or
loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any
interest paid on the financial liability. Fair value is determined in the manner described in Note 12.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction
costs, and subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis. The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts the estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period.
(q)
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a
reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the
costs that are incurred directly in connection with the issue of those equity instruments and which would
not have been incurred had those instruments not been issued.
(r)
Revenue recognition
Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns and allowances, trade discounts, volume rebates and sales taxes. Revenue is
recognised when the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs and possible return of goods can be
estimated reliably, and there is no continuing management involvement with the goods.
Transfers of risks and rewards vary depending on the individual terms of the contract of sale and with
local statute, but are generally when title and insurance risk has passed to the customer and the goods
have been delivered to a contractually agreed location.
Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of
the transaction at the reporting date. The stage of completion of the contract is determined as follows:
�
�
revenue from drilling services contracts is recognised on the basis of actual meters drilled for each
contract; and
revenue from time and material contracts is recognised at the contractual rates as labour hours are
delivered and direct expenses are incurred.
Investment income is accrued over time, by reference to the principal outstanding and at the effective
applicable interest rate.
_______________________________________________________________________________________
71
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
72
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Foreign currency transactions
The financial statements of the Group and its international subsidiaries have been translated into US
dollars using the exchange rate at each balance sheet date for assets and liabilities of foreign
operations and at an average exchange rate for revenues and expenses throughout the period. The
effects of exchange rate fluctuations on the translation of assets and liabilities are recorded as
movements in the foreign currency translation reserve (“FCTR”).
The Group’s presentation currency is the US dollar. The Group determines the functional currency of its
subsidiaries based on the currency used in their primary economic environment, and, as such, foreign
currency translation adjustments are recorded in the FCTR for those subsidiaries with a functional
currency different from the US dollar.
Transaction gains and losses, and unrealised translation gains and losses on short-term inter-company
and operating receivables and payables denominated in a currency other than the functional currency,
are included in other income in the consolidated income statement.
(t)
Contingencies
The recognition of accruals for legal disputes is subject to a significant degree of estimation. Accruals
are made for loss contingencies when it is deemed probable that an adverse outcome will occur and the
amount of the loss can be reasonably estimated. Accruals are recognised when (a) the Group has a
present legal or constructive obligation as a result of past events, (b) it is more likely than not that an
outflow of resources will be required to settle the obligation, and (c) the amount of that outflow has been
reliably estimated.
(u)
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration for each acquisition is measured at the aggregate of the fair values (at the date of
exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group
in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as
incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a
contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes
in such fair values are adjusted against the cost of acquisition where they qualify as measurement
period adjustments (see below). All other subsequent changes in the fair value of contingent
consideration classified as an asset or liability are recognised in the profit or loss as incurred. Changes
in the fair value of contingent consideration classified as equity are not recognised.
Where a business combination is achieved in stages, the Group’s previously held interests in the
acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains
control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if
that interest were disposed of.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for
recognition under AASB 3(2008) are recognised at their fair value at the acquisition date, except that:
�
�
�
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements
are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119
Employee Benefits respectively;
liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-
based payment awards are measured in accordance with AASB 2 Share-based Payment; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Non-
current Assets Held for Sale and Discontinued Operations are measured in accordance with that
Standard.
_______________________________________________________________________________________
72
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
73
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u)
Business combinations (continued)
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see
below), or additional assets or liabilities are recognised, to reflect new information obtained about facts
and circumstances that existed as of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as of the acquisition date, and is
subject to a maximum of one year.
(v)
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST),
except:
� where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as
part of the cost of acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.
�
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash
flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority is classified as operating cash flows.
_______________________________________________________________________________________
73
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
74
4.
SEGMENT REPORTING
The Group has adopted AASB 8 ‘Operating Segments’ and AASB 2007-3 ‘Amendments to Australian Accounting
Standards arising from AASB 8’ with effect from 1 January 2009. AASB 8 requires operating segments to be
identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief
operating decision maker in order to allocate resources to the segment and to assess its performance. In
contrast, the predecessor Standard (AASB 114 ‘Segment Reporting’) required an entity to identify two sets of
segments (business and geographical), using a risk and rewards approach, with the entity’s ‘system of internal
reporting to key management personnel’ serving only as the starting point for the identification of such segments.
The adoption of AASB 8, has not changed the identification of the Group’s reportable segments.
Segment information reported externally continues to be analysed on the basis of the Group’s two general
operating activities – Global Drilling Services and Global Products – which provides services and products to
mining companies, energy companies (coal, oil, gas and geothermal), water utilities, environmental and
geotechnical engineering firms, government agencies and other mining services companies. This information is
reported to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of
performance.
Information regarding these segments is presented below. The accounting policies of the reportable segments
are the same as the Group’s accounting policies.
The following is an analysis of the Group’s revenue and results by reportable operating segment for the periods
under review:
Segment revenues and results
Segment revenue
Segment profit
31 Dec 2009
31 Dec 2008
31 Dec 2009
31 Dec 2008
US$'000
US$'000
US$'000
US$'000
737,180
240,997
978,177
1,240,559
597,979
1,838,538
Global Drilling Services
Global Products
Unallocated *
Finance costs
Interest income
Profit (loss) before taxation
72,383
16,232
88,615
(66,085)
(46,752)
1,616
(22,606)
230,614
115,284
345,898
(76,568)
(39,688)
1,637
231,279
* Unallocated costs include corporate general and administrative costs as well as other expense items such as
restructuring costs and foreign exchange gains or losses.
_______________________________________________________________________________________
74
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
75
4.
SEGMENT REPORTING (CONTINUED)
Segment assets
Global Drilling Services
Global Products
Total of all segments
Unallocated *
Total
Segment assets
31 Dec 2009
31 Dec 2008
US$'000
US$'000
781,115
225,947
1,007,062
358,776
1,365,838
751,497
290,895
1,042,392
251,615
1,294,007
* Unallocated assets are those assets that are not specifically associated with either of the segments and include:
cash, deferred tax assets, post-employment assets, and other general corporate assets.
For the purposes of monitoring segment performance and allocating resources between segments, the chief
operating decision marker monitors the segment assets as disclosed above.
Other segment information
Depreciation and amoritzation of
segment assets
Additions to non-current assets*
31 Dec 2009
31 Dec 2008
31 Dec 2009
31 Dec 2008
US$'000
US$'000
US$'000
US$'000
69,450
10,204
79,654
8,853
88,507
68,562
12,999
81,561
4,786
86,347
38,145
10,031
48,176
7,922
56,098
255,245
24,043
279,288
24,620
303,908
Global Drilling Services
Global Products
Total of all segments
Unallocated **
Total
* Non-current assets excluding deferred tax assets, post-employment assets and other financial assets.
** Unallocated additions to non-current assets relates to the acquisition of general corporate assets which
includes intangible software.
The Group has no single external customer that provided more than 10% of the Group’s revenues.
Geographic Information
The Group’s two business segments operate in five principal geographic areas – Africa, Europe, North America,
Latin America, and Asia Pacific. The Group’s revenue from external customers and information about its
segment assets by geographical locations is detailed below:
North America
Asia Pacific
Latin America
Africa
Europe
Total
Revenue from external customers
Non-current assets*
31 Dec 2009
31 Dec 2008
31 Dec 2009
31 Dec 2008
US$'000
US$'000
US$'000
US$'000
463,085
275,856
112,080
82,156
45,000
978,177
790,581
507,739
230,498
203,171
106,549
1,838,538
311,259
307,577
74,028
39,677
11,016
743,557
332,786
275,094
69,857
23,089
12,503
713,329
* Non-current assets excluding deferred tax assets, post-employment assets and other financial assets.
_______________________________________________________________________________________
75
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
76
5.
REVENUE
An analysis of the Group’s revenue for the year is as follows:
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Revenue from the rendering of services
Revenue from the sale of goods
737,180
240,997
978,177
1,240,559
597,979
1,838,538
Interest income:
Bank deposits
Other loans and receivables
Other
Dividends from subsidiaries
6.
FINANCE COSTS
1,314
113
189
1,616
-
1,470
75
92
1,637
-
979,793
1,840,175
-
-
-
2
12,543
-
12,545
-
12,545
-
-
-
574
29
-
603
55,110
55,713
Interest on loans and bank overdrafts
Interest rate swap expense
Amortisation of debt issuance costs
Interest on obligations under finance leases
Finance costs due to debt repayment
Interest rate swap expense - ineffective hedge
Bank refinancing fee
Write-off of debt issuance costs
Loss arising on derivatives in a
designated fair value hedge accounting relationship
Gain arising on adjustment to hedged
item in a designated fair value hedge accounting relationship
Total finance costs
Consolidated
2009
US$'000
2008
US$'000
11,752
15,556
2,352
430
30,090
15,242
1,050
370
16,662
694
(694)
-
46,752
31,210
6,147
1,651
680
39,688
-
-
-
-
14,760
(14,760)
-
39,688
_______________________________________________________________________________________
76
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
77
7.
PROFIT FOR THE YEAR
(a)
Gains and losses
Profit for the year has been arrived at after crediting (charging) the following gains and (losses):
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Loss on disposal of property,
plant and equipment
(49)
(1,018)
Gain (loss) on disposal of businesses
(4,130)
9,131
-
-
-
-
Net foreign exchange gains (losses)
(2,512)
7,054
(109)
(1,786)
Change in fair value of financial
assets carried at fair value
through profit or loss
Other income
1,389
2,976
-
2,242
-
-
-
-
(b)
Income and expenses relating to financial instruments
Profit for the year includes the following income and expenses arising from movements in the carrying
amounts of financial instruments (other than derivative instruments in an effective hedge relationship).
Loans and receivables:
Interest income
Impairment of loans and receivables
Financial liabilities at amortised cost
Interest expense
Interest rate swap expense
Amortisation expense
Finance costs due to debt repayment
Exchange loss
Interest on obligations
under finance leases
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
1,427
91
1,518
(11,752)
(15,556)
(2,352)
(16,662)
(74)
(430)
(46,826)
1,545
(5,428)
(3,883)
(31,210)
(6,147)
(1,651)
-
(219)
(680)
(39,907)
12,545
-
12,545
-
-
-
-
-
-
603
-
603
-
-
-
-
-
-
_______________________________________________________________________________________
77
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
78
7.
PROFIT FOR THE YEAR (CONTINUED)
(c)
Employee benefit expenses:
Post employment benefits:
Defined contribution plans
Defined benefit plans
Long-term incentive plans:
Equity-settled share-based
payments
Cash rights compensation
Termination benefits (non-restructuring)
Termination benefits (restructuring)
Other employee benefits 1
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
(12,025)
(632)
(13,229)
758
(47)
-
(61)
-
(3,432)
(690)
(416)
(8,234)
(52,666)
(78,095)
(2,224)
-
(845)
(9,312)
(108,234)
(133,086)
(311)
(334)
-
-
-
-
-
-
-
-
(358)
(395)
(1) Other employee benefits include such items as medical benefits, worker’s compensation, other
fringe benefits, state taxes, etc.
(d)
Other:
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Depreciation of non-current assets
Amortisation of non-current assets
Operating lease rental expense
Impairment of inventory
Recovery of inventory previously imparied
Impairment of property, plant and
equipment (restructuring)
(79,865)
(8,642)
(34,440)
(563)
1,706
(80,307)
(6,040)
(27,619)
(7,220)
-
(1,318)
(1,398)
-
-
-
-
-
-
-
-
-
-
_______________________________________________________________________________________
78
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
79
8.
INCOME TAXES
Income tax expense (benefit) is as follows:
Income tax expense (benefit):
Current tax expense (benefit)
Adjustments recognised in the current year
in relation to the current tax of prior years
Deferred tax expense (benefit)
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
35,264
105,655
(3,369)
(2,633)
1,762
(44,749)
(7,723)
(218)
(30,882)
74,555
-
6,392
3,023
-
4,384
1,751
(a) The prima facie income tax expense (benefit) on pre-tax accounting profit reconciles to the income tax
expense (benefit) in the financial statements as follows:
Profit (loss) before taxation
(22,606)
231,279
9,876
51,842
Income tax (benefit) expense calculated at
Australian rate of 30%
Impact of higher rate tax countries
Impact of lower rate tax countries
Net nondeductible/nonassessable items
Unrecognised tax losses
Income subject to double taxation in the U.S.
Unutilised foreign tax credits
Recognition of deferred tax assets arising
in prior years
Deduction of foreign taxes
Dividends exempt from tax
Other
(Over) under provision
(6,782)
(7,796)
(1,487)
(6,560)
1,148
2,607
4,978
(638)
(1,304)
-
6,349
(9,485)
1,762
(7,723)
69,384
6,183
(2,552)
(2,756)
73
7,693
8,337
(2,506)
(4,963)
-
(4,120)
74,773
(218)
74,555
2,963
15,553
-
-
60
-
-
-
-
-
-
-
3,023
-
3,023
-
-
-
-
-
2,322
-
-
(16,533)
409
1,751
-
1,751
_______________________________________________________________________________________
79
80
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
8.
INCOME TAXES (CONTINUED)
(b) Income tax recognised directly in equity during the period
The following current and deferred amounts were charged (credited) directly to equity during the period:
Deferred tax:
Actuarial movements on defined benefit plans
Share issue costs
Cash flow hedges
(c) Current tax assets and liabilities
Current tax assets:
Income tax receivable attributable to:
Parent
Other entities in the tax consolidated group
Other entities
Current tax liabilities:
Income tax payable attributable to:
Parent
Other entities in the tax consolidated group
Other entities
(d) Deferred tax balances
Deferred tax comprises:
Temporary differences
Tax losses
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
(340)
12,437
(9,465)
2,632
19,060
(8,042)
10,197
21,215
-
-
41,221
41,221
72,147
44,630
116,777
7,262
-
4,900
12,162
17,878
(11,295)
3,578
10,161
-
-
32,378
32,378
66,407
-
66,407
-
12,437
-
12,437
19,060
(8,042)
-
11,018
-
-
-
-
-
-
-
-
17,878
(11,295)
-
6,583
-
-
-
-
17,661
-
17,661
11,614
-
11,614
_______________________________________________________________________________________
80
81
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
8.
INCOME TAXES (CONTINUED)
Opening Credited to
FX
Acquired/
balance
income
Differences
disposed
Adj. to PY
acquisitions
Credited
to equity
Closing
balance
Consolidated
2009
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Deferred tax assets (liabilities)
Property, plant and equipment
Provisions
Doubtful debts
Intangibles
Acquisitions and restructuring costs
Share-issue expenses
Accrued liabilities
Pension
Debt and interest
Hedge loss
Unearned revenues
Inventory
Investments in subsidiaries
Foreign tax credit carryforward
Unrealised foreign exchange
Other
Unused tax losses and credits:
Tax losses
Presented in the balance sheet as follows:
Deferred tax liability
Deferred tax asset
(21,165)
5,891
577
(7,429)
8,092
11,737
9,716
6,839
2,764
9,834
-
7,415
(597)
6,723
20,960
5,050
66,407
-
66,407
7,067
(1,794)
9
(1,303)
(1,250)
(6,496)
(991)
(1,878)
5,870
5,954
23,488
(1,202)
-
-
(24,479)
(2,876)
119
44,630
44,749
31
452
44
(570)
621
-
745
525
182
-
-
569
-
-
-
390
2,989
-
2,989
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,437
-
(340)
-
(9,465)
-
-
-
-
-
-
2,632
-
2,632
(14,067)
4,549
630
(9,302)
7,463
17,678
9,470
5,146
8,816
6,323
23,488
6,782
(597)
6,723
(3,519)
2,564
72,147
44,630
116,777
(5,323)
122,100
116,777
2009
Deferred tax assets (liabilities)
Share issue costs
Accrued Liabilities
Presented in the balance sheet as follows:
Deferred tax liability
Deferred tax asset
Opening
Charged to
Balance
US$'000
income
US$'000
11,614
-
11,614
(6,496)
106
(6,390)
Parent
Other
US$'000
Charged to
Equity
US$'000
Closing
Balance
US$'000
-
-
-
12,437
12,437
17,555
106
17,661
-
17,661
17,661
_______________________________________________________________________________________
81
82
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
8.
INCOME TAXES (CONTINUED)
Opening Credited to
FX
Acquired/
balance
income
Differences
disposed
Adj. to PY
acquisitions
Credited
to equity
Closing
balance
Consolidated
2008
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Deferred tax assets (liabilities)
Property, plant and equipment
Provisions
Doubtful debts
Intangibles
Acquisitions and restructuring costs
Share-issue expenses
Accrued liabilities
Pension
Debt and interest
Hedge loss
Unearned revenues
Inventory
Investments in subsidiaries
Foreign tax credit carryforward
Unrealised foreign exchange
Other
Unused tax losses and credits:
Tax losses
Presented in the balance sheet as follows:
Deferred tax liability
Deferred tax asset
(23,753)
4,138
125
(7,822)
11,080
16,122
9,231
923
4,688
4,935
(1,169)
2,976
(597)
-
-
(705)
20,170
3,902
24,072
2,752
1,381
441
3,765
(3,983)
(4,385)
(344)
(1,429)
(2,345)
-
1,274
4,172
54
6,723
20,960
6,099
35,135
(4,253)
30,882
(242)
372
11
(703)
995
-
829
83
421
-
(105)
267
(54)
-
-
(61)
1,813
351
2,164
78
-
-
-
-
-
(2,052)
(617)
-
-
-
-
-
-
-
-
-
-
-
(281)
(2,255)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,262
-
4,899
-
-
-
-
-
-
(21,165)
5,891
577
(7,429)
8,092
11,737
9,716
6,839
2,764
9,834
-
7,415
(597)
6,723
20,960
5,052
66,407
(617)
12,161
-
-
-
-
(2,255)
(617)
12,161
66,407
(2,130)
68,537
66,407
2008
Deferred tax assets (liabilities)
Opening
Charged to
Balance
US$'000
income
US$'000
Parent
Other
US$'000
Credited to
Equity
US$'000
Closing
Balance
US$'000
Share issue costs
15,999
(4,385)
-
-
11,614
Presented in the balance sheet as follows:
Deferred tax liability
Deferred tax asset
-
11,614
11,614
_______________________________________________________________________________________
82
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
83
8.
INCOME TAXES (CONTINUED)
Unrecognised deferred tax assets
Tax losses - revenue
Unused tax credits
Consolidated
2009
US$'000
2008
US$'000
2,789
48,951
51,740
2,197
52,696
54,893
The Parent and its wholly-owned Australian resident entities became part of the same tax-consolidated group
with effect from 12 April 2007 and are therefore taxed as a single entity from that date. The head entity within the
tax-consolidated group is Boart Longyear Limited. Companies within the US group also form a tax-consolidated
group within the United States. Certain companies within the Dutch group have also formed a tax-consolidated
group within the Netherlands.
Entities within the tax-consolidated groups have entered into tax-funding arrangements with the head entities.
Under the terms of the tax-funding arrangements, the tax-consolidated groups and each of the entities within
those tax-consolidated groups agree to pay a tax equivalent payment to or from the head entity, based on the
current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable or
payable to other entities in the tax-consolidated groups.
9.
GROUP RESTRUCTURING
The Company initiated a restructuring and cost reduction plan beginning in November of 2008. Activities related
to the restructuring and cost reduction plan continued during 2009. The restructuring and cost reduction plan
activities include:
�
�
�
�
�
�
�
reduction of drilling services and manufacturing operating and administrative staff levels;
reduction of sales, general and administrative staff levels;
consolidation of drilling services, manufacturing and administrative facilities;
relocation of certain manufacturing activities to lower cost facilities;
outsourcing certain operational and administrative activities;
discontinuing certain businesses and product lines; and
the sale of non-core businesses (see Note 30).
The Group incurred costs related to executing the restructuring and cost reduction plan, including costs
associated with employee separations, leased facilities, and impairments of inventory and capital equipment
related to discontinued businesses and product lines. Expenses related to executing the restructuring and cost
reduction plan were as follows:
Employee separation costs
Occupancy
Impairment of property, plant and equipment
Impairment of inventory
Recovery of inventory previously impaired
Other
Consolidated
2009
US$'000
2008
US$'000
8,234
3,436
1,318
563
(1,706)
798
12,643
9,312
2,002
1,398
7,220
-
396
20,328
_______________________________________________________________________________________
83
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
84
9.
GROUP RESTRUCTURING (CONTINUED)
Restructuring expenses relate to the following expense categories:
Cost of goods sold
General and administrative expenses
Selling and marketing expenses
10.
TRADE AND OTHER RECEIVABLES
Consolidated
2009
US$'000
2008
US$'000
3,541
5,162
3,940
12,643
12,345
3,971
4,012
20,328
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Trade receivables
Allowance for doubtful accounts
Goods and services tax receivable
Other receivables
Intercompany receivable
177,442
(5,940)
14,901
12,195
-
198,598
217,239
(8,100)
13,965
11,474
-
234,578
-
-
1,707
-
648,995
650,702
-
-
-
106
28,217
28,323
The aging of trade receivables is detailed below:
Current
Past due 0 - 30 days
Past due 31 - 60 days
Past due 61-90 days
Past due 90 days
Consolidated
2009
US$'000
2008
US$'000
128,700
32,235
6,771
3,086
6,650
166,870
28,055
9,204
6,542
6,568
177,442
217,239
_______________________________________________________________________________________
84
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
10.
TRADE AND OTHER RECEIVABLES (CONTINUED)
The movement in the allowance for doubtful accounts in respect of trade receivables is detailed below:
85
Opening Balance
Additional provisions
Amounts used
Amounts reversed
Foreign currency exchange differences
Closing balance
Consolidated
2009
US$'000
2008
US$'000
8,100
4,989
(2,664)
(5,080)
595
5,940
3,425
6,453
(125)
(1,025)
(628)
8,100
The average credit period on sales of goods is 60 days (2008: 65 days). No interest is presently charged on
trade receivables.
The Group’s policy requires customers to pay the Group in accordance with agreed payment terms. The Group’s
settlement terms are generally 30 to 60 days from date of invoice. All credit and recovery risk associated with
trade receivables has been provided for in the balance sheet. Trade receivables have been aged according to
their original due date in the above aging analysis. The Group holds security for a number of trade receivables
in the form of letters of credit, deposits, and advanced payments.
The Group has used the following basis to assess the allowance loss for trade receivables and as a result is
unable to specifically allocate the allowance to the aging categories shown above:
�
�
�
the general economic conditions in specific geographical regions;
an individual account by account specific risk assessment based on past credit history; and
any prior knowledge of debtor insolvency or other credit risk.
11.
INVENTORIES
Raw materials
Work in progress
Finished products
Consolidated
2009
US$'000
2008
US$'000
16,327
5,194
123,469
144,990
32,724
5,788
138,784
177,296
_______________________________________________________________________________________
85
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
86
12.
FINANCIAL INSTRUMENTS
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balances.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 17, cash and
cash equivalents and equity attributable to equity holders of the Parent, comprising issued capital, reserves, other
equity and retained earnings (accumulated losses) as disclosed in Notes 20, 21, 22 and 23 respectively.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are disclosed in Note 3 to the financial statements.
Categories of financial instruments
Financial Assets
Current
Loans and Receivables:
Cash and cash equivalents
Trade and other receivables
Other financial assets
Non-current
Investments carried at cost:
Investments in subsidiaries
Financial Liabilities
Current
Amortised cost:
Trade and other payables
Restructuring Provisions
Loans and borrowings
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
87,557
198,598
1,818
287,973
50,603
234,578
306
285,487
148
650,702
-
650,850
108
28,323
-
28,431
-
-
2,226,378
2,186,106
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
170,118
195,597
2,256
3,133
8,730
1,148
175,507
205,475
1,041
-
1,041
1,511
-
1,511
Other financial liabilities - Derivative instruments
11,835
-
Non-current
Amortised cost:
Trade and other payables
Loans and borrowings
-
132,486
132,486
1,293
813,770
815,063
Other financial liabilities - Derivative instruments
4,822
27,197
-
-
-
-
-
-
-
-
-
-
At the reporting date there are no significant concentrations of credit risk. The carrying amount reflected above
represents the Group’s and the Parent’s maximum exposure to credit risk for such loans and receivables.
_______________________________________________________________________________________
86
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
87
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Financial risk management objectives
The Group’s corporate treasury function provides services to the business, coordinates access to domestic and
international financial markets, and monitors and manages the financial risks relating to the operations of the
Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks
include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and
cash flow interest rate risk.
The Group seeks to minimise the effects of these risks, where deemed appropriate, by using derivative financial
instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies
approved by the board of directors, which provide written principles on foreign exchange risk and interest rate
risk. The Group does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates (Note 3(j)). The Group enters into a variety of derivative financial instruments to manage its
exposure to interest rate and foreign currency risk, including:
�
�
foreign exchange forward contracts to hedge the exchange rate risk arising from transactions not recorded
in an entity’s functional currency;
interest rate swaps to mitigate the risk of rising interest rates.
Foreign currency risk management
The Group subsidiaries undertake certain transactions denominated in currencies other than their functional
currency, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within
approved policy parameters utilising forward foreign exchange contracts.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities,
including intercompany balances, at the reporting date is as follows:
Australian Dollar
Canadian Dollar
Euro
US Dollar
Assets
Liabilities
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
429,090
79,700
35,944
346,502
308,821
24,062
40,948
201,245
77,391
42,631
118,378
368,349
56,458
37,211
113,280
158,592
_______________________________________________________________________________________
87
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
88
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Foreign currency sensitivity
The Group is mainly exposed to Australian Dollars (AUD), Canadian Dollars (CAD), the Euro (EUR) and United
States Dollar (USD). The Group is also exposed to translation differences as the Group’s presentation currency
is different to the functional currencies of various operating entities. However this represents a translation risk
rather than a financial risk and consequently is not included in the following sensitivity analysis.
The following tables detail the Group’s sensitivity to a 10% change in each of the Group’s subsidiaries functional
currency against the relevant foreign currencies. The percentages disclosed below are the sensitivity rates used
when reporting foreign currency risk internally to key management personnel and represents management’s
assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at the period end for a given
percentage change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to
foreign operations within the Group where the denomination of the loan is in a currency other than the currency of
the lender or the borrower. A positive number indicates an increase in net profit and net assets where the
subsidiaries functional currency strengthens against the respective currency. For a weakening of the subsidiaries
functional currency against the respective currency there would be an equal and opposite impact on the profit
and net assets.
AUD Impact
Consolidated
CAD Impact
Consolidated
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
Net profit
Net assets
Change in currency 1
(24)
(31,973)
10%
(428)
(22,498)
10%
EUR Impact
Consolidated
980
191
10%
6,165
(3,370)
10%
USD Impact
Consolidated
Net profit
Net assets
Change in currency 1
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
97
7,494
10%
(982)
7,506
10%
15,737
1,986
10%
(5,550)
1,231
10%
(1) This has been based on the historical changes in the Group’s subsidiaries functional currencies against the
related foreign currencies in the financial year ended 31 December 2009 and 31 December 2008.
The Parent has no significant exposure to foreign currencies at the reporting date. The Group’s sensitivity to
certain foreign currency denominated loans has decreased during the current period mainly due to the retirement
of these instruments and due to current hedging activity.
In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk
as the year end exposure does not necessarily reflect the exposure during the course of the year.
_______________________________________________________________________________________
88
89
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Forward foreign exchange contracts
There were no open forward foreign currency contracts as of 31 December 2009. At 31 December 2008 the
Group had the following open forward foreign currency contract:
Outstanding
contracts
Consolidated
Sell - CAD
Less than 3 months
Average
exchange rate
Foreign currency
Contract value
Fair value
2008
rate
2008
FC'000
2008
US$'000
2008
US$'000
1.2216
30,540
25,000
-
During the years ended 31 December 2009, and 2008, the Group entered into contracts to hedge the foreign
currency exposure it has on United States dollar denominated loans in Canada. The Group periodically enters
into forward foreign exchange contracts (for terms not exceeding 9 months) to hedge the exchange rate risk
arising from these anticipated future transactions, which are designated as fair value hedges.
Interest rate risk management
The Parent and the Group are exposed to interest rate risk as entities within the Group borrow funds at both fixed
and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed
and floating rate borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated
regularly to align with interest rate views and defined risk appetite. The Parent’s and the Group’s exposures to
interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of
this note.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative
and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of
the financial year and held constant throughout the reporting period. A 100 basis point increase or decrease is
used when reporting interest rate risk internally to key management personnel and represents management’s
assessment of the possible change in interest rates.
At the reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held
constant, the Group’s:
�
�
profit before tax would increase/decrease by $2,774,000 (2008: decrease/increase by $3,295,000).
$1,157,000 of the increase/decrease is attributable to the Group’s exposure to interest rates on its variable
rate borrowings. An offsetting $3,931,000 is attributable to the fair value change in the ineffective portion of
the Group’s interest rate swap contract.
other equity reserves would increase/decrease by $247,000 (2008: increase/decrease by $7,196,000) mainly
as a result of the Group’s exposure to interest rates on its interest rate swap contracts that are in a cash flow
hedge relationship.
Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate
interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate
the risk of changing interest rates on the cash flow exposures on the issued variable rate debt held. The fair
value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the
LIBOR curve at reporting date and the credit risk inherent in the contract, and are disclosed below. The average
interest rate is based on the outstanding balances at the start of the financial year.
_______________________________________________________________________________________
89
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
90
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate swap contracts (continued)
The following tables detail the notional principal amounts and the remaining terms of interest rate swap contracts
outstanding as at reporting date.
Outstanding floating
for fixed contracts
Consolidated
1 to 2 years
2 to 5 years
Average contracted
fixed interest rate
2009
%
2008
%
5.1825%
-
3.1890%
5.1825%
Notional
principal amount
Fair value
2009
2008
2009
2008
US$'000
US$'000
US$'000
US$'000
275,000
-
275,000
100,000
325,000
425,000
(16,657)
-
(16,657)
(1,497)
(25,700)
(27,197)
The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is 90-day USD
LIBOR. The Group settles the difference between the fixed and floating interest rate on a net basis.
The effective portion of the interest rate swap contracts that exchange floating rate interest amounts for fixed rate
interest amounts are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting
from variable rates on borrowings. The interest rate swaps and the interest payments on the loan occur
simultaneously and the amount deferred in equity is recognised in profit or loss over the period of the loan.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining
sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical
areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Group does not have any significant credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is
limited because the counterparties are banks with high credit ratings assigned by international credit-rating
agencies.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial
statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without
taking account of the value of any collateral obtained.
Financial assets and other credit exposures
Consolidated
Maximum credit risk
2009
2008
US$'000
US$'000
Performance guarantees provided including letter of credits
28,557
40,619
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Treasurer and board of directors, who have
built an appropriate liquidity risk management framework for the management of the Group’s short, medium and
long-term funding and liquidity management requirements.
_______________________________________________________________________________________
90
91
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity risk management (continued)
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities. Included in Note 17 is a listing of additional undrawn facilities that the Group has at its
disposal to further reduce liquidity risk.
Liquidity and interest risk tables
The following tables detail the Parent’s and the Group’s remaining contractual maturity for its non-derivative
financial liabilities. The tables have been presented based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group may be required to pay. The table includes both interest and
principal cash flows. The adjustment column represents the possible future cash flows attributable to the
instrument included in the maturity analysis which are not included in the carrying amount of the balance sheet.
Consolidated
2009
Non-interest bearing
payables
Restructuring provision
Weighted
average
effective
interest
rate
%
-
-
Finance lease liability
8.4%
Variable interest rate
instruments
1.3%
Fixed interest rate
Less
than
3 months
1 to 3
to
Adjust-
1 month months
1 year
1 - 5 years
5+ years
ment
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
109,326
60,792
376
548
-
1,692
2,464
-
-
570
293
1,317
134,240
188
274
146
instruments
3.1%
1,000
-
-
-
110,934
62,009
5,473
134,810
2008
Non-interest bearing
payables
Restructuring provision
Finance lease liability
8.1%
Variable interest rate
-
-
136,463
728
32
59,134
1,455
65
-
6,547
2,433
1,293
-
3,285
instruments
3.9%
2,657
5,313
23,909
832,621
Fixed interest rate
instruments
12.0%
1,173
-
-
-
141,053
65,967
32,889
837,199
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(381)
170,118
2,256
3,475
(3,996)
132,000
-
1,000
(4,377)
308,849
-
-
(1,032)
196,890
8,730
4,783
(52,500)
812,000
-
1,173
(53,532)
1,023,576
_______________________________________________________________________________________
91
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
92
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity and interest risk tables (continued)
Parent
Weighted
average
effective
interest
rate
%
Less
than
3 months
1 to 3
to
Adjust-
1 month months
1 year
1 - 5 years
5+ years
ment
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
-
-
844
844
1,054
1,054
197
197
457
457
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,041
1,041
1,511
1,511
2009
Non-interest bearing
payables
2008
Non-interest bearing
payables
The following table details the Parent’s and the Group’s expected maturity for its non-derivative financial assets.
The tables below have been presented based on the undiscounted contractual maturities of the financial assets.
Consolidated
2009
Non-interest bearing
receivables
Cash
2008
Non-interest bearing
receivables
Cash
Less
than
3 months
1 to 3
to
Adjust-
1 month
months
1 year
1 - 5 years
5+ years
ment
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
86,348
87,557
86,348
25,902
-
-
173,905
86,348
25,902
108,267
50,603
158,870
126,311
-
126,311
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
198,598
87,557
286,155
234,578
50,603
285,181
_______________________________________________________________________________________
92
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
93
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity and interest risk tables (continued)
Parent
2009
Non-interest bearing
receivables
Cash
2008
Non-interest bearing
receivables
Cash
Less
than
3 months
1 to 3
to
Adjust-
1 month
months
1 year
1 - 5 years
5+ years
ment
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
325,351
325,351
148
-
325,499
325,351
13,072
108
13,180
15,251
-
15,251
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
650,702
148
650,850
28,323
108
28,431
The liquidity and interest risk tables have been prepared based on the Group’s intent to collect the assets or
settle the liabilities in accordance with their contractual terms. If the group were to collect or settle the balances
early, the liquidity disclosure would be different than what is reported.
The following table details the Group’s liquidity analysis for its derivative financial instruments. The table has
been drawn up based on the undiscounted net cash inflows (outflows) on the derivative instrument that settle on
a net basis and the undiscounted net inflows (outflows) on those derivatives. When the amount payable or
receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as
illustrated by the yield curves existing at the reporting date.
Consolidated
2009
Interest rate swaps
2008
Interest rate swaps
Less
than
3 months
1 to 3
to
Adjust-
1 month
months
1 year
1 - 5 years
5+ years
ment
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
-
-
(3,418)
(8,417)
(4,822)
(3,416)
(10,366)
(13,476)
-
-
-
(16,657)
61
(27,197)
The Parent had no derivative financial instruments for the reporting periods disclosed.
_______________________________________________________________________________________
93
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
94
12.
FINANCIAL INSTRUMENTS (CONTINUED)
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
�
�
�
the fair value of financial assets and financial liabilities with standard terms and conditions and traded
on active liquid markets are determined with reference to quoted market prices
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are
determined in accordance with generally accepted pricing models based on discounted cash flow
analysis using prices from observable current market transactions
the fair value of derivative instruments are calculated using quoted prices. Where such prices are not
available, use is made of discounted cash flow analysis using the applicable yield curve for the duration
of the instruments for non-optional derivatives, and option pricing models for optional derivatives.
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised
cost in the financial statements approximate their fair values.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
�
�
�
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the
asset or liability that are not based on observable market data (unobservable inputs).
2009
Financial assets at FVTPL
Held for trading
Financial liabilities at FVTPL
Derivative instruments
2008
Financial liabilities at FVTPL
Derivative instruments
Level 1
US$'000
Level 2
US$'000
Level 3
US$'000
Total
US$'000
1,494
-
-
-
16,657
27,197
-
-
-
1,494
16,657
27,197
_______________________________________________________________________________________
94
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
95
13.
PROPERTY, PLANT AND EQUIPMENT
Balance at 1 January 2008
Additions
Acquisitions through business combinations
Adjustments to business combinations
accounted for on a provisional basis in 2007
Disposal of assets
Currency movements
Balance at 1 January 2009
Additions
Adjustments to business combinations
accounted for on a provisional basis in 2008
Disposal of assets
Transfer from intangible assets
Currency movements
Balance at 31 December 2009
Accumulated depreciation and impairment:
Balance at 1 January 2008
Depreciation for the year
Impairment of non-current assets
Disposal of assets
Currency movements
Balance at 1 January 2009
Depreciation for the year
Impairment of non-current assets
Disposal of assets
Currency movements
Balance at 31 December 2009
Net book value at 31 December 2008
Net book value at 31 December 2009
Land and
Buildings
US$'000
Consolidated
Plant and
Equipment
US$'000
Total
US$'000
44,829
4,011
4,329
-
(539)
(5,538)
47,092
12
-
(9,363)
-
3,431
41,172
(4,121)
(3,223)
-
157
2,631
(4,556)
(1,622)
-
1,377
(1,803)
(6,604)
42,536
34,568
452,950
134,026
33,270
2,540
(20,221)
(100,407)
502,158
34,243
(6,554)
(19,093)
655
80,709
592,118
(135,298)
(77,084)
(1,398)
14,156
58,623
(141,001)
(78,243)
(1,318)
15,226
(40,835)
(246,171)
361,157
345,947
497,779
138,037
37,599
2,540
(20,760)
(105,945)
549,250
34,255
(6,554)
(28,456)
655
84,140
633,290
(139,419)
(80,307)
(1,398)
14,313
61,254
(145,557)
(79,865)
(1,318)
16,603
(42,638)
(252,775)
403,693
380,515
Tangible property, plant and equipment includes machinery equipment, office equipment, furniture and fixtures,
and vehicles, which are substantially freehold. The net book value of property, plant and equipment at 31
December 2009 and 2008 includes an amount of $3,424,000 and $3,430,000 respectively, related to assets held
under finance leases.
During 2009, the Group sold its Sub Saharan manufacturing operations. This sale included net book value of
property, plant and equipment of $5,487,000.
During 2008, the Group sold the mining capital equipment and diamond wire businesses in South Africa and the
residential water business in the United States of America. These sales included net book value of property,
plant and equipment of $425,000, $257,000 and $1,768,000, respectively.
_______________________________________________________________________________________
95
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
96
14.
GOODWILL
Gross carrying amount:
Balance at 1 January 2008
Additions through business combinations
Adjustments to business combinations accounted
for on a provisional basis in 2007
Currency movements
Balance at 31 December 2008
Balance at 1 January 2009
Adjustments to business combinations accounted
for on a provisional basis in 2008
Currency movements
Balance at 31 December 2009
Consolidated
Goodwill
US$'000
206,186
65,577
2,775
(39,967)
234,571
234,571
7,947
34,438
276,956
Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to individual cash generating units. The carrying
amount of goodwill by geographic segment allocated to cash-generating units that are significant individually or in
aggregate is as follows:
Asia Pacific
Latin America
North America
Consolidated
2009
US$'000
2008
US$'000
136,943
33,884
106,129
276,956
105,661
33,108
95,802
234,571
_______________________________________________________________________________________
96
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
97
14.
GOODWILL (CONTINUED)
The carrying amount of goodwill is tested for impairment annually at 31 October and whenever there is an
indicator that the asset may be impaired. Due to the current economic environment and the impact on trading
performance, the Group believes that there is an indication of impairment and therefore tested for impairment at
30 June 2009 as well as at 31 October 2009. If an asset is impaired, it is written down to its recoverable amount.
In its impairment assessment, the Group assumes the recoverable amount based on a value in use calculation
using cash flow projections based on the Group’s three year strategic plan and financial forecasts over a 9-year
period, which approximates the length of a typical business cycle based on historical industry experience, with a
terminal value. Key assumptions used for impairment testing include:
�
�
a global discount rate of 11.5% adjusted on a case by case basis for regional variations in the required
equity rate of return based on independent data (the adjusted rates ranged from 9.2% to 25.3%)
expected future profits and future annual growth rates consistent with internal forecasts and expected
performance of the specific business line being tested for impairment over the cycle. The growth rates do
not exceed forecasts for the long term industry averages.
Sensitivity analyses were performed to determine whether the carrying value is supported by different
assumptions. The key variables of the sensitivity analysis included:
�
�
�
applicable discount rates;
terminal growth rates; and
inflation assumptions.
Based on the impairment testing performed, the recoverable amount from each cash generating unit exceeded
the goodwill carrying amount. Consequently, no impairments were recorded in 2009.
_______________________________________________________________________________________
97
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
98
15.
OTHER INTANGIBLE ASSETS
Consolidated
Customer
Develop-
ment
Trademarks
Patents
relationships
Software
assets
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
1,988
1,270
-
-
1,090
-
-
-
-
3,258
-
1,090
24,544
33,376
1,763
-
(7,710)
51,973
-
-
-
15,890
-
15,890
5,474
-
-
5,081
(846)
9,709
33,096
34,646
1,763
20,971
(8,556)
81,920
3,258
1,090
51,973
15,890
9,709
81,920
-
505
-
-
-
3,763
-
607
-
-
-
1,697
(41)
(123)
-
(297)
(160)
-
(164)
(457)
(164)
(423)
-
(587)
(457)
(190)
-
(647)
(990)
-
-
-
6,745
57,728
(2,693)
(4,058)
1,145
(5,606)
(5,606)
(5,398)
(1,559)
(12,563)
-
7,065
-
-
-
22,955
-
(1,340)
-
(1,340)
(1,340)
(2,187)
-
(3,527)
-
5,719
(363)
(655)
2,459
16,869
(990)
13,896
(363)
(655)
9,204
103,012
(587)
(359)
49
(897)
(3,618)
(6,040)
1,194
(8,464)
(897)
(444)
(60)
(1,401)
(8,464)
(8,642)
(1,619)
(18,725)
Gross carrying amount:
Balance at 1 January 2008
Additions through business
combinations
Adjustments to business
combinations accounted for on a
provisional basis in 2007
Additions
Currency movements
Balance at 31 December 2008
Balance at 1 January 2009
Adjustments to business
combinations accounted for on a
provisional basis in 2008
Additions
Disposals
Transfer to PP&E
Currency movements
Balance at 31 December 2009
Accumulated amortisation:
Balance at 1 January 2008
Amortisation for the period
Currency movements
Balance at 31 December 2008
Balance at 1 January 2009
Amortisation for the period
Currency movements
Balance at 31 December 2009
Net book value at 31 December 2008
Net book value at 31 December 2009
3,094
3,176
633
1,050
46,367
45,165
14,550
19,428
8,812
15,468
73,456
84,287
_______________________________________________________________________________________
98
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
99
16.
TRADE AND OTHER PAYABLES
Current
Trade payables
Accrued payroll and benefits
Goods and services tax payable
Professional fees
Other sundry payables and accruals
Non-current
Trade and other payables
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
86,391
40,226
19,530
3,992
19,979
105,671
34,833
24,795
4,127
26,171
170,118
195,597
-
-
1,293
1,293
-
-
-
766
275
1,041
-
-
-
-
-
618
893
1,511
-
-
The average credit period on purchases of certain goods is 37 days (2008: 43 days). No interest is charged on
the trade payables for this period. Thereafter, various percentages of interest may be charged on the
outstanding balance based on the terms of the specific contracts. The Group has financial risk management
policies in place to ensure that all payables are paid within the credit timeframe.
_______________________________________________________________________________________
99
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
100
17.
BORROWINGS
Unsecured - at amortised cost
Current
Term bank loans
Debt issuance costs
Non-current
Term bank loans
Revolver bank loans
Debt issuance costs
Secured - at amortised cost
Current - finance lease liabilities
Non-current - finance lease liabilities
Disclosed in the financial statements as:
Current borrowings
Non-current borrowings
A summary of the maturity of the Group's borrowings is as follows:
Less than 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
More than 4 years
Term Bank Loans
Consolidated
2009
US$'000
2008
US$'000
1,000
(381)
65,000
67,000
(475)
2,514
961
135,619
3,133
132,486
135,619
3,133
458
132,028
-
-
135,619
1,173
(2,166)
650,000
162,000
(873)
2,141
2,643
814,918
1,148
813,770
814,918
1,148
585,241
1,737
226,341
451
814,918
During the year ended 31 December 2009, the Group repaid $585,000,000 of its bank term loans. The loans had
an original, scheduled maturity date of 10 April 2010. The bank term loans were repaid with proceeds from the
2009 capital raising program (see Note 20).
At 31 December 2009, outstanding bank term loans primarily consist of a variable rate loan with a scheduled
maturity date of 13 April 2012. The interest rates on the loans are based on a base rate plus applicable margin.
The base rate is generally based upon USD LIBOR rates, while the margin is determined based upon leverage
according to a pricing grid. At 31 December 2009, the rates were based upon USD LIBOR + 1.05%, which
totaled 1.36%. At 31 December 2008, the rates ranged from USD LIBOR + 0.65% to USD LIBOR + 0.75%,
which amounted to rates ranging from 2.05% to 2.15%.
The Group hedges its exposure to floating rates under the loans via interest rate swaps, exchanging variable rate
interest payments for fixed rate interest payments. The interest swap contracts were largely entered into in 2006
and reflect notional amounts and maturities assuming (a) a portion of the variable interest loans would be hedged
and (b) that bank term loans would be repaid largely according to original, scheduled maturity dates. As of 31
December 2009, the notional amount of interest rate swap contracts was $275,000,000, which exceeded
outstanding bank term loans. As of 31 December 2009, interest rate swap contracts with notional value up to
$16,250,000 are deemed effective and are accounted for as cash flow hedges, while $258,750,000 of the interest
rate swap contract are deemed ineffective as cash flow hedges upon repayment of the $585,000,000 bank term
loan in late 2009. As of 31 December 2008, the entire $425,000,000 of outstanding interest rate swap contracts
were deemed to be effective cash flow hedges and were accounted for accordingly.
As of 31 December 2009, the $275,000,000 of interest rate swap contracts outstanding swapped variable rates
(as noted above) to fixed at a base rate 5.18%. As of 31 December 2008, $425,000,000 notional amount of
floating rate interest rates were swapped to fixed at a base rate ranging from 3.16% to 5.18%.
_______________________________________________________________________________________
100
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
101
17.
BORROWINGS (CONTINUED)
Revolver Bank Loans
Bank facilities include a revolver of $200,000,000. As of 31 December 2009, $67,000,000 is drawn with interest
rates of 1.30%. As of 31 December 2008, $162,000,000 was drawn with interest rates ranging from 1.15% to
2.59%. Outstanding letters of credit of $11,405,000 and $11,550,000 as of 31 December 2009 and 2008,
respectively, reduce the amount available to draw under the revolver.
Loan Covenants - Term and Revolver Bank Loans
The Group’s borrowings contain covenants and restrictions requiring the Group to meet certain financial ratios
and reporting requirements, as well as minimum levels of subsidiaries that are guarantors of the borrowings.
These covenants include maintaining a Debt to EBITDA ratio of not more than 3.75:1 and an EBITDA to Interest
ratio of not less than 3.0:1. The agreement also requires that borrowers and guarantors represent at least 75%
of the EBITDA and total tangible assets of the Group (see Note 27 for a listing of subsidiary guarantors). Testing
of covenant compliance takes place twice-yearly for the trailing 12 month periods to 30 June and 31 December.
Noncompliance with one or more of the covenants and restrictions could result in the full or partial principal
balance of the associated debt becoming immediately due and payable. The Group is in compliance with the
debt covenants as of 31 December 2009 and 2008.
Finance Leases
The finance lease liabilities were assumed largely as part of acquiring certain businesses prior to 2008. The
leases are secured by the assets leased. The borrowings have interest rates ranging from 6.77% to 13.08%,
with repayment periods not exceeding 3 years.
_______________________________________________________________________________________
101
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
102
18.
PROVISIONS
Current
Employee benefits
Restructuring and termination costs (i)
Warranty (ii)
Non-current
Employee benefits
Pension and post-retirement benefits (Note 19)
Consolidated
2009
US$'000
2008
US$'000
11,103
2,256
614
13,973
1,942
42,948
44,890
58,863
9,013
8,730
5,366
23,109
1,909
43,128
45,037
68,146
The changes in the provisions for the year ended 31 December 2009 are as follows:
Balance at 1 January 2009
Additional provisions recognised
Reductions arising from payments/other sacrifices of
future economic benefits
Reductions resulting from remeasurement or settlement
without cost
Foreign exchange
Balance at 31 December 2009
Consolidated
Restructuring
and termination
costs (i)
US$'000
Warranty (ii)
US$'000
8,730
11,267
(15,796)
(2,548)
603
2,256
5,366
2,609
(5,880)
(1,710)
229
614
(i)
(ii)
The provision for restructuring and termination costs represents the present value of management’s best estimate of
the costs directly and necessarily caused by the restructuring that are not associated with the ongoing activities of the
entity, including termination benefits and onerous leases.
The provision for warranty claims represents the present value of management’s best estimate of the future outflow
of economic benefits that will be required under the Group’s warranty program.
The Parent has a provision for $690,000 at 31 December 2009 for cash rights compensation.
_______________________________________________________________________________________
102
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
103
19.
PENSION AND POSTRETIREMENT BENEFITS
The Parent has no employees and therefore does not support any pension or postretirement plans. Accordingly,
the disclosures detailed below relate to the Group.
Pension and Postretirement Medical Commitments
The Group operates defined contribution and defined benefit pension plans for the majority of its employees. It
also operates postretirement medical arrangements in Southern Africa and North America. The policy for
accounting for pensions and postretirement benefits is included in Note 3(n).
The assets of the defined contribution plans are held separately in independently administered funds. The
charge in respect of these plans is calculated on the basis of contributions payable by the Group during the fiscal
year.
The majority of the defined benefit pension plans are funded in accordance with minimum funding requirements
by local regulators. The assets of these plans are held separately from those of the Group, in independently
administered funds, in accordance with statutory requirements or local practice throughout the world.
The postretirement medical arrangements provide health benefits to retired employees and certain dependants.
Eligibility for coverage is dependent upon certain criteria. The majority of these plans are unfunded and have
been provided for by the Group.
Defined Contribution Plans
Pension costs represent actual contributions paid or payable by the Group to the various plans. At 31 December
2009, and 2008, there were no significant outstanding/prepaid contributions. Group contributions to these plans
were $12,025,000 and $13,229,000 for the years ended 31 December 2009, and 2008, respectively.
The Group’s operations in the Netherlands participate in an industry-wide pension scheme for the mechanical
and electrical engineering industries, known as the PME Fund. Although it is a defined benefit pension plan, the
participating employers have no obligation other than to pay set contributions based on benefits accrued by the
employees every period. The employers are not obligated to make additional payments to fund deficits, nor have
they any right to repayments in the event of surpluses. The Group treats the PME scheme as a defined
contribution plan.
Defined Benefit Pension Plans
Full actuarial valuations of the defined benefit pension plans were performed as of various dates and updated to
31 December 2009 by qualified independent actuaries. The estimated market value of the assets of the funded
pension plans was $178,854,000 and $150,626,000 at 31 December 2009, and 2008, respectively. The market
value of assets was used to determine the funding level of the plans. The market value of the assets of the
funded plans was sufficient to cover 93% and 88% in 2009 and 2008, respectively, of the benefits that had
accrued to participants after allowing for expected increases in future earnings and pensions. Entities within the
Group are paying contributions as required in accordance with local actuarial advice.
As the majority of the defined benefit pension plans are closed to new participants, it is expected that under the
projected unit credit method, service cost will increase as the participants age.
Group contributions to these plans were $5,310,000 for both the years ended 31 December 2009 and 2008.
Contributions in 2010 are expected to be $7,058,000.
During the year ended 31 December 2009 the pension plan in the United States of America was frozen with
respect to all beneficiaries. This resulted in a curtailment and resulted in a gain of $2,510,000, which was
recognised in profit and loss in 2009.
_______________________________________________________________________________________
103
104
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
19.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
The principal assumptions used to determine the actuarial present value of benefit obligations and pension costs
are detailed below (shown in weighted averages):
Discount rates
Expected average rate of increase
Southern
2009
The
Africa
9.5%
Americas
5.9%
Europe
5.5%
Southern
Africa
7.5%
2008
The
Americas
6.5%
Europe
6.3%
in salaries
6.8%
4.0%
4.0%
5.0%
4.3%
3.5%
Expected average rate of increase
of pensions in payment
5.8%
-
1.5%
4.0%
-
1.5%
Expected average long term rate of
return on plan assets
Expected average increase
7.5%
7.4%
6.4%
6.8%
8.0%
6.4%
in healthcare costs (initial)
7.8%
7.5%
Expected average increase
in healthcare costs (ultimate)
7.8%
5.0%
-
-
6.0%
8.0%
6.0%
5.0%
-
-
Amounts recognised in profit or loss in respect of these defined benefit plans are as follows:
2009
Post-
2008
Post-
Pension
retirement
Pension
retirement
Plan
medical Plan
Total
plan
Medical Plan
Total
US$'000
2,126
11,145
122
(11,396)
(2,510)
US$'000
509
636
-
-
-
US$'000
2,635
11,781
122
US$'000
3,070
13,315
4,069
US$'000
453
735
US$'000
3,523
14,050
(4,126)
(57)
(11,396)
(17,555)
-
(17,555)
(2,510)
142
(861)
(719)
(513)
1,145
632
3,041
(3,799)
(758)
Current service cost
Interest cost on plan liabilities
Past service cost
Expected return on plan assets
Effects of settlement and
curtailment gains
Total charge (credit) to profit
and loss account
For the financial years ended 31 December 2009 and 2008 a loss (gain) of $412,000 and $(564,000),
respectively, has been included in cost of goods sold and the remainder in general and administrative or sales
and marketing expenses.
_______________________________________________________________________________________
104
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
105
19.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
The following amounts have been recognised in the statement of comprehensive income.
2009
Post-
2008
Post-
Pension
retirement
Pension
retirement
Plan
Medical Plan
Total
Plan
Medical Plan
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Actuarial losses during
the year, net of taxes
(2,786)
(667)
(3,453)
(22,779)
(1,639)
(24,418)
In 2001, legislation in South Africa was passed which restricts pension surpluses where they are not expected to
give rise to future contribution reductions or refunds because of local restrictions over their use. During 2007, the
South African Regulators approved the subsidiary's proposal in respect of the apportionment of the surplus from
the plans. The majority of the members elected to transfer to the Alexander Forbes Retirement Fund effective 28
February 2008, leaving only one member in the fund. The liability with respect to the transfer was settled on 19
December 2008. The net asset recorded has certain restrictions on how the surplus can be used.
The amount included in the balance sheet arising from the Group’s obligations in respect of defined benefit plans
is as follows:
2009
Post-
2008
Post-
Pension
retirement
Pension
retirement
Plan
Medical Plan
Total
Plan
Medical Plan
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
188,455
(178,854)
9,601
-
-
-
188,455
165,891
(178,854)
(150,626)
9,601
15,265
-
-
-
165,891
(150,626)
15,265
4,901
14,502
10,488
10,488
15,389
24,990
5,421
20,686
9,411
9,411
14,832
30,097
Present value of funded defined benefit
obligations
Fair value of plan assets
Present value of unfunded defined
benefit obligations
Deficit
Net liability arising from defined
benefit obligations
14,502
10,488
24,990
20,686
9,411
30,097
_______________________________________________________________________________________
105
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
106
19.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
Movements in the present value of the defined benefit obligations were as follows:
2009
Post-
2008
Post-
Pension
retirement
Pension
retirement
Plan
Medical Plan
Total
Plan
Medical Plan
Total
US$'000
171,312
US$'000
9,411
US$'000
180,723
US$'000
246,668
US$'000
11,481
US$'000
258,149
2,126
11,145
2
15,857
122
(2,510)
(1,185)
12,167
(15,681)
-
509
636
299
601
-
-
(266)
103
(863)
58
2,635
11,781
301
3,070
13,315
65
16,458
(20,689)
122
(2,510)
(1,451)
12,270
(16,544)
58
4,069
194
(18,766)
(26,761)
(29,853)
-
453
735
290
2,655
(4,126)
-
(861)
(585)
(631)
-
3,523
14,050
355
(18,034)
(57)
194
(19,627)
(27,346)
(30,484)
-
Opening defined benefit obligation
Current service cost
Interest cost
Contributions from plan participants
Actuarial losses (gains)
Past service cost
Losses (gains) on curtailments
Liabilities extinguished on settlements
Exchange differences on foreign plans
Benefits paid
Federal subsidy on benefits paid
Closing defined benefit obligation
193,355
10,488
203,843
171,312
9,411
180,723
Changes in the fair value of plan assets were as follows:
2009
Post-
2008
Post-
Pension
retirement
Pension
retirement
Plan
Medical Plan
Total
Plan
Medical Plan
Total
US$'000
150,626
US$'000
-
US$'000
150,626
US$'000
257,362
US$'000
-
US$'000
257,362
11,396
13,345
(1,185)
15,041
5,310
2
(15,681)
178,854
-
-
(266)
-
830
299
11,396
13,345
(1,451)
15,041
6,140
301
17,555
(49,714)
(18,717)
(31,382)
5,310
65
-
-
-
-
341
290
17,555
(49,714)
(18,717)
(31,382)
5,651
355
(863)
(16,544)
(29,853)
(631)
(30,484)
-
178,854
150,626
-
150,626
Opening fair value plan of assets
Expected return on plan assets
Actuarial gains (losses)
Assets distributed on settlements
Exchange differences on foreign plans
Contributions from the employer
Contributions from plan participants
Benefits paid
Closing fair value of plan assets
_______________________________________________________________________________________
106
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
19.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
The analysis of the plan assets and the expected rate of return at the balance sheet date are as follows:
107
2009
Southern Africa
The Americas
Europe
Rate of
Return
Fair
Value
Rate of
Return
Fair
Value
Rate of
Return
Fair
Value
Total
Fair Value
%
US$'000
%
US$'000
%
US$'000
US$'000
-
9.5%
-
7.5%
-
7.5%
-
9,876
-
10,700
-
20,576
9.3%
4.6%
-
3.7%
3.7%
7.4%
57,752
53,039
-
4,714
2,357
117,862
7.8%
3.8%
6.3%
2.0%
-
6.4%
24,654
12,933
2,425
404
-
40,416
82,406
75,849
2,425
15,818
2,357
178,854
2008
Southern Africa
The Americas
Europe
Rate of
Return
Fair
Value
Rate of
Return
Fair
Value
Rate of
Return
Fair
Value
Total
Fair Value
%
US$'000
%
US$'000
%
US$'000
US$'000
10.5%
7.5%
-
5.5%
-
6.8%
6,968
6,757
-
7,391
-
21,116
10.0%
5.0%
-
4.0%
4.0%
7.9%
41,682
43,576
-
6,631
2,842
94,731
8.0%
4.0%
6.5%
-
-
6.8%
19,476
12,520
2,783
-
-
34,779
68,126
62,853
2,783
14,022
2,842
150,626
At 31 December 2009
Equity
Bonds
Property
Cash
Other
Total market value
At 31 December 2008
Equity
Bonds
Property
Cash
Other
Total market value
The pension and post-retirement (surplus) deficit by geographic region are as follows:
Consolidated
31 December 2009
31 December 2008
Southern
The
Southern
The
Africa
Americas
Europe
Total
Africa
Americas Europe
Total
Postretirement medical
plan deficit
Pension plan
-
10,488
-
10,488
218
9,193
-
9,411
(surplus) deficit
Total (surplus) deficit
(17,958)
(17,958)
14,275
24,763
18,185
18,185
14,502
24,990
(13,249)
(13,031)
18,435
27,628
15,500
15,500
20,686
30,097
On 8 December 2003, the Medicare Prescription Drug Improvement and Modernisation Act of 2003 was signed
into law in the U.S. The Act introduced a prescription drug benefit beginning 2006 under Medicare (“Medicare
Part D”) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is
at least actuarially equivalent to Medicare Part D. Based on an actuarial analysis of the levels of benefits
provided under the Group’s Postretirement Welfare Plan, the plan’s actuary has concluded that beneficiaries
receive drug coverage at least actuarially equivalent to Medicare Part D. The federal subsidy was reflected in
costs, reducing the accumulated postretirement benefit obligation by approximately $905,000 and $468,000 at 31
December 2009 and 2008, respectively. The expense was reduced by approximately $29,000 and $87,000 at 31
December 2009 and 2008, respectively.
_______________________________________________________________________________________
107
108
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
19.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
2009
Post-
retirement
Medical Plan
US$'000
-
Pension
Plan
US$'000
178,854
Total
US$'000
178,854
Pension
Plan
US$'000
150,626
2008
Post-
retirement
Medical Plan
US$'000
-
Total
US$'000
150,626
(193,355)
(14,502)
(10,488)
(10,488)
(203,843)
(24,990)
(171,312)
(20,686)
(9,411)
(9,411)
(180,723)
(30,097)
(570)
(166)
(736)
(635)
63
(572)
13,345
-
13,345
(49,714)
-
(49,714)
Fair value of plan assets
Present value of
defined benefit obligation
Deficit
Experience adjustments
on plan liabilities
Experience adjustments
on plan assets
Assumed healthcare cost trend rates have a significant effect on the amounts recognised in profit or loss. A one
percentage point change in assumed healthcare cost trend rates would have the following effects:
One percentage point increase
Effect on the aggregate of the service cost and interest cost
Effect on accumulated post-employment benefit obligation
One percentage point decrease
Effect on the aggregate of the service cost and interest cost
Effect on accumulated post-employment benefit obligation
2009
2008
US$'000
US$'000
168
1,362
126
1,256
(142)
(1,160)
(107)
(1,067)
_______________________________________________________________________________________
108
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
109
20.
ISSUED CAPITAL
Share Capital
Ordinary shares, fully paid
Movements in ordinary shares
Balance at beginning of year
Issued under capital raising program
Share issuance costs
GST receivable on share issuance costs
Deferred tax on share issuance costs
Purchase of shares for LTIP
Balance at end of the year
Share Capital
Ordinary shares, fully paid
Movements in ordinary shares
Balance at beginning of year
Issued under capital raising program
Share issuance costs
GST receivable on share issuance costs
Deferred tax on share issuance costs
GST refund on capitalized IPO costs
Purchase of shares for LTIP
Consolidated
2009
US$'000
2008
US$'000
1,136,347
478,036
478,036
697,702
(49,549)
1,707
12,437
(3,986)
479,673
-
-
-
-
(1,637)
1,136,347
478,036
Parent
2009
Number of
shares
(000's)
2008
US$'000
2008
Number of
shares
(000's)
2009
US$'000
2,890,807
4,585,942
2,228,139
1,497,624
2,228,139
697,702
(49,549)
1,707
12,437
4,357
(3,986)
1,497,624
3,108,730
-
-
-
2,229,776
1,502,846
-
-
-
-
-
-
-
-
(20,412)
(1,637)
(5,222)
Balance at end of the year
2,890,807
4,585,942
2,228,139
1,497,624
During the financial year, the Group executed a capital raising program which raised $697,702,000. Proceeds
from the capital raising were used to repay $585,000,000 of the Group’s Term Loan A facility, to repay
approximately $62,000,000 of amounts previously drawn on its existing revolver facility, and to pay $49,549,000
of costs directly related to the capital raising.
_______________________________________________________________________________________
109
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
21.
RESERVES
22.
OTHER EQUITY
110
Foreign currency translation
Equity-settled employee benefits
Unrealised losses related
to hedging instruments
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
17,630
6,024
(616)
23,038
(103,549)
2,592
(17,362)
(118,319)
-
6,024
-
6,024
-
2,592
-
2,592
During the years ended 31 December 2009 and 2008 the changes in each of the respective reserve accounts
were as follows:
Foreign currency translation
Balance at beginning of year
Exchange differences arising on translation
of foreign operations
Balance at end of the year
Consolidated
2009
US$'000
2008
US$'000
(103,549)
30,215
121,179
17,630
(133,764)
(103,549)
Exchange differences relating to the translation from the functional currencies of the Group’s foreign controlled
entities into United States dollars are brought to account by entries made directly to the foreign currency
translation reserve.
Equity-settled employee benefits
Balance at beginning of year
Share-based compensation expense
Balance at end of the year
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
2,592
3,432
6,024
368
2,224
2,592
2,592
3,432
6,024
368
2,224
2,592
The equity-settled employee benefits reserve arises on the grant of restricted shares, LTIP rights and share
options. Amounts are transferred out of the reserve and into issued capital when the share is issued.
Unrealised losses related to hedging instruments
Balance at beginning of year
Unrealised loss on cash flow hedges
Transfer to profit or loss on cash flow hedges
Interest rate swap expense - ineffective hedge
Related income tax
Balance at end of the year
Consolidated
2009
US$'000
2008
US$'000
(17,362)
(2,007)
12,976
15,242
(9,465)
(616)
(8,050)
(20,359)
6,147
-
4,900
(17,362)
The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow
hedges. The cumulative deferred gain or loss on the hedge is recognised in profit or loss when the hedged
transaction impacts the profit or loss, or is included as a basis adjustment to the non-financial hedged item,
consistent with the applicable accounting policy. During the financial year, the Group executed a capital raising
program which raised approximately $697,702,000. Proceeds from the capital raising were used to repay loans
that were being hedged thus making a portion of the hedge ineffective. As a result, the mark to market balance
of $15,242,000 associated with the ineffective portion of the hedge was transferred to profit or loss.
During the years ended 31 December 2009 and 2008, the changes in other equity consisted of:
Balance at beginning of year
Balance at end of the year
Capitalised transaction costs - GST refund related to 2007 IPO
23.
RETAINED EARNINGS (ACCUMULATED LOSSES)
During the years ended 31 December 2009 and 2008, the changes in accumulated losses consisted of:
Consolidated
2009
US$'000
2008
US$'000
(141,539)
4,357
(137,182)
(141,539)
-
(141,539)
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
(65,830)
(141,028)
492
7,509
(14,883)
-
(3,453)
(84,166)
156,724
(57,108)
(24,418)
(65,830)
6,853
-
-
7,345
50,091
(57,108)
-
492
Balance at beginning of year
Profit (loss) for the period attributable
to equity holders of the parent
Dividends paid
Actuarial losses on defined benefit
plans (net of tax)
Balance at end of the year
24.
DIVIDENDS
Fully paid ordinary shares
Final dividend 35% franked
Interim dividend 35% franked
There were no dividends declared or paid for the year ended 31 December 2009. Dividends declared and paid
during the year ended 31 December 2008 are as follows:
2008
US Cents per
share
Total
US$'000
1.5
2.3
3.8
22,543
34,565
57,108
2009
US$'000
2008
US$'000
Below is the combined amount of franking credits available for the next year:
Adjusted combined franking balance
7,995
12,471
_______________________________________________________________________________________
110
_______________________________________________________________________________________
111
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
111
22.
OTHER EQUITY
During the years ended 31 December 2009 and 2008, the changes in other equity consisted of:
Balance at beginning of year
Capitalised transaction costs - GST refund related to 2007 IPO
Balance at end of the year
23.
RETAINED EARNINGS (ACCUMULATED LOSSES)
Consolidated
2009
US$'000
2008
US$'000
(141,539)
4,357
(137,182)
(141,539)
-
(141,539)
During the years ended 31 December 2009 and 2008, the changes in accumulated losses consisted of:
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
(65,830)
(141,028)
492
7,509
(14,883)
-
(3,453)
(84,166)
156,724
(57,108)
(24,418)
(65,830)
6,853
-
-
7,345
50,091
(57,108)
-
492
Balance at beginning of year
Profit (loss) for the period attributable
to equity holders of the parent
Dividends paid
Actuarial losses on defined benefit
plans (net of tax)
Balance at end of the year
24.
DIVIDENDS
There were no dividends declared or paid for the year ended 31 December 2009. Dividends declared and paid
during the year ended 31 December 2008 are as follows:
Fully paid ordinary shares
Final dividend 35% franked
Interim dividend 35% franked
2008
US Cents per
share
Total
US$'000
1.5
2.3
3.8
22,543
34,565
57,108
Below is the combined amount of franking credits available for the next year:
2009
US$'000
2008
US$'000
Adjusted combined franking balance
7,995
12,471
_______________________________________________________________________________________
111
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
112
25.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic earnings (loss) per share
The earnings (loss) and weighted average number of ordinary shares
used in the calculation of basic earnings per share are as follows:
Consolidated
2009
Cents
2008
Cents
per share
per share
(0.6)
(0.6)
10.4
10.4
2009
US$'000
2008
US$'000
Earnings (loss) used in the calculation of basic EPS
(14,883)
156,724
Weighted average number of ordinary shares for the purposes of
basic earnings per share
2,436,800
1,502,011
2009
'000
2008
'000
Diluted earnings per share
The earnings (loss) used in the calculation of diluted earnings per
share is as follows:
2009
US$'000
2008
US$'000
Earnings used in the calculation of diluted EPS
(14,883)
156,724
Weighted average number of ordinary shares used in the
calculation of basic EPS
Shares deemed to be issued for no consideration in respect of:
Non-executive director restricted shares
LTIP share rights
Weighted average number of ordinary shares used in the
calculation of diluted EPS
2009
'000
2008
'000
2,436,800
1,502,011
-
7,257
335
635
2,444,057
1,502,981
Instruments which have not been included in the calculation of diluted earnings per share because they are
not dilutive include non-executive restricted shares, LTIP share rights and share options.
_______________________________________________________________________________________
112
113
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
26.
COMMITMENTS FOR EXPENDITURE
Commitments
The Group has a number of continuing operational and financial commitments in the normal course of business.
2009
US$'000
2008
US$'000
Capital Commitments
Purchase commitments for capital expenditures
3,930
732
Operating leases
Non-cancellable future operating lease commitments as at 31 December 2009 and 2008, consist of the following:
Consolidated
31 December 2009
31 December 2008
Land and
Buildings
US$'000
Plant and
Equipment
US$'000
Land and
Buildings
US$'000
Plant and
Equipment
US$'000
8,876
19,922
9,462
38,260
20,402
43,618
2,655
66,675
7,774
16,610
8,367
32,751
16,060
39,123
4,476
59,659
Payments due within:
One year
Two to five years
After five years
Description of operating leases
The Group has operating leases for land, buildings, plant and equipment with the following lease terms:
�
�
�
1 – 30 years for land and buildings with an average lease term of 7 years
1 – 5 years for machinery and equipment with an average lease term of 3 years
1 – 7 years for all other property with an average lease term of 3 years
The Group’s property operating leases generally contain escalation clauses, which are fixed increases generally
between 3% and 9%, or increase subject to a national index. The Group does not have any significant purchase
options.
Contingent rental payments exist for certain pieces of equipment and are not significant compared with total
rental payments. These are based on excess wear and tear and excess use.
The Group has no significant operating leases that are considered onerous other than the $1,933,000 included in
the restructuring expenses provision.
_______________________________________________________________________________________
113
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
114
27.
CONTINGENT LIABILITIES
Indemnifications
Anglo American plc has agreed to indemnify the Group for 50% of any losses in excess of $250,000 suffered due
to unknown environmental matters (up to a maximum of $15,000,000) arising from Group properties formerly
owned by Anglo American plc and which are identified within five years of the purchase date on 29 July 2005.
Letters of credit
Standby letters of credit primarily issued in support of commitments or other obligations as of 31 December 2009
are as follows.
� One of the Group’s subsidiaries in Holland has a letter of credit in the amount of $2,500,000 for
�
�
�
performance bonds which expires July 2010.
Three of the Group’s subsidiaries in the U.S. have letters of credit in the amounts of $405,000,
$500,000 and $2,400,000 for various leases which expire January 2010 and February 2010.
Two of the Group’s subsidiaries in Argentina have letters of credit in the amounts of $2,200,000 and
$1,400,000 to support loans, which expire February 2010.
The Group’s subsidiary in Zambia has a letter of credit in the amount of $2,000,000 to support products
inventory which expires December 2010.
A summary of the maturity of issued letters of credit is as follows:
Less than one year
Consolidated
2009
US$'000
2008
US$'000
11,405
11,550
_______________________________________________________________________________________
114
115
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
27.
CONTINGENT LIABILITIES (CONTINUED)
Guarantees
The subsidiaries of the Group provide guarantees within the normal course of business which includes payment
guarantees to cover import duties, taxes, performance and completion of contracts. In addition, the Group and
certain subsidiaries are guarantors on the Group’s loans and borrowings.
A summary of the Group’s subsidiaries which are guarantors of the Group’s long-term debt is as follows:
Country
Canada
United States
Entity
Longyear Canada ULC
Boart Longyear Alberta Limited
Boart Longyear Canada
Longyear Holdings, Inc.
Longyear TM, Inc.
Boart Longyear Company
Boart Longyear Consolidated Holdings Inc
Boart Longyear International Holdings Inc
Longyear Global Holdings, Inc.
Resources Services Holdco, Inc.
Boart Longyear Global Holdco, Inc.
Prosonic Corporation
Boart Longyear Nevada
Australia
Boart Longyear Limited
Boart Longyear Management Pty Limited
Boart Longyear Investments Pty Limited
Votraint No. 1609 Pty Limited
North West Drilling Pty Limited
Drillcorp Pty Limited
Grimwood Davies Pty Limited
Boart Longyear Australia Pty Limited
Boart Longyear Australia Holdings Pty Limited
A.C.N. 066 301 531 Pty Limited
Aqua Drilling & Grouting Pty Ltd.
New Zealand
Boart Longyear (NZ) Limited
Europe
Coopertief Longyear Holdings
Longyear Calulo Holdings BV
Boart Longyear International BV
Boart Longyear BV
South Africa
Longyear South Africa (Pty) Limited
Chile
Boart Longyear S.A.
Connors SA
Legal Contingencies
The Group is subject to certain routine legal proceedings that arise in the normal course of its business. The
Group believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or
combined), including the legal proceedings described above, will not materially affect the Group’s operations,
liquidity, or financial position taken as a whole. However, the ultimate outcome of any litigation is uncertain, and
unfavorable outcomes could have a material adverse impact.
_______________________________________________________________________________________
115
116
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
27.
CONTINGENT LIABILITIES (CONTINUED)
Other Contingencies
Other contingent liabilities as at 31 December 2009 and 2008 consist of the following:
Contingent Liabilities
Guarantees or counter-guarantees issued to outside parties
17,152
29,069
Consolidated
2009
US$'000
2008
US$'000
_______________________________________________________________________________________
116
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
117
28.
COMPANY SUBSIDIARIES
The principal subsidiaries’ ownership percentage consist of the following:
Subsidiaries
A.C.N. 066 301 531 Pty Ltd
Aqua Drilling & Grouting Pty Ltd.
BLI Zambia Ltd.
BLY Ghana Limited
BLY Mali S.A.
BLY Mexico Servicios S.A. de C.V.
Boart Longyear (Cambodia) Ltd.
Boart Longyear (D.R.C.) SPRL
Boart Longyear (Germany) GmbH
Boart Longyear (Holdings) Ltd.
Boart Longyear (Hong Kong) Limited
Boart Longyear (Investments) Ltd.
Boart Longyear (NZ) Limited
Boart Longyear (Pty) Ltd
Boart Longyear (Vic) No. 1 Pty Ltd (Australia)
Boart Longyear (Vic) No. 2 Pty Ltd (Australia)
Boart Longyear Alberta Limited
Boart Longyear Argentina S.A. (i)
Boart Longyear Australia Holdings Pty Limited
Boart Longyear Australia Pty Ltd
Boart Longyear Bermuda Limited
Boart Longyear Burkina Faso Sarl
Boart Longyear BV
Boart Longyear Canada
Boart Longyear Company
Boart Longyear Consolidated Holdings, Inc.
Boart Longyear Drilling Products Co.(Wuxi) Ltd.
Boart Longyear Drilling Services KZ LLP
Boart Longyear EMEA Cooperatief U.A.
Boart Longyear Global Holdco, Inc
Boart Longyear GmbH & Co Kg
Boart Longyear Holdings (Thailand) Co., Ltd.
Boart Longyear India Private Ltd
Boart Longyear International BV
Boart Longyear International Holdings, Inc.
Boart Longyear Investments Pty Ltd
Boart Longyear Limitada
Boart Longyear Limited
Boart Longyear Limited
Boart Longyear Limited
Boart Longyear LLC
Boart Longyear Ltd
Boart Longyear Management Pty Ltd
Country of
Incorporation
Australia
Australia
Zambia
Ghana
Mali
Mexico
Business
Tools and Equipment
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Cambodia
Drilling Services
Dem. Rep. of Con Drilling Products & Services
Germany
Tools and Equipment
United Kingdom Holding Company
Hong Kong
Drilling Services
United Kingdom Dormant
New Zealand
Drilling Services
Botswana
Drilling Products
Australia
Australia
Canada
Argentina
Australia
Australia
Bermuda
Holding Company
Holding Company
Holding Company
Drilling Services
Holding Company
Drilling Services
Holding Company
Burkina Faso
Drilling Services
Netherlands
Drilling Products
Canada
Drilling Products & Services
USA
USA
China
Tools, Equipment and Drilling
Holding Company
Drilling Products and Services
Kazakhstan
Drilling Services
Netherlands
Holding Company
USA
Germany
Thailand
India
Holding Company
Drilling Products and Services
Drilling Services
Tools and Equipment
Netherlands
Holding Company
USA
Australia
Brazil
Ireland
Laos
Thailand
Holding Company
Holding Company
Drilling Products
Drilling Products
Drilling Services
Drilling Services
Russia Federation Drilling Services
Ghana
Australia
Dormant
Holding Company
31 Dec
31 Dec
2009
2008
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
_______________________________________________________________________________________
117
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
118
28.
COMPANY SUBSIDIARIES (CONTINUED)
Subsidiaries
Boart Longyear Netherlands BV
Boart Longyear Nevada
Boart Longyear Poland Spolka Z.o.o.
Boart Longyear Products KZ LLP
Boart Longyear RUS
Boart Longyear S.A.
Boart Longyear S.a.r.l.
Boart Longyear SAC
Country of
Incorporation
Norway
USA
Poland
Business
Holding Company
Drilling Services
Drilling Products and Services
Kazakhstan
Drillings Products
Russia Federation Drilling Services
Chile
France
Peru
Tools, Equipment and Drilling Svs
Holding Company
Drilling Products and Services
Boart Longyear Vermogensverwaltung GmbH
Germany
Dormant
Boart Longyear Zambia Ltd.
Britton Hermanos Perforaciones de Mexico, S.A. C.V.
Connors SA
Zambia
Mexico
Chile
Drilling Services
Drilling Services
Drilling Services
Cooperatief Longyear Holdings UA
Netherlands
Holding Company
Drillcorp Pty Ltd
Geoserv Pesquisas Geologicas S.A.
Grimwood Davies Pty Ltd
Inavel S.A.
J&T Servicios, S.C.
Longyear Calulo Holdings BV
Longyear Canada, ULC
Longyear Global Holdings, Inc.
Longyear Holdings New Zealand, Ltd.
Longyear Holdings, Inc.
Longyear South Africa (Pty) Ltd
Longyear TM, Inc.
North West Drilling Pty Limited
P.T. Boart Longyear
Patagonia Drill Inversiones Mineras S.A.
Patagonia Drill Mining Services S.A.
Portezuelo S.A.
Australia
Brazil
Australia
Uruguay
Mexico
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Netherlands
Drilling Services
Canada
USA
Tools and Equipment Services
Holding Company
New Zealand
Holding Company
USA
Holding Company
South Africa
Drilling Products and Services
USA
Australia
Indonesia
Chile
Argentina
Paraguay
Holding Company
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Professional Sonic Drillers (Pty) Ltd T/A Prosonic Africa (ii)
South Africa
Drilling Services
Prosonic Corporation
Prosonic Deutschland GmbH
Prosonic International, Inc.
Rentas de Exploracion I Limitada
Rentas de Exploracion II Limitada
Rentas de Exploracion III Limitada
Resources Services Holdco, Inc
Votraint No. 1609 Pty Ltd
Votraint Switzerland SARL
USA
Drilling Services
Germany
Drilling Services
USA
Chile
Chile
Chile
USA
Drilling Services
Holding Company
Holding Company
Holding Company
Holding Company
Australia
Drilling Services
Switzerland
Holding Company
(i) This entity changed its name from Connors Argentina SA
(ii) As at 31 December 2009 this entity is in the process of being liquidated.
31 Dec
31 Dec
2009
2008
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
_______________________________________________________________________________________
118
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
119
29.
ACQUISITION OF OPERATIONS
There were no entities acquired by the Group during the year ended 31 December 2009.
During 2009, goodwill related to 2008 acquisitions was increased by $7,947,000. The goodwill adjustment
related to the Eklund Drilling Company, Inc. (Eklund) and Westrod Engeneering acquisitions, which were
accounted for provisionally at 31 December 2008. The 2009 adjustments to goodwill reflect primarily fair value
adjustments of $7,544,000 related to Eklund property plant and equipment and intangible assets. In addition,
cash of $403,000 was paid in 2009 for a purchase price adjustment and stamp tax payment for Westrod
Engeneering.
During the financial year ended 31 December 2008 the Group acquired the following entities:
On 25 February 2008, the Group acquired 100% of the issued share capital of Britton Brothers Diamond Drilling
(Britton Brothers). Britton Brothers is a provider of uranium and minerals exploration drilling services located in
Canada and Mexico. Accounting for this acquisition was determined provisionally at 31 December 2008 as
market valuations and other calculations had not been finalised. The goodwill arising on the acquisition of Britton
Brothers is attributable to the position it occupies as a leading exploratory driller in Canada and Mexico, which
provides the Group the opportunity to expand both its mineral and energy footprints in Canada and Mexico and
neighbouring countries through leveraging Boart Longyear’s global infrastructure and resources.
On 5 May 2008, the Group acquired 100% of the issued share capital of Aqua Drilling & Grouting Pty Limited
(“Aqua”). Aqua is a Melbourne-based drilling services company specialising in environmental drilling,
geotechnical drilling, water drilling and related services. Accounting for this acquisition was determined
provisionally at 31 December 2008 as market valuations and other calculations had not been finalised. The
goodwill arising on the acquisition of Aqua is attributable to its position as one of the leading environmental and
infrastructure drilling companies in Eastern Australia and its experienced management and operational teams.
On 1 July 2008, the Group acquired the business of Westrod Engineering. Westrod Engineering is a Western
Australia-based manufacturer of reverse circulation (“RC”) consumables including rods, subs and swivels for
minerals drilling. Accounting for this acquisition was determined provisionally at 31 December 2008 as market
valuations and other calculations had not been finalised. The goodwill arising on the acquisition of Westrod
Engineering is attributable to the ability to expand into the RC drilling market. The introduction of the RC product
range into the Group will be an excellent complement to our growing RC drilling services business. Combined
with recent RC-related acquisitions such as KWL and Grimwood Davies, this acquisition expands our RC offering
by making Boart Longyear the only company that manufactures and distributes RC products and also does RC
contract drilling, all on a global scale.
On 16 September 2008, the Group acquired certain assets of Eklund Drilling Company, Inc. (Eklund). Eklund is
located in the United States with headquarters in Elko, Nevada. Eklund specialises in reverse circulation drilling.
Accounting for this acquisition was determined provisionally at 31 December 2008 as market valuations and
other calculations had not been finalised. The goodwill arising on the acquisition of Eklund is attributable to its
position in global reverse circulation drilling which provides the Group the opportunity to expand its reach into a
key reverse circulation market and the opportunity to expand its global footprint.
Patagonia Drilling, which was purchased on 31 December 2007, was accounted for provisionally at 31 December
2007 and was finalised during the financial year ended 31 December 2008. This resulted in adjustments to the
initial book values that decreased the net assets purchased by $7,290,000 million, primarily as the result of the
recognition of provisions for taxes payable, other contingencies and debt balances. In addition, this was offset by
fair value adjustments amounting to $3,332,000 which had not been determined at 31 December 2007.
All of these acquisitions were accounted for as purchase transactions and the consolidated profit and loss
amounts includes the operations of the acquisitions from the date of acquisition through 31 December 2008.
The net profit contributed by these acquisitions in the period between the dates of acquisition and the reporting
date were approximately $5,325,000. Had the acquisitions been completed on 1 January 2008, total
consolidated revenue for the period would have been $1,892,250,000 and consolidated profit for the period would
have been $168,180,000.
_______________________________________________________________________________________
119
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
29.
ACQUISITION OF OPERATIONS (CONTINUED)
The net assets acquired during 2008 for all other business combinations, and the goodwill arising, are as follows:
120
Net assets acquired
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid expenses
Intangible assets
Property, plant and equipment
Trade and other payables
Deferred tax liabilities
Goodwill arising on the acquisition
Total consideration
Net cash outflow arising on acquisition:
Total Consideration
Cash and cash equivalents acquired
Acquiree's
carrying amount
before business
combination
US$'000
Fair value
adjustments
US$'000
Fair value
US$'000
2,811
9,748
974
333
-
18,057
(6,855)
34
25,102
-
-
-
-
33,656
12,988
-
(2,052)
44,592
2,811
9,748
974
333
33,656
31,045
(6,855)
(2,018)
69,694
73,524
143,218
(143,218)
2,811
(140,407)
_______________________________________________________________________________________
120
121
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
30.
DISPOSAL OF OPERATIONS
On 30 June 2009, the Group announced the sale of its Sub Saharan manufacturing operations and the exclusive
right to sell certain of the Group’s percussive rock drills and hard rock tools in Sub Saharan Africa for $7,803,000.
The disposal is consistent with the Group’s on-going strategy to divest select non-core assets. The assets that
were sold were not considered a core business and earned lower returns than the core business lines.
The net assets disposed of are as follows:
Book value of net assets sold
Assets
Liabilities
Foreign currency translation reserve
Net assets disposed
Working capital adjustment
Disposal costs
Loss on disposal
Total proceeds
Cash paid - closing costs and working capital adjustment
Net cash inflow from disposal of subsidiaries
US$'000
7,017
(444)
2,683
9,256
1,388
1,069
(3,910)
7,803
(2,457)
5,346
During the year ended 31 December 2009 the Group also paid $220,000 related to the settlement of the disposal
of its diamond wire business in South Africa, which was sold on 2 September 2008.
MCE South Africa
On 17 March 2008, the Group announced the sale of its mining capital equipment (“MCE”) business in South
Africa for total proceeds of $16,972,000. The disposal is consistent with the Group’s long-term policy to focus its
activities on higher return, core business opportunities. The MCE South Africa business was not considered a
core business and earned lower returns than the core business lines.
The MCE South Africa net assets disposed of are as follows:
Book value of net assets sold
Assets
Liabilities
Net assets disposed
Disposal costs
Gain on disposal
Total proceeds
Cash paid - closing costs
Net cash inflow from disposal of subsidiaries
Diamond Wire
US$'000
13,060
(6,094)
6,966
597
9,409
16,972
(597)
16,375
On 2 September 2008, the Group sold its diamond wire business in South Africa for total proceeds of
$2,536,000. The disposal is consistent with the Group’s long-term policy to focus its activities on higher return,
core business opportunities. The diamond wire business was not considered a core business and earned lower
returns than the core business lines.
Residential Water
On 31 December 2008, the Group sold its residential water business in the United States of America for total
proceeds of $831,000. The disposal is consistent with the Group’s long-term policy to focus its activities on
higher return, core business opportunities. The residential water business was not considered a core business
and earned lower returns than the core business lines.
_______________________________________________________________________________________
121
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
122
31.
NOTES TO THE CASH FLOW STATEMENT
(a)
Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in
banks and investments in money market instruments, net of outstanding bank overdrafts.
Cash and cash equivalents
87,557
50,603
148
108
Consolidated
Parent
2009
US$'000
2008
US$'000
2009
US$'000
2008
US$'000
(b)
Businesses acquired
During the financial year ended 31 December 2009 there were no acquisitions. The Group paid
additional cash of $403,000 for the Eklund and Westrod acquisitions.
During the financial year ended 31 December 2008, the Group acquired four businesses. The net cash
outflow for acquisitions was $140,004,000. Refer to Note 29 for further details. In addition, there was a
working capital adjustment that resulted in a refund of $1,578,000 related to a 2007 acquisition.
(c)
Businesses disposed
During the financial year ended 31 December 2009 the Group disposed of its Sub Saharan
manufacturing operation. During the financial year ended 31 December 2008, the Group disposed of its
MCE South Africa, Diamond Wire, and Residential Water businesses. Details of the disposal are as
follows:
Book value of net assets sold
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Prepaids and other assets
Trade and other payables
Foreign currency translation reserve
Net assets disposed
Working capital adjustment
Disposal costs
Gain (loss) on disposal
Total proceeds
Cash paid - closing costs and working capital adjustment
Net cash inflow on disposal
Consolidated
2009
US$'000
2008
US$'000
-
539
5,487
363
628
(444)
2,683
9,256
1,388
1,069
(3,910)
7,803
(2,457)
5,346
5,803
8,276
2,450
-
306
(6,342)
-
10,493
-
715
9,131
20,339
(715)
19,624
During the year ended 31 December 2009 the Group also paid $220,000 related to the settlement of the
disposal of its diamond wire business in South Africa, which was sold on 2 September 2008.
_______________________________________________________________________________________
122
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
123
32.
SHARE-BASED PAYMENTS
The Company has established a Long-term Incentive Plan (“LTIP”) to assist in retaining key employees and
encouraging a superior performance on a sustained basis. The incentive provided under the LTIP includes an
annual grant of rights that will vest based on the satisfaction of either time-base conditions or both performance-
based and time-based conditions. Vested rights will convert to ordinary fully paid shares on a one-for-one basis.
Under the terms of the LTIP, the performance share rights vest upon the achievement of the cumulative EPS
targets set by the Board. The Board will set a minimum and maximum EPS target for each financial year during
the three-year vesting period. Vesting will be determined by the Company’s actual performance against
cumulative EPS targets for the relevant three-year period. Partial vesting occurs on a pro-rata basis if the
cumulative three-year minimum EPS target is surpassed. Full vesting occurs only if the Company’s actual EPS
performance meets or exceeds the maximum cumulative EPS target for the three-year period. Participants must
also remain employed with the Company during the EPS period. The retention share rights vest upon continuous
employment with the Company from the grant date until the third anniversary of the grant date. The Company
may acquire shares underlying the grants which will be held in trust. The participant will receive dividends paid
on those shares from the time of acquisition until vesting.
During the years ended 31 December 2009 and 2008, there were several grants of share rights made under the
Long-Term Incentive Plan (“LTIP”). The total share-based expense associated with share rights for the years
ended 31 December 2009 and 2008 was $2,460,000 and $1,555,000, respectively.
The Company grants share options to certain senior management in order to attract, retain and properly
incentivise those individuals. During 2009, the Company granted 3,450,000 share options to employees. During
2008, the Company’s prior CEO announced his retirement and his successor was granted 2,500,000 share
options as part of his employment agreement. The share-based expense associated with share options for the
years ended 31 December 2009 and 2008 was $661,000 and $354,000, respectively.
In addition, prior to the IPO, there were 643,240 restricted shares granted to Board members in consideration of
services performed. The share-based expense recorded relating to the restricted shares during the years ended
31 December 2009 and 2008 was $311,000 and $334,000, respectively.
The following table shows the share-based payment arrangements that were in existence at 31 December 2009:
Series
Number
Grant Date
(1) Issued 12 April 2007
(2) Issued 1 September 2007
(3) Issued 11 April 2008
(4) Issued 28 April 2008
(5) Issued 28 April 2008
(6) Issued 26 June 2008
(7) Issued 23 July 2008
(8) Issued 23 October 2008
(9) Issued 14 January 2009
(10) Issued 25 March 2009
(11) Issued 18 June 2009
(12) Issued 18 June 2009
*
610,808
432,000
3,112,801
1,000,000
1,500,000
411,901
124,000
487,500
32,500
13,625,000
2,275,000
12-Apr-07
17-Sep-07
11-Apr-08
28-Apr-08
28-Apr-08
26-Jun-08
23-Jul-08
23-Oct-08
14-Jan-09
25-Mar-09
18-Jun-09
900,000
18-Jun-09
Vesting
Date
12-Apr-10
1-Jul-10
11-Apr-11
1-Jan-13
1-Jan-14
11-Apr-11
23-Jul-11
23-Oct-11
14-Jan-12
25-Mar-12
18-Jun-12
18-Jun-12
Fair Value at
Grant Date
US$
1.53
1.81
1.77
0.69
1.45
2.10
2.05
0.40
0.18
0.07
0.14
0.14
* Mr. Kipp was awarded 900,000 options on 18 June 2009 by the Board, subject to shareholder approval.
Should shareholder approval not be received, the Company is legally committed to provide other
compensation of equal value to Mr. Kipp.
_______________________________________________________________________________________
123
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
32.
SHARE-BASED PAYMENTS (CONTINUED)
The fair value of the rights was determined using the Black-Scholes option pricing model using the following
inputs:
124
Grant date
share price
US$
Expected
volatility
Life of
rights
Dividend
Risk-free
yield
interest rate
Series 1
Series 2
Series 3
Series 4
Series 5
*
*
Series 6
Series 7
Series 8
Series 9
Series 10
*
Series 11
*
Series 12
1.53
1.81
1.77
1.63
1.63
2.10
2.05
0.40
0.18
0.07
0.19
0.19
35.95%
35.95%
49.62%
49.86%
49.86%
50.34%
50.62%
56.68%
73.10%
86.74%
97.29%
97.29%
36 months
33.5 months
36 months
56 months
68 months
34 months
36 months
36 months
36 months
36 months
60 months
60 months
0.00%
0.00%
0.00%
0.86%
0.86%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
6.42%
6.16%
5.43%
5.58%
5.58%
5.67%
5.81%
6.11%
4.84%
5.55%
5.59%
5.59%
* Subsequent to the original grant date, the Company’s Board of Directors modified the share option exercise
price to reflect the dilution impact resulting from the Company’s 2009 capital raising program and the related
issuance of additional shares subsequent to the original grant date, as follows:
Original
exercise
price
A$1.95
A$0.21
A$0.30
A$0.30
Modified
exercise
price
A$1.895
A$0.155
A$0.245
A$0.245
Series 4
Series 5
Series 11
Series 12
The following reconciles the outstanding restricted shares, LTIP rights and share options at the beginning and
end of the financial year:
Consolidated
2009
2008
Number of
restricted
shares, rights
and options
'000
Weighted
average
exercise
price
US$
Number of
restricted
shares, rights
and options
'000
Weighted
average
exercise
price
US$
Balance at beginning of financial year
Granted during the financial year
Forfeited during the financial year
Exercised during the financial year
Balance at end of the financial year
Exercisable at end of the financial year
8,294
18,177
(1,959)
-
24,512
-
0.25
0.05
(0.03)
-
0.11
-
1,249
7,436
(359)
(32)
8,294
-
0.00
0.28
0.00
0.00
0.25
-
_______________________________________________________________________________________
124
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
125
33.
KEY MANAGEMENT PERSONNEL COMPENSATION
Details of key management personnel
The directors and other members of key management personnel of the Group during the year were:
� Graham Bradley - Chairman, non-executive director
� Bruce Brook - Non-executive director
� David McLemore - Non-executive director
� Peter St George - Non-executive director
� David Grzelak - Non-executive director
� Craig Kipp - Chief Executive Officer and Executive Director
�
� Brad Baker - Senior Vice President, Human Resources
�
� Scott Alexander - Vice President of Global Drilling Services (employment ended 31 December 2009)
� Michael Birch - Vice President of Global Products
Fabrizio Rasetti - Senior Vice President, General Counsel and Company Secretary
Joseph Ragan III - Chief Financial Officer
The aggregate compensation made to key management personnel of the Parent and Group is set out below.
Consolidated
Parent
2009
US$
2008
US$
2009
US$
2008
US$
Short-term employee benefits
5,752,835
6,158,031
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payment
128,681
360,545
324,487
1,549,832
8,116,380
155,004
153,000
45,000
1,148,217
7,659,252
700,115
46,797
-
-
866,533
61,303
-
-
311,229
1,058,141
334,479
1,262,315
34.
RELATED PARTY TRANSACTIONS
(a)
Transactions with key management personnel
(i)
Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 33 to the financial
statements.
(ii)
Other transactions with key management personnel of the Group.
Details of other transactions with key management personnel are disclosed in Note 32 of the
financial statements.
(iii)
Key management personnel equity holdings
_______________________________________________________________________________________
125
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
126
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
Details of key management personnel equity holdings are disclosed below.
2009
Graham Bradley
Bruce Brook
David McLemore
Peter St. George
David Grzelak
Scott Alexander
Michael Birch
Craig Kipp
Fabrizio Rasetti
2008
Graham Bradley
Bruce Brook
Geoff Handley
David McLemore
Peter St. George
David Grzelak
Paul Brunner
Scott Alexander
Michael Birch
Patrick Johnson
Craig Kipp
Fabrizio Rasetti
Balance
1 January
No.
Net change
during year
No.
Balance
Balance
31 December
No.
held nominally
No.
2,610,255
504,053
1,158,609
519,188
10,000
588,918
664,596
5,214,626
1,066,121
2,433,782
540,164
-
555,299
-
-
-
-
-
5,044,037
1,044,217
1,158,609
1,074,487
10,000
588,918
664,596
5,214,626
1,066,121
-
-
-
-
-
-
-
-
-
Balance
1 January
No.
Net change
during year
No.
Balance
Balance
31 December
No.
held nominally
No.
2,383,782
154,053
86,486
808,609
289,188
-
226,473
350,000
24,512
350,000
230,000
10,000
2,610,255
504,053
110,998
1,158,609
519,188
10,000
16,869,839
3,175,161
20,045,000
588,918
664,596
1,430,973
10,214,626
984,121
-
-
(1,430,973)
(5,000,000)
82,000
588,918
664,596
-
5,214,626
1,066,121
-
-
-
-
-
-
-
-
-
-
-
-
_______________________________________________________________________________________
126
127
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
Rights, Options and Shares Granted as Compensation to Key Management Personnel
Share Rights and Shares
Details of the rights under the LTIP and restricted shares that were granted as compensation to the KMP during
the reporting period, and details of those that were exercised, vested, or lapsed during the financial year are as
follows:
Held at the
Vested and
Held at the
Exercisable
beginning of
Granted as
Vested
Forfeited
end of the
as at
Name
Graham Bradley
Bruce Brook
David Grzelak
David McLemore
Peter St George
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
the Financial
Year
No.
Remun-
eration
No. 1
491,891
45,945
-
-
72,972
494,710
300,000
178,500
85,000
200,000
150,000
-
-
-
-
-
1,800,000
750,000
550,000
550,000
550,000
550,000
during the
during the
Financial
31 December
year
No.
year
No.
Year
No.
491,891
45,945
-
-
72,972
2,294,710
1,050,000
728,500
-
-
-
-
-
-
-
-
(635,000)
-
-
-
750,000
700,000
-
-
-
-
-
-
-
-
-
-
-
2009
No.
-
-
-
-
-
-
-
-
-
-
-
(1) The fair value of rights at the grant date is the closing price on the 25 March 2009 date of grant (US$0.07),
the rights vest over a three-year period from the grant date, with 50% subject to certain performance
conditions.
_______________________________________________________________________________________
127
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
128
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
Cash Rights
Details of the cash rights that were granted to the KMP during the reporting period, and details of those that were
exercised, vested or forfeited during the financial year are as follows:
Held at the
beginning of
Granted as
Vested
Forfeited
the Financial
Remun-
during the
during the
Year
US$
eration
US$ 1
year
US$
year
US$
Held at the
end of the
Financial
Year
US$
Vested and
Exercisable
as at
31 December
2009
US$
-
-
-
-
-
-
550,000
275,000
225,000
225,000
225,000
225,000
-
-
-
-
-
-
-
-
-
(225,000)
-
-
550,000
275,000
225,000
-
225,000
225,000
-
-
-
-
-
-
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
(1) The cash rights vest over a three-year period from the grant date, with 50% subject to certain performance
conditions.
The rights under the LTIP and the restricted shares were provided at no cost to the recipient.
Options
Held at the
Vested and
Held at the
Exercisable
beginning of
Granted as
Vested
Forfeited
end of the
as at
the Financial
Year
No.
2,500,000
-
-
-
-
-
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
Remun-
eration
No.
900,000
375,000
275,000
275,000
275,000
275,000
during the
during the
Financial
31 December
year
No.
year
No.
-
-
-
-
-
-
-
-
-
(275,000)
-
-
Year
No.
3,400,000
375,000
275,000
-
275,000
275,000
2009
No.
-
-
-
-
-
-
During the year ended 31 December 2009, the Board awarded to Mr. Kipp 900,000 stock options, subject to
shareholder approval. In addition to those options granted to Mr. Kipp, the Board granted a total of 1,475,000
stock options to other KMP. All the stock options granted in 2009 will vest in full and become exercisable on 18
June 2012 if the executive remains continuously employed with the Company until that date. At the date of grant,
the options had an original exercise price of A$0.30 per option and a fair market value of US$0.143 per option.
On 15 December 2009, in accordance with the ASX listing rules, the Board adjusted the exercise price from
A$0.30 per option to A$0.245 per option to reflect the dilution impact resulting from the Company’s 2009 capital
raising program and the related issuance of additional shares subsequent to the original grant date.
In regards to the 900,000 stock options awarded to Mr. Kipp on 18 June 2009, should shareholder approval not
be received, the Company is legally committed to provide other compensation of equal value to Mr. Kipp.
During the year ended 31 December 2008, the previous CEO announced his retirement and Mr. Kipp signed an
employment agreement which allowed for the issuance of two tranches of share options. The first tranche of
1,000,000 options vests on 1 January 2013 and had an original exercise price of A$1.95 per option and a fair
value on the grant date of US$0.69 per option. The second tranche of 1,500,000 options vests on 1 January
2014 and had an original exercise price of A$0.21 and a fair value on the grant date of US$1.45 per option.
_______________________________________________________________________________________
128
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
129
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
On 15 December 2009, in accordance with the ASX listing rules, the Board adjusted the exercise price for the
first tranche from A$1.95 per option to A$1.85 per option, and for the second tranche from A$0.21 per option to
A$0.155 per option. The changes in exercise price were made to reflect the dilution impact resulting from the
Company’s 2009 capital raising program and the related issuance of additional shares subsequent to the original
grant date. Vesting for both tranches of options is conditioned on Mr. Kipp’s employment with the Company on
the relevant vesting date, although vesting may accelerate upon certain events such as a change in control. Both
tranches of options expire on 31 December 2015.
Except as described above, no options or other rights over shares in the Company have been granted to KMP
during or since the end of the financial year.
During the reporting period, no shares were issued on the exercise of options or rights previously granted as
compensation.
Analysis of Movements in Rights, Options and Shares
The movement during the reporting period, by value of the relevant rights, options and shares in the Company
held by KMP is detailed below:
Value granted in year
Value forfeited in year
Entitlement to
Entitlement to
share rights
cash rights
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
US$
132,911
55,380
40,612
40,612
40,612
40,612
US$
550,000
275,000
225,000
225,000
225,000
225,000
Share
options
US$
Entitlement to
Entitlement to
share rights
cash rights
US$
US$
Share
options
US$
128,675
53,615
39,317
39,317
39,317
39,317
-
-
-
-
-
-
-
-
-
227,335
225,000
39,317
-
-
-
-
-
-
The value (based upon historic valuations) of outstanding rights, options and shares in the Company held by
KMP as at 31 December 2009 is detailed below:
Name
Craig Kipp
Joseph Ragan III
Fabrizio Rasetti
Scott Alexander
Michael Birch
Brad Baker
Share rights
value as of
period end
US$
Cash rights
value as of
period end
US$
Options
value as of
period end
US$
Total rights and
option value as of
period end
US$
1,008,548
175,380
356,557
-
424,147
306,112
550,000
275,000
225,000
-
225,000
225,000
2,990,983
53,615
39,317
-
39,317
39,317
4,549,531
503,994
620,874
-
688,464
570,429
_______________________________________________________________________________________
129
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
130
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
(b)
Transactions with related parties
Transactions with other related parties consist of the following:
Consolidated
2009
US$
2008
US$
Consulting fees paid to a director
-
34,264
The Company’s Chairman, Mr. Bradley, is also the chairman of the unlisted local, Australian subsidiary of HSBC
plc, a lender to the Group under its term and revolver bank loans (see Note 17). Terms under the bank loans are
at arms length.
35.
REMUNERATION OF AUDITORS
Audit or review of the financial report
Auditor of the parent entity
Related practice of the parent entity auditor
Non-audit services
Tax services
Review of tax returns
Capital raising
Due diligence and other non-audit services
Consolidated
Parent
2009
US$
2008
US$
2009
US$
2008
US$
1,139,000
1,254,000
2,393,000
1,459,000
2,199,000
3,658,000
826,000
415,000
420,000
13,000
746,000
590,000
-
10,000
20,000
-
20,000
-
80,000
420,000
-
20,000
-
20,000
-
130,000
-
-
1,674,000
1,346,000
500,000
130,000
The auditor of Boart Longyear Limited is Deloitte Touche Tohmatsu.
36.
SUBSEQUENT EVENTS
The directors have not become aware of any matter or circumstance that has arisen since 31 December 2009
that has affected or may affect the operations of the consolidated entity, the results of those operations, or the
state of the consolidated entity in subsequent years.
_______________________________________________________________________________________
130
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
131
SUPPLEMENTARY INFORMATION
Additional stock exchange information as at 12 March 2010.
Number of holders of equity securities
(a)
Ordinary share capital
4,611,574,674 fully paid ordinary shares are held by 30,240 individual shareholders.
All issued ordinary shares carry one vote per share, however partly paid shares do not carry the rights to
dividends.
(b)
Share rights and share options
18,099,802 share rights are held in trust for 128 individual shareholders.
4,775,000 share options are held by 10 individual option holders.
Distribution of holders of equity securities
1-1000
1,001-5000
5,001-10,000
10,001-100,000
100,001 and over
Fully paid
ordinary
shares
Share
rights
Share
options
1,504
5,672
4,279
15,966
2,819
30,240
-
6
8
87
27
128
-
-
-
-
10
10
_______________________________________________________________________________________
131
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2009
BOART LONGYEAR LIMITED
132
SUPPLEMENTARY INFORMATION (CONTINUED)
Substantial shareholders
Ordinary shareholders
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
ANZ Nominees Limited
Amp Life Limited
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
Australian Reward Investment Alliance
Cogent Nominees Pty Limited - SMP Accounts
Queensland Investment Corporation
HSBC Custody Nominees (Australia) Limited - A/C 2
USB Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Limited
Bond Street Custodians Limited
Citicorp Nominees Pty Limited
Grandor Pty Limited
Band and Company
Fully paid ordinary shares
Percent of Issued Capital
Number
871,126,150
524,870,049
519,598,245
333,148,677
169,486,026
132,640,637
58,462,760
48,785,476
48,751,861
41,016,020
40,997,750
34,204,875
34,004,437
27,607,901
23,561,100
22,045,000
21,463,033
20,000,000
20,000,000
16,972,566
Percent
18.9%
11.4%
11.3%
7.2%
3.7%
2.9%
1.3%
1.1%
1.1%
0.9%
0.9%
0.7%
0.7%
0.6%
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
3,008,742,563
65.3%
_______________________________________________________________________________________
132
Executive Leadership Team
20
Financial Statements
2
4
6
8
Financial Report
Directors’ Report
Independent Auditor’s Report
18
Directors’ Declaration
21
Supplementary Information
23
Corporate information
50
52
Contents
Chairman's letter
Chief Executive Officer's report
Results summary
Business review
Board of Directors
Financial Calendar
2009 Full Year Financial results
Annual General Meeting
Financial Half Year End
Interim results
Financial Year End
Annual General Meeting
The Annual General Meeting of Boart Longyear will be held at
Museum of Sydney – AGL Theatre
Corner Bridge and Phillip Streets
Sydney, NSW 2000, Australia
Commencing at 10.00am on 11 May 2010
Telephone +61 2 9251 5988
Boart Longyear Limited
ACN. 123 052 728
53
131
IBC
19 February 2010
11 May 2010
30 June 2010
August 2010
31 December 2010
Forward-Looking Statements
Statements in this report that are
not historical are forward-looking
statements. These statements are
based on management’s current belief
and their expectations. The forward-
looking statements in this report are
subject to uncertainty and changes
in circumstances and involve risks
and uncertainties that may affect
our operations, markets, products,
services, prices and other factors as
discussed in our filings with the Australian
Securities Exchange. Significant risks
and uncertainties may relate to, but
are not limited to, financial, economic,
competitive, environmental, political, legal,
regulatory and technological factors.
In addition, completion of transactions
of the type described in this report are
subject to a number of uncertainties and
to negotiation and execution of definitive
agreements among the parties and
closing will be subject to approvals and
other customary conditions. Accordingly,
there can be no assurance that the
transactions will be completed or that
our expectations will be realised. We
assume no obligations to provide revision
to any forward-looking statements
should circumstances change, except as
otherwise required by securities and other
applicable laws.
Corporate information
Headquarters
Principal Administrative Office
10808 South Riverfront Parkway #600
South Jordan, Utah 84095
Tel: +1 801 972 6430
Fax: +1 801 977 3374
Registered Office
919-929 Marion Road
Mitchell Park,
South Australia 5043
Tel: +61 8 8375 8375
Fax: +61 8 8377 0539
Auditors
Deloitte Touche Tohmatsu
Company Secretaries
Fabrizio Rasetti
Paul Blewett
Shareholder Enquiries
Boart Longyear
Investor Relations
10808 South Riverfront Parkway
South Jordan, Utah 84095
Australia: +61 8 8375 8300
Others: +1 801 952 8513
email: ir@boartlongyear.com
Listing
Boart Longyear is listed on the
Australian Securities Exchange
under the symbol “BLY”
Share Registry
Link Market Services Limited
Level 12680 George Street
Sydney NSW 2000
Tel: +61 2 8280 7111
Annual Meeting
The third Annual General Meeting of
Shareholders of Boart Longyear Limited
will be held at the Museum of Sydney,
located at the corner of Bridge and Phillip
Streets, Sydney NSW 2000 on Tuesday,
11 May 2010, commencing at 10:00 a.m.
(Sydney time).
Website
www.boartlongyear.com
www.precinct.com.au