BOART LONGYEAR
DRILLING SERVICES
DRILLING EQUIPMENT
PERFORMANCE TOOLING
2012 ANNUAL REPORT
WHO WE ARE
Boart Longyear is the world’s largest mineral
exploration drilling services, drilling equipment and
performance tooling company. With more than
120 years of expertise, we provide drilling services
and drilling products for the global mineral exploration
industry. We also have globally recognised expertise
in mine de-watering, as well as energy and oil sands
exploration. Our customers rely on our unique ability
to develop, fi eld test and deliver any combination of
performance tooling, drilling equipment and expertise
direct to any corner of the world.
HISTORY
Edmund J. Longyear drilled the fi rst diamond core
hole in the Mesabi Iron Range in northern Minnesota
during the late 1880s. This was the beginning of a
long history of innovation and expertise in contract
drilling and product development. Today, we are still
developing technology to increase productivity and
to fulfi ll the drilling needs of our customers. The
momentum of this rich 120+ year history has led us
to remain the leading products and services provider
in our space.
Boart Longyear Limited (ACN 123 052 728)
CONTENTS
Overview
Breaking Ground
Chair’s Report
Chief Executive Offi cer’s Report
Drilling Services
Drilling Products
Environmental, Health and Safety
People and Community
Board of Directors
Executive Leadership Team
Financial Report
Directors’ Report
Independent Auditor’s Report
Directors’ Declaration
Financial Statements
Supplementary Information
Corporate Information
1
2
4
6
8
10
12
14
16
18
21
22
62
65
70
128
Inside BC
FINANCIAL CALENDAR
Final results and
dividend announcement
Annual General Meeting
Half Year End
Interim results
Year End
18 February 2013
21 May 2013
30 June 2013
26 August 2013
31 December 2013
ANNUAL GENERAL MEETING
The Annual General Meeting of Boart Longyear
will be held at:
Sofi tel Hotel Melbourne
West Tower Suite
25 Collins Street
Melbourne, VIC 3000
Australia
Commencing at 1:00 pm on 21 May 2013.
2012 OVERVIEW
REVENUE
US$2.01B
2012
2011
2010
2.01
2.02
1.48
NET PROFIT AFTER TAX
US$114M
2012
2011
2010
68
114*
85
160
EBITDA
US$322M
2012
2011
2010
254
322*
356
222
CASH FROM OPERATIONS
US$77M
64
77*
2012
2011
2010
52
198
*Adjusted EBITDA and NPAT are non-IFRS measures and are used internally by management to assess the performance of the business and have been derived from the Company’s audited
fi nancial statements. The adjusted measure excludes the impact of $68 Million ($46 Million net of tax) of restructuring and related impairment charges, of which $13 Million was paid in cash in 2012.
TOTAL COMPANY REVENUE SPLIT
COMPANY REVENUE BY REGION
Surface Core Drilling
Rotary Drilling
Performance Tooling
39%
19%
18%
Underground Core Drilling 10%
Drilling Equipment
Non-Mining / Other
Production Drilling
7%
4%
3%
Asia Pacifi c
United States
27%
23%
Europe, Middle East and Africa 20%
Canada
Latin America
16%
14%
DRILLING SERVICES REVENUE BY COMMODITY
DRILLING SERVICES REVENUE BY STAGE
Gold
Copper
Iron
Nickel
Energy
Other Metals
Environmental
Other
44%
23%
9%
5%
5%
5%
5%
4%
Production / Underground 34%
Greenfi eld
Brownfi eld / Near Mine
Non-Mining
Water Services
30%
24%
7%
5%
SAFETY:
TCIR 1.56
2012
2011
2010
LTIR 0.10
2012
2011
2010
TCIR = (# of recordable incidents x 200,000) / man hours worked
1.56
2.33
2.23
LTIR = (# of lost-time incidents x 200,000) / man hours worked
0.10
0.13
0.12
NUMBER OF EMPLOYEES
9,162
2012
2011
2010
9,162*
10,572
9,221
*As of 31 December 2012.
Annual Report 2012
1
BREAKING GROUND
Largest
SURFACE CORING
ROTARY
UG CORING
SONIC
Global Services Fleet
UP TO
™
UMXDIAMOND BITS =
100%
INCREASE IN
PRODUCTIVITY
*
274.32M
SONIC DEPTH RECORD
LARGEST INSTALLED BASE OF EXPLORATION DRILL RIGS
Operating in Over Countries Worldwide
40
I
D
R
I
L
L
I
N
G
S
E
R
V
C
E
S
–
K
E
N
N
E
C
O
T
T
,
U
T
–
2
0
1
2
2,200+
Drilling Equipment and
Performance Tooling
Customers In
100+
Countries
Calgary Rotary Drilling Services
Calgary Rotary Drilling Services
1,000,000 MAN HOURS
LTI FREE
Jakarta Drilling Services
Jakarta Drilling Services
15 YEARS
LTI FREE
*Based on a 2012 copper mining case study in the Southwestern United States, using 07UMX™, Stage 3 bits.
Boart Longyear
2
GROUND BREAKING
TOP-SELLING
CORING RODS
First Ever
1,000M
DIAMOND DRILL HOLE
Laos – 2012
1,200,000
METRES DRILLED
LF™120A
Industry’s First
Hands-Free Rod
Handling System
$2,000,000 RAISED
Utah Food Bank – 2012
1,000+ RIG GLOBAL DRILLING SERVICES FLEET
P
R
O
D
U
C
T
I
O
N
D
R
I
L
L
I
N
G
S
E
R
V
C
E
S
C
A
N
A
D
A
–
2
0
1
2
I
700+
Patent
Applications
Since 2007
2012 EHS
TCIR
LTIR
27%
23%
94% OF DRILLERS ASSESSED IN DRILLING SERVICES TRAINING
Annual Report 2012
3
SOME THINGS HAVEN’T CHANGED: OUR
DEDICATION TO WORKING SAFELY IN
EVERY PLACE WE DO BUSINESS, OUR
MARKET-LEADING TECHNOLOGY AND
OUR ENTHUSIASM FOR HELPING FIND
SOLUTIONS FOR THE CHALLENGES OUR
CUSTOMERS FACE ARE UNPARALLELED
IN OUR INDUSTRY.
BARBARA JEREMIAH
CHAIR
44
DEAR SHAREHOLDERS
2012 was a year of promise and disappointment.
While Boart Longyear made US$68 million
(US$114 million on an adjusted basis*) net profi t
after tax, as compared to US$160 million in 2011,
we did not end the year as strongly as we began.
In light of the challenges facing us, we determined
to make a change of our CEO in October and
began a search for the successor. While our search
progressed, our Chairman, Dave McLemore,
stepped in and acted as interim CEO. We are
grateful to Dave for his willingness to assume this
role and for the decisive actions he took to address
the change in customer demand our businesses
experienced in the second half of 2012. We
needed to respond with a sense of urgency to the
reduction in business, and Dave has put us on a
good footing to move forward in 2013.
After an extensive search for CEO candidates and
interviewing a number of highly qualifi ed internal
and external candidates, the Board selected
Richard O’Brien, the outgoing CEO of Newmont
Mining, to be our next CEO. Richard brings a
number of critical qualifi cations to the role. His
knowledge of our industry, experience leading a
major global mining company, fi nancial background
and creativity in delivering shareholder value,
and ability to hit the ground running as a veteran
public company CEO are attributes that make the
Board confi dent Richard is attuned to the diverse
constituents and values a good CEO weighs in
each decision he or she makes.
We are optimistic that with Dave’s cost cutting
actions and Richard’s views on how to grow our
business from a customer’s perspective, we have
created a platform for our growth to resume in
2013. Some things haven’t changed: our dedication
to working safely in every place we do business,
our market-leading technology and our enthusiasm
for helping fi nd solutions for the challenges our
customers face.
I would like to thank my fellow Board members
for their support, advice and guidance in the last
year. In particular, with the entire Board joining
me, I would like to thank Peter St George, who
has decided to step down from his role as a non-
executive director at the Annual General Meeting,
for his years of service to the Company. Peter has
been affi liated with Boart Longyear since before
its initial public offering in 2007 and has provided
critical fi nancial and market expertise to the Board
and the remuneration and audit committees
throughout his tenure. The Board currently is
conducting a search for a director with comparable
skills to Peter’s and hopes to present his
replacement to shareholders in the coming weeks.
I also would like to thank our executive team for
their leadership and dedication in a turbulent year.
We look forward to introducing Richard to many of
you at the Annual General Meeting in Melbourne.
*Adjusted EBITDA and NPAT are non-IFRS measures and are used internally by management to assess the performance of the business and have been derived from the Company’s audited
fi nancial statements. The adjusted measure excludes the impact of $68 Million ($46 Million net of tax) of restructuring and related impairment charges, of which $13 Million was paid in cash in 2012.
Annual Report 2012
5
THROUGH THE CYCLE
The past year was a tale of two halves for the
Company. The fi rst half was characterised
by strong demand for drilling services, which
underpinned record earnings for the Company. In
the second half, however, we encountered strong
headwinds in the form of a sharp downturn in the
mining cycle.
Cyclicality is a feature of the mining services
industry, and the challenges that such a downturn
present to fi nancial performance will come as no
surprise to experienced observers of our industry.
However, the downturn in the December half was
notable for its suddenness and far-reaching impact
on the mining services sector. Our performance in
this period was affected by circumstances, many
of them out of our immediate control, ranging from
a collapse in commodity prices and tightening
credit markets to a freezing of mining company
exploration budgets and a lack of fi nancing for
mining juniors. While these dampened revenue, the
bigger impact was on margins and EBITDA, which
deteriorated signifi cantly during the second half.
Sovereign, compliance and security risks in
developing countries also affected our 2012
fi nancial performance, at different times requiring
us to suspend or reduce activity in key developing
markets or cease pursuing entry into these
markets. When operating in such geographies,
Boart Longyear has shown it will not compromise
on the investment necessary to operate compliantly
and safely and maintain contingency arrangements
for crisis situations. This commitment does make
operations in some developing markets unviable in
certain circumstances, and that is the situation we
faced in 2012.
Despite the Company’s close monitoring of the
many external and internal indicators of our
business, precise forecasting remains a key
challenge to our ability to manage effectively
through the mining cycle. Nevertheless, our
response to the second-half market contraction
and associated impact on operating margins was
aggressive. From August we moved quickly to align
the cost base with the mining cycle and sustain our
overall competitive advantage, making very diffi cult
decisions around executive leadership, reductions
to headcount, rationalising manufacturing and
realigning our overheads.
To date, more than US$70 million in costs has
been taken out of the business following this work,
and the Company continues to look for additional
cost reduction opportunities. Specifi cally, we have
commenced working with external advisers to
identify structural changes to our operating model
and cost base. This exercise will result in a simpler,
more effi cient and more fl exible operating base that
will allow Boart Longyear to respond more nimbly
and effectively to future cyclical downturns.
Boart Longyear’s Board and management team
recognise the fundamental importance of prudent
capital management through the cycle. To this
end, improving the Company’s debt profi le and
extracting better returns from more strategic capital
expenditures are key areas of focus that will
support improved shareholder returns in the future.
Notwithstanding the challenges of the past
six months, the Board is very optimistic about
the Company’s future and prospects. We are
a stronger and wiser Company for the recent
downturn, and the changes underway will position
us to manage more profi tably through all stages of
our industry cycles in the future. Our goal now is
to better leverage the synergies of our integrated
products and services business model to deliver
operating margins that exceed those of our peers.
Our strategy is to be the “One Source” of drilling
services, drilling equipment and performance
tooling for mining and drilling companies globally.
Boart Longyear remains the best and most
recognisable brand in our industry. The strength of
our brand, our global footprint and the signifi cant
investments made over the years in a diverse and
modernised fl eet and pipeline of state-of-the-art
products, position us uniquely to deliver on the
One Source strategy. Meanwhile, Boart Longyear’s
high standards of safety and compliance continue
to be a source of competitive advantage and
remain at the core of our culture. Our 2012 safety
performance refl ected signifi cant improvements in
all major metrics, with the Total Case Incident Rate
improving by 27% (a Company record) and the
Lost-Time Injury Rate improving by 23%.
At this point, I also would like to welcome our new
CEO, Mr Richard O’Brien, and recognise our new
Board Chair, Ms Barbara Jeremiah. Their combined
leadership and experience, and Richard’s deep
knowledge of mining industry operations in
particular, will ensure that the Company stays
focused on supporting its customers and delivering
returns and value to shareholders.
In summary, 2013’s priorities will be to redouble our
attention on the following key initiatives:
Focus: On delivering shareholder value through
margin and cost improvements, a healthy balance
sheet, and more frequent market communication.
Defend: Safety performance, compliance, global
market share and technology.
Grow: In new product segments and technologies,
by increasing market share with the “Majors”, and
expanding aftermarket services.
Given the competitive strengths of our business,
the depth of our leadership and the dedication of
our motivated global workforce, I know we can
deliver on these commitments.
6
Boart Longyear
WE ARE A STRONGER AND WISER
COMPANY FOR THE RECENT DOWNTURN,
AND THE CHANGES UNDERWAY WILL
POSITION US TO MANAGE MORE
PROFITABLY THROUGH ALL STAGES OF
OUR INDUSTRY CYCLE IN THE FUTURE.
DAVID MCLEMORE
INTERIM CHIEF EXECUTIVE OFFICER
Annual Report 2012
7
DRILLING SERVICES
Boart Longyear – the preferred drilling partner
to the global mining industry
With the world’s largest and most diverse fl eet of
drilling rigs, it is no surprise Boart Longyear is the
drilling partner of choice for many of the world’s
largest mining companies.
With a 120-year history, Boart Longyear has
assembled the equipment, capability and expertise
necessary to support mining projects of all sizes, in
any location. Our customers know that partnering
with Boart Longyear means consistency; they can
be sure when working with us that their project
will be completed with a skilled, competent, and
compliant crew utilising the safest and most
modern equipment and operating to a consistent
set of contractual terms and conditions.
With operations in nearly 40 countries,
Boart Longyear is also highly adaptable. We
understand how to drill safely and productively
in extreme weather, at high altitude, in remote
or environmentally sensitive locations, in diffi cult
ground formations and at ever greater depths.
Our ability to operate successfully under these
conditions is underpinned by a commitment to
investing in and developing our drilling technology
and skills. We demonstrate this commitment each
day as we recover core at record depths and
complete holes that others consider impossible.
Safety and compliance – our key priorities
Maintaining our safety record while we operate in
such challenging and changing environments is
no accident. It refl ects an ingrained safety culture
across Boart Longyear that is reinforced by robust
safety processes and systems. This too requires
a commitment to investing in the best safety
equipment available and intensive training and to
developing drilling methods that are not only more
productive for customers but also safer.
In the dynamic mining market, Boart Longyear
must be ready to service new projects as and when
they emerge, even in countries or jurisdictions
where we do not currently operate. When entering
new regions, our fi rst step is to establish the legal
8
Boart Longyear
REVENUE
US$1.5B
2012
2011
2010
0.7
1.5
1.4
entity necessary to comply with all applicable
labour, tax, safety and other legal requirements.
If circumstances in existing geographies change
such that we feel that our requirements for legal
and safety compliance can no longer be fully
satisfi ed, we exit those geographies.
Expertise and innovation – solving new
drilling challenges
Boart Longyear recognises that each drilling project
is unique and as such requires a customised
approach. Whether the solution is surface
coring, reverse circulation, underground coring,
production, sonic, or large rotary drilling, we have
the world’s largest fl eet of rigs for that job. Each of
these rigs is operated by a seasoned, professional
drill crew who set the standard for our industry.
While the characteristics of different mining
projects may vary, the challenge of insuffi cient or
excess water at mine sites is a constant. To meet
this challenge, Boart Longyear has built the world’s
largest mine water services fl eet over the past two
years. Utilising advanced tooling and processes
for well drilling and development, and skills honed
over the past two decades in the world’s most
diffi cult ground formations, our mine water services
team is expanding its expertise globally. The
result is more wells, sunk in less time, with higher
productivity and longer life, at lower overall cost to
the customer.
The global expansion of the mine water services
team highlights a key Boart Longyear strength: the
ability of our drilling teams to acquire and develop
specialised skills and technologies on projects
throughout the world. Using the world’s largest
mineral drilling services operation as a live test
environment, we improve upon those skills and
technologies, often engineering our own solutions
and then deploying them globally, rapidly and in a
standardised fashion.
Annual Report 2012
9
DRILLING PRODUCTS
DRILLING EQUIPMENT – THE RIG FOR ANY FLEET
MULTIPURPOSE
REVERSE CIRCULATION
SURFACE CORING
SONIC
GEO-CONSTRUCTION
1
8
2
m
1
4
0
m
7
7
5
m
UNDERGROUND CORING
ROCK DRILL AND BLAST
8
0
m
2
,
3
7
9
m
3
,
5
9
1
m
1
,
4
0
0
m
REVENUE
US$142M
2012
2011
2010
142
155
80
Boart Longyear is a leading manufacturer and
supplier of drill rigs to the global mining industry,
with our range of highly productive drill rigs now
found in more than 100 countries worldwide.
Engineered and manufactured to the most
demanding specifi cations, our drill rigs and
tooling are purpose designed for surface coring,
underground coring, underground production,
reverse circulation, sonic and multipurpose
applications. Underpinned by our industry-
leading R&D program, our pioneering of technical
advances in hands-free rod handling and remote
drill operations help us meet the dual customer
demands of increased safety
and productivity.
For Boart Longyear, future growth in drilling
products will rest on three strategic pillars:
1) Offering a complete drilling system allowing
customers to drill faster and deeper than ever
before, more safely;
10
Boart Longyear
PERFORMANCE TOOLING – THE MOST PRODUCTIVE DRILL STRING
CORE
RETRIEVAL
SYSTEM
CORE BARREL
SYSTEM
DRILL RODS &
CASING
DRILL BITS &
REAMERS
REVENUE
US$353M
2012
2011
2010
353
418
315
2) Leveraging our global distribution capability to
make a spare part or component available to the
customer, wherever and whenever they need it,
from one of more than 50 stocking locations;
3) A world-class aftermarket service that allows us to
service our products and equipment wherever our
customer is located.
Whether our customer needs a rod-handling solution
for an existing drill rig or a complete rebuild, Boart
Longyear has the componentry, technical expertise
and experience to meet the need. Our end-to-end
involvement in the products we sell helps keep our
customers’ maintenance costs to a minimum over
the lifetime of their equipment.
Annual Report 2012
11
ENVIRONMENTAL, HEALTH & SAFETY
EHS
Boart Longyear’s Environmental, Health & Safety
(“EHS”) program has matured into an industry-
leading system that keeps our employees safer,
limits environmental impacts and adds signifi cant
value to our business operations, customers and
shareholders.
In 2012, although Boart Longyear staff worked
a record number of hours (up 6% over 2011),
injuries and reported incidents were down
substantially and other EHS prevention indicators
fell sharply.
SEVERITY RATE**
LOST TIME DAYS
2012
2011
2010
1.84
1.90
2012
2011
2010
3.08
268
307
306
**Severity Rate = (# of Lost Time Days x 200,000) / # of man hours
For Boart Longyear, EHS is a priority at every level
of our organisation, from the Boardroom to the drill
platform. By engaging our employees consistently
and continually around core EHS principles, we
are driving a system in which these principles are
applied to the workplace every day.
The company’s ISO-14001 and OHSAS-18001
certifi ed EHS programs include a dedicated
focus on design and manufacture which ensure
our products deliver value to clients both in the
services and products we provide. Examples
include:
• Installing remote-vehicle monitors in more
than 500 vehicles that allow us to track driver
performance and provide real-time feedback
to drivers, their supervisors and senior
management. This investment has led to a
noticeable improvement in driving performance
and measurable reductions in driving-related
incidents, injuries and related costs.
• Transitioning to 100% water-based paints for the
production of drilling products, which reduces
emissions of volatile organic compounds and
improves workplace health.
• Making safety personal by focusing efforts on
• Global tracking of a robust set of waste
those incident types that tend to injure industry
personnel most frequently (ie hand and fi nger
injuries) or which have the most potential for
serious injury or death (driving). Our goal is for
all our employees to return home safe, every
day.
• Coupling the mandatory use of high-visibility
gloves in high-risk environments with innovative
development of tools for drill-rod handling that
safeguard our employees’ hands.
and utility metrics with a view to minimising
waste and improving environmental resource
utilisation, while adding a competitive advantage
through reduced costs.
Boart Longyear has an enviable record with
regard to EHS performance, among the best in the
business. We want our clients to do business with
us for our safe and environmentally sustainable
value-added approach to our work. We also
believe that our EHS culture provides superior
value to our shareholders and other stakeholders.
12
Boart Longyear
ENVIRONMENTAL SUSTAINABILITY
FY 2012 marked the fi rst full year of Boart Longyear’s
global sustainability initiative. Following this work,
sustainability has now been incorporated into our
revised EHS Management System, EHS Standards
and EHS risk assessment process. The Company’s
sustainability strategy seeks to mitigate the impact our
operations have on the following three areas:
Air Quality
Boart Longyear now tracks the operation of our drill
fl eet, support equipment and vehicles in addition to
fl ight miles and process emissions. These data will
help us calculate greenhouse gas emissions and set
emission reduction goals. Fleet upgrades, restrictions
on engine idling and reducing the use of volatile
organic solvents and paints are among the steps we
have taken to reduce air quality impacts.
Energy and Water Conservation
We are testing the use of pitless drilling methods on
four continents to conserve water resources and limit
the substantial costs associated with water haulage in
arid regions. Energy effi ciency improvements include
relamping of shop fl oors, upgrading high-demand,
high-load equipment and application of energy-
management technologies. As well as reducing power
and water consumption, these initiatives also improve
profi tability.
Waste and Hazardous Materials
Waste minimisation efforts in 2012 included the
recycling of scrap metal and other materials worth
millions of dollars. In 2013, the Company will reduce
inventories of hazardous materials, and improve
waste management. Collectively, these efforts are
reducing environmental risk and operating costs.
Details on our Sustainability Program are available
online at: www.boartlongyear/environment.
THREE-YEAR IMPLEMENTATION
Economy
Sustainability
Society
Environment
CASE STUDY: Mississauga Heat Treat Furnace
Boart Longyear’s installation of a high-effi ciency
electric induction heating coil system at our
Mississauga, Canada facility has reduced annual
natural gas consumption by 3.1 million cubic metres
and CO2-equivalent greenhouse gas emissions by
7,000 tonnes. This impact is equivalent to taking
1,200 passenger vehicles permanently off roads.
ANNUAL FINANCIAL IMPACT:
Natural Gas Utility Bill of CAD261,000
Replaced by Electrical Bill of CAD11,000
2012:
Program announcement
and data collection
of key performance
indicators
2013:
2014:
Data analysis, continued data collection
and establishment of interim goals
2015:
Program
assessment
Annual Report 2012
13
PEOPLE & COMMUNITY
PEOPLE
People are Boart Longyear’s most important
asset. None of our products could be developed,
manufactured or sold nor any of our drill rigs
mobilised and operated, without the support of
our employees. Our diverse employee base is
drawn from more than 35 countries worldwide,
which partly explains why mutual trust and respect
remains a core value.
We believe the best ideas develop as a result of
collaboration between individuals with diverse
backgrounds, opinions and perspectives.
NORTH AMERICA (NAM)
Where We Are
Underpinning this process is training and
professional development and FY12 saw a
quadrupling of employee training programs
across Boart Longyear globally. These programs
remain focused on developing leadership and
management skills, and core competencies in
the fi eld. Complementing our direct training is
Boart Longyear’s new Global Learning Center,
which will make available more than 3,500 online
courses as well as student manuals, reference
materials and external training resources.
EMPLOYEES AROUND THE GLOBE
NAM
31%
LAM
22%
APAC
27%
EMEA
20%
Community Support Programs
FIRST Lego League
Utah Food Bank
Canada Sick Kids
Foundations
Mining Matters
LATIN AMERICA (LAM)
Where We Are
Community Support Programs
Creches las Rosinhas
International
Association of Chile
Hogar Montana
14
Boart Longyear
COMMUNITY
Boart Longyear’s community support program
continued to evolve in the past year. During 2012,
the Company extended support to a range of
charitable organisations providing education and
opportunities for children, and programs focused
on health and preventive care.
To better service the communities in which we
operate, the Company established charitable
contribution committees in each of our four
regions and the corporate headquarters. The
committees meet regularly to review requests
submitted from employees and the general
public at http://www.boartlongyear.com/giving.
Contribution decisions are made to ensure the
Company is aligned with key focus areas and the
needs of local communities.
EUROPE, MIDDLE EAST AND AFRICA (EMEA)
Where We Are
Community Support Programs
Face of a Child Foundation
ASIA PACIFIC (APAC)
Where We Are
Community Support Programs
Royal Flying Doctor Service
Batu Hijau Doctors
Children Fund
Trees for Life
Annual Report 2012
15
BOARD OF DIRECTORS
BARBARA JEREMIAH – NON EXEC. CHAIR
Barbara Jeremiah was appointed a Director of the Company on
1 October 2011 and is a member of the Audit, Compliance and Risk
Committee and Environment, Health and Safety Committee. On
18 February 2013, the Company announced that Ms Jeremiah was
appointed the Chair of the Board effective 1 March 2013.
Ms Jeremiah is a non-executive director of Allegheny Technologies,
Inc. (New York Stock Exchange) and First Niagara Financial
Group (NASDAQ). She also serves on the board of two non-profi t
organisations in the United States. She has also served as a non-
executive director of EQT, Inc. (New York Stock Exchange).
Ms Jeremiah’s professional career includes several senior executive
roles for Alcoa, Inc. She retired as Alcoa’s Executive Vice President
for Corporate Development in 2009 and in that role was responsible
for leading Alcoa’s worldwide acquisition and divestiture activity as
well as its strategic analysis of its business. Prior to her corporate
development responsibilities, she held several senior positions
in Alcoa’s legal department, including corporate secretary and
assistant general counsel.
Ms Jeremiah received her JD from the University of Virginia School
of Law and BA in Political Science from Brown University.
DAVID MCLEMORE – NON EXEC. INTERIM CHIEF EXECUTIVE OFFICER
David McLemore was appointed a Director on 21 February 2007
and became Chairman of the Board on 23 August 2010. He became
Interim Chief Executive Offi cer of the Company on 3 October 2012,
contemporaneously with the cessation of Mr Kipp’s employment,
and served in that additional capacity until 31 March 2013.
Mr McLemore has resigned as Chairman of the Board effective
1 March 2013, but otherwise will remain on the Board.
Mr McLemore is a member of the Remuneration and Nominations
Committee and served as the Chairman of the Committee during
part of the fi nancial year, having held the chairmanship from
22 March 2010 until resigning the post on 1 March 2012.
Mr McLemore has more than 35 years of industrial and broad
operational experience. He has held a number of positions with
various Advent International portfolio companies for more than 15
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. He also served as a general manager of a General Electric
Power Systems division from 1985 to 1997.
Mr McLemore received his BS from Oklahoma State University.
BRUCE BROOK – NON EXEC. DIRECTOR
Bruce Brook was appointed a Director of the Company on
21 February 2007. He is Chairman of the Audit, Compliance and
Risk Committee and a member of the Environment, Health and
Safety Committee.
Mr Brook currently is Chairman of the Board of Programmed Group
and a director of CSL Limited, the Export Finance and Insurance
Corporation, the Deep Exploration Technologies Co-operative
Research Centre and Newmont Mining Corporation (New York Stock
Exchange). Mr Brook is also a member of the Audit Committee of
the Salvation Army (Southern Territory).
Mr Brook was the Chief Financial Offi cer of WMC Resources Ltd
from 2002 to 2005 and has approximately 30 years of experience
in various management roles, including Deputy Chief Financial
Offi cer of ANZ Banking Group Limited, Group Chief Accountant
of Pacifi c Dunlop Limited, General Manager, Group Accounting at
CRA Limited and General Manager, Accounting and Services at
Pasminco Limited.
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.
16
Boart Longyear
ROGER BROWN – NON EXEC. DIRECTOR
Roger Brown was appointed a Director of the Company on
1 July 2010. He is a member of the Remuneration and Nominations
Committee and has served as the Committee’s Chairman since
1 March 2012. He also is a member of the Environment, Health and
Safety Committee.
Mr Brown currently holds board positions with McDermott
International Inc. (New York Stock Exchange) and Ultra Petroleum
Corporation (New York Stock Exchange). In addition, he has held
board positions for I.E. Miller Services, Sandvik/Smith Ltd and the
Petroleum Equipment Suppliers Association.
Mr Brown served as President of Smith Technologies, a business
unit of Smith International, Inc., which prior to its acquisition by
Schlumberger, Ltd. was a Fortune 500 company and a leading
worldwide supplier of products and services to the oil and gas
industrial markets.
Mr Brown received his BS in Economics, History, and Political
Science, and his JD, from the University of Oklahoma.
ROY FRANKLIN – NON EXEC. DIRECTOR
Roy Franklin was appointed a Director of the Company on
15 October 2010. He is the Chairman of the Environment, Health
and Safety Committee and a member of the Audit, Compliance
and Risk Committee.
Mr Franklin currently serves as Chairman of the Board of
Keller Group PLC (London Stock Exchange) and a director of
Santos Ltd (Australian Securities Exchange), Statoil ASA (Oslo
Stock Exchange) and Cuadrilla Resources. He previously held
directorships on a number of other corporate boards, including
International Energy Group and Novera Energy.
Mr Franklin served as Chief Executive Offi cer of Paladin Resources
from 1997 to 2006, was Managing Director of Clyde Petroleum from
1991 to 1997, and held a number of executive roles with British
Petroleum earlier in his career.
Mr Franklin received his BS in Geology from the University of
Southampton.
TANYA FRATTO – NON EXEC. DIRECTOR
Tanya Fratto was appointed a Director of the Company on 1 June
2011 and is a member of the Environmental, Health and Safety
Committee and the Remuneration and Nominations Committee.
Ms Fratto most recently served as President and Chief Executive
Offi cer of Diamond Innovations, the world’s leading supplier
of manufactured diamond, cubic boron nitride (CBN), and
polycrystalline products, from 2004 to April 2011. Ms Fratto also
was an offi cer of the General Electric Company and held a number
of leadership positions over more than 20 years there, including in
general management, operations, sourcing, product management
and marketing.
Ms Fratto received her BS in Electrical Engineering from the
University of South Alabama.
PETER ST. GEORGE – NON EXEC. DIRECTOR
Peter St George was appointed a Director of the Company on
21 February 2007 and is a member of the Remuneration and
Nominations Committee and the Audit, Compliance and Risk
Committee.
Mr St George currently is a director of Dexus Property Group and
First Quantum Minerals Limited (Toronto Stock Exchange). He also
has served as a director of SFE Corporation Limited and Spark
Infrastructure Group.
Mr St George’s professional experience includes serving as Chief
Executive/Co-Chief Executive of Salomon Smith Barney Australia/
NatWest Markets Australia from 1995 to 2001 and more than
20 years of experience in senior corporate advisory roles within
NatWest Markets and Hill Samuel & Co in London.
He qualifi ed as a Chartered Accountant in South Africa and received
his MBA from the University of Cape Town.
Mr St George has announced his resignation as a Director of the
Company effective 21 May 2013.
17
EXECUTIVE LEADERSHIP TEAM
RICHARD O’BRIEN
Mr O’Brien was appointed President and Chief Executive Offi cer
on 1 April 2013. He brings over 25 years of operational, fi nancial
and leadership experience from the natural resources, energy and
power industries. He was employed in various capacities between
2005 and March 2013 by NYSE-listed Newmont Mining Corporation,
serving as President and CEO since 2007 and Executive Vice
President and Chief Financial Offi cer prior to that time. Before
Newmont Mining, Mr O’Brien‘s executive roles included Chief
Financial Offi cer of US-based natural gas utility company AGL
Resources and Chief Operating Offi cer and Chief Financial Offi cer
at Pacifi Corp, an electric power company.
Mr O’Brien holds a Bachelor of Arts in economics from the University
of Chicago and a Doctor of Jurisprudence degree from Lewis and
Clark Law School. He has been a director of Xcel Energy Inc. since
August 2012 and a director of Vulcan Materials Company since
October 2008.
M. BRADLEY BAKER
Mr Baker was appointed Senior Vice President, Human Resources
in 2008. Prior to joining Boart Longyear he worked for Milacron Inc.
in Cincinnati, Ohio for 17 years in a variety of operational, divisional
and global human resources roles including: Vice President of
Human Resources, Director of Human Resources, North America,
Director of Human Resources for the Plastics Technologies Group
and leading the human resources and leadership integration of
multiple acquisitions including the Michigan-based consumable
tooling manufacturer, Valenite Inc.
Mr Baker received his Bachelor of Science in Business
Administration from Bowling Green State University and his
Master’s degree in Business Administration from Xavier University.
KENT HOOTS
Mr Hoots was appointed Senior Vice President of Global Products
in January 2013 in addition to his responsibilities of Global Supply
Chain and IT, which he took over in July of 2012. He joined Boart
Longyear in April 2007 as Vice President – Asia Pacifi c located in
Adelaide, Australia. Prior to joining Boart Longyear, Mr Hoots was
employed by General Electric for over 20 years where he held
various positions of increasing responsibility in both the Aviation
and Energy divisions including Sourcing Director for GE’s Power
Generation Operations, Asia Sourcing Director, Customer Quality
Leader for GE Energy, and Quality Director for GE Energy’s
European Operations. In addition, he has held several international
positions including assignments in Dubai, United Arab Emirates,
Belfort, France and Shanghai, China.
Mr Hoots is a graduate of GE’s Manufacturing Management
Program and received his Bachelor of Science in Industrial
Engineering from North Carolina State University and his Master’s
degree in Mechanical Engineering from the University of Cincinnati.
18
Boart Longyear
JOSEPH RAGAN III
Mr Ragan was appointed Chief Financial Offi cer in 2008. Prior
to joining Boart Longyear, he held the position of Chief Financial
Offi cer for GTSI Corporation, a leading technology solutions provider
for the public sector listed on NASDAQ. Mr Ragan also held the
position of Chief Financial Offi cer of U.S. Operations for Winstar
Communications Inc., an international telecommunications company.
Earlier in his career, he held various international and domestic
fi nance positions for PSEG, The AES Corporation, and Deloitte and
Touche.
Mr Ragan received his Bachelor of Science in Accounting from
The University of the State of New York, his Master’s degree in
Accounting from George Mason University, and is a Certifi ed Public
Accountant in the Commonwealth of Virginia.
The Company and Mr Ragan have mutually agreed that Mr Ragan
will leave the Company but currently have not set a date for his
departure. Mr Ragan is assisting the Company with the transition of
his responsibilities.
ALAN SIDES
Mr Sides was appointed as Senior Vice President of Global Drilling
Services in January 2013 after successfully leading the Global
Products division since 2010. He spent over 25 years with the
General Electric Company in the energy business. Mr Sides was
employed in various leadership capacities in both services and
capital equipment globally. Just prior to joining Boart Longyear, he
was the global commercial leader for the Aero Energy business
in Houston, Texas, USA. Other positions included leading the
commercial function in Asia Pacifi c for GE’s power generation
business and leading the wind energy P&L in Asia from Beijing.
Mr Sides has been responsible for leading sales, commercial and
services activities for GE while located in Singapore, Beijing, Tokyo,
London and the USA. In addition, he has extensive acquisition
integration experience having overseen over 20 integrations.
Mr Sides received his Bachelor of Science in Mechanical
Engineering from the Georgia Institute of Technology and earned a
Master’s of Business Administration degree from Emory University.
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, Mr Rasetti worked in the private law fi rms of
Howrey & Simon and Towey & Associates in Washington, DC, USA.
Mr Rasetti received his Bachelor of Science in Foreign Service and
Juris Doctorate from Georgetown University.
19
20
Boart Longyear
FINANCIAL REPORT
Directors’ Report
Auditor’s Independence
Declaration
Independent
Auditor’s Report
Directors’ Declaration
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes In Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
22
61
62
64
65
66
67
68
70
Annual Report 2012
21
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
DIRECTORS’ REPORT
The directors present their report together with the financial report of Boart Longyear Limited (the “Parent”) and its
controlled entities (collectively the “Company”) for the financial year ended 31 December 2012 (“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 (the “Directors”) in office during the financial year and as of the date of this report are set
out below.
• Bruce Brook
• Roger Brown
• Roy Franklin
•
Tanya Fratto
• Barbara Jeremiah
• David McLemore
• Peter St. George
Others who held office as Directors during the financial year were:
• Craig Kipp (appointed effective 28 June 2008; resigned effective 3 October 2012)
DIRECTORS’ MEETINGS
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/she was a
Director or committee member. The table does not reflect the Directors’ attendance at committee meetings in an “ex-
officio” capacity.
Board of Directors
Attended
Held
Remuneration &
Nominations
Committee
Held
Attended
Audit, Compliance
& Risk Committee
Held
Attended
Environment,
Health &
Safety Committee
Held
Attended
Bruce Brook
Roger Brown
Roy Franklin
Tanya Fratto
Barbara Jeremiah
Craig Kipp 1
David McLemore 2
Peter St. George
7
7
7
7
7
5
7
7
7
7
7
7
7
5
7
7
4
4
3
4
4
4
3
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
(1) Mr Kipp resigned from the Board effective 3 October 2012.
(2) Mr McLemore attended the 5 November 2013 Remuneration and Nominations Committee meeting in an ex
officio capacity while serving as interim Chief Executive Officer.
In addition to the regular meetings listed above, several special meetings of the Board and its committees were held
during the course of the year.
COMPANY SECRETARIES
Fabrizio Rasetti was appointed Company Secretary on 26 February 2007. He joined Boart Longyear in April 2006. Prior
to that time, he worked at SPX Corporation (New York Stock Exchange), where he held various management roles in the
legal department and for business development over a period of almost nine years. He also worked in the private law
firms of Howrey & Simon and Towey & Associates in Washington, DC. He received his BS in Foreign Service and JD
from Georgetown University.
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 eight years with
22
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
the Lynch Meyer law firm in Adelaide, South Australia. Mr Blewett received his LLB from the University of Adelaide in
1983.
PRINCIPAL ACTIVITIES
Boart Longyear is a provider of drilling services, drilling equipment and performance tooling for mining and drilling
companies globally. It conducts its business activities through two operating divisions, Global Drilling Services and
Global Products.
The Global Drilling Services division operates in over 40 countries on five continents for a diverse mining customer base
spanning a wide range of commodities, including copper, gold, nickel, zinc, uranium, and other metals and minerals.
Among other advantages, Boart Longyear is able to offer the broadest range in its market segments of drilling
technologies to suit its customers’ requirements. Those technologies include surface and underground diamond coring,
reverse circulation, rotary and sonic drilling. With its global footprint and drilling expertise, the Company’s drilling
services strategy is to support all phases of its customers’ operations, from greenfield exploration through mine
development and production to mine closure.
The Global Products division designs, manufactures and sells drilling equipment and performance tooling to customers
in over 100 countries. These products are used by the Company’s own Drilling Services division, as well as other drilling
services companies in the mineral exploration, mining, and energy industries. The Global Products division’s strategy
has been to position itself as the innovation leader in the segments in which it competes and to offer a full range of
products within those segments. The Products division also has invested in recent years in developing a stronger
aftermarket service and support business to provide drill equipment commissioning, training, maintenance programs,
spare parts and emergency parts kits.
Boart Longyear’s overall strategy is to be the “One Source” for drilling services, drilling equipment and performance
tooling for mining and drilling companies globally. The Company believes it gains a significant advantage from its
integrated structure – i.e., from the interaction of its drilling services and products divisions – both for the product
innovations it can deliver to the market as well as the efficiencies and productivity gains its drilling services operations
can enjoy from being early adopters of new technologies. The free flow of expertise, knowledge and ideas between the
Company’s divisions allows the Company to deliver a continually improving range of products and services to customers
worldwide.
The Company has made significant investments in both divisions to pursue organic growth since the recovery of its
markets from the Global Financial Crisis in 2009. In 2012 and 2011, for example, annual capital expenditures were
$282,794,000 and $220,947,000 respectively. In the Global Drilling Services division, much of the available capital has
been directed toward modernising and diversifying the types of rigs in its fleet. In addition, in 2012 and 2011 significant
investments were made to expand on a global basis its mine water services business, which previously had been based
predominantly in the United States. Boart Longyear estimates global mine water services demand be over $1 billion,
and the Company believes its dual-tube flooded reverse drilling technology and experience in the challenging ground
conditions in Nevada in the US make it uniquely well-positioned to satisfy international demand. Similarly, the Global
Products division has focused its investment on developing and sustaining a pipeline of industry-leading products for
which it can demand premium pricing. Over the past three years, this emphasis on research and development has
resulted in over 500 patent applications and the introduction of approximately two dozen significant new products.
The Company’s growth and financial performance, however, is challenged and tempered by a variety of risks inherent to
the industries and geographies it serves. Among them is the cyclical nature of minerals mining, which can be affected
significantly and quickly by factors beyond the Company’s control, such as mining company exploration budgets,
commodity prices, availability of financing for junior mining companies and global credit markets. While such cycles
often impact geographies, commodities, drilling types or mine life stage activity differently, history indicates they can be
significant and occur quickly. Additionally, sovereign, compliance and security risks in developing countries have at
times affected the Company’s financial performance by requiring the suspension or reduction of activity in key
developing markets or causing the Company not to pursue entry into new geographies. When operating in such
geographies, the Company incurs additional cost to operate compliantly and keep its people and resources safe and
maintain detailed contingency arrangements in the event of crisis situations.
Annual Report 2012
23
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Financial Overview
Revenue
NPAT
Adjusted NPAT
EBITDA
Adjusted EBITDA
Cash from operations
2012
US$ Millions
2011
US$ Millions
Movement
%
2,011.5
68.2
114.2
254.3
321.9
64.2
2,020.3
159.9
159.9
356.3
356.3
197.7
Flat
Down 58%
Down 29%
Down 29%
Down 10%
Down 61%
Earnings per share (basic)
Earnings per share (diluted)
15.0 cents
14.8 cents
35.1 cents
34.8 cents
Down 57%
Down 57%
Drilling Services
US$ Millions
Revenue
EBITDA
EBITDA Margin %
Products
2011
1,448
296
20%
1st Half
2012
2nd Half
2012
Total
2012
% Change
817
177
22%
699
1,516
113
16%
290
19%
5%
-2%
US$ Millions
2011
1st Half
2012
2nd Half
2012
Total
2012
Revenue
EBITDA
EBITDA Margin %
572
132
23%
282
68
24%
213
39
18%
495
107
22%
% Change
-13%
-19%
Global Drilling Services recorded revenue of $1,516,203,000 for the full year, up 5% on the previous year and a record
revenue performance for the division.
However, lower rig utilisation and a softer pricing environment in the second half contributed to a 2% decline in Global
Drilling Services EBITDA to $289,602,000 for the full year. This result also reflects the timing lag between declining
Global Drilling Service revenues in the second half and the take-out of costs, mainly headcount reductions, in response.
Drill rig utilisation averaged 69% for 2012, compared to 75% in 2011.
Revenue from Global Drilling Products, including drilling equipment and performance tooling, was down 13% for the full
year to $495,304,000, while EBITDA declined 19% to $107,239,000. Slowing demand in the second half of 2012 was
evident in the higher fixed-cost-per-unit for products in this period.
In an encouraging sign for near-term market conditions in Global Drilling Products, the sharp decline in the order backlog
that commenced in the second quarter of 2012 stabilised by year end, and is trending favourably.
DIVIDENDS
The Company paid aggregate dividends of US 12.0 cents per share during the financial year.
• A dividend of 5.6 US cents per share (total of $25,825,151) was paid on 13 April 2012. The dividend, which
was for the second half of 2011, was 15% franked at the Australian corporate taxation rate of 30%. None of the
unfranked portion of the dividend was conduit foreign income; and
• A dividend of 6.4 US cents per share (total of $29,514,457) was paid on 10 October 2012. The dividend, which
was for the half-year ended 30 June 2012, also was 15% franked at the Australian corporate taxation rate of
30%. None of the unfranked portion of the dividend was conduit foreign income.
On 18 February 2013, the Directors determined to pay a dividend of 1.0 US cent per share (for a total of approximately
$4,611,000) for the second half of 2012. The dividend is expected to be paid on 12 April 2013 to shareholders of record
as at 15 March 2013. The dividend will be 35% franked at the Australian corporate taxation rate of 30%. All of the
24
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
unfranked portion of the dividend will be conduit foreign income. The dividend is not included as a liability in the 31
December 2012 financial statements.
Directors expect to continue franking future dividends at 35% until all available franking credits are utilised.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The Company implemented a series of restructuring actions and cost reductions in the second half of 2012 to address
declining revenues in many of its core markets. The restructuring charges and related impairments associated with
those actions totalled approximately $67.6 million in the financial year and included significant costs associated with the
reduction of approximately 2,500 overhead and direct positions and the closure of several facilities. Approximately $70
million in annual cost reductions for 2013 were achieved by restructuring activities commenced in late 2012.
EVENTS SUBSEQUENT TO REPORTING DATE
On 15 February 2013, the Company amended its revolving bank debt facility to increase the aggregate principal amount
available under the facility to $450 million from $350 million. The increase was completed by the Company primarily to
provide additional liquidity and flexibility as insurance against current market uncertainty. A required reduction of $50
million of commitments will occur 18 months after the closing date of the amendment, bringing the total outstanding
commitments at that time to $400 million. All other material terms and conditions of the revolving credit agreement,
including covenants, maturity and pricing, remain unchanged.
On 18 February 2013, the Company announced its intent to appoint Mr Richard O’Brien as President and Chief
Executive Officer of the Company effective approximately 1 April 2013. Mr O’Brien currently serves as President and
CEO of NYSE-listed Newmont Mining Corporation, one of the world’s largest gold producers, and will join the Company
upon completion of his employment there, He brings 25 years of operational and financial experience in the natural
resources, energy and power sectors to his new role.
FUTURE DEVELOPMENTS
The Company remains focused on its core mining markets and intends to continue to invest in high-potential organic
growth opportunities in those markets in a selective and disciplined manner. Examples of such opportunities include
ongoing expansion of the Company’s mine water drilling services business as well as developing the next generation of
consumable products, rod-handling solutions for the entire range of drilling rigs the Company offers and other products
that enhance safety and productivity. In addition, the Company continues to evaluate operational enhancements to
improve operating margins, cash generation and debt reduction, such as an ongoing third-party evaluation of its
overhead cost structure and initiatives to reduce inventory and working capital.. The Company may also elect to expand
through strategic acquisitions.
Further information about likely developments in the operations of the Company in future years, expected results of
those operations, and strategies of the Company and its prospects for future financial years has been omitted from this
report because disclosure of the information would be speculative or prejudicial to the Company.
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 Company. 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 its Board and committee charters, diversity policy and
Code of Conduct, may be found on the Company’s website at www.boartlongyear.com.
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;
•
•
Annual Report 2012
25
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
•
•
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 Company’s Code of Business Conduct. The Board
policies and charter 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 and Director selection process
At the date of this report, the Company has seven non-executive Directors, including Mr McLemore, the Chair of the
Board, who has acted as the Company’s Interim Chief Executive Officer since 3 October 2012.
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 Company serves. Among other things, the Board considers the
results of its periodic Board performance assessments and Company strategy reviews to determine whether to recruit
additional Board talent. The Board recruited two new non-executive Directors in 2011 and has developed a list of
potential director candidates should an opening on the Board, or need for a particular skill, arise.
Board independence
The Company recognises that a majority of the Directors should be independent, and the Board reviews Director
independence at least annually. 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 within the last three years or 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 within the last
three years;
is a partner in, material shareholder or officer of, or otherwise has a significant association with, a material
supplier or customer of the Company;
has a material contractual relationship with the Company other than as a Director; or
has received more than A$100,000 from the Company during the past year other than as compensation for the
Director fulfilling his duties as a Director.
The Board 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 revenue 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 Directors, including the Chair of the Board and the chairs of the
three Board committees, meet the independence criteria listed above. In particular, the Board has considered whether
Mr McLemore’s temporary assumption of the chief executive officer’s duties compromises his independence or status as
a non-executive director and has determined that, save for the period of his service as Interim CEO, it does not, given
the temporary nature of the assignment. During such period, Mr. McLemore temporarily relinquished his responsibilities
as Chair to another non-executive director and attended the November 2012 and February 2013 meetings of the
Remuneration and Nominations Committee in an ex officio capacity, as permitted in the committee’s charter. Further,
although Mr McLemore received additional fees of $37,500 per month while acting as Interim CEO, he was not eligible to
participate in the Company’s short term incentive or long term incentive programs.
In addition, the Board has considered each Director's previous and current relationships with the Company's customers,
suppliers, consultants, professional advisors and substantial shareholders. The Board notes that two non-executive
Directors, Bruce Brook and Roy Franklin, each hold positions in companies with which the Company currently has
commercial relationships or had commercial relationships during 2012. Mr Brook is a non-executive director of Newmont
Mining Corporation and Mr Franklin is the non-executive Chairman of Keller Group plc. Newmont is a current customer
of the Company’s Drilling Services business. Keller Group, through its Hayward Baker geotechnical construction
engineering business, also was a customer in 2012 of the Company’s discontinued infrastructure drilling services group.
26
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
The Board has considered Mr Brook’s and Mr Franklin’s cases separately and has concluded that these relationships are
not material and do not interfere with the relevant Director's exercise of independent judgment. Nor do these
relationships affect their ability to act in the best interests of the Company’s shareholders. The relationships are arm’s
length customer-supplier relationships based on normal commercial terms. Neither Mr Brook nor Mr Franklin
participates directly or indirectly in those relationships or the terms on which the companies conduct business with Boart
Longyear, and they were not involved in any procurement or other Board decision-making regarding the companies with
which they have an association. The Board also notes the importance of having Directors with experience in the
Company's markets serving on the Board.
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, the Secretaries, and other senior management in conjunction with
the Chair and, along with supporting papers, is distributed to Directors prior to each meeting. Certain senior executives
participate in Board and committee meetings to provide 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 and in other settings. The Board endeavours to schedule at least one meeting annually at one
of the Company’s significant operating locations to meet with the location’s management and better familiarise the Board
with those operations and the Company’s risks and opportunities. In 2012, Board meetings were held in the Company’s
regional offices in Adelaide, Australia, and Santiago, Chile, which meetings provided the Board the opportunity to more
closely review those regional operations and meet directly with key regional management personnel.
Board committees
The Board is assisted by the following three permanent committees in discharging its responsibilities:
•
•
•
Audit, Compliance & Risk Committee;
Remuneration & Nominations Committee; and
Environment, Health & Safety Committee.
The committees have written charters that are reviewed annually. All non-executive Directors may attend any committee
meeting. The Chair of each committee reports on committee proceedings at the next Board meeting, and minutes of all
committee meetings are circulated to Directors in subsequent Board meeting 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 and the Company’s Code of
Conduct and policies. 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 or
its affiliates.
The Committee is currently comprised of four non-executive Directors, all of whom are independent Directors and at
least one of whom has relevant accounting qualifications or experience. The Committee consisted of the following non-
executive Directors during the financial year:
• Bruce Brook – Chair
• Roy Franklin
• Barbara Jeremiah (appointed 30 January 2012)
• Peter St. George
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;
promoting workforce diversity and monitoring the Company’s performance against established diversity
objectives; and
reviewing the composition of the Board and monitoring the performance of the Board and the Directors.
Annual Report 2012
27
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
The Committee consisted of the following non-executive Directors during the financial year:
Tanya Fratto
• Roger Brown – Chair
•
• David McLemore (Committee membership currently inactive while serving as Interim CEO)
• Peter St. George
Mr Brown became Chair of the Committee effective 1 March 2012, contemporaneously with Mr McLemore’s resignation
of the chairmanship.
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, including Australia’s work health and safety legislation, and has authority to
investigate any matter within the scope of the Committee’s charter.
Among its responsibilities, the Committee:
•
•
•
•
assists the Directors to maintain an up-to-date knowledge of work health and safety matters;
ensures that the Company has effective resources, 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 consisted of the following non-executive Directors during the financial year:
• Roy Franklin – Chair
• Bruce Brook
• Roger Brown
•
Tanya Fratto
• Barbara Jeremiah (appointed 30 January 2012)
Board and Director performance
The Board has a formal assessment process that includes performance assessments of the Board committees and
individual Directors an approximately an annual basis. 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 Chair of the Board or committee, as applicable, and discussed with
each Director individually.
The most recent Board performance evaluation was completed in the first half of 2012 with the assistance of an external
advisor, who prepared a questionnaire for the Directors and certain members of senior management and compiled and
reported the results in a report to the Chair and the Directors. The Chair then reviewed the results and
recommendations with the Directors and senior management.
In addition, the Board committee chairs conducted performance assessments of their respective committees and
members. The committee assessments commenced in were completed in April and May 2012.
Director induction process
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 Chair 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;
28
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
•
•
keep confidential, and not use for the benefit of any person or party other than the Company, any confidential
information of the Company; 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 Chair, consult with professional
advisors.
The Company’s induction process also includes meetings with senior management, including the leaders of the
Company’s business units and administrative functions.
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 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 and other senior managers of the Company participate in an annual short-term
incentive plan that is based on the achievement of the annual corporate operating margin, safety and revenue growth
performance objectives as well as certain individual strategic initiatives approved by the Board. Individuals are advised
annually of their target bonuses, which in 2012 ranged from 50% to an additional 100% of base pay for senior
executives. Cerain other corporate executives and managers also participate in the corporate bonus plan at lower target
levels.
Exceptional individual and corporate performance can increase actual bonuses paid under the Corporate Bonus Plan to
up to 150% of a participant’s target bonus amount. The Company’s executive performance assessment process for 2012
and goal-setting process for 2013 commenced in January 2013 and will be completed in March 2013.
Risk Management
The Board recognises that disciplined risk management and sound 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;
certifications from management and process owners throughout the Company regarding the design and
operation of risk management systems, internal controls and compliance; and
a formal risk management system, overseen by the Director of Risk Management, based on a written risk
management policy, regularly regional and corporate risk identification and mitigation reviews and the findings
of Company audits and investigations.
The Board reviews on a semi-annual basis the risk registers prepared by regional and corporate management. It also 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 health safety and operational risks generally and the Audit,
Compliance & Risk Committee with respect to financial and compliance 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 and confirm the implementation of corrective actions to mitigate
identified risks and deficiencies. The Audit, Compliance & Risk Committee also monitors compliance programs
managed by the Company’s legal function or outside counsel and reviews the significant findings of any compliance
reviews or investigations.
Integrity of financial reporting
In accordance with the ASX Guidelines, the Interim 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 2012:
Annual Report 2012
29
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
(i)
(ii)
the financial statements 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, and notes thereto, present a true and fair view, in all material respects, of the
financial position and performance of the Company 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 beliefs after having made appropriate enquiries, with regard to risk
management and internal control systems of the Company for the year ended 31 December 2012:
(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 2012 that would indicate any
material change to the statements made in 2(i) and 2(ii) above.
These statements are supported by certifications made to the Interim Chief Executive Officer and Chief Financial Officer
by the regional and financial managers of each of the Company’s divisions. 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.
In addition, the Company maintains, and actively promotes the use of, several systems for employees and other persons
to report potential violations of the Code of Conduct and other policies. Reported concerns are investigated by the
Company’s legal department or external legal counsel and reported to the Board.
Workforce diversity
In 2011 the Board of Directors established a workforce diversity policy for the Company. The complete policy can be
found under the governance section on the Company’s website (www.boartlongyear.com).
The policy sets out the Company’s commitment to creating a diverse workforce that is representative of the diverse
communities in which the Company operates and a work environment where people are free to achieve their best,
without encountering prejudice regarding their gender, ethnicity, age, disability, sexual orientation, religion or cultural
differences.
30
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
The Remuneration and Nominations Committee of the Board of Directors has responsibility for oversight of the policy.
The Committee also reviews the policy at least annually and oversees its implementation, including progress made
toward measurable objectives for achieving desired diversity representation and the continued relevance of those
objectives.
Diversity objectives achieved in 2012 include:
• Establishment of a system to measure and report global gender representation at more localized levels by
geography, business unit or function;
• An increase in female representation among senior managers from 5% in 2010 to 10% in 2011 to 13% in 2012;
and
• A specific review of women in senior management positions as part of the Company’s formal leadership
assessment, development and succession management process.
The levels of gender diversity as at 31 December 2012 are:
Gender Diversity
Total Employees
Total Employees (excl. Drillers and Driller Helpers)
Senior Managers
Board of Directors
Environmental performance
Male
92%
83%
87%
71%
Female
8%
17%
13%
29%
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 and Safety Committee, monitors environmental performance against relevant legislation and
Company objectives and monitors remedial action, when required.
In 2011, the Board approved a corporate environmental sustainability initiative that outlines specific waste and emission
reduction programs to be developed and implemented by the Company’s operations over three years. Additional
information about the programme, including some of the early results it has yielded, is available on the Company’s
website at www.boartlongyear.com.
The Directors are not aware of any business unit operating in breach of environmental regulations during the financial
year, or as at, the date of this report, under any applicable law of the Commonwealth or of a State or Territory. The
Company’s Environmental, Health and Safety Policy also can be reviewed on the Company’s website.
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
potentially price-sensitive developments and changes that are likely to materially affect the Company’s 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. In addition,
the Company endeavours to provide earnings guidance to shareholders on a regular basis throughout the 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. The Company’s Charitable Giving Policy formally establishes the
framework and requirements for all charitable giving by, and on behalf of, all Company operations and units. The policy
aims to align Company charitable giving with the charitable interests of employees and regional operations by soliciting
proposals directly from them and targeting projects and causes in which they participate actively. The Company
especially targets projects that have clear objectives and outcomes promoting the following:
•
education and opportunities for children – programs and opportunities that assist young people to develop
marketable skills and competencies, particularly in the areas of engineering, science and technology; and
Annual Report 2012
31
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
•
health and preventive care – programs that improve the health and safety of employees, their families and their
communities by improving access to critical resources and addressing endemic illnesses, including providing
access to clean water sources and supporting the development of malaria vaccinations and treatments.
The Company’s charitable giving is coordinated by the Company’s regional leadership teams and overseen by its
Executive Committee.
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.
Bruce Brook
Roger Brown
Roy Franklin
Tanya Fratto
Barbara Jeremiah
David McLemore
Peter St. George
Fully paid
ordinary shares
134,423
30,000
45,000
20,000
50,000
155,861
157,450
Rights and
options
-
-
-
-
-
-
-
Total
134,423
30,000
45,000
20,000
50,000
155,861
157,450
In August 2011, the Board adopted a Non-Executive Director shareholding guideline, which recommends that non-
executive Directors acquire and hold at least 30,000 Company shares within five years of their appointment. The target
share amount was established to be roughly equivalent to one year’s directors’ fees and was based on the value of the
Company shares at the time. The target shareholding amount may be adjusted from time-to-time to track movements in
the Company’s share price.
GRANTS OF SHARES, RIGHTS OVER SHARES AND OPTIONS GRANTED TO DIRECTORS AND EXECUTIVES
No shares or rights over shares of the Company that have been granted to non-executive Directors since the Company’s
initial public offering in April 2007. Share and rights over shares granted to executives of the Company are included in
the Remuneration Report. As detailed more fully in the Remuneration Report, the Company has at various times in 2008,
2009 and 2010 granted options to the former Chief Executive Officer, Mr Kipp, and other members of senior
management. 250,000 options granted to Mr Kipp in April 2008 upon his nomination as the Company’s chief executive
vested in accordance with their terms as a result of his termination in October 2012. A further 345,000 options granted
to Mr Kipp and nine other senior executives in June 2009 vested in 2012. None of those vested options was exercised
during the financial year by the option holder, and no shares or interests have been issued during the financial year as a
result of exercise of options.
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.
32
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
REMUNERATION REPORT
INTRODUCTION
This remuneration report sets out Boart Longyear’s remuneration policies and practices, the rationale underlying them
and their outcomes.
The Company’s policies have been developed within a framework that seeks to fairly reconcile and balance:
-
-
-
the overall objective of attracting, retaining, aligning and motivating management in order to achieve the highest
levels of performance from them for the benefit of all shareholders;
high standards of fairness, transparency and sound corporate governance principles;
the particular business environment in which Boart Longyear operates, recognising that:
o
o
o
the Company’s business is global and, consequently, the senior executive team is based primarily
outside of Australia and is recruited internationally;
the markets in which the Company operates can have strong cyclical characteristics which place equal
performance pressures on management in an upswing as in down cycles; and
importantly, the Company is incorporated and listed in Australia and must comply with local corporate
regulatory requirements and practices.
As a result of changes to the Company’s remuneration practices and policies in 2010, combined with the revised
structure and improved transparency of the remuneration report, shareholders approved the 2010 and 2011
remuneration reports with greater than 90% in favour. This 2012 remuneration report maintains the improvements the
Company made to the report over the past two years.
Some of the specific actions and events that impacted 2012 outcomes or are otherwise discussed within this report
include:
•
•
selection of a new independent compensation consultant to the Committee (see section 2.1);
development of a Protocol to govern the relationship with the independent compensation consultant to comply
with obligations under Part 2D.8 of the Corporations Act; (see section 2.1);
• modification of the Long Term Incentive Plan (“LTIP”) such that, for Performance Rights granted beginning
2013, the ROE performance metric will now be calculated on a linear basis rather than at amounts tied to a
range of performance achievement. In addition, the three-year average ROE performance required to achieve
the target pay-out was increased to 9.5% (see below and section 3.4);
•
•
•
•
•
the Board’s determination to evaluate the design and implementation of an executive stock ownership guideline
during 2013;
appointment of Roger Brown as the new Remuneration Committee Chair to separate the Committee and Board
chairmanships;
payment or accrual of contractual termination benefits to the former Chief Executive Officer;
payment of additional director fees to the Chair for his service as Interim CEO; and
decreased 2012 STI plan outcomes compared to 2011 as a result of difficult business conditions affecting the
Company’s markets.
These items are discussed further below or elsewhere in this Remuneration Report.
Change of LTI Plan ROE performance payout to a linear calculation
Effective with grants made after 1 January 2013, the Board has modified the three-year average ROE payout matrix for
the LTI Plan from payouts based on achieving certain ranges of average ROE to a straight linear calculation. The change
in methodology for calculating achievement of plan targets better aligns management actions with shareholder interests
by mitigating the potential for risk-taking that may be inconsistent with long-term value creation in order to get to the “next
level” of payout.
Annual Report 2012
33
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Chief Executive Officer transition
In October 2012, Craig Kipp’s employment with the Company was terminated and Chair David McLemore was appointed
Interim Chief Executive Officer. Mr McLemore has been involved with Boart Longyear since 2005, has served on its
Board since 2007 and been the Company’s Chair since 2010. During his tenure he has helped direct and guide the
Company through a number of significant transitions, including private equity ownership and public listing. In light of the
substantial additional demands of serving as interim CEO, the Board approved an additional monthly fee of $37,500 for
Mr McLemore to be paid for the duration of his Interim CEO duties which is not to exceed six months. Mr McLemore will
not be eligible to participate in any incentive programs as Interim CEO. Further details are outlined in section 6.4 of this
report.
Consistent with Mr Kipp’s employment agreement and shareholder approval at the Company’s 2011 Annual General
Meeting, Mr. Kipp is entitled to the following termination benefits:
•
•
•
•
•
•
severance payments equal to twelve months of his base salary;
pro-rata payment of his 2012 annual bonus under the Company’s Corporate Bonus Plan through his termination
date, subject to achievement of specified corporate and personal goals;
a waiver of medical premiums for twelve months;
accelerated vesting on a pro-rata basis of retention rights granted under the LTI Plan;
eligibility for pro-rata performance rights granted under the LTI Plan to vest in accordance with established
performance conditions at the normal testing date; and
accelerated vesting of all options granted under the 2008 Option Plan.
The expense of these termination benefits and equity awards has been brought forward as required under applicable
accounting standards and fully expensed in the 2012 financial statements. The extent to which Mr Kipp receives any
value from unvested performance rights for which he remains eligible depends upon the Company’s achievement of
ROE performance metrics during the relevant performance period for those awards.
In exchange for these termination benefits, Mr Kipp is subject to a non-competition and non-solicitation agreement for
twelve months from the date of his termination. The Company may elect to extend these restrictive covenants for up to
an additional twelve months by continuing Mr Kipp’s monthly severance payments for the relevant extension period.
Further, should Mr Kipp relocate within 12 months from the date of his termination the Company may still be required to
reimburse him for moving expenses not to exceed $100,000. No tax gross-up payment will be made in association with
the termination benefits Mr Kipp will receive.
2012 financial performance impact on STI outcome
After very strong first half financial performance in line with expectations, the Company experienced a marked
contraction in its core markets during the second half of the year. The Company was unable to reduce its cost structure
as quickly as revenues declined due to statutory employee notice periods and other factors, and operating margin fell
from 13% in 2011 to 10.8% in 2012. Further, the Company achieved no year-over-year revenue growth during 2012, and
STI awarded fell from 97% (on average) in 2011 to 71.9% in 2012.
The Company had outstanding safety performance in 2012. Achievement of the STI safety targets for 2012 was at
maximum levels, as the Company recorded significant year-over-year improvements in its Total Case Incident Rate and
Lost Time Incident Rate of 26% and 23%.
(cid:1)
The Company understands the desire for greater transparency of specific targets that are represented in the strategic
objectives portion of the STI plan. Given the Company’s size and position in the industry, it believes disclosing certain
detailed financial or strategic performance targets would put it at a competitive disadvantage due to commercial
sensitivities. However, in 2012 the Board did establish several specific strategic and operational objectives with the CEO
that included metrics for new product introductions, supply chain process enhancements, market expansions in both
geography and drilling types, and communications with employees, customers and shareholders. These objectives
generally also pertained to other senior executives as they relate to their business, function or region. The Board was
satisfied that the progress made on the majority of these strategic initiatives for the CEO was, on average, slightly under
the targeted performance established for the year.
34
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Report Structure
The Remuneration Report (the “Report”) is presented in six sections, as follows.
1
2
3
4
5
6
Section
2012
remuneration
overview
Description of content
• Outlines the Company’s remuneration practices and the key influences on the
Company’s remuneration arrangements during the year ended 31 December 2012.
• Explains how executive remuneration is structured to support the Company’s strategic
objectives.
• Sets out the Directors and senior executives who are covered by this Report.
• Details the actual remuneration earned by the CEO and other senior executives during
the year ended 31 December 2012.
Remuneration
framework and
strategy
• Sets out the Company’s remuneration governance framework and explains how the
Board and Remuneration & Nominations Committee make remuneration decisions,
including the use of external remuneration consultants.
• Outlines the Company’s remuneration strategy.
Components
of executive
remuneration
• Provides a breakdown of the various components of executive remuneration.
• Details the components of executive remuneration that are fixed and therefore not “at-
risk”.
Performance
and risk
alignment
Executive
remuneration
in detail
• Outlines the key features of the short-term incentive plan that applies to the Company’s
executives.
• Outlines the key features of the long-term incentive plan and option plan that apply to the
Company’s executives.
• Explains how executive remuneration is aligned with performance and outlines short-
term and long-term performance indicators and outcomes.
• Explains how executive remuneration is structured to encourage behaviour that supports
long-term financial soundness and the Company’s risk management framework.
• Sets out the total remuneration provided to executives (calculated pursuant to the
accounting standards) during the years ended 31 December 2012 and 2011.
• Provides details of the Rights granted to executives during the year ended 31 December
2012 under the long-term incentive plan.
• Summarises the key terms of executive service contracts (including termination
entitlements).
Non-executive
Director
arrangements
• Explains the non-executive Directors’ remuneration structure including the basis on
which non-executive Director remuneration is set and the components.
• Outlines key features of the non-executive Director Share Acquisition Plan.
• Sets out the non-executive Directors’ remuneration during the years ended 31 December
2012 and 2011.
Annual Report 2012
35
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
1. 2012 REMUNERATION OVERVIEW
This section provides:
•
•
•
an overview of the Company’s executive remuneration strategy and linkages between the strategy and the design
of the components of executive remuneration;
details of the Directors and senior executives covered by this Report; and
details of the actual remuneration outcomes for senior executives.
At the Company’s annual general meeting on 11 May 2010, shareholders approved a 10 for 1 share consolidation.
Trading in the consolidated shares commenced 13 May 2010. Where relevant, amounts have been restated in this
Report using consolidated share amounts.
1.1. EXECUTIVE REMUNERATION STRATEGY
The diagram below illustrates the significant objectives of the Company’s executive remuneration strategy and how the
components of overall remuneration have been designed to support these objectives:
36
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
1.2. DIRECTORS AND SENIOR EXECUTIVES
This Report sets out the remuneration arrangements in place for the key management personnel (“KMP”) of the
Company for the purposes of the Corporations Act and the Accounting Standards, being those persons who have
authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly,
including the non-executive Directors. The KMP include the six highest remunerated executives of the Company for the
year ended 31 December 2012 and are listed in Table 1.2 below:
Table 1.2: Directors and senior executives who were KMP during the year ended 31 December 2012
Non-executive
Directors
David McLemore 1
Bruce Brook
Roger Brown
Roy Franklin
Tanya Fratto
Barbara Jeremiah
Peter St. George
Position
Chairman, Non-executive Director and Interim Chief Executive Officer
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Senior executives
Position
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch 2
Alan Sides
Chief Executive Officer, Executive Director (terminated employment effective 5 October 2012)
Chief Financial Officer
Senior Vice President, General Counsel and Secretary
Senior Vice President, Human Resources
Vice President, Global Drilling Services
Vice President, Global Products
(1) Mr McLemore has served as Interim CEO since 5 October 2012, during which time his responsibilities as Chair
have been assumed by Ms. Jeremiah and he has served as an executive Director.
(2) Mr Birch’s employment terminated on 31 January 2013.
The remuneration policy and programs set out in this Report apply to all KMP and to other members of the Company’s
senior management who are not KMP.
1.3. REMUNERATION OUTCOMES
Actual remuneration
Details of CEO and other senior executive remuneration for the year ended 31 December 2012, prepared in accordance
with statutory obligations and accounting standards, are contained in Table 5.1 of this Report. The remuneration
calculations in Table 5.1 are based on the Accounting Standards principle of “accrual accounting” and, consequently do
not necessarily reflect the amount of compensation an executive actually realised in a particular year. To supplement the
required disclosure we have included the additional table 1.3 below which shows the actual compensation realised by
the senior executives’ in the years shown. It illustrates how the Company’s remuneration strategy for senior executives
translates into practice. It is important to note that the STI and LTI amounts are amounts earned on performance during
the prior plan year(s) and vested and/or paid in the current year. 2011 was a year of record financial performance for the
Company in revenues and earnings.
Table 1.3: Actual remuneration received by senior executives during the year ended 31 December 2012
Base salary
US$
STI (cash)1
US$
LTI (equity)2
US$
LTI (cash)2
US$
Other3
US$
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
769,231
450,154
412,308
322,269
465,500
350,462
950,000
305,844
209,200
157,500
215,898
161,330
977,829
347,344
256,924
254,473
258,163
19,752
746,300
275,000
225,000
225,000
225,000
-
229,190
40,480
39,447
40,120
36,956
35,800
Total
US$
3,672,550
1,418,822
1,142,879
999,362
1,201,517
567,344
Annual Report 2012
37
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
(1) Represents the cash paid in respect of the executive’s STI award earned for the prior year’s performance. For
further details of the STI Plan, see section 3.3 of this Report.
(2) Represents the value of share rights and cash rights vested during the year (based on the A$4.13 market value
of shares at the vesting date) and dividends received on share rights granted prior to 1 January 2012. Share
rights granted during the year ended 31 December 2012, and share rights and cash rights granted under the
Company’s LTI Plan and options granted under the Company’s Option Plans during other grant years that are
still in progress do not appear in this table, as they do not vest until the conclusion of the performance period
and/or continued service requirement. For further details of the LTI Plan and Option Plans, see section 3.4 of
this Report.
(3) Represents benefits such as special one-time bonuses (if any), US 401(k) retirement plan Company matching
and/or profit sharing contributions, relocation benefits, car allowance, tax preparation service reimbursement,
and severance, if applicable. For Mr Kipp, this amount reflects severance payments received in 2012 from the
date of his termination on 3 October 2012 and payment of his accrued and unused vacation in 2012
2. REMUNERATION FRAMEWORK AND STRATEGY
This section outlines the processes, principles and strategy that underpin the remuneration arrangements for senior
executives.
2.1. HOW REMUNERATION DECISIONS ARE MADE
Board responsibility
The Board is responsible for the Company’s remuneration arrangements and ensuring that they are equitable and
aligned with the long-term interests of the Company and its shareholders. In performing this function and making
decisions about executive remuneration, the Board is fully informed and acts independently of management. To assist in
making decisions relating to remuneration, the Board has established a Remuneration & Nominations Committee.
Remuneration & Nominations Committee
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 strategies 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 Remuneration 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 CEO and his direct reports and reviewing performance against those
objectives;
overseeing strategies 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 charter of the Remuneration Committee is set out in full on the Company’s website at www.boartlongyear.com.
The CEO, the Senior Vice President for Human Resources and other members of senior management attend meetings
of the Remuneration Committee, as appropriate, to provide information necessary for the Remuneration Committee to
discharge its duties. Individual executives do not attend or participate in discussions where recommendations regarding
their own circumstances are determined.
Use of remuneration consultants
Where appropriate, the Board seeks and considers advice from independent remuneration consultants. Remuneration
consultants are engaged by, and report directly to, the Remuneration Committee and support the Committee in
assessing market practice and movements to ensure that base salary and targeted short-term and long-term
compensation are in line with comparable roles. When remuneration consultants are engaged, the Committee
establishes with the consultants the appropriate level of independence from the Company’s management that is required
depending upon the circumstances of the assignment or advice being sought. Thus the Committee may determine that
complete independence from management is required or that the consultants may be directed to work with Company
management to obtain relevant information or input in order to formulate advice or recommendations to the Committee.
In 2012, the Committee changed its remuneration consultant in favour of a consultant with which the Company has no
other business relationships. Although the Committee was very comfortable with the independence of the advice
historically received from Mercer Consulting, Mercer’s performance of other important human resources related services
38
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
for the Company led the Committee to strengthen its remuneration governance and select a new independent executive
remuneration consultant. The Committee researched and interviewed several potential consultants and ultimately
selected Frederic W. Cook & Co., Inc. In making its selection, the Committee considered that Frederic W. Cook consults
on executive compensation as its sole business and therefore is independent of other potential business considerations
that could possibly compromise the consultant’s objectivity; has been successfully performing this work since 1973; and
has extensive experience with clients within the relevant mining and natural resources industries.
The Committee also established a formal Protocol that summarises the policy and procedures that the Company has
adopted to govern the relationship between the independent remuneration consultant, the Committee and management.
This Protocol was developed in compliance with the obligations under Part 2D.8 of the Corporations Act and ensures
that the remuneration consultant remains free from any undue influence by any member of the KMP to whom the
recommendations relate. All consultant remuneration recommendations are provided directly to the Committee and are
accompanied by an undue influence declaration from the consultant.
The amount paid to remuneration consultants during 2012 was $46,361.
The table below sets out details of the remuneration consultants engaged and a summary of the services provided
during the year ended 31 December 2012.
Table 2.1: Remuneration consultant arrangements
Remuneration consultant
Frederic W. Cook & Co., Inc.
Nature of services provided
The Committee engaged Frederic W. Cook & Co., Inc. to review the
competitiveness of Boart Longyear’s executive remuneration program
with a focus on competitive pay levels. As part of this analysis a peer
group was selected to provide a competitive frame of reference from
which to assess the market compensation levels for the CEO and
other executives named in the Remuneration Report.
Freehills
Provided regular independent advice and counsel on various legal
and governance standards related to executive remuneration.
Ashurst (formerly Blake Dawson)
Provided regular independent advice and counsel on various legal
and governance standards related to executive remuneration.
2.2. REMUNERATION POLICY AND STRATEGY
The Company’s remuneration programme has been designed to ensure that the structure, mix of fixed and “at-risk”
remuneration and quantum of senior executive remuneration all meet the Company’s specific business needs and
objectives and are consistent with good market practice.
Accordingly, the Company’s senior executive remuneration programme has been structured so that it:
•
•
•
•
is reasonable;
provides a competitive compensation program to retain, attract, motivate and reward key employees;
achieves clear alignment between total remuneration and delivered business and personal performance over the
short and long term; and
is an appropriately balanced mix of fixed and “at-risk” remuneration.
The Company and the Remuneration Committee regularly review all elements of the remuneration programme to ensure
that it remains appropriate to the business strategy, is competitive and is consistent with contemporary market practice.
The diagram below illustrates three primary components of the executives’ total compensation opportunity and how the
components are structured to achieve the remuneration strategy and align with shareholder interests:
Annual Report 2012
39
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Fixed Remuneration
Short-term Incentive
(Corporate Bonus Plan)
Long-term Incentive
• Provides a predictable base level
of compensation commensurate
with the executive’s scope of
responsibilities, leadership skills,
values, performance and
contribution to the Company.
• Generally targeted to be near the
median of the competitive talent
market using external
benchmarking data. Since the
majority of the Company’s
executives (and all of the KMP) are
located in the US, the competitive
talent market is determined to be
the US market.
• Variability around the median is
based on the experience,
performance, skills, position,
business unit size and/or
complexity and unique market
considerations where necessary.
• This component of compensation is
• This component of compensation is
“at-risk” and earned only if
challenging performance metrics
are achieved.
• Key performance metrics include
operating margin, safety
performance, revenue growth and
individual strategic goals.
• The plan is designed to weight
performance on operating margins,
safety and revenue growth to
overall Company performance in
order to promote collaboration and
to align with shareholder interests.
• Individual strategic goals can
include financial and/or strategic
targets for a business unit or
function. Examples can include
business unit growth, cost control
goals, cash flow generation,
geographic expansion, productivity
programs, etc.
“at-risk” and earned only if
challenging performance metrics
are achieved and/or continued
service requirements are met over
a three-year performance period.
• The Board has determined to use
three-year average return on equity
(“ROE”) as the key measure for
performance-based long-term
incentive awards.
• The three-year average ROE
targets include a minimum
threshold performance, below
which no value is achieved. The
range of performance payouts was
established based on an historical
return analysis of the Company as
well as against stated analyst and
shareholder expectations.
• ROE provides a strong link to
shareholders as it is a measure of
the profitability of the equity
employed in the business. It also
provides a basis to evaluate the
Company’s performance relative to
other companies and can provide a
direct comparison with alternative
investments available to
shareholders.
3. COMPONENTS OF EXECUTIVE REMUNERATION
3.1. REMUNERATION MIX
Total remuneration for the CEO and senior executives is made up of fixed remuneration (consisting primarily of base
salary and superannuation contributions (or the foreign equivalent such as the United States’ 401(k)) payments) and
variable “at-risk” remuneration. The variable remuneration has two “at-risk” components:
• STI – being an annual bonus granted under the Company’s Corporate Bonus Plan; and
•
LTI – being equity or cash grants tied to vesting conditions, such as continued employment and performance
hurdles.
The relevant proportions of fixed to “at-risk” components for senior executive remuneration during 2012 were:
Table 3.1: Remuneration mix
Fixed Remuneration
"At-risk" remuneration
STI2
LTI3
CEO
KMPs (Excl. CEO)1
17%
40% - 44%
21%
19% - 26%
62%
33% - 39%
(1) Percentages vary between individuals. This is a range for the group.
(2) Assuming performance metrics are achieved such that 100% of target bonus is earned.
(3) Represents fair value at date of grant, assuming 100% performance and vesting requirements are achieved.
40
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
3.2. FIXED REMUNERATION
The fixed component of executive remuneration consists primarily of base salary. Senior executives also receive other
benefits, such as a vehicle allowance. In addition, the Company contributes to retirement programs, such as Australia’s
compulsory superannuation scheme or the United States’ 401(k) plans.
Base salaries are reviewed annually by the Remuneration Committee (or, for the CEO, by the Board) and may be
adjusted as appropriate to maintain market competitiveness and/or based on merit in accordance with the CEO’s
recommendation (for senior executives other than the CEO).
3.3. SHORT-TERM INCENTIVE
Table 3.3: Summary of STI program
What is the STI
program?
The Corporate Bonus Plan (“CBP”) provides certain employees with the potential to receive an
annual bonus if they satisfy specific annual objectives and targets that are pre-determined by the
Board.
Who participates in
the STI program?
Why does the
Board consider the
STI program an
appropriate
incentive?
Potential incentives available to be earned under the CBP range between 10% and 200% of an
employee’s base salary depending on the employee’s role and actual performance achieved.
The actual bonus that an employee will receive under the CBP (if any) will vary depending on the
Company’s and the individual’s performance against the relevant objectives and targets, as
detailed more fully below.
Approximately 200 senior employees participated in the CBP in 2012.
The CBP and the performance conditions set under the CBP have been designed to:
•
•
•
focus eligible employees on maximising Company performance in key financial, safety
and operational targets;
align individual efforts with Company and shareholder interests; and
reward for superior individual and Company performance.
By putting a significant proportion of senior executive remuneration “at risk” under the CBP
against challenging targets, the CBP aligns executive interests with the Company’s financial and
safety performance and with the operational and/or functional objectives of their relevant
business unit or function.
What are the
performance
conditions?
There are four key performance components to the CBP. Each component has a threshold
performance below which no bonus is earned for that component; a target level of performance
where 100% of the bonus can be earned; and a maximum stretch level of performance whereby
superior results can earn up to 150% of that component of the bonus.
The four performance components and their relative weightings are:
(1) Operating margin - 60% of an employee’s CBP opportunity is linked to the Company’s
overall financial operating margin performance. For purposes of calculating operating
margin, the operating income component is adjusted to eliminate the impact of items
such as restructuring costs, amortization of intangibles, gain/loss on disposal of assets,
foreign exchange transactions and other immaterial non-operating related expenses.
(2) Strategic objectives - 30% of an employee’s CBP opportunity is dependent upon
performance against strategic objectives relevant to the employee’s business unit or
functional responsibility. Examples of strategic objectives may include business unit or
functional cost targets, geographic or targeted market segment growth, new product
introductions, specific project or initiative progress, etc.
(3) Safety - 10% of an employee’s CBP opportunity is dependent upon the Company’s
overall safety performance.
(4) Revenue growth - a multiplier based on year-over-year increases in revenue is applied
to any amounts earned for meeting or exceeding the Operating Margin, Strategic
Annual Report 2012
41
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Objectives and Safety performance goals, thereby capturing overall business growth as
a key objective.
The Company’s annual financial target for the purposes of the CBP is set by the Remuneration
Committee and in 2012 both threshold and stretch targets were set to further incentivise
executives. The Remuneration Committee’s philosophy in setting financial targets is to establish
threshold targets that represent the desired minimum outcome for each goal (below which no
bonus is payable) and stretch targets that can only be met by the achievement of excellent
outcomes for each goal.
For 2012, the Remuneration Committee specifically approved the following performance payout
matrices for corporate Operating Margin and Revenue Multipliers:
Op. margin
performance
20.0%
17.5%
15.0%
12.5%
10.0%
7.5%
5.0%
Payout (% of
target for
financial
component)
150%
120%
90%
70%
50%
40%
30%
Revenue
growth
50%
40%
30%
20%
10%
0%
Multiplier
1.33x
1.27x
1.20x
1.13x
1.07x
1.00x
While these metrics are specific to 2012 and will be reviewed annually, they have been
established with the intent of remaining consistent through the business cycle and are
unchanged from 2011. The Remuneration Committee also reviews and approves the non-
financial targets for senior executives (including the CEO).
The Board maintains total discretion to reduce or eliminate a bonus entirely for any reason,
including as a means of a clawback of a prior year’s bonus should it be determined that a
material misstatement of financial performance had occurred. Certain conditions may apply to an
employee’s CBP opportunity that reduces (but not increases) the bonus that they receive under
the CBP. For example, if an employee fails to adhere to corporate leadership values, such as
legal compliance, this may reduce total bonus payable to them under the CBP by up to 100%.
How are the
performance
conditions
measured?
Performance is assessed against the relevant targets annually. The final determination of the
Company’s financial performance is determined after reviewing the Company’s audited financial
results for the relevant period. Financial targets are assessed quantitatively against the pre-
determined targets. Where possible, non-financial targets are also assessed quantitatively and
otherwise they are assessed by periodic qualitative performance appraisal.
Sample calculation
Following is an example of how a bonus would be calculated assuming the following:
• Employee earns $150,000 with a 40% target bonus amount
• Corporate Operating Margin of 12.5%
• Safety and strategic objectives achievement each at target performance
• Revenue growth of 10%
Corporate Operating Margin of 12.5% = 70% component payout (per table above)
Safety performance at target = 100% component payout
Strategic Objectives at target = 100% component payout
Revenue Growth of 10% = Revenue Multiplier of 1.07 (per table above)
Calculation:
Step 1: Determine component subtotal
+
+
=
Operating Margin = (70% x 60% weighting)
Safety performance = (100% x 10% weighting)
Strategic objectives = (100% x 30% weighting)
Subtotal achievement
= 42%
= 10%
= 30%
= 82%
42
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Step 2: Multiply Subtotal by achieved Revenue Multiplier to obtain Total Bonus Percentage
82% x 1.07 = 88%
Step 3: Calculate Bonus
$150,000 x 40% Target Bonus x 88% Bonus achievement = $52,800 Bonus
All bonuses awarded under the CBP are delivered as a cash bonus.
Bonuses under the CBP during the year ended 31 December 2012 are set out in Table 4.1.3 in
section 4.1 of this Report. The bonuses will be paid in or after March 2013 after Board approval.
In what form is the
STI delivered?
What STI awards
did senior
executives earn in
2012?
3.4. LONG-TERM INCENTIVES
Long-term Incentive Plan (“LTIP”)
Table 3.4: Summary of the LTIP
What is the
purpose of the
LTIP?
The Company established the LTIP to:
• align senior executive reward with shareholder value;
• assist in retaining key executives;
• encourage superior performance on a sustained basis; and
• provide executives with an opportunity to share in the growth and value of the Company
by tying the LTI component of senior executive remuneration to the achievement of
performance conditions and time-based service conditions.
Who participates in
the LTIP?
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, skills and contributions to the Company. The target amounts are generally based on
market averages for comparable roles at similarly-sized companies. The Company made grants
to approximately 105 participants during the year ended 31 December 2012.
What proportion of
total remuneration
does the LTIP
program
represent?
How is reward
delivered under the
LTIP?
Senior executives are offered grants that represent approximately 31% - 34% (49% for the CEO)
of their total remuneration (on an annualised basis). However, participating senior executives
derive no actual value from their LTI grants under the LTIP unless the performance hurdles
and/or service conditions are satisfied.
The incentive provided under the LTIP is a grant of rights (“Rights”). Rights can be granted in the
form of shares (“Share Rights”), cash (“Cash Rights”) or a combination of the two. A Share Right
is an entitlement to receive a fully-paid ordinary share in the Company and a Cash Right is an
entitlement to receive a cash bonus up to a set maximum. Although the Board may elect to grant
Cash Rights for any reason, they have typically been used to supplement Share Rights in order
to appropriately limit share dilution when the stock price was low at the time of the award. The
combination of both Share and Cash Rights utilised a more appropriate quantum of Share Rights
to deliver the desired grant date award values.
Rights are granted on terms and conditions determined by the Board, including vesting
conditions linked to service and performance over a specified period (usually three years).
Do participants pay
for the Share
Rights?
Rights are offered at no cost to the senior executives.
Annual Report 2012
43
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
What rights are
attached to the
Share Rights?
Share Rights do not carry voting rights; however, shares allocated upon vesting of Share Rights
will carry the same rights as other ordinary shares.
The Company may acquire shares underlying the Share Rights that it has granted under the
LTIP, 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 for Share Rights granted
beginning 2012, all dividends paid on unvested Share Rights will be held in trust and payable
when the participant satisfies the vesting conditions. For Share Rights granted prior to 2012,
even though the Share Rights have not yet vested, the participant will receive dividends
attributable to the shares that underlie their Share Rights from the time those underlying shares
are acquired by the trustee.
Senior executives are not entitled to trade or hedge their unvested Rights.
What are the
vesting
conditions?
For Rights granted during the years ending since 31 December 2010, the vesting conditions
were as follows:
Tranche
Percentage of grant
Vesting condition
Partial vesting
Performance
Share Rights or
Performance
Cash Rights
100% for the CEO
50% for executives
other than the CEO
Achievement of average
ROE targets over a
three-year period set by
the Board. The targets
include a threshold
average ROE target and
a stretch average ROE
target for the three-year
performance period.
plus
Continuation of
employment during the
three-year performance
period.
Vesting occurs on a pro-
rata basis if the
minimum three-year
average ROE threshold
is surpassed.
At the minimum three-
year average ROE
threshold, 50% of
Performance Share
and/or Performance
Cash Rights will vest.
Full vesting occurs only
if the Company’s three-
year average ROE
meets or exceeds the
stretch target for the
performance period.
Retention Share
Rights or
Retention Cash
Rights
0% for the CEO
50% for executives
other than the CEO
Continuation of
employment during the
three-year continued
service period.
No
44
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
How is the Return
on Equity (“ROE”)
hurdle measured?
Vesting of the Performance Share Rights or Performance Cash Rights that were granted during
the years ending since 31 December 2010 will be determined by the Company’s performance
against average ROE targets for the three-year performance period. ROE is defined as annual
net profit after tax (“NPAT”) attributable to equity shareholders divided by average total equity.
The following table shows the three-year average ROE threshold, target and maximum
performance requirements:
3-year average ROE
performance
% of award earned
Maximum Award
Greater than 13.0%
Greater than 11.0% and less than
or equal to 13.0%
Target Award
Greater than 9.0% and less than
or equal to 11.0%
Greater than 7.0% and less than
or equal to 9.0%
Threshold Award
Greater than or equal to 6.0% and
less than or equal to 7.0%
Less than Threshold
Less than 6.0%
150%
125%
100%
75%
50%
0%
The number of Performance Share Rights or Performance Cash Rights granted in 2010 that are
earned pursuant to the three-year average ROE performance metric above will vest in 2013
following the completion of the continuous service requirement.
For Performance Share Rights or Performance Cash Rights granted beginning 2013, the three-
year average ROE threshold, target and maximum performance requirements are as follows:
3-year average ROE
performance
% of award earned
Maximum Award
Greater than or equal to 13.0%
Target Award
Equal to 9.5%
Threshold Award
Equal to 6.0%
Less than Threshold
Less than 6.0%
150%
100%
50%
0%
Actual amounts earned for three-year ROE performance falling between the threshold and
target, or between the target and maximum, will be calculated on a linear basis.
Why have the
performance
hurdles been
chosen?
In 2010, the Board chose, based on independent consultation with Mercer Consulting, to move
to an ROE performance hurdle for Performance Share Rights and Performance Cash Rights in
place of the EPS hurdle used in previous years. ROE measures how effectively the Company is
using the money shareholders have invested to generate profits. ROE is a reflection of multiple
financial measures including net profitability of the Company and the efficient management of
assets employed. The Board further believes a focus on this metric will lead to improved cash
generation in order to internally fund its capital requirements and limit the need to seek debt
funding for a business subject to a cyclical industry such as ours. Utilising a three-year average
measure reduces the risk for short-term decision making and accommodates the inherent cycles
within our industry and business. The ROE hurdle therefore provides a greater alignment
Annual Report 2012
45
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
between the long-term incentive provided to senior executives and their ability to influence the
Company’s performance.
What if a senior
executive ceases
employment?
A senior executive’s unvested Rights will generally lapse on the date that they cease
employment, unless the Board determines otherwise. However, where a senior executive’s
employment ceases due to their death or total and permanent disability, all of their unvested
Rights will vest. Also, unless the Board determines otherwise, where a senior executive’s
employment ceases by reason of “Special Circumstances” (which includes redundancy,
retirement or other circumstances which are considered by the Board to be extraordinary):
•
•
where there is no performance condition attached to a Right (i.e. it is a Retention Share
Right or Retention Cash Right), any applicable time-based condition will be waived and
the number of Retention Share Rights and/ or Retention Cash Rights that vest will be pro-
rated according to the extent of the retention period actually worked; and
where there is a performance condition attached to a Right (i.e. it is a Performance Share
Right or Performance Cash Right), there will be no accelerated vesting of the
Performance Rights and instead, the Performance Rights will remain “on foot” and be
tested in the ordinary course and against the applicable performance condition.
However, the number of Rights that vest will be pro-rated over the period of time actually
worked during the continued service period.
What happens in
the event of a
change of control?
In the event of a takeover or change of control of the Company, any unvested Rights may vest at
the Board’s discretion.
What Rights were
granted in 2012?
Rights granted during the year ended 31 December 2012 are set out in Table 5.2 of this Report.
The Rights were granted on 15 March 2011.
Option Plans
In 2009, the Board approved the establishment of the 2009 Option Plan which authorised the granting of no more than
5,000,000 (later adjusted to 500,000 in light of the 10:1 consolidation of the Company’s shares in 2010) options in total.
The purpose of the Option Plan was to bolster executive retention during the economic downturn in 2009 by providing a
one-off grant of options to senior executives (including the CEO).
No options were granted to senior executives during 2012.
Options with an exercise price set at a premium of 22.5% of the prevailing market price for the Company’s shares on the
date of the grant, were granted to the senior executives employed on 18 June 2009 and vested in full and became
exercisable on 18 June 2012. Unexercised options will expire on 18 June 2014. On 15 March 2010, 25,000 options were
granted to a new senior executive at an exercise price of A$3.20, and those options will vest in full and become
exercisable on 15 March 2013 and will expire on 15 March 2015.
In 2008, the Board approved the establishment of the 2008 Option Plan upon Mr Kipp’s appointment to the position of
CEO in order to award Mr Kipp a total of 2,500,000 (later adjusted to 250,000 in light of the 10:1 consolidation of the
Company’s shares in 2010) shares under two separate grants, both of which vested upon his termination of employment
and remain exercisable until 5 April 2013. No other senior executive received a grant under the 2008 Option Plan.
Details of options that have been granted to senior executives under both option plans can be found in Table 4.1.7.
4. PERFORMANCE AND RISK ALIGNMENT
4.1. PERFORMANCE ALIGNMENT
While senior executive remuneration is structured to attract and retain talented employees, the amount of remuneration
received by an individual is dependent on the achievement of superior performance and generating value for
shareholders.
Table 4.1.1 below summarises the Company’s performance over the past five years in respect of the financial and non-
financial indicators identified by the Board to assess the Company’s performance and future prospects.
46
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Table 4.1.1: Year-on-year performance
Share performance
Earnings performance
Closing
share
price
A$
Dividend
p/share
US$ 1
1.88
2.78
4.56
3.52
1.99
0.12
0.08
0.02
-
0.38
Financial
year
2012
2011
2010
2009
2008
EPS % 2
7.7%
13.0%
4.0%
(2.0%)
52.0%
Revenue
US$
millions
EBITDA
US$
millions
NPAT
US$
millions
ROE 3
Operating
margin 4
2,012
2,020
1,476
978
1,838
254
356
222
111
356
68
160
85
(15)
157
6.0% 10.7%
14.6% 13.0%
9.0%
8.5%
(2.0%)
2.0%
18.0% 15.0%
(1) Dividends per share are shown based upon the cash amounts paid in each year.
(2) Calculated as basic EPS divided by closing share price. EPS is adjusted for 10:1 share consolidation
completed in May 2010.
(3) 2008 ROE is calculated on a pro-forma basis allowing for the $700,000,000 equity raising completed in
November 2009.
(4) Excludes other income and other expenses.
The Board believes incentivising and rewarding management for sustaining higher levels of operating margin (via cash
bonuses under the CBP) and ROE (via performance-based LTIP rights) will more consistently yield desirable
shareholder returns over time. The Board will continue to monitor this relationship and make further modifications as it
deems appropriate.
Short-term performance indicators and outcomes
As discussed above, the CBP rewards senior executives and other participants for their achievement of specific key
performance indicators for the Company as well as for the achievement of performance goals specific to the business
unit or function for which they are responsible during a financial year.
Table 4.1.2: Average proportion of STI awarded, 2008-2012
% of target STI awarded 1
2008
84%
2009
99%
2010
88%
2011
97%
2012
72%
(1) Weighted average for senior executives.
Table 4.1.3: STI earned during the year ended 31 December 2012
STI earned
US$
644,088
233,806
178,152
140,974
169,183
143,031
Target
STI 1
US$
1,000,000
317,240
208,000
162,225
234,325
176,800
STI earned
as % of
target STI
% of target
STI forfeited
STI as % of
maximum
STI 2
64%
74%
86%
87%
72%
81%
36%
26%
14%
13%
28%
19%
32%
37%
43%
43%
36%
40%
Craig Kipp 3
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
(1) The target potential value of the 2012 STI awards for the CEO and senior executives (who receive STI awards
wholly in cash) is the amount disclosed. A minimum level of performance must be achieved before any STI is
awarded. Therefore, the minimum potential value of the STI for all participants in 2012 was nil.
(2) The maximum potential award assuming superior performance against all CBP metrics is 200% of target STI.
(3) Mr Kipp’s STI earned was prorated to 5 October 2012.
Annual Report 2012
47
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Long-term performance indicators and outcomes
LTI awards are provided through the LTIP to assist in retaining key executives, encourage superior performance on a
sustained basis, and provide such executives with an opportunity to share in the growth and value of the Company.
Table 4.1.4 shows the actual ROE performance achieved during each of the three years applicable to the 2010
performance awards, as well as the actual three-year average ROE. Based on the actual performance over the period,
and pursuant to the performance requirement outlined in Table 3.4. 100% of the award will be eligible to vest once the
executive satisfies the continued service requirement, which in all cases will not occur prior to March 2013. The vesting
dates for all outstanding awards are shown in Table 4.1.5 below.
Table 4.1.4: Cumulative performance for 2010 grants of performance-based LTIP awards
2010
2011
2012
3-year Average
% of Award Earned
ROE Performance
8.5%
14.6%
6.0%
9.7%
100.0%
The vested Share Rights listed in Table 4.1.5 below include the Retention Share Rights and Performance Share Rights
that were granted in 2009 and vested in 2012. The Performance Share Rights were subject to the performance period
ended 31 December 2011 and achieved 100% of the target award amount (as detailed in last year’s remuneration
report). These earned Performance Rights remained unvested until the continuous service requirement was met in
2012.
48
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Table 4.1.5: Movement in Share Rights during the year ended 31 December 2012
Nam e
Craig Kipp
Joe Ragan III
Brad Baker
Michael Birch
Fabrizio Rasetti
Alan Sides
Grant
date
Vesting
date
25-Mar-09
1-Mar-10
1-Mar-10
15-Mar-11
15-Mar-12
25-Mar-09
1-Mar-10
15-Mar-11
25-Mar-12
5-Oct-12 2
1-Mar-13 3
15-Mar-14 3
15-Mar-15 3
25-Mar-12
1-Mar-13
15-Mar-14
15-Mar-12
15-Mar-15
25-Mar-09
1-Mar-10
15-Mar-11
15-Mar-12
25-Mar-09
1-Mar-10
15-Mar-11
15-Mar-12
25-Mar-09
1-Mar-10
15-Mar-11
15-Mar-12
15-Mar-10
15-Mar-11
15-Mar-12
25-Mar-12
1-Mar-13
15-Mar-14
15-Mar-15
25-Mar-12
1-Mar-13
15-Mar-14
15-Mar-15
25-Mar-12
1-Mar-13
15-Mar-14
15-Mar-15
15-Mar-13
15-Mar-14
15-Mar-15
LTIP
shares
(Total)
Num ber of
Share
Rights
vested
Value of
Share
Rights
vested
US$ 1
Num ber of
Share
Rights
forfeited
Value of
Share
Rights
forfeited
US$ 1
Num ber of
Share Rights
Outstanding
180,000
54,820
375,000
455,580
681,200
75,000
103,000
80,000
90,000
55,000
72,150
60,000
75,000
55,000
82,900
80,000
90,000
55,000
82,578
70,000
90,000
104,600
60,000
70,000
180,000
47,475
-
-
-
75,000
-
-
-
55,000
-
-
-
55,000
-
-
-
55,000
-
-
-
-
-
-
778,576
80,193
-
-
-
324,407
-
-
-
237,898
-
-
-
237,898
-
-
-
237,898
-
-
-
-
-
-
-
7,345
50,250
218,405
553,747
-
-
-
-
12,407
84,880
368,920
935,364
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
324,750
237,175
127,453
-
103,000
80,000
90,000
-
72,150
60,000
75,000
-
82,900
80,000
90,000
-
82,578
70,000
90,000
104,600
60,000
70,000
(1) Represents the value of share rights vested and forfeited during the year based on the market value of
shares at the vesting date.
(2) The number of Share Rights that vested on 5 October 2012 represents a prorated amount of retention
shares that vested pursuant to the terms of the LTI award agreement.
(3) As a result of Mr Kipp’s termination of employment in 2012, and pursuant to the terms of the LTI award
agreement, Mr Kipp’s outstanding Share Rights were prorated to his date of termination. This resulted in
the amount of Share Right forfeitures indicated above. The balance of his Performance Share Rights
remains subject to the Performance Conditions and other vesting requirements of the award.
Annual Report 2012
49
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Table 4.1.6: Movement in Cash Rights during the year ended 31 December 2012
Nam e
Grant
date
Vesting
date
Craig Kipp
Brad Baker
Joe Ragan III
25-Mar-09
1-Mar-10
25-Mar-09
1-Mar-10
25-Mar-09
1-Mar-10
25-Mar-09
1-Mar-10
Fabrizio Rasetti 25-Mar-09
1-Mar-10
15-Mar-10
Michael Birch
Alan Sides
25-Mar-12
1-Mar-13
25-Mar-12
1-Mar-13
25-Mar-12
1-Mar-13
25-Mar-12
1-Mar-13
25-Mar-12
1-Mar-13
15-Mar-13
Num ber
of Cash
Rights
vested
Value of
Cash
Rights
vested
US$
Num ber
of Cash
Rights
forfeited
Value of
Cash
Rights
forfeited
US$
Num ber of
Cash Rights
Outstanding
746,300
-
275,000
-
225,000
-
225,000
-
225,000
-
-
746,300
-
275,000
-
225,000
-
225,000
-
225,000
-
-
-
-
-
60,300 2
60,300 2
389,700 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
80,000
-
80,000
-
80,000
80,000
Cash
(total)
US$
746,300 1
450,000
275,000
100,000
225,000
80,000
225,000
80,000
225,000
80,000
80,000
(1) This amount was revised in this 2012 report to correct a reporting error from the prior years. Mr Kipp’s total
number of Cash Rights granted on 25 March 2009 was 746,300 but had been previously reported as 550,000.
(2) As a result of Mr Kipp’s termination of employment in 2012, and pursuant to the terms of the LTI award
agreement, Mr Kipp’s outstanding Performance Cash Rights were prorated to 5 October 2012. The balance of
his Performance Cash Rights remains subject to the Performance Conditions and other vesting requirements of
the award.
Table 4.1.7: Movement in options during the year ended 31 December 2012
Effective
grant
date
Vesting
date
Options
(total)
Num ber
of
options
vested
Value of
options
vested
US$
Option
price
A$
Num ber of
Options
Outstanding
28-Apr-08
5-Oct-12
100,000
100,000
687,308
18.95
28-Apr-08 2
18-Jun-09
18-Jun-09
18-Jun-09
18-Jun-09
18-Jun-09
15-Mar-10
5-Oct-12
18-Jun-12
18-Jun-12
18-Jun-12
18-Jun-12
18-Jun-12
15-Mar-13
150,000
90,000
37,500
27,500
27,500
27,500
25,000
150,000
90,000
37,500
27,500
27,500
27,500
-
2,175,000
128,675
53,615
39,317
39,317
39,317
-
1.55
2.45
2.45
2.45
2.45
2.45
3.20
-
-
-
-
-
-
-
25,000
Nam e
Craig Kipp 1
Joe Ragan III
Brad Baker
Michael Birch
Fabrizio Rasetti
Alan Sides
(1) Pursuant to the terms of the agreements governing his option awards, Mr Kipp’s outstanding options
vested on 5 October 2012. The award agreements stipulated that should his termination occur after 18
months from the grant date of the award, the outstanding options would vest in full upon his date of
termination.
(2) The second grant of options Mr Kipp received in conjunction with his appointment as CEO was issued as of
1 January 2009. For purposes of compliance with Australian Accounting Standards, the effective grant
date was determined to be 28 April 2008.
50
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Adjustments made to existing Share Rights and options following share consolidation
In light of the 10:1 share consolidation, all unvested Share Rights and options held by executives prior to the
consolidation were adjusted by dividing the number of Share Rights and/or options held by 10. The exercise price
applicable to the options was also adjusted by multiplying it by 10 so that the exercise price per option became A$2.45
for options granted to all executives on 11 April 2009; A$3.20 for options granted to Mr Sides on 15 March 2010; and
A$18.95 and A$1.55 for options granted to the CEO on 28 April 2008 and 1 January 2009 respectively. As the
adjustments were made purely to address the impact of the share consolidation, the adjustments did not affect the fair
value of the adjusted Share Rights and options.
4.2. RISK ALIGNMENT
Employee and Director trading in Company securities
Under the Company’s Securities Trading Policy, Directors and employees (including senior executives) are prohibited
from entering into transactions that limit the economic risk of holding unvested Rights or options that have been received
as part of their remuneration. The Company treats compliance with this policy as a serious issue and takes appropriate
measures to ensure the policy is adhered to, including imposing appropriate sanctions where an employee is found to
have breached the policy.
Further restrictions also apply to Directors and senior executives with respect to their dealing in the Company’s shares
and other securities under the Securities Trading Policy and further details of the policy are set out in the Corporate
Governance Statement on page eight of this Annual Financial Report.
Executive Stock Ownership Guidelines
The Board has determined to evaluate the design and implementation of an executive stock ownership guideline during
2013. The Board firmly supports equity ownership as an important instrument in creating strong alignment of executive
and shareholder interests. The financial risk an executive assumes by taking a meaningful equity position in the
Company creates mutual ownership between the executives and shareholders and provides a focus on long-term
shareholder value creation. The Board further believes that establishing a share ownership guideline for executives helps
to mitigate the potential for excessive risk-taking for short-term performance that may be contrary to achieving long-term
value creation.
Annual Report 2012
51
.
1
.
5
l
e
b
a
T
n
i
t
u
o
t
e
s
e
r
a
)
s
d
r
a
d
n
a
t
s
g
n
i
t
n
u
o
c
c
a
l
e
b
a
c
i
l
p
p
a
h
t
i
w
e
c
n
a
d
r
o
c
c
a
n
i
l
d
e
t
a
u
c
a
c
(
l
1
1
0
2
d
n
a
2
1
0
2
r
e
b
m
e
c
e
D
1
3
d
e
d
n
e
s
r
a
e
y
e
h
t
g
n
i
r
u
d
n
o
i
t
a
r
e
n
u
m
e
r
’
s
e
v
i
t
u
c
e
x
e
i
r
o
n
e
s
h
c
a
e
f
o
s
l
i
a
t
e
D
n
o
i
t
a
r
e
n
u
m
e
r
e
v
i
t
u
c
e
x
e
i
r
o
n
e
S
:
1
.
5
l
e
b
a
T
I
N
O
T
A
R
E
N
U
M
E
R
L
A
T
O
T
.
1
.
5
I
I
D
E
T
M
L
R
A
E
Y
G
N
O
L
T
R
A
O
B
t
r
o
p
e
R
l
a
i
c
n
a
n
F
i
l
a
u
n
n
A
2
1
0
2
R
E
B
M
E
C
E
D
1
3
.
s
e
v
i
t
u
c
e
x
e
i
r
o
n
e
s
r
e
h
t
o
d
n
a
O
E
C
e
h
t
r
o
f
s
m
r
e
t
t
c
a
r
t
n
o
c
i
e
c
v
r
e
s
d
n
a
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
t
f
o
s
l
i
a
t
e
d
i
s
e
d
v
o
r
p
n
o
i
t
c
e
s
i
s
h
T
I
L
A
T
E
D
N
I
I
N
O
T
A
R
E
N
U
M
E
R
E
V
T
U
C
E
X
E
I
.
5
52
Boart Longyear
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:12)
(cid:27)
(cid:23)
(cid:16)
(cid:25)
(cid:22)
(cid:24)
(cid:14)
(cid:1)
(cid:15)
(cid:16)
(cid:27)
(cid:12)
(cid:13)
(cid:31)
(cid:19)
(cid:27)
(cid:12)
(cid:14)
(cid:31)
(cid:23)
(cid:24)
(cid:5)
(cid:37)
(cid:1)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:12)
(cid:27)
(cid:23)
(cid:16)
(cid:25)
(cid:22)
(cid:24)
(cid:14)
(cid:1)
(cid:15)
(cid:16)
(cid:27)
(cid:12)
(cid:13)
(cid:31)
(cid:16)
(cid:26)
(cid:12)
(cid:19)
(cid:9)
(cid:36)
(cid:1)
(cid:27)
(cid:28)
(cid:20)
(cid:17)
(cid:16)
(cid:23)
(cid:16)
(cid:3)
(cid:1)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:12)
(cid:23)
(cid:22)
(cid:20)
(cid:26)
(cid:16)
(cid:10)
(cid:27)
(cid:28)
(cid:20)
(cid:17)
(cid:16)
(cid:23)
(cid:16)
(cid:13)
(cid:22)
(cid:1)
(cid:26)
(cid:16)
(cid:28)
(cid:31)
(cid:18)
(cid:23)
(cid:24)
(cid:21)
(cid:1)
(cid:26)
(cid:16)
(cid:19)
(cid:28)
(cid:6)
(cid:1)
(cid:27)
(cid:28)
(cid:20)
(cid:17)
(cid:16)
(cid:23)
(cid:16)
(cid:13)
(cid:1)
(cid:28)
(cid:23)
(cid:16)
(cid:22)
(cid:30)
(cid:24)
(cid:21)
(cid:25)
(cid:22)
(cid:16)
(cid:31)
(cid:28)
(cid:27)
(cid:24)
(cid:7)
(cid:35)
(cid:1)
(cid:27)
(cid:28)
(cid:20)
(cid:17)
(cid:16)
(cid:23)
(cid:16)
(cid:13)
(cid:22)
(cid:1)
(cid:26)
(cid:16)
(cid:28)
(cid:1)
(cid:28)
(cid:26)
(cid:24)
(cid:19)
(cid:9)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:12)
(cid:27)
(cid:23)
(cid:16)
(cid:25)
(cid:22)
(cid:24)
(cid:14)
(cid:1)
(cid:15)
(cid:16)
(cid:27)
(cid:12)
(cid:13)
(cid:31)
(cid:19)
(cid:27)
(cid:12)
(cid:4)
(cid:21)
(cid:12)
(cid:28)
(cid:24)
(cid:10)
(cid:33)
(cid:9)
(cid:11)
(cid:31)
(cid:16)
(cid:26)
(cid:12)
(cid:19)
(cid:9)
(cid:15)
(cid:16)
(cid:27)
(cid:12)
(cid:13)
(cid:44)
(cid:27)
(cid:28)
(cid:19)
(cid:18)
(cid:20)
(cid:8)
(cid:33)
(cid:9)
(cid:11)
(cid:27)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:25)
(cid:6)
(cid:33)
(cid:9)
(cid:11)
(cid:26)
(cid:16)
(cid:19)
(cid:28)
(cid:6)
(cid:33)
(cid:9)
(cid:11)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:12)
(cid:23)
(cid:22)
(cid:20)
(cid:26)
(cid:16)
(cid:10)
(cid:33)
(cid:9)
(cid:11)
(cid:27)
(cid:28)
(cid:19)
(cid:18)
(cid:20)
(cid:8)
(cid:33)
(cid:9)
(cid:11)
(cid:1)
(cid:19)
(cid:27)
(cid:12)
(cid:4)
(cid:1)
(cid:16)
(cid:14)
(cid:23)
(cid:12)
(cid:1)
(cid:19)
(cid:27)
(cid:12)
(cid:4)
(cid:27)
(cid:28)
(cid:19)
(cid:18)
(cid:20)
(cid:8)
(cid:33)
(cid:9)
(cid:11)
(cid:41)
(cid:1)
(cid:26)
(cid:16)
(cid:19)
(cid:28)
(cid:6)
(cid:33)
(cid:9)
(cid:11)
(cid:31)
(cid:22)
(cid:26)
(cid:24)
(cid:17)
(cid:26)
(cid:16)
(cid:7)
(cid:1)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:23)
(cid:16)
(cid:28)
(cid:16)
(cid:8)
(cid:1)
(cid:23)
(cid:24)
(cid:20)
(cid:28)
(cid:12)
(cid:29)
(cid:23)
(cid:23)
(cid:12)
(cid:40)
(cid:1)
(cid:27)
(cid:28)
(cid:20)
(cid:17)
(cid:16)
(cid:23)
(cid:16)
(cid:13)
(cid:31)
(cid:26)
(cid:16)
(cid:25)
(cid:29)
(cid:9)
(cid:33)
(cid:9)
(cid:11)
(cid:39)
(cid:1)
(cid:26)
(cid:16)
(cid:19)
(cid:28)
(cid:6)
(cid:33)
(cid:9)
(cid:11)
(cid:1)
(cid:21)
(cid:12)
(cid:29)
(cid:23)
(cid:23)
(cid:2)
(cid:38)
(cid:1)
(cid:27)
(cid:29)
(cid:23)
(cid:24)
(cid:13)
(cid:33)
(cid:9)
(cid:11)
(cid:1)
(cid:19)
(cid:27)
(cid:12)
(cid:4)
(cid:30)
(cid:26)
(cid:12)
(cid:21)
(cid:12)
(cid:27)
(cid:33)
(cid:9)
(cid:11)
8
i
p
p
K
g
a
r
C
i
,
4
0
2
1
3
2
4
,
,
6
9
8
3
6
4
4
,
,
9
1
2
0
0
1
1
,
,
5
9
2
6
2
2
1
,
0
1
3
9
3
9
,
,
9
6
3
6
0
0
1
,
7
6
7
4
7
7
,
3
2
3
2
4
8
,
7
1
5
5
8
9
,
,
9
6
4
9
8
0
1
,
0
6
9
9
5
8
,
7
5
5
4
7
7
,
%
6
1
3
.
%
6
3
4
.
%
5
7
2
.
%
0
3
2
.
%
7
6
2
.
%
4
3
2
.
%
9
7
2
.
%
5
4
2
.
%
7
5
2
.
%
9
3
2
.
%
8
3
3
.
%
2
5
2
.
4
4
4
5
0
7
,
,
3
2
8
3
9
2
1
,
4
1
3
4
9
2
,
9
3
7
4
6
2
,
4
8
0
5
4
2
,
1
1
1
2
2
2
,
9
0
7
9
0
2
,
5
9
2
3
9
1
,
4
0
5
7
4
2
,
4
4
1
7
4
2
,
7
4
8
2
7
2
,
5
0
3
7
7
1
,
1
8
0
2
3
6
,
1
7
1
4
5
6
,
6
1
3
8
,
6
5
8
7
1
,
8
9
0
6
,
4
9
0
3
1
,
8
9
0
6
,
4
9
0
3
1
,
8
9
0
6
,
4
9
0
3
1
,
1
2
9
7
1
,
1
2
9
7
1
,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
4
6
,
8
3
0
0
0
,
6
0
0
,
1
4
6
1
,
7
6
6
9
9
,
3
6
3
3
8
5
,
1
9
8
2
6
,
7
1
2
4
7
6
,
9
1
3
6
3
,
2
8
3
3
9
,
5
1
1
7
8
,
6
6
3
3
9
,
5
1
1
7
8
,
6
6
3
3
9
,
5
1
1
7
8
,
6
6
6
3
3
,
7
4
9
4
,
2
2
5
1
3
,
7
2
3
4
4
,
2
6
6
4
0
,
2
2
7
8
7
,
0
5
6
4
0
,
2
2
7
8
7
,
0
5
6
4
0
,
2
2
7
8
7
,
0
5
1
1
8
,
2
1
1
2
3
,
3
1
0
0
5
,
7
0
5
3
,
7
0
0
5
,
7
0
5
3
,
7
0
0
5
,
7
0
5
3
,
7
0
0
5
,
7
0
5
3
,
7
0
0
5
,
7
0
5
3
,
7
0
0
5
,
7
0
5
3
,
7
0
0
5
7
,
0
5
3
7
,
0
0
5
7
,
0
5
3
7
,
0
0
5
7
,
0
5
3
7
,
0
0
5
7
,
0
5
3
7
,
0
0
5
7
,
0
5
3
7
,
0
0
5
7
,
0
5
3
7
,
3
2
6
5
9
,
8
2
9
5
3
1
,
8
8
0
4
4
6
,
0
0
0
0
5
9
,
1
3
2
,
9
6
7
0
0
0
,
0
0
0
,
1
2
1
0
2
1
1
0
2
0
4
6
1
5
,
4
6
9
2
4
,
9
8
6
4
4
,
4
6
6
5
3
,
8
3
7
2
4
,
1
1
7
4
3
,
3
5
2
4
4
,
3
8
2
1
3
,
2
5
5
0
4
,
2
0
1
2
3
,
6
0
8
3
3
2
,
4
4
8
5
0
3
,
4
5
1
,
0
5
4
5
8
3
,
5
3
4
2
5
1
8
7
1
,
0
0
2
9
0
2
,
8
0
3
,
2
1
4
2
4
9
,
3
9
3
4
7
9
0
4
1
,
0
0
5
7
5
1
,
9
6
2
,
2
2
3
5
6
3
,
1
1
3
2
1
0
2
1
1
0
2
I
I
I
n
a
g
a
R
e
o
J
i
t
t
e
s
a
R
o
z
i
r
b
a
F
i
2
1
0
2
1
1
0
2
2
1
0
2
1
1
0
2
r
e
k
a
B
d
a
r
B
h
c
r
i
B
l
e
a
h
c
M
i
3
8
1
9
6
1
,
8
9
8
5
1
2
,
0
0
5
,
5
6
4
2
9
6
,
9
4
4
2
1
0
2
1
1
0
2
i
s
e
d
S
n
a
A
l
1
3
0
3
4
1
,
0
3
3
1
6
1
,
2
6
4
,
0
5
3
5
8
3
,
5
3
3
2
1
0
2
1
1
0
2
e
t
a
d
e
h
t
m
o
r
f
s
h
t
n
o
m
2
1
r
o
f
i
s
m
u
m
e
r
p
l
I
I
D
E
T
M
L
R
A
E
Y
G
N
O
L
T
R
A
O
B
i
a
c
d
e
m
s
h
i
f
o
i
r
e
v
a
w
e
h
t
f
o
e
u
a
v
l
e
h
t
d
n
a
s
t
n
e
m
y
a
p
n
o
i
t
a
n
m
r
e
t
i
’
s
p
p
K
i
r
M
f
o
i
g
n
s
n
e
p
x
e
e
h
t
g
n
i
t
n
e
s
e
r
p
e
r
l
a
u
r
c
c
a
g
n
i
t
n
u
o
c
c
a
2
1
0
2
e
h
t
s
e
d
u
c
n
I
l
.
i
d
e
d
v
o
r
p
s
t
i
f
e
n
e
b
y
r
a
t
e
n
o
m
-
n
o
n
o
n
e
r
e
w
e
r
e
h
T
)
1
(
)
2
(
t
r
o
p
e
R
l
a
i
c
n
a
n
F
i
l
a
u
n
n
A
2
1
0
2
R
E
B
M
E
C
E
D
1
3
l
y
e
t
a
m
i
t
l
u
y
a
m
s
e
v
i
t
u
c
e
x
e
i
r
o
n
e
s
t
a
h
t
)
y
n
a
f
i
(
t
i
f
e
n
e
b
e
h
t
f
o
e
v
i
t
a
c
d
n
i
i
r
o
o
t
d
e
t
a
e
r
l
t
o
n
s
i
n
o
i
t
a
r
e
n
u
m
e
r
s
a
d
e
d
u
c
n
l
i
t
n
u
o
m
a
e
h
T
.
d
o
i
r
e
p
g
n
i
t
s
e
v
e
h
t
r
e
v
o
i
d
e
s
n
g
o
c
e
r
s
i
d
n
a
e
t
a
d
t
n
a
r
g
e
h
t
t
a
s
a
i
d
e
n
m
r
e
t
e
d
s
i
s
t
n
e
m
u
r
t
s
n
i
y
t
i
u
q
e
f
o
e
u
a
v
l
r
i
a
f
e
h
T
l
.
)
)
s
(
n
a
P
n
o
i
t
p
O
e
h
t
r
e
d
n
u
d
e
d
r
a
w
a
s
n
o
i
t
p
o
d
n
a
P
T
L
I
e
h
t
r
e
d
n
u
d
e
d
r
a
w
a
s
t
h
g
R
i
.
e
.
i
(
d
o
i
r
e
p
g
n
i
t
s
e
v
e
v
i
t
c
e
p
s
e
r
e
h
t
r
e
v
o
i
d
e
s
n
g
o
c
e
r
n
o
i
t
a
s
n
e
p
m
o
c
y
t
i
u
q
e
f
o
e
u
a
v
l
r
i
a
f
l
a
c
i
r
o
t
s
h
i
e
h
t
f
o
n
o
i
t
r
o
p
a
s
e
d
u
c
n
l
i
n
o
i
t
a
r
e
n
u
m
e
r
,
d
r
a
o
B
s
d
r
a
d
n
a
t
S
g
n
i
t
n
u
o
c
c
A
n
a
i
l
a
r
t
s
u
A
e
h
t
f
o
s
t
n
e
m
e
r
i
u
q
e
r
e
h
t
h
t
i
w
e
c
n
a
d
r
o
c
c
a
n
I
)
3
(
.
2
1
0
2
r
o
f
n
o
i
t
a
c
a
v
d
e
s
u
n
u
d
n
a
d
e
u
r
c
c
a
’
s
p
p
K
i
r
M
r
o
f
t
n
e
m
y
a
p
e
h
t
s
t
n
e
s
e
r
p
e
r
”
r
e
h
t
O
“
n
i
t
n
u
o
m
a
e
h
T
.
2
1
0
2
r
e
b
o
t
c
O
3
n
o
n
o
i
t
i
a
n
m
r
e
t
i
s
h
f
o
n
o
i
t
a
u
a
v
l
l
s
e
o
h
c
S
-
k
c
a
B
a
l
i
g
n
y
p
p
a
l
2
B
S
A
A
h
t
i
w
e
c
n
a
d
r
o
c
c
a
n
i
i
d
e
n
m
r
e
t
e
d
n
e
e
b
s
a
h
t
n
a
r
g
r
i
e
h
t
f
o
e
t
a
d
e
h
t
t
a
s
n
o
i
t
p
o
f
o
e
u
a
v
l
r
i
a
f
e
h
T
.
t
s
e
v
s
t
n
e
m
u
r
t
s
n
i
y
t
i
u
q
e
e
h
t
l
d
u
o
h
s
e
s
i
l
a
e
r
.
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
i
f
e
h
t
o
t
2
3
e
t
o
N
n
i
t
u
o
t
e
s
e
r
a
s
n
o
i
t
a
u
a
v
l
e
s
e
h
t
i
i
g
n
n
n
p
r
e
d
n
u
s
n
o
i
t
p
m
u
s
s
a
e
h
T
.
d
o
h
t
e
m
e
r
e
w
d
n
a
3
1
0
2
h
c
r
a
M
n
i
i
d
a
p
e
b
o
t
d
e
t
c
e
p
x
e
e
r
a
i
h
c
h
w
,
2
1
0
2
r
e
b
m
e
c
e
D
1
3
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
e
v
i
t
u
c
e
x
e
e
h
t
y
b
d
e
n
r
a
e
s
t
n
e
m
y
a
p
I
T
S
h
s
a
c
s
t
n
e
s
e
r
p
e
r
t
n
u
o
m
a
2
1
0
2
e
h
T
)
4
(
i
.
s
t
h
g
R
e
r
a
h
S
n
o
i
d
e
v
e
c
e
r
s
d
n
e
d
v
d
i
i
,
e
c
n
a
t
s
s
s
a
i
i
g
n
x
a
t
d
n
a
l
i
a
c
n
a
n
i
f
f
o
s
t
n
e
m
e
s
r
u
b
m
e
r
i
,
s
e
c
n
a
w
o
l
l
a
e
v
i
t
o
m
o
t
u
a
s
e
d
u
c
n
I
l
.
3
1
0
2
y
r
a
u
r
b
e
F
6
1
n
o
d
r
a
o
B
e
h
t
y
b
d
e
v
o
r
p
p
a
.
s
e
t
a
t
S
d
e
t
i
n
U
e
h
t
n
i
y
t
i
t
n
e
i
g
n
y
o
p
m
e
l
e
h
t
y
b
e
d
a
m
s
n
o
i
t
u
b
i
r
t
n
o
c
i
g
n
h
c
t
a
m
n
a
p
l
)
k
(
1
0
4
s
e
d
u
c
n
I
l
.
s
e
t
a
t
S
d
e
t
i
n
U
e
h
t
n
i
y
t
i
t
n
e
i
g
n
y
o
p
m
e
l
e
h
t
y
b
e
d
a
m
s
n
o
i
t
u
b
i
r
t
n
o
c
g
n
i
r
a
h
s
t
i
f
o
r
p
)
k
(
1
0
4
s
e
d
u
c
n
I
l
.
2
1
0
2
r
e
b
o
t
c
O
3
n
o
d
e
t
i
a
n
m
r
e
t
t
n
e
m
y
o
p
m
e
l
’
s
p
p
K
i
.
r
M
)
5
(
)
6
(
)
7
(
)
8
(
Annual Report 2012
53
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
5.2. RIGHTS AND OPTIONS GRANTED
Table 5.2: Rights granted during the year ended 31 December 2012
Share Rights
Number of
Rights
granted1
Future
years
payable2
Fair value
per Right 3
US$
681,200
90,000
90,000
75,000
90,000
70,000
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
4.50
4.50
4.50
4.50
4.50
4.50
Maximum
value of
grant 4
US$
4,598,100
506,250
506,250
421,875
506,250
393,750
Name
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
(1) The grants made to senior executives constituted their full LTI entitlement for 2012 and were made on 15 March
2012 on the terms summarised above. Any Rights that do not vest on the vesting date will be forfeited.
(2) Rights vest on 15 March 2015 subject to performance over the period from 1 January 2013 to 31 December 2014
and/or continued service until the vesting date.
(3) The fair value was calculated as at the grant date of 15 March 2012.
(4) The maximum fair value of the grant is based on the fair value per instrument and full achievement of the stretch
targets. The minimum total value of the grant, if the applicable performance conditions are not met, is nil.
There were no options or Cash Rights granted during the year ended 31 December 2012.
54
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
5.3 SERVICE CONTRACTS AND TERMINATION PROVISIONS
Duration of
contract
Notice period by
Company
Notice period
by executive
Termination payments (where
these are in addition to
statutory entitlements)
No fixed term
None required
180 days
Name and
position held at
the end of
financial year
Craig Kipp
Former Chief
Executive Officer,
President
(employment
terminated 3
October 2012)
Joe Ragan III
Chief Financial
Officer
No fixed term
None required
90 days
No fixed term
None required
90 days
Fabrizio Rasetti
Senior Vice
President,
General Counsel
and Secretary
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
• 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
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
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
Annual Report 2012
55
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
Name and
position held at
the end of
financial year
Brad Baker
Senior Vice
President, Human
Resources
Duration of
contract
No fixed term
Notice period by
Company
None required
Notice period
by executive
90 days
Alan Sides
Vice President,
Global Products
No fixed term
None required
90 days
No fixed term
None required
90 days
Michael Birch
Vice President,
Global Drilling
Services
Termination payments (where
these are in addition to
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
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
For termination with cause,
statutory entitlement only
For termination without cause:
• 12 months’ salary
• Pro-rata bonus to termination
date
• Waiver of medical insurance
premiums for 12 months
Under the terms of the Company’s LTIP and option plans, the Board has discretion to provide for early vesting of all or a
portion of unvested LTIP Rights and options depending on the circumstances of an employee’s termination. In addition,
the executive employment contracts listed above contain a twelve-month non-competition and non-solicitation covenant in
the Company’s favour. The Company may, at its option, extend the term of the covenants upon an executive’s termination
of employment for up to an additional twelve months in exchange for monthly payments of the executive’s base salary for
the term of the extension.
6. NON-EXECUTIVE DIRECTOR ARRANGEMENTS
This section explains the remuneration structure and outcomes for non-executive Directors.
6.1. NON-EXECUTIVE DIRECTORS’ FEE STRUCTURE
Non-executive Directors are remunerated by a fixed annual base fee with additional fees paid for serving on Board
committees. The fees are determined within a maximum aggregate fee pool that is approved by shareholders in general
meeting. The current approved fee pool limit is A$2 million, which has not changed since the Company’s initial public
offering in 2007. During the financial year, $1,355,000 of the pool was utilised for non-executive Director fees, being
approximately 68% of the fee pool limit.
In 2011, the Board performed a detailed review of the NED remuneration structure, and in 2012 determined to make no
adjustments to NED remuneration.
In consideration of Mr McLemore’s duties as interim CEO following the termination of Mr Kipp’s employment in October,
the Board determined to pay Mr McLemore an additional monthly fee of $37,500 until the earlier of the appointment of a
new CEO or six months from the Board’s approval. In addition, Mr McLemore will be reimbursed for reasonable expenses
56
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
associated with temporary living arrangements in Salt Lake City while serving in this capacity. Mr McLemore is not eligible
to participate in the Company’s short- or long-term incentive plans.
Table 6.1: Components of non-executive Director remuneration
Component
Explanation
Board fees
Current base fees per annum are:
•
•
$120,000 for non-executive Directors other than the
Chair; and
$300,000 for the Chair of the Board
Committee fees
Current committee fees for non-executive Directors (other
than the Chair) are:
Other fees/benefits
Post-employment benefits
•
•
$15,000 annually for committee members; and
$30,000 annually for committee chairs.
Where the Chair of the Board sits on a committee, he does
not receive any additional fee.
Non-executive Directors are entitled to be reimbursed for all
reasonable out-of-pocket expenses incurred in carrying out
their duties, including travel costs. The Chair also is entitled
to reimbursement for office and secretarial support.
Non-executive Directors may also, with the approval of the
Board, be paid additional fees for extra services or special
exertions for the benefit of the Company.
Non-executive Directors are not entitled to receive any
performance-related remuneration, such as short-term or
long-term incentives.
Compulsory superannuation contributions for Australian-
resident non-executive Directors are included in the base
fee and additional committee fees set out above.
Non-executive Directors do not receive any retirement
benefits other than statutory superannuation contributions.
6.2 NON-EXECUTIVE SHAREHOLDING GUIDELINE
In 2011, the Board implemented a shareholding guideline requiring non-executive Directors to accumulate 30,000 Boart
Longyear shares over a five-year period from the latter of 1 September 2011 or the date of their appointment to the Board.
6.3. NON-EXECUTIVE DIRECTOR SHARE ACQUISITION PLAN
In February 2008, the Remuneration 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 their pre-tax base and committee 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 10 years, during which they are unable to
deal with their shares. The holding lock may be removed in certain circumstances, including a cessation of directorship.
No shares were purchased under this plan during the year ended 31 December 2012.
Annual Report 2012
57
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
6.4. DETAILS OF REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of non-executive Directors’ remuneration for the year ended 31 December 2012 and 2011 are set out in the table
below.
Table 6.4: Non-executive Director remuneration
Fees (incl.
committee
fees) 1
US$
Superannuation
contributions 2
US$
Shares
US$
Total
US$
412,500
300,000
151,376
129,969
165,000
130,000
165,000
134,167
150,000
82,500
147,500
30,000
137,615
112,385
-
-
13,624
11,697
-
-
-
-
-
-
12,385
10,115
-
-
-
-
-
-
-
-
-
-
-
-
412,500
300,000
165,000
141,666
165,000
130,000
165,000
134,167
150,000
82,500
147,500
30,000
150,000
122,500
David McLemore 3
2012
2011
Bruce Brook
2012
2011
Roger Brown
2012
2011
Roy Franklin
2012
2011
Tanya Fratto 4
2012
2011
Barbara Jeremiah 5
2012
2011
Peter St. George
2012
2011
(1) Please refer to Table 6.1 above for details of the annual non-executive Director base fees and committee fees.
(2) Includes compulsory superannuation guarantee payments to Australian-resident Directors which are deducted
from their base and additional committee fees.
(3) Includes $112,500 of additional fees received by Mr McLemore in recognition of his duties as interim Chief
Executive Officer from October 2012 through December 2012.
(4) Ms Fratto was appointed a Director effective 1 June 2011.
(5) Ms Jeremiah was appointed a Director effective 1 October 2011.
58
Boart Longyear
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
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 auditor of Boart Longyear Limited is Deloitte Touche Tohmatsu. The Company has employed Deloitte Touche
Tohmatsu on assignments additional to their audit duties where their expertise and experience with the Company are
important. These assignments principally have been related to tax advice and tax compliance services, the magnitude of
which is impacted by the global reach of the Company.
The Company and its Audit, Compliance & Risk Committee (“Audit Committee”) are committed to ensuring the
independence of the external auditors. Accordingly, significant scrutiny is given to non-audit engagements of the external
auditor. The Company has a formal pre-approval policy which requires the pre-approval of non-audit services by the Chair
of the Audit Committee or the Audit Committee. Additionally, the total annual fees for such non-audit services cannot
exceed the auditor’s annual audit fees without the approval of the Audit Committee. The Audit Committee believes that
the combination of these two approaches results in an effective procedure to pre-approve services performed by the
external auditor.
Consistent with the approach outlined above, the Audit Committee approved Deloitte Touche Tohmatsu’s services on a
tax-related business improvement project for the years ended 31 December 2012 and 2011. It is expected that this
project will conclude during the year ending 31 December 2013. The Company expects that the level of non-audit
services will continue to be below the audit fee in subsequent years.
None of the services performed by the auditor 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.
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 and are of the opinion that the services, as disclosed in Note 35 to the financial statements, do not
compromise the external auditor’s independence.
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.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 61 of the annual financial report.
Annual Report 2012
59
Annual Financial Report
31 DECEMBER 2012 BOART LONGYEAR LIMITED
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
David McLemore
Chair and Interim Chief Executive Officer
Sydney, 18 February 2013
60
Boart Longyear
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 2 9322 7000
Fax: +61 2 9322 7001
www.deloitte.com.au
The Board of Directors
Boart Longyear Limited
26 Butler Boulevard
Adelaide Airport SA 5650
Australia
(cid:1)
(cid:1)
18 February 2013
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 consolidated financial statements of Boart Longyear Limited for the
financial year ended 31 December 2012, 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
Samantha Lewis
Partner
Chartered Accountants
Annual Report 2012
61
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 2 9322 7000
Fax: +61 9322 7001(cid:1)
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 2012, the statement of comprehensive income, 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 64 to 127.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 4, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements,
that the consolidated financial statements 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. Those 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 company’s preparation of the financial
report that gives a true and fair view, 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 company’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.
62
Boart Longyear
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of Boart Longyear Limited, would be in the same terms if given to the directors as at the time
of this auditor’s report.
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 consolidated entity’s financial position as at 31 December 2012 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting Standards as
disclosed in Note 4.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 33 to 58 of the directors’ report for the year
ended 31 December 2012. 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.
Opinion
In our opinion the Remuneration Report of Boart Longyear Limited for the year ended 31 December 2012,
complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Samantha Lewis
Partner
Chartered Accountants
Sydney, 18 February 2013
Annual Report 2012
63
Annual Financial Report
31 DECEMBER 2012 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 are in compliance with International Financial
Reporting Standards, as stated in Note 4 to the financial statements;
(c)
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
(d) 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.
David McLemore
Chair and Interim Chief Executive Officer
Sydney, 18 February 2013
64
Boart Longyear
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
Revenue
Cost of goods sold
Gross margin
Other income
General and administrative expenses
Selling and marketing expenses
Restructuring expenses and related impairments
Other expenses
Operating profit
Interest income
Finance costs
Profit before taxation
Income tax expense
Profit for the year attributable
to equity holders of the parent
Earnings per share:
Basic earnings per share
Diluted earnings per share
Other comprehensive income
Profit for the year attributable
to equity holders of the parent
Gain on cash flow hedges recorded in equity
Transfer to profit or loss on cash flow hedges
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 loss for the year (net of tax)
Note
6
2012
US$'000
2,011,507
(1,499,060)
512,447
10
6
7
9
25
25
3,097
(258,107)
(39,551)
(67,584)
(23,454)
126,848
3,143
(30,065)
99,926
(31,762)
68,164
15.0 cents
14.8 cents
2012
US$'000
68,164
-
-
6,324
(19,448)
3,088
(10,036)
2011
US$'000
2,020,322
(1,456,023)
564,299
3,215
(263,607)
(38,955)
(29)
(19,288)
245,635
5,111
(23,936)
226,810
(66,939)
159,871
35.1 cents
34.8 cents
2011
US$'000
159,871
193
137
(26,087)
(27,782)
8,165
(45,374)
Total comprehensive income for the year
attributed to equity holders of the parent
58,128
114,497
Annual Report 2012
65
Consolidated Statement of Financial Position
As at 31 December 2012 BOART LONGYEAR LIMITED
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivable
Prepaid expenses and other assets
Assets classified as held for sale
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Current tax payable
Loans and borrowings
Total current liabilities
Non-current liabilities
Loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Other equity
Retained earnings
Total equity
Note
30a
11
12
9
31
14
15
16
9
17
19
9
18
18
9
19
21
22
23
2012
US$'000
2011
US$'000
89,628
260,502
533,690
39,331
42,021
965,172
33,997
999,169
628,691
290,786
128,158
192,352
11,582
1,251,569
2,250,738
284,251
36,271
97,486
189
418,197
601,733
7,757
87,634
697,124
1,115,321
1,135,417
1,122,189
70,914
(137,182)
79,496
1,135,417
82,286
320,756
400,439
29,993
23,782
857,256
-
857,256
508,231
294,063
129,843
144,587
10,760
1,087,484
1,944,740
316,660
22,286
82,000
2,518
423,464
310,343
2,905
73,588
386,836
810,300
1,134,440
1,128,923
59,667
(137,182)
83,032
1,134,440
66
Boart Longyear
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
Issued
capital
US$'000
1,132,051
-
-
-
5,204
(8,332)
-
1,128,923
1,128,923
-
-
-
-
2,435
(9,169)
-
Balance at 1 January 2011
Profit for the period
Other comprehensive loss
for the period
Payment of dividends
Vesting of LTIP rights, restricted shares
Purchase of shares for LTIP
Share-based compensation
Balance at 31 December 2011
Balance at 1 January 2012
Profit for the period
Other comprehensive loss
for the period
Payment of dividends
Vesting of LTIP rights, restricted shares
Purchase of shares for LTIP
Share-based compensation
Balance at 31 December 2012
1,122,189
Foreign
currency
translation
reserve
US$'000
Equity-settled
compensation
reserve
US$'000
Hedging
reserve
US$'000
Other
equity
US$'000
Accumulated
(losses)/
retained
earnings
US$'000
Total
attributable
to owners of
the parent
US$'000
76,421
-
(26,087)
-
-
-
-
50,334
50,334
-
-
6,324
-
-
-
-
56,658
8,415
-
-
-
(5,204)
-
6,122
9,333
9,333
-
-
-
-
(2,435)
-
7,358
14,256
(259)
-
(137,182)
-
(19,477)
159,871
1,059,969
159,871
259
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(137,182)
(137,182)
-
-
-
-
-
-
-
(137,182)
(19,546)
(37,816)
-
-
-
83,032
83,032
68,164
-
(16,360)
(55,340)
-
-
-
79,496
(45,374)
(37,816)
-
(8,332)
6,122
1,134,440
1,134,440
68,164
-
(10,036)
(55,340)
-
(9,169)
7,358
1,135,417
Annual Report 2012
67
Consolidated Statement of Cash Flows
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
Note
2012
US$'000
2011
US$'000
Cash flows from operating activities
Profit for the year
Adjustments provided by operating activities:
Income tax expense recognised in profit
Finance costs recognised in profit
Depreciation and amortisation
Interest income recognised in profit
Loss (gain) on sale or disposal of non-current assets
Impairment of current and non-current assets
Non-cash foreign exchange loss
Share-based compensation
Long-term compensation - cash rights
Changes in net assets and liabilities, net of effects
from acquisition and disposal of businesses:
Decrease (increase) 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
7
8
6
8
8, 32
8
6
68,164
31,762
30,065
127,443
(3,143)
900
36,300
1,472
7,304
3,336
45,906
(140,276)
(20,588)
(39,668)
6,742
155,719
(28,928)
3,143
(65,722)
64,212
159,871
66,939
23,936
110,623
(5,111)
(365)
450
686
5,854
2,670
(62,052)
(126,305)
11,286
58,844
(3,801)
243,525
(23,541)
5,111
(27,394)
197,701
68
Boart Longyear
Consolidated Statement of Cash Flows (continued)
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
Note
2012
US$'000
2011
US$'000
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Intangible costs paid
Net cash flows used in investing activities
Cash flows from financing activities
Payments for share purchases for LTIP
Payments for debt issuance costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash flows from financing activities
24
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
30a
(247,653)
3,266
(35,141)
(279,528)
(9,169)
(490)
418,444
(129,872)
(55,340)
223,573
8,257
82,286
(915)
89,628
(179,655)
2,908
(41,292)
(218,039)
(8,332)
(7,627)
752,237
(683,708)
(37,816)
14,754
(5,584)
94,944
(7,074)
82,286
Annual Report 2012
69
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
1.
GENERAL INFORMATION
Boart Longyear Limited (the “Parent”) 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
“Company”) 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
26 Butler Boulevard
Burbridge Business Park
Adelaide Airport, SA 5650
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 Company 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.
Standards and Interpretations issued not yet effective
The accounting standards and AASB Interpretations that will be applicable to the Company and may have an
effect 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 Company.
Financial instruments
AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9 ‘Financial Instruments’
introduces new requirements 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; and
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.
These amendments will be adopted for the year ending 31 December 2015 subject to the AASB adopting the
amendments to IFRS 9 (AASB effective date is currently 1 January 2013). Management has not yet assessed
the impact of adoption of these amendments.
Consolidated financial statements
AASB 10 ‘Consolidated Financial Statements’ introduces a single consolidation model for all entities based on
control, irrespective of the nature of the investee. This standard will be adopted for the year ending 31 December
2013. Management does not believe that the adoption of this standard will have a significant impact on the
Company’s financial results or statement of financial position.
Fair value measurement
AASB 13 ‘Fair Value Measurement’ defines fair value and provides guidance on how to determine fair value and
requires disclosures about fair value measurement. This standard will be adopted for the year ending 31
December 2013. Management has not yet assessed the impact of the adoption of this standard.
70
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
2.
ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)
Employee benefits
Amendments to AASB 119 ‘Employee Benefits’ require changes in the calculation of the net defined benefit
liability and pension expense and provides changes to certain financial statement disclosures. These
amendments will be adopted for the year ending 31 December 2013. The primary impact will be that beginning
for 2013, the interest cost and expected return on assets will be combined into net financing cost. This will be
determined as the interest on the net liability based on the assumed discount rate. The net impact will be an
increase in the pension expense which will vary from country to country depending on the spread between the
discount rate and the expected return on asset assumption used previously. Management does not believe that
the adoption of this standard will have a significant impact on the Company’s financial results or statement of
financial position.
Financial instruments
A revised version of AASB 9 ‘Financial Instruments’ incorporates revised requirements for the classification and
measurement of financial liabilities. This revised standard will be adopted for the year ending 31 December 2013.
Management does not believe that the adoption of this standard will have a significant impact on the Company’s
financial results or statement of financial position.
Disclosure of interests in other entities
AASB 12 ‘Disclosure of Interests in Other Entities’ requires disclosure of information that enables financial
statement users to evaluate the nature of, and risks associated with, interests in other entities and the effects of
those interests on its financial position, financial performance and cash flows. This standard will be adopted for
the year ending 31 December 2013. Management has not yet assessed the impact of the adoption of this
standard.
Additional amendments of Australian Accounting Standards have been issued, the adoption of which
management does not believe will have a significant impact on the Company’s financial results or statement of
financial position.
3.
CRITICAL ACCOUNTING POLICIES
In applying A-IFRS, management is required to make judgements, estimates and form assumptions that affect
the application of accounting policies and reported amounts of assets and liabilities and the disclosure of
contingent liabilities at the date of the financial statements, and the reported revenue and expenses during the
periods presented herein. On an ongoing basis, management evaluates its judgements and estimates in relation
to asset, liabilities, contingent liabilities, revenues 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 judgements about the 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 respective periods in which they are revised if only those periods are affected, or in the
respective periods of the revisions as well as future periods if the revision affects both current and future periods.
The key judgements, estimates and assumptions that have or could have the most significant effect on the
amounts recognised in the financial statements relate to the following areas:
(a)
Estimated Impairment of Goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-
generating units to which goodwill has been allocated. The value in use calculation requires the
Company to estimate the future cash flows expected to arise from the cash-generating unit and a
suitable discount rate in order to calculate present value. These estimates are subject to risk and
uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which
may impact the recoverable amount of the assets.
The carrying amount of goodwill at 31 December 2012 and 31 December 2011 was $290,786,000 and
$294,063,000, respectively, after an impairment loss of $6,839,000 was recognised during 2012. See
Note 15.
Annual Report 2012
71
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
3.
CRITICAL ACCOUNTING POLICIES (CONTINUED)
(b)
Other Intangible Assets
The Company values identifiable other intangible assets acquired in a business combination based on a
combination of independent valuations in some cases and management’s estimate of the net present
value of estimated future cash flows of the assets. Identifiable intangible assets are amortised over their
estimated useful lives. Given the estimates involved, management reviews the carrying value of these
assets annually for impairment.
The carrying amount of other intangible assets at 31 December 2012 and 31 December 2011 was
$128,158,000 and $129,843,000, respectively, after impairment losses of $15,554,000 and $393,000
were recognised during 2012 and 2011, respectively. See Note 16.
(c)
Useful lives of Property, Plant and Equipment
The estimation of useful lives of assets has been based on historical experience. In addition, the
condition of the assets is assessed at least annually and considered against the remaining useful life.
Adjustments to useful lives are made when considered necessary.
(d)
Income Taxes
The Company is subject to income taxes in Australia and other jurisdictions around the world in which
the Company operates. Significant judgement is required in determining the Company’s current tax
assets and liabilities. Judgement is also required in assessing whether deferred tax assets and certain
deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising
from unrecouped tax losses, capital losses, foreign tax credits and temporary differences, are
recognised only where it is considered more likely than not that they will be recovered, which is
dependent on the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits and repatriation of retained earnings depend
on management’s estimates of future cash flows. Judgements are also required about the application of
income tax legislation and its interaction with income tax accounting principles. These judgements and
assumptions are subject to risk and uncertainty, hence there is a possibility that changes in
circumstances will alter expectations, which may impact the amount of deferred tax assets and tax
liabilities recognised on the balance sheet. In such circumstances, some or all of the carrying amount of
recognised deferred tax assets and tax liabilities may require adjustment, resulting in a corresponding
credit or charge to the income statement.
(e)
Defined Benefit Pension Plans
The Company’s accounting policy for defined benefit pension plans requires management to make
annual estimates and assumptions about future returns on classes of assets, future remuneration
changes, employee attrition rates, administration costs, changes in benefits, inflation rates, exchange
rates, life expectancy and expected remaining periods of service of employees. In making these
estimates and assumptions, management considers advice provided by external advisers, such as
actuaries. Where actual experience differs to these estimates, actuarial gains and losses are
recognised directly in equity.
4.
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 consolidated financial statements of the Company.
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 Company 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 18 February 2013.
72
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
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.
At the Company’s annual general meeting on 11 May 2010, shareholders approved a 10 for 1 share
consolidation. Trading in the consolidated shares commenced 13 May 2010. The Company’s earnings per
share information, as well as the number of shares and rights under the LTIP, option plan and restricted shares
have been restated in this report using the consolidated share amounts.
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 Company.
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 Company 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 Company until such time as the Company
ceases to control such entity. Where necessary, adjustments are made to the financial statements of subsidiaries
to make their accounting policies consistent with Company 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 2012 and the comparative information.
(a)
Presentation currency
Results of operating businesses are recorded in their functional currencies, which are generally their
local currencies. The US dollar is the Company’s predominant currency. Accordingly, management
believes that reporting the Company’s financial statements in the US dollar is most representative of the
Company’s financial results and position and therefore the consolidated financial information is
presented in US dollars.
(b)
Cash and cash equivalents
Cash and cash equivalents primarily include deposits with financial institutions repayable upon demand.
Cash overdrafts are included in current liabilities in the statement of financial position unless there is a
legal right of offset.
(c)
Trade and other receivables
Trade receivables are recorded at amortised cost. The Company reviews collectability of trade
receivables on an ongoing basis and provides allowances for credit losses when there is evidence that
trade receivables may not be collectible. These losses are 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 accounts. Subsequent recoveries of amounts previously written off
are recorded in other income in profit or loss.
Annual Report 2012
73
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d)
Inventories
Inventories are measured at the lower of cost or net realisable value. The cost of most 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 overhead expenses (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.
Allowances are recorded for inventory considered to be excess or obsolete and damaged items are
written down to the net realisable value.
(e)
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment
losses. Costs include expenditures that are directly attributable to the acquisition of the assets,
including the costs of materials and direct labour and other costs directly attributable to bringing the
assets to a working condition for the intended use. 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 related to previously capitalised assets are capitalised only when it is probable that
they will result in commensurate future economic benefit and the costs can be reliably measured. All
other costs, including repairs and maintenance, are recognised in profit or loss as incurred.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease
terms or their useful lives. Items in the course of construction or not yet in service 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
years
5-10
years
5-12
years
1-5
years
5-10
3-5
1-7
years
years
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
74
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Goodwill and other intangible assets
Goodwill
Goodwill resulting from business combinations is recognised as an asset at the date that control is
acquired. 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 previously held equity interest in
the acquiree (if any) over the net amounts of the identifiable assets acquired and the liabilities assumed.
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 Company’s cash-generating units expected to
benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication that the carrying value of 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. An impairment loss recognised for goodwill is not reversed in a
subsequent period.
Upon 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 Company 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 three
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 business combinations are identified and recognised
separately from goodwill where they satisfy the definition of an intangible asset and their fair values can
be reliably measured. Contractual customer relationships have finite useful lives and are carried at cost
less accumulated amortisation and accumulated impairment losses.
Contractual customer relationships are amortised over 10 – 15 years on a straight-line basis.
Amortisation methods and useful lives are reassessed at each reporting date.
Patents
Patents are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is charged on a straight-line basis over estimated useful lives of 10 - 20 years.
Amortisation methods and useful lives are reassessed at each reporting date.
Research and development costs
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the production of new or substantially improved
products and processes. Development costs are 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 Company intends to and has sufficient resources to complete
development and to use or sell the asset. Capitalised costs include the cost of materials, direct labour
and overhead costs directly attributable to preparing the asset for its intended use. Other development
costs are expensed when incurred.
Capitalised development costs are measured at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight-line basis over the estimated useful lives,
which on average is 15 years.
Annual Report 2012
75
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g)
Leased assets
Leases are classified as finance leases when the terms of the leases transfer substantially all the risks
and rewards incidental to ownership of the leased assets to the Company. All other leases are
classified as operating leases.
Assets held under finance leases are initially recognised at 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 statement of financial position as a finance lease
obligation.
Finance lease payments are apportioned between finance charges and reductions of the lease
obligations so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
leased assets are amortised on a straight-line basis over the shorter of the lease terms or the estimated
useful lives of the assets.
Operating lease payments are recognised as expenses on a straight-line basis over the lease terms.
Lease incentives
In the event that lease incentives are received at the inception of operating leases, such incentives are
recognised as liabilities. The aggregate benefits of incentives are recognised as reductions of rental
expense on a straight-line basis over the lease terms.
(h)
Current and deferred taxation
Income tax expense includes current and deferred tax expense (benefit). Income tax expense (benefit)
is recognised in profit or loss except to the extent that amounts relate to items recognised directly in
equity, in which case the income tax expense (benefit) is also recognised in equity, or amounts that
relate to a business combination, in which case the income tax expense (benefit) is recognised in
goodwill.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at
the reporting date, and any adjustment to tax payable in respect of previous years. Management
periodically evaluates provisions taken in tax returns with respect to situations in which applicable tax
regulation is open to interpretation. The Company establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred tax is recognised using the balance sheet method, in respect of all temporary differences for
which 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 but have not reversed at the balance sheet date. Temporary
differences are differences between the Company’s taxable income and its profit before taxation, as
reflected in profit or loss, that arise from the inclusion of profits and losses in tax assessments in periods
different from those in which they are recognised in profit or loss.
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 likely 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.
76
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h)
Current and deferred taxation (continued)
Tax consolidation
The Company includes tax consolidated groups for the entities incorporated in Australia and the United
States. Tax expense (benefit) and deferred tax assets/liabilities 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 credits of
each member 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.
(i)
Derivative financial instruments
The Company periodically 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 executed and are
subsequently remeasured to fair value at each reporting date. The resulting gain or loss is recognised
in profit or loss 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 Company designates certain derivatives as either hedges of the fair value of recognised assets,
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).
Hedge accounting
The Company 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 Company 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 Company documents whether
the hedging instrument 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 Company 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.
Annual Report 2012
77
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i)
Derivative financial instruments (continued)
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, other income, or interest expense as 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.
Hedge accounting is discontinued when the Company 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.
(j)
Impairment
Non-financial assets
The Company’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 respective 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 are largely independent from other assets and groups. 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.
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.
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.
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.
(k)
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 Company prior to the end of the financial period that are unpaid
and arise when the Company becomes obligated to make future payments.
78
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l)
Provisions
A provision is recognised if, as a result of a past event, the Company 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 Company maintains warranty reserves for products it manufactures. 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
claims; and 3) the amount of the claims can be reliably estimated.
Restructuring
A provision for restructuring is recognised when the Company has approved a detailed and formal
restructuring plan and the Company 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 Company’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 from a
contract are less 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.
(m)
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 and are calculated at
discounted amounts based on rates that the Company expects to pay as at reporting date, including
costs such as workers’ compensation insurance and payroll tax, when it is probable that settlement will
be required and they are capable of being reliably measured.
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
Company 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 Company as the benefits are
provided to the employees.
Provisions are recognised for amounts expected to be paid under short-term cash bonus or profit-
sharing plans if the Company has present legal or constructive obligations to pay these amounts as a
result of past service provided by employees and the obligations can be reliably estimated.
Annual Report 2012
79
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m)
Employee benefits (continued)
Defined contribution pension plans and post-retirement benefits
A defined contribution plan is a pension plan under which the Company pays fixed contributions into a
separate entity. The Company 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 profit or loss 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 statement of financial position.
Defined benefit pension plans
The Company’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 the terms of the Company’s defined benefit obligations. 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.
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. For stock options, 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 Company’s estimate of shares that will
eventually vest.
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 the achievement of performance metrics established by the Board of Directors
related to long-term incentives that includes performance vesting conditions. 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.
(n)
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. Borrowings are classified as current liabilities unless the Company
has an unconditional right to defer settlement of the liability for at least 12 months after the balance
sheet date.
80
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)
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 arrangements.
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 or the amount initially recognised less cumulative
amortisation in accordance with the revenue recognition policies described in Note 4(q).
(p)
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.
(q)
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 tax. 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 the statement of comprehensive income 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 metres drilled or other
services performed 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.
(r)
Foreign currency
The financial statements of the Company and its subsidiaries have been translated into US dollars using
the exchange rates at each balance sheet date for assets and liabilities and at an average exchange
rates for revenue 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 Company’s presentation currency is the US dollar. The Company 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 or other expenses in profit or loss.
(s)
Contingencies
The recognition of provisions for legal disputes is subject to a significant degree of judgement.
Provisions are established when (a) the Company 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.
Annual Report 2012
81
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
4.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t)
Business combinations
Business combinations 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 Company in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, consideration for acquisitions includes assets or liabilities resulting from contingent
consideration arrangements, measured at the acquisition-date fair value. Subsequent changes in such
fair values are adjusted against the costs of the acquisitions where they qualify as measurement period
adjustments (see below). All other subsequent changes in the fair values of contingent consideration
classified as assets or liabilities are recognised in the statement of comprehensive income as incurred.
Changes in the fair values of contingent consideration classified as equity are not recognised.
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 Company 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.
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Company 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 Company obtains
complete information about facts and circumstances that existed as of the acquisition date, and is
subject to a maximum of one year.
(u)
Goods and services tax
Revenue, 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.
82
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
5.
SEGMENT REPORTING
Information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance is aggregated based on the Company’s two general operating activities –
Drilling Services and Products. The Drilling Services segment provides a broad range of drilling services to
mining companies, energy companies, water utilities, environmental and geotechnical engineering firms,
government agencies and other mining services companies. The Products segment designs, manufactures and
sells drilling equipment and performance tooling to customers in the drilling services and mining industries.
Information regarding these segments is presented below. The accounting policies of the reportable segments
are the same as the Company’s accounting policies.
Segment revenue and results
Segment revenue
Segment profit
Drilling Services
Products
2012
US$'000
1,516,203
495,304
2,011,507
2011
US$'000
1,447,881
572,441
2,020,322
Unallocated 1
Restructure expenses and related impairments
Finance costs
Interest income
Profit before taxation
2012
US$'000
2011
US$'000
186,992
93,177
280,169
(85,737)
(67,584)
(30,065)
3,143
99,926
212,542
119,765
332,307
(86,643)
(29)
(23,936)
5,111
226,810
(1) Unallocated costs include corporate general and administrative costs as well as other expense items
such as foreign exchange gains or losses.
Other segment information
Depreciation and amortisation of
segment assets
2012
US$'000
2011
US$'000
Additions to non-current
assets 2
2012
US$'000
2011
US$'000
102,610
14,061
116,671
10,772
127,443
89,448
12,757
102,205
8,418
110,623
241,524
27,564
269,088
21,026
290,114
138,538
45,360
183,898
34,436
218,334
Drilling Services
Products
Total of all segments
Unallocated 1
Total
(1) Unallocated additions to non-current assets relate to the acquisition of general corporate assets such as
software and hardware.
(2) Non-current assets excluding deferred tax assets.
The Company has no single external customer that provided more than 10% of the Company’s revenue.
Annual Report 2012
83
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
5.
SEGMENT REPORTING (CONTINUED)
Geographic information
The Company’s two business segments operate in five principal geographic areas – North America, Asia Pacific,
Latin America, Africa, and Europe. The Company’s revenue from external customers and information about its
segment assets by geographical locations are detailed below:
North America
Asia Pacific
Latin America
Africa
Europe
Total
Revenue from external customers
2012
US$'000
752,886
534,687
314,877
305,550
103,507
2,011,507
2011
US$'000
780,381
534,915
290,509
288,168
126,349
2,020,322
Non-current assets 1
2011
US$'000
2012
US$'000
378,804
393,101
116,649
140,703
29,960
1,059,217
378,472
360,376
98,529
83,104
22,416
942,897
(1) Non-current assets excluding deferred tax assets.
6.
REVENUE
An analysis of the Company’s revenue for the year is as follows:
Revenue from the rendering of services
Revenue from the sale of goods
Interest income:
Bank deposits
Other
Total
2012
US$'000
1,516,202
495,305
2,011,507
2,863
280
3,143
2,014,650
2011
US$'000
1,447,881
572,441
2,020,322
5,003
108
5,111
2,025,433
84
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
7.
FINANCE COSTS
Interest on loans and bank overdrafts
Interest rate swap expense
Amortisation of debt issuance costs
Interest on obligations under finance leases
Finance costs due to debt repayment:
Interest rate swap expense
Write-off of debt issuance costs
2012
US$'000
2011
US$'000
28,965
-
951
149
30,065
-
-
-
21,252
347
1,179
251
23,029
137
770
907
Total finance costs
30,065
23,936
8.
PROFIT FOR THE YEAR
(a)
Gains and losses
Profit for the year includes the following gains and (losses):
(Loss) gain on disposal of property,
plant and equipment
2012
US$'000
2011
US$'000
(900)
365
Net foreign exchange losses
(5,949)
(3,381)
Net (expense) reversal of bad debt
(605)
(245)
(b)
Employee benefits expenses
Salaries and wages
Post-employment benefits:
Defined contribution plans
Defined benefit plans
Long-term incentive plans:
Equity-settled share-based payments
Cash rights compensation
Termination benefits
Other employee benefits 1
2012
US$'000
2011
US$'000
(592,371)
(591,464)
(23,863)
(2,808)
(21,175)
(1,106)
(7,304)
(3,336)
(22,974)
(166,771)
(819,427)
(5,854)
(2,670)
(135)
(154,794)
(777,198)
(1) Other employee benefits include items such as medical benefits, workers’ compensation, other
fringe benefits, state taxes, etc.
Annual Report 2012
85
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
8.
PROFIT FOR THE YEAR (CONTINUED)
(c)
Other
Depreciation of non-current assets
Amortisation of non-current assets
Impairment of property, plant, and equipment
Impairment of intangibles
Impairment of goodwill
Impairment of inventory
Operating lease rental expense
9.
INCOME TAXES
Income tax expense is as follows:
Income tax expense:
Current tax expense
Adjustments recognised in the current year
in relation to the current tax of prior years
Deferred tax (benefit) expense
2012
US$'000
2011
US$'000
(110,991)
(16,452)
(6,164)
(15,554)
(6,839)
(7,743)
(32,276)
(95,096)
(15,527)
(57)
(393)
-
(568)
(37,686)
2012
US$'000
2011
US$'000
70,913
68,574
2,262
(41,413)
31,762
(5,208)
3,573
66,939
(a) The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax
expense in the financial statements as follows:
Profit before taxation
Income tax expense calculated at
Australian rate of 30%
Impact of higher rate tax countries
Impact of lower rate tax countries
Net non-deductible/non-assessable items
Unrecognised tax losses
Profit/Losses subject to double taxation in the US
Unutilised foreign tax credits
Recognition of net deferred tax assets/liabilities
arising in prior years
Deduction of foreign taxes
Other
Under (over) provision from prior years
99,926
226,810
29,977
4,903
(646)
3,024
145
(2,468)
7,055
(16,827)
-
4,337
29,500
2,262
31,762
68,042
5,196
(20,473)
(2,763)
(826)
4,547
16,908
150
(5,594)
6,960
72,147
(5,208)
66,939
86
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
9.
INCOME TAXES (CONTINUED)
(b) Income tax recognised directly in equity during the period
The following current and deferred amounts were charged (credited) directly to equity during the year:
Deferred tax:
Actuarial movements on defined benefit plans
Cash flow hedges
(c) Current tax assets and liabilities
Current tax assets:
Income tax receivable attributable to:
Parent
Other entities in the tax consolidated group
Other entities
Current tax liabilities:
Income tax payable attributable to:
Entities other than parent
and entities in the consolidated group
(d) Deferred tax balances
Deferred tax comprises:
Temporary differences
Unused tax losses and credits
2012
US$'000
2011
US$'000
3,088
-
3,088
8,236
(71)
8,165
(21,684)
26,069
34,946
39,331
(6,857)
14,282
22,568
29,993
97,486
97,486
82,000
82,000
118,801
65,794
184,595
99,055
42,627
141,682
Annual Report 2012
87
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
9.
INCOME TAXES (CONTINUED)
2012
Deferred tax assets (liabilities)
temporary differences
Property, plant and equipment
Provisions
Doubtful debts
Intangibles
Share-issue expenses
Accrued liabilities
Pension
Debt and interest
Inventory
Investments in subsidiaries
Unrealised foreign exchange
Other
Unused tax losses and credits:
Tax losses
Foreign tax credits
Opening Credited to
balance
US$'000 US$'000
Credited
FX
income differences to equity
US$'000
Closing
balance
US$'000 US$'000
(5,691)
4,162
188
(9,079)
4,935
2,590
10,156
25,562
17,616
(1,500)
38,455
11,661
99,055
1,408
6,358
169
(380)
(2,487)
2,016
2,291
(522)
7,330
-
3,814
(1,751)
18,246
33,611
9,016
141,682
(11,482)
34,649
41,413
19
(106)
(5)
232
-
(66)
(260)
(654)
(450)
-
-
(298)
(1,588)
-
-
(1,588)
-
-
-
-
-
-
3,088
-
-
-
-
-
3,088
-
-
3,088
(4,264)
10,414
352
(9,227)
2,448
4,540
15,275
24,386
24,496
(1,500)
42,269
9,612
118,801
22,129
43,665
184,595
192,352
(7,757)
184,595
Presented in the statement of financial position as follows:
Deferred tax asset
Deferred tax liability
88
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
9.
INCOME TAXES (CONTINUED)
2011
Deferred tax assets (liabilities)
temporary differences
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
Unrealised foreign exchange
Other
Unused tax losses and credits:
Tax losses
Foreign tax credits
Opening Credited to
balance
US$'000 US$'000
Credited
FX
income differences to equity
US$'000
Closing
balance
US$'000 US$'000
(8,842)
2,429
403
(9,605)
3,176
11,182
2,075
9,015
13,523
2,774
19,090
13,874
(1,500)
15,905
5,782
79,281
3,054
1,687
(223)
709
(3,237)
(6,247)
475
(7,267)
11,781
(2,703)
(5,473)
3,478
-
8,569
5,770
10,373
48,371
8,202
56,573
(14,760)
814
(13,946)
97
46
8
(183)
61
-
40
172
258
-
364
264
-
-
109
1,236
-
-
-
-
-
-
-
-
-
-
8,236
-
(71)
-
-
-
-
-
8,165
-
-
-
(5,691)
4,162
188
(9,079)
-
4,935
2,590
10,156
25,562
-
13,981
17,616
(1,500)
24,474
11,661
99,055
33,611
9,016
42,627
135,854
(3,573)
1,236
8,165
141,682
Presented in the statement of financial position as follows:
Deferred tax asset
Deferred tax liability
Unrecognised deferred tax assets
Tax losses - revenue
Unused tax credits
144,587
(2,905)
141,682
2012
US$'000
2011
US$'000
3,582
32,889
36,471
2,449
63,754
66,203
The Parent Entity 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.
Entities within the Australian tax-consolidated group have entered into tax-funding arrangements with the head
entity. Under the terms of the tax-funding arrangements, the tax-consolidated groups and each of the entities
within the tax-consolidated group agrees 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 group.
Annual Report 2012
89
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
9.
INCOME TAXES (CONTINUED)
The Canada Revenue Agency (“CRA”) has been reviewing the Company’s tax returns for the years 2005 to
2009. The review has been broken down into two time periods, 2005 to 2006 and 2007 to 2009. The review of
the first time period was completed in 2011, and assessments were received in 2011 and 2012. The review of
the second time period currently is underway and is expected to be completed in 2013.
The majority of the taxes, interest and penalties assessed for the first time periods relate to profits which the CRA
asserts should have been attributable to the Company’s Canadian operations. These profits were assessed in
other jurisdictions and taxes were paid in those jurisdictions, many of which have tax rates similar to Canada.
The Company disagrees with the CRA’s conclusions and has filed a Notice of Objection for the 2005 to 2006 time
periods. The Company is required to provide security while its appeal of the assessments is under consideration,
and the Company is in discussions with the CRA as to its requirements for such security. Furthermore, the
Company has requested relief for the assessments for the period through a process known as “competent
authority,” which allows interested jurisdictions to determine where the Company’s income and costs should be
reported. This process avoids double payment of taxes, but the Company would be exposed to penalties and
interest on any underpayments. The Company will likely follow similar proceedures for any assessments that may
be received for the 2007 to 2009 review.
The Company believes it is appropriately reserved in respect of this matter.
10.
RESTRUCTURING AND IMPAIRMENT CHARGES
During 2012, the Company initiated a significant effort to reduce operating costs through a series of restructuring
activities. The Company’s restructuring efforts 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; and
the proposed sale of non-mining environmental and infrastructure businesses (see Note 31).
The Company incurred costs related to executing the restructuring and cost reduction plans, including costs
associated with employee separations, leased facilities, and impairments of inventory and capital equipment
related to relocating certain manufacturing activities and resizing the business. Expenses related to executing
the restructuring and cost reduction plan were as follows:
Employee separation costs
Onerous leases
Impairment of inventory
Impairment of property, plant and equipment
Impairment of goodwill
Impairment of intangibles
Impairment of development asset
Impairment of software
Net of tax
2012
US$'000
2011
US$'000
22,974
8,514
7,743
5,960
6,839
3,491
8,416
3,647
67,584
46,102
166
(142)
-
-
-
-
-
5
29
20
Of these expenses, approximately $13 million relate to cash expenses that were incurred in 2012.
90
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
10.
RESTRUCTURING AND IMPAIRMENT CHARGES (CONTINUED)
Restructuring expenses relate to the following expense categories:
Cost of goods sold
General and administrative expenses
Selling and marketing expenses
Research and development
Other expense
Net of Tax
11.
TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for doubtful accounts
Goods and services tax receivable
Other receivables
The ageing of trade receivables is detailed below:
Current
Past due 0 - 30 days
Past due 31 - 60 days
Past due 61-90 days
Past due 90 days
2012
US$'000
2011
US$'000
25,383
20,113
3,326
8,434
10,328
67,584
46,102
-
16
13
-
-
29
20
2012
US$'000
2011
US$'000
222,248
(1,841)
35,082
5,013
260,502
292,719
(1,412)
20,245
9,204
320,756
2012
US$'000
2011
US$'000
156,357
45,273
7,074
6,005
7,539
222,248
220,532
45,619
11,344
7,778
7,446
292,719
The movement in the allowance for doubtful accounts in respect of trade receivables is detailed below:
Opening balance
Additional provisions
Amounts used
Amounts reversed
Foreign currency exchange differences
Closing balance
2012
US$'000
2011
US$'000
1,412
1,583
(186)
(978)
10
1,841
3,619
500
(2,361)
(255)
(91)
1,412
Annual Report 2012
91
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
11.
TRADE AND OTHER RECEIVABLES (CONTINUED)
The average credit period on sales of goods as at 31 December 2012 is 53 days (2011: 52 days). No interest is
charged on trade receivables.
The Company’s policy requires customers to pay the Company in accordance with agreed payment terms. The
Company’s settlement terms are generally 30 to 60 days from date of invoice. All credit and recovery risk
associated with trade receivables has been provided for in the statement of financial position. Trade receivables
have been aged according to their original due date in the above ageing analysis. The Company holds security
for a number of trade receivables in the form of letters of credit, deposits, and advanced payments.
The Company has used the following basis to assess the allowance loss for trade receivables and as a result is
unable to specifically allocate the allowance to the ageing categories shown above:
•
•
•
the general economic conditions in specific geographical regions;
an individual account by account specific risk assessment based on past credit history; and
any prior knowledge of debtor insolvency or other credit risk.
12.
INVENTORIES
Raw materials
Work in progress
Finished products
13.
FINANCIAL INSTRUMENTS
Capital risk management
2012
US$'000
2011
US$'000
52,606
13,029
468,055
533,690
32,019
6,774
361,646
400,439
The Company manages its capital to ensure that entities in the Company will be able to continue as going
concerns while maximising the return to stakeholders through the optimisation of the debt and equity balances.
The capital structure of the Company consists of debt, which includes the loans and borrowings disclosed in Note
18, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued
capital, reserves, and retained earnings as disclosed in Notes 21, 22, and 23, respectively.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are disclosed in Note 4.
Categories of financial instruments
Financial assets
Current
Cash and cash equivalents
Trade and other receivables
2012
US$'000
2011
US$'000
89,628
260,502
350,130
82,286
320,756
403,042
92
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
13.
FINANCIAL INSTRUMENTS (CONTINUED)
Financial liabilities
Current
Amortised cost:
Trade and other payables
Loans and borrowings
Non-current
Amortised cost:
Loans and borrowings
2012
US$'000
2011
US$'000
284,251
189
284,440
316,660
2,518
319,178
601,733
601,733
310,343
310,343
At the reporting date there are no significant concentrations of credit risk. The carrying amount reflected above
represents the Company’s maximum exposure to credit risk for trade and other receivables.
Financial risk management objectives
The Company’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
Company 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 Company 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
Company’s policies approved by the Board, which provide written principles on foreign exchange risk and interest
rate risk. The Company does not enter into or trade financial instruments, including derivative financial
instruments, for speculative purposes.
Market risk
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
and interest rates (Note 4(i)). The Company periodically enters into certain 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; and
interest rate swaps to mitigate the risk of rising interest rates.
Annual Report 2012
93
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
13.
FINANCIAL INSTRUMENTS (CONTINUED)
Foreign currency risk management
Company 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, which may include utilising forward foreign exchange contracts.
The most significant carrying amounts of monetary assets and monetary liabilities (which include intercompany
balances with other subsidiaries) that: (1) are denominated in currencies other than the functional currency of the
respective Company subsidiary; and (2) cause foreign exchange rate exposure, at 31 December are as follows:
Assets
Liabilities
2012
US$'000
2011
US$'000
2012
US$'000
2011
US$'000
Australian Dollar
Canadian Dollar
Euro
US Dollar
543,182
10,692
2,515
193,379
402,240
7,306
33,510
206,392
39,895
93,889
93,582
439,146
7,972
88,785
38,326
386,926
Foreign currency sensitivity
The Company is mainly exposed to exchange rate fluctuations in the Australian Dollar (AUD), Canadian Dollar
(CAD), Euro (EUR) and United States Dollar (USD). The Company is also exposed to translation differences as
the Company’s presentation currency is different from the functional currencies of various subsidiaries. However,
this represents a translation risk rather than a financial risk and consequently is not included in the following
sensitivity analysis.
The following tables reflect the Company’s sensitivity to a 10% change in the exchange rate of each of the
currencies listed above. This sensitivity analysis includes only outstanding monetary items denominated in
currencies other than the respective subsidiaries’ functional currencies and remeasures these at the respective
year end to reflect a 10% decrease in the indicated currency against the respective subsidiaries’ functional
currencies. A positive number indicates an increase in net profit and/or net assets.
Net profit
Net assets
Net profit
Net assets
10% change in AUD
10% change in CAD
2012
US$'000
(1,913)
(45,753)
2011
US$'000
(586)
(35,842)
2012
US$'000
2011
US$'000
4,614
7,563
4,745
7,407
10% change in EUR
10% change in USD
2012
US$'000
8,279
8,279
2011
US$'000
438
438
2012
US$'000
4,090
22,342
2011
US$'000
2,441
16,412
In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk
as the year-end exposure does not reflect the exposure during the course of the year.
94
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
13.
FINANCIAL INSTRUMENTS (CONTINUED)
Forward foreign exchange contracts
There were no open forward foreign currency contracts as of 31 December 2012 or 2011.
Interest rate risk management
The Company is exposed to interest rate risk as entities within the Company borrow funds at both fixed and
floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed
and floating-rate borrowings and, from time to time, by the use of interest rate swap contracts. There are no
interest rate swaps as of 31 December 2012 (2011 : nil). Hedging activities are evaluated regularly to align with
interest rate views and risk tolerance. The Company’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.
During the year, if interest rates had been 100 basis points higher or lower and all other variables were held
constant, the Company’s profit before tax would increase/decrease by $3,080,000 (2011: decrease/increase by
$170,000) all of which is attributable to the Company’s exposure to interest rates on its variable-rate borrowings.
Credit risk management
The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient
collateral, when appropriate, as a means of mitigating the risk of financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical
areas. Ongoing credit evaluation is performed on accounts receivable. The Company holds security for a
number of trade receivables in the form of letters of credit, deposits, and advanced payments.
The Company does not have any significant credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is
limited because the counterparties are banks with high credit ratings assigned by international credit-rating
agencies.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial
statements, net of any allowances for losses, represents the Company’s maximum exposure to credit risk without
taking account of the value of any collateral obtained. See Note 27.
Financial assets and other credit exposures
Maximum credit risk
2012
US$'000
2011
US$'000
Performance guarantees provided, including letters of credit
32,459
21,849
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Company’s Treasurer and Board, who have
built an appropriate liquidity risk management framework for the management of the Company’s short, medium
and long-term funding and liquidity management requirements.
The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecasted and actual cash flows and matching the maturity profiles of
financial assets and liabilities. Included in Note 18 is a list of undrawn facilities that the Company has at its
disposal to further reduce liquidity risk.
Annual Report 2012
95
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
13.
FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity and interest risk tables
The following tables reflect the expected maturities of non-derivative financial liabilities. These are based on the
undiscounted expected cash flows of financial liabilities at the earliest date on which the Company may be
required to pay. The table includes both interest and principal cash flows. The adjustment column represents the
possible future cash flows attributable to the instrument included in the maturity analysis which are not included in
the carrying amount on the balance sheet.
Weighted
average
effective
interest
rate
%
Less
than
1 to 3
3 months
to
1 year
1 month months
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
1 - 5 years 5+ years
Total
Adjust-
ment
2012
Non-interest bearing
payables
Finance lease liability
Variable interest rate
instruments
Fixed interest rate
instruments
2011
Non-interest bearing
payables
Finance lease liability
Variable interest rate
instruments
Fixed interest rate
instruments
8.0%
184,376
17
99,875
35
-
157
-
67
2.1%
538
1,075
4,839
321,770
-
-
-
-
(23)
284,251
253
(20,222)
308,000
7.0%
1,750
3,500
15,750
84,000
368,351
(173,351)
300,000
186,681
104,485
20,746
405,837
368,351
(193,596)
892,504
8.9%
2.2%
7.0%
193,360
40
123,300
80
-
360
-
121
32
63
286
18,363
-
-
-
-
(65)
316,660
536
(1,744)
17,000
1,760
195,192
3,520
126,963
15,839
16,485
86,191
104,675
389,408
389,408
(194,527)
(196,336)
302,191
636,387
96
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
13.
FINANCIAL INSTRUMENTS (CONTINUED)
Liquidity and interest risk tables (continued)
The following tables reflect the expected maturities of non-derivative financial assets. These are based on the
undiscounted expected cash flows of the financial assets.
2012
Non-interest bearing
receivables
Cash
2011
Non-interest bearing
receivables
Cash
Less
than
1 month
US$'000
1 to 3
months
US$'000
3 months
to
1 year
US$'000
Total
US$'000
144,575
89,628
234,203
110,840
-
110,840
5,087
-
5,087
260,502
89,628
350,130
170,920
82,286
253,206
125,340
24,496
-
-
125,340
24,496
320,756
82,286
403,042
The liquidity and interest risk tables are based on the Company’s intent to collect the assets or settle the liabilities
in accordance with the contractual terms.
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
analyses 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 analyses using the applicable yield curve for the
duration of the instruments for non-optional derivatives, and option pricing models for optional
derivatives.
Management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised
cost in the financial statements materially approximate their fair values.
Annual Report 2012
97
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
14.
PROPERTY, PLANT AND EQUIPMENT
Land and
Buildings
US$'000
Plant and
Equipment
US$'000
Construction
in Progress
US$'000
Balance at 1 January 2011
Additions
Disposal
Transfer to/from CIP
Currency movements
Balance at 1 January 2012
Additions
Disposal
Transfers to assets held for sale
Transfer to/from CIP
Transfer from intangible assets
Currency movements
Balance at 31 December 2012
Accumulated depreciation and impairment:
Balance at 1 January 2011
Depreciation
Impairment
Disposal
Currency movements
Balance at 1 January 2012
Depreciation
Impairment
Disposal
Transfers to assets held for sale
Currency movements
Balance at 31 December 2012
Net book value at 31 December 2011
Net book value at 31 December 2012
45,192
1,160
(922)
16,251
(405)
61,276
8,963
(2,462)
(143)
7,935
-
(128)
75,441
(9,101)
(2,584)
-
494
93
(11,098)
(3,321)
(1,867)
2,222
76
(4)
(13,992)
50,178
61,449
615,078
47,624
(17,485)
101,955
(25,678)
721,494
106,333
(26,056)
(53,069)
188,166
1,179
11,101
949,148
(315,925)
(92,512)
(57)
15,370
18,798
(374,326)
(107,670)
(4,297)
22,130
34,477
(8,025)
(437,711)
104,202
129,117
-
(118,206)
(4,228)
110,885
141,343
-
(500)
(196,101)
-
178
55,805
-
-
-
-
-
-
-
-
-
-
-
-
Total
US$'000
764,472
177,901
(18,407)
-
(30,311)
893,655
256,639
(28,518)
(53,712)
-
1,179
11,151
1,080,394
(325,026)
(95,096)
(57)
15,864
18,891
(385,424)
(110,991)
(6,164)
24,352
34,553
(8,029)
(451,703)
347,168
511,437
110,885
55,805
508,231
628,691
The net book value of property, plant and equipment at 31 December 2012 and 2011 includes amounts of
$6,107,000 and $1,770,000, respectively, related to assets held under finance leases.
98
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
15.
GOODWILL
Gross carrying amount:
Balance at 1 January 2011
Currency movements
Balance at 31 December 2011
Balance at 1 January 2012
Impairment loss
Currency movements
Balance at 31 December 2012
Goodwill by cash-generating units
US$'000
297,408
(3,345)
294,063
294,063
(6,839)
3,562
290,786
For purposes of impairment testing, goodwill is included in cash-generating units that are significant individually
or in aggregate. The carrying amount of goodwill included in cash-generating units, by geographic area, is as
follows:
Argentina
Australia
Canada
Chile
Mexico
New Zealand
United States of America
2012
US$'000
2011
US$'000
13,572
157,427
20,255
12,776
-
1,644
85,112
290,786
15,281
153,135
19,728
12,776
4,710
1,542
86,891
294,063
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. If an asset is impaired, it is written down to its recoverable amount.
In its impairment assessment, the Company assumes the recoverable amount based on a value-in-use
calculation using cash flow projections based on the Company’s three-year strategic plan and financial forecasts
over a nine-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 8.9% to 20.3%); and
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 include:
•
•
•
applicable discount rates;
terminal growth rates; and
inflation assumptions.
Based on the impairment testing performed, the Company has recognised an impairment loss on goodwill of
$5,060,000 due to the financial performance of a subsidiary.
In addition, goodwill of $1,779,000 was impaired during the year as a result of the announcement to restructure
and divest of the non-mining environmental and infrastructure business.
Annual Report 2012
99
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
16.
OTHER INTANGIBLE ASSETS
Gross carrying amount:
Balance at 1 January 2011
Additions
Currency movements
Balance at 31 December 2011
Balance at 1 January 2012
Additions
Disposals
Transfer to PP&E
Transfer to held for sale
Currency movements
Balance at 31 December 2012
Accumulated amortisation:
Balance at 1 January 2011
Amortisation for the period
Impairment for the period
Currency movements
Balance at 31 December 2011
Balance at 1 January 2012
Amortisation for the period
Disposals
Transfer to held for sale
Impairment for the period
Currency movements
Balance at 31 December 2012
Trademarks Patents
US$'000 US$'000
Customer
relationships
and other
US$'000
Develop-
ment
Software
assets
US$'000 US$'000 US$'000
Total
3,884
-
-
3,884
3,884
340
(163)
-
-
(78)
3,983
(1,010)
(423)
-
-
(1,433)
(1,433)
-
163
-
-
-
(1,270)
2,947
1,725
-
4,672
4,672
1,071
-
-
-
200
5,943
(847)
(267)
-
-
(1,114)
(1,114)
(395)
-
-
-
2
(1,507)
61,554
-
(691)
60,863
60,863
1,360
(6,253)
-
-
1,267
57,237
(19,783)
(6,165)
-
324
(25,624)
(25,624)
(6,147)
6,253
-
(3,446)
(1,096)
(30,060)
47,334
23,646
-
70,980
70,980
16,413
(3,871)
-
-
(2,599)
80,923
(5,727)
(7,940)
-
-
(13,667)
(13,667)
(9,200)
3,871
-
(3,647)
(213)
(22,856)
20,720
14,935
(567)
35,088
136,439
40,306
(1,258)
175,487
35,088
14,291
-
(1,179)
(588)
(222)
47,390
175,487
33,475
(10,287)
(1,179)
(588)
(1,432)
195,476
(2,777)
(732)
(393)
96
(3,806)
(3,806)
(710)
-
175
(8,461)
1,177
(11,625)
(30,144)
(15,527)
(393)
420
(45,644)
(45,644)
(16,452)
10,287
175
(15,554)
(130)
(67,318)
Net book value at 31 December 2011
Net book value at 31 December 2012
2,451
2,713
3,558
4,436
35,239
27,177
57,313
58,067
31,282
35,765
129,843
128,158
100
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
17.
TRADE AND OTHER PAYABLES
Current
Trade payables
Accrued payroll and benefits
Goods and services tax payable
Accrued drilling costs
Accrued legal and environmental
Accrued interest
Professional fees
Other sundry payables and accruals
2012
US$'000
2011
US$'000
160,076
46,928
27,105
4,916
7,468
5,632
6,067
26,059
284,251
173,936
59,492
25,421
10,013
6,202
5,446
5,331
30,819
316,660
The average credit period on purchases of certain goods is 43 days (2011: 42 days). No interest is charged on
the trade payables for this period. Thereafter, various percentages of interest may be charged on the
outstanding balance based on the terms of the specific contracts. The Company has financial risk management
policies in place to ensure that all payables are paid within the credit timeframe.
18.
LOANS AND BORROWINGS
Unsecured - at amortised cost
Current
Bank loans
Non-current
Senior notes
Revolver bank loans
Debt issuance costs
Secured - at amortised cost
Current - finance lease liabilities
Non-current - finance lease liabilities
Disclosed in the financial statements as:
Current borrowings
Non-current borrowings
A summary of the maturity of the Company's borrowings is as follows:
Less than 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
More than 4 years
2012
US$'000
2011
US$'000
-
2,191
300,000
308,000
(6,331)
300,000
17,000
(6,866)
189
64
601,922
189
601,733
601,922
189
64
-
306,470
295,199
601,922
327
209
312,861
2,518
310,343
312,861
2,518
197
13
-
310,133
312,861
Annual Report 2012
101
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
18.
LOANS AND BORROWINGS (CONTINUED)
Senior notes
The Company has $300,000,000 of senior unsecured notes at an interest rate of 7% with a scheduled maturity
date of 1 April 2021. The Company may redeem all or a portion of the notes prior to maturity subject to certain
conditions, including in certain cases the payment of premiums or make-whole amounts. Guarantors of the
senior notes are the same as the $350,000,000 revolver bank loan facility described below.
Revolver bank loans
The bank facility includes a $350,000,000 revolving bank loan which was increased on 31 July 2012 from an
aggregate principal amount of $250,000,000. As of 31 December 2012 and 2011 the amount drawn was
$308,000,000 and $17,000,000 respectively. Interest rates on borrowings are based on a base rate plus an
applicable margin. The base rate is generally based on either 30-day USD LIBOR or the prime rate as
determined by Bank of America, while the margin is determined based on leverage according to a pricing grid.
$288,000,000 and $15,000,000 of the borrowings as at 31 December 2012 and 2011, were based on 30-day
LIBOR at the time of draws (between 0.210% and 0.215% for 31 December 2012 and between 0.27% and 0.30%
for 31 December 2011) plus a margin of 1.75%, for a weighted average interest rate of 1.96% and 2.03% for 31
December 2012 and 2011, respectively. $20,000,000 and $2,000,000 of the borrowings as at 31 December
2012 and 2011 were based on the prime rate of 3.25% plus a margin of 0.75% for a total interest rate of 4.0%.
The scheduled maturity date is 29 July 2016.
The revolving bank loan was increased by $100,000,000, to an aggregate amount of $450,000,000, on 15
February 2013. A required reduction of $50 million of commitments will occur 18 months after the closing date of
the amendment, 15 August 2014, bringing the total outstanding commitments at that time to $400 million. All
other material terms and conditions of the revolving credit agreement, including covenants, maturity and pricing,
remain unchanged.
Outstanding letters of credit of $2,305,000 as of 31 December 2012 and 2011, reduce the amount available to
draw under the revolvers.
Covenants – revolver bank loans and senior notes
The Company’s revolver contains covenants and restrictions requiring the Company to meet certain financial
ratios and reporting requirements, as well as minimum levels of subsidiaries that are guarantors of the
borrowings. This includes maintaining a gross debt to EBITDA ratio of not more than 3.5:1, and an EBITDA to
interest ratio of not less than 3.0:1. The agreement also requires that borrowers and guarantors represent at
least 60% of Company EBITDA and total tangible assets of the Company.
Prior to the Company engaging in certain activities, including incurring additional indebtedness, the Company is
subject to specific covenants, which contain specified exceptions and qualifications.
See Note 27 for a list of subsidiary guarantors which guarantee one or more of the debt facilities. Testing of
covenant compliance takes place twice-yearly for the trailing 12 month periods to 30 June and 31 December.
Non-compliance 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 Company is in compliance with the
debt covenants as at 31 December 2012 and 2011 as well as 30 June 2012 and 2011.
The indenture governing the senior notes includes covenants that restrict the Company’s ability to engage in
certain activities, including incurring additional indebtedness and paying dividends, subject in each case to
specified exceptions and qualifications. The senior notes also include certain provisions including those similar to
the bank revolver, but do not include testing of financial ratios.
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 7.65% to 8.07%, with
repayment periods not exceeding two years.
102
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
19.
PROVISIONS
Current
Employee benefits
Restructuring and termination costs 1
Warranty 2
Onerous leases
Non-current
Employee benefits
Pension and post-retirement benefits (Note 20)
Onerous leases
2012
US$'000
2011
US$'000
22,018
8,765
223
5,265
36,271
3,753
80,422
3,459
87,634
123,905
19,871
1,044
715
656
22,286
4,510
69,078
-
73,588
95,874
The changes in the provisions for the year ended 31 December 2012 are as follows:
Balance at 1 January 2012
Additional provisions recognised
Reductions arising from payments
Reductions resulting from remeasurement
Foreign exchange
Balance at 31 December 2012
Restructuring
and termination
costs 1
US$'000
Warranty 2
US$'000
Onerous
lease costs 3
US$'000
1,044
12,452
(4,322)
(349)
(60)
8,765
715
92
(88)
(486)
(10)
223
656
8,694
-
(626)
-
8,724
(1) 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.
(2) 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 Company’s warranty program.
(3) Includes current and non-current.
Annual Report 2012
103
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
20.
PENSION AND POST-RETIREMENT BENEFITS
Pension and post-retirement medical commitments
The Company operates defined contribution and defined benefit pension plans for the majority of its employees.
It also operates post-retirement medical arrangements in North America. The policy for accounting for pensions
and post-retirement benefits is included in Note 4(m).
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 Company 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 Company, in independently
administered funds, in accordance with statutory requirements or local practice throughout the world.
The post-retirement medical arrangements provide health benefits to retired employees and certain dependants.
Eligibility for coverage is dependent upon certain criteria. Most of these plans are unfunded and have been
provided for by the Company.
Defined contribution plans
Pension costs represent actual contributions paid or payable by the Company to the various plans. At 31
December 2012, and 2011, there were no significant outstanding/prepaid contributions. Company contributions
to these plans were $23,863,000 and $21,175,000 for the years ended 31 December 2012 and 2011,
respectively.
The Company’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 Company 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 2012 by qualified independent actuaries. The estimated market value of the assets of the funded
pension plans was $191,207,000 and $173,776,000 at 31 December 2012, and 2011, 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 77% in both 2012 and 2011, of the benefits that had accrued to participants
after allowing for expected increases in future earnings and pensions. Entities within the Company are paying
contributions as required by statutory requirements and 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.
Company contributions to these plans were $11,065,000 and $9,612,000 in the years ended 31 December 2012
and 2011, respectively. Contributions in 2013 are expected to be $9,012,000.
104
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
20.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
The principal assumptions used to determine the actuarial present value of benefit obligations and pension costs
are detailed below (shown in weighted averages):
Discount rates
Expected average rate of increase
2012
North
2011
North
America
Europe
America
Europe
4.0%
3.4%
4.5%
4.8%
Southern
Africa 1
-
in salaries
3.5%
4.0%
3.8%
4.0%
Expected average rate of increase
of pensions in payment
Expected average long-term rate of
return on plan assets 2
Expected average increase
in healthcare costs (initial)
Expected average increase
-
-
7.4%
in healthcare costs (ultimate)
5.0%
1.5%
-
1.5%
-
-
-
7.1%
4.2%
8.0%
5.0%
-
-
-
-
-
-
-
(1) The Southern Africa pension and post-retirement medical plans were settled with participants in 2008. The
majority of the members elected to transfer to the Alexander Forbes Retirement Fund, leaving only one
member in the plan. In December 2011, the Company received payment from the plan representing the net
pension assets.
(2) Under the revised AASB 119 ‘Employee Benefits’ which is applicable for reporting periods starting on or after
1 January 2013, the return on asset will now be calculated using the same discount rate applied to liabilities
rather than the expected investment return with the difference taken to Other Comprehensive Income.
Amounts recognised in profit or loss in respect of these defined benefit plans are as follows:
2012
Post-
Pension retirement
plan medical plan Total
US$'000
US$'000 US$'000
2,096
10,199
(207)
(11,063)
940
843
-
-
3,036
11,042
(207)
(11,063)
Pension
plan
US$'000
1,862
11,081
-
(13,409)
2011
Post-
retirement
medical plan
US$'000
769
803
-
-
Total
US$'000
2,631
11,884
-
(13,409)
Current service cost
Interest cost on plan liabilities
Past service cost
Expected return on plan assets
Total charge (credit) to profit
and loss account
1,025
1,783
2,808
(466)
1,572
1,106
For the financial years ended 31 December 2012 and 2011, charges of approximately $2,608,000 and $932,000,
respectively, have been included in cost of goods sold and the remainder in general and administrative or sales
and marketing expenses.
The following amounts have been recognised in the statement of comprehensive income.
2012
Post-
2011
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Actuarial losses during
the year, net of taxes
15,864
496
16,360
18,456
1,090
19,546
Annual Report 2012
105
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
20.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
The amount included in the balance sheet arising from the Company’s obligations in respect of defined benefit
plans is as follows:
2012
Post-
2011
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
246,789
(191,207)
55,582
-
-
-
246,789
(191,207)
55,582
221,041
(173,776)
47,265
-
-
-
221,041
(173,776)
47,265
5,742
61,324
19,098
19,098
24,840
80,422
4,575
51,840
17,238
17,238
21,813
69,078
61,324
19,098
80,422
51,840
17,238
69,078
Present value of funded defined
benefit obligations
Fair value of plan assets
Present value of unfunded defined
benefit obligations
Deficit
Net liability arising from defined
benefit obligations
Changes in the present value of the defined benefit obligations were as follows:
2012
Post-
2011
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Pension retirement
plan medical plan
US$'000
US$'000
209,750
1,862
11,081
-
17,510
-
(4,414)
(10,173)
-
14,879
769
803
434
1,752
-
(12)
(1,387)
-
Total
US$'000
224,629
2,631
11,884
434
19,262
-
(4,426)
(11,560)
-
225,616
17,238
242,854
Opening defined benefit obligation
Current service cost
Interest cost
Contributions from plan participants
Actuarial losses
Past service cost
Exchange differences on foreign plans
Benefits paid
Federal subsidy on benefits paid
Closing defined benefit obligation
225,616
2,096
10,199
-
23,264
(207)
4,077
(12,514)
-
252,531
17,238
940
843
423
799
-
15
(1,279)
119
19,098
242,854
3,036
11,042
423
24,063
(207)
4,092
(13,793)
119
271,629
106
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
20.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
Changes in the fair value of plan assets were as follows:
2012
Post-
2011
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Pension retirement
plan medical plan
US$'000
US$'000
Opening fair value plan of assets
Expected return on plan assets
Actuarial gains (losses)
Exchange differences on foreign plans
Contributions from the employer
Distribution of assets from settled plan
Contributions from plan participants
Benefits paid
Closing fair value of plan assets
173,776
11,063
4,615
3,202
11,065
-
-
(12,514)
191,207
-
-
-
-
856
-
423
(1,279)
-
173,776
11,063
4,615
3,202
11,921
-
423
(13,793)
191,207
194,620
13,409
(8,520)
(5,155)
9,612
(20,017)
-
(10,173)
173,776
-
-
-
-
953
-
434
(1,387)
-
The analysis of the plan assets and the expected rate of return at the balance sheet date are as follows:
Total
US$'000
194,620
13,409
(8,520)
(5,155)
10,565
(20,017)
434
(11,560)
173,776
North America
Fair
value
Rate of
return
% 1 US$'000
2012
Europe
Rate of
return
%
Fair
value
1 US$'000
Total
fair value
US$'000
-
-
-
-
-
81,124
55,782
-
4,302
338
141,546
-
-
-
-
-
17,749
30,116
1,319
403
74
49,661
98,873
85,898
1,319
4,705
412
191,207
At 31 December 2012
Equity
Bonds
Property
Cash
Other
(1) Under the revised AASB 119 ‘Employee Benefits’ which is applicable for reporting periods starting on or after
1 January 2013, the return on asset will now be calculated using the same discount rate applied to liabilities
rather than the expected investment return with the difference taken to Other Comprehensive Income.
North America
Fair
value
US$'000
Rate of
return
%
2011
Europe
Rate of
return
%
Fair
value
US$'000
Southern Africa
Fair
value
US$'000
Rate of
return
%
9.0%
4.6%
-
3.4%
3.4%
7.1%
59,418
60,498
-
6,794
2,140
128,850
6.8%
2.5%
4.8%
1.4%
-
4.2%
15,963
25,187
1,544
215
-
42,909
-
-
-
-
-
-
-
-
-
2,017
-
2,017
Total
fair value
US$'000
75,381
85,685
1,544
9,026
2,140
173,776
At 31 December 2011
Equity
Bonds
Property
Cash
Other
Annual Report 2012
107
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
20.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
The pension and post-retirement deficit by geographic region are as follows:
31 December 2012
31 December 2011
North
America
Europe
Total
North
America
Europe
Southern
Africa
Post-retirement medical
plan deficit
Pension plan
deficit
Total deficit
19,098
-
19,098
17,238
-
36,625
55,723
24,699
24,699
61,324
80,422
36,298
53,536
15,542
15,542
-
-
-
Total
17,238
51,840
69,078
On 8 December 2003, the Medicare Prescription Drug Improvement and Modernisation Act of 2003 was signed
into law in the US 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 Company’s Post-retirement 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 post-retirement benefit obligation by approximately $1,389,000 and $930,000 at 31
December 2012 and 2011, respectively. The expense was reduced by approximately $53,000 and $49,000 at 31
December 2012 and 2011, respectively.
2012
Post-
2011
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
191,207
-
191,207
173,776
-
173,776
(252,531)
(61,324)
(19,098)
(19,098)
(271,629)
(80,422)
(225,616)
(51,840)
(17,238)
(17,238)
(242,854)
(69,078)
3,341
4,615
605
3,946
141
85
226
-
4,615
(8,520)
-
(8,520)
Fair value of plan assets
Present value of
defined benefit obligation
Deficit
Experience adjustments
on plan liabilities
Experience adjustments
on plan assets
2010
Post-
2009
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
194,620
-
194,620
178,854
-
178,854
(209,750)
(15,130)
(14,879)
(14,879)
(224,629)
(30,009)
(193,355)
(14,501)
(10,488)
(10,488)
(203,843)
(24,989)
(643)
106
(537)
(570)
(166)
(736)
3,867
-
3,867
13,345
-
13,345
Fair value of plan assets
Present value of
defined benefit obligation
Deficit
Experience adjustments
on plan liabilities
Experience adjustments
on plan assets
108
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
20.
PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
2008
Post-
Pension retirement
plan medical plan
US$'000
US$'000
Total
US$'000
150,626
-
150,626
(171,312)
(20,686)
(9,411)
(9,411)
(180,723)
(30,097)
(635)
63
(572)
Fair value of plan assets
Present value of
defined benefit obligation
Deficit
Experience adjustments
on plan liabilities
Experience adjustments
on plan assets
(49,714)
-
(49,714)
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
2012
US$'000
2011
US$'000
254
2,462
211
2,133
(216)
(2,072)
(180)
(1,808)
21.
ISSUED CAPITAL
2012
2011
Shares
'000
US$'000
Shares
'000
US$'000
Share capital
Ordinary shares, fully paid
454,710
1,122,189
455,755
1,128,923
Movements in ordinary shares
Balance at beginning of year
Vesting of LTIP rights, restricted shares
Purchase of shares for LTIP
Balance at end of the year
Total shares outstanding
Shares held in trust
Balance at end of the year
455,755
1,597
(2,642)
454,710
461,163
(6,453)
454,710
1,128,923
2,435
(9,169)
1,122,189
1,146,804
(24,615)
1,122,189
457,129
322
(1,696)
455,755
1,132,051
5,204
(8,332)
1,128,923
461,163
(5,408)
455,755
1,147,676
(18,753)
1,128,923
Annual Report 2012
109
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
22.
RESERVES
Foreign currency translation
Equity-settled employee benefits
2012
US$'000
56,658
14,256
70,914
2011
US$'000
50,334
9,333
59,667
During the years ended 31 December 2012 and 2011, 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 year
2012
US$'000
50,334
6,324
56,658
2011
US$'000
76,421
(26,087)
50,334
Exchange differences relating to the translation from various functional currencies of the Company’s subsidiaries
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
Vesting of LTIP rights
Balance at end of year
2012
US$'000
2011
US$'000
9,333
7,358
(2,435)
14,256
8,415
6,122
(5,204)
9,333
The equity-settled employee benefits reserve is recognised over the vesting period of restricted shares, LTIP
rights and share options. Amounts are transferred out of the reserve and into issued capital when the shares are
issued.
Unrealised losses related to hedging instruments
Balance at beginning of year
Unrealised gain on cash flow hedges
Transfer to profit or loss on cash flow hedges
Related income tax
Balance at end of year
2012
US$'000
2011
US$'000
-
-
-
-
-
(259)
193
137
(71)
-
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.
110
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
23.
RETAINED EARNINGS
During the years ended 31 December 2012 and 2011, the changes in retained earnings consist of:
Balance at beginning of year
Profit 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 year
2012
US$'000
2011
US$'000
83,032
(19,477)
68,164
(55,340)
(16,360)
79,496
159,871
(37,816)
(19,546)
83,032
24 .
DIVIDENDS
Dividends declared and paid during the year ended 31 December 2012 are as follows:
Fully paid ordinary shares
Final 2011 dividend 15% franked
Interim 2012 dividend 15% franked
Fully paid ordinary shares
Final 2010 dividend 35% franked
Interim 2011 dividend 35% franked
2012
US cents per
share
Total
US$'000
5.6
6.4
12.0
25,826
29,514
55,340
2011
US cents per
share
Total
US$'000
3.4
4.8
8.2
15,679
22,137
37,816
On 18 February 2013, the Directors determined to pay a dividend of US 1.0 cent per share (for a total of
approximately $4,611,000) for the second half of 2012. The dividend is expected to be paid on 12 April 2013 to
shareholders of record on 15 March 2013. The dividend will be 35% franked at the Australian corporate taxation
rate of 30%. All of the unfranked portion of the dividend will be conduit foreign income. The dividend is not
included as a liability in the 31 December 2012 financial statements. Franking credits available after payment of
this dividend will be $7,162,000.
Below is the combined amount of franking credits available for the next year:
Adjusted combined franking balance
2012
US$'000
2011
US$'000
7,853
7,437
Annual Report 2012
111
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
25.
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Basic earnings per share
The earnings and weighted average number of ordinary shares
used in the calculation of basic earnings per share are as follows:
2012
US cents
per share
2011
US cents
per share
15.0
14.8
35.1
34.8
2012
US$'000
2011
US$'000
Earnings used in the calculation of basic EPS
68,164
159,871
2012
'000
2011
'000
Weighted average number of ordinary shares for the purposes of
basic earnings per share
454,862
456,117
Diluted earnings per share
The earnings used in the calculation of diluted earnings per
share are as follows:
2012
US$'000
2011
US$'000
Earnings used in the calculation of diluted EPS
68,164
159,871
Weighted average number of ordinary shares used in the
calculation of basic EPS
454,862
456,117
Shares deemed to be issued for no consideration in respect of:
LTIP share rights
Options
4,917
-
2,856
39
Weighted average number of ordinary shares used in the
calculation of diluted EPS
459,779
459,012
2012
'000
2011
'000
112
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
26.
COMMITMENTS FOR EXPENDITURE
Commitments
The Company has a number of continuing operational and financial commitments in the normal course of
business.
Capital commitments
Purchase commitments for capital expenditures
10,857
13,631
2012
US$'000
2011
US$'000
Non-cancellable future operating lease commitments as at 31 December 2012 and 2011 consist of the following:
Payments due within:
1 year
2 to 5 years
After 5 years
31 December 2012
31 December 2011
Land and
buildings
US$'000
Plant and
equipment
US$'000
Land and
buildings
US$'000
Plant and
equipment
US$'000
15,603
32,483
6,740
54,826
12,086
11,601
-
23,687
15,536
34,172
12,166
61,874
17,121
24,616
-
41,737
Description of operating leases
The Company 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 seven years
1 – 5 years for machinery and equipment with an average lease term of three years
1 – 7 years for all other property with an average lease term of three years
The Company’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 Company 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.
Annual Report 2012
113
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
27.
CONTINGENT LIABILITIES
Letters of credit
Standby letters of credit primarily issued in support of commitments or other obligations as at 31 December 2012
are as follows:
•
•
The Company’s subsidiary in Zambia has a letter of credit in the amount of $1,900,000 to support
products inventory, which expires December 2013.
The Company’s subsidiary in the US has a letter of credit in the amount of $405,000 to secure a
worker’s compensation program which expires January 2013.
A summary of the maturity of issued letters of credit is as follows:
Less than 1 year
1 to 3 years
Guarantees
2012
US$'000
2011
US$'000
2,305
-
2,305
1,900
405
2,305
The subsidiaries of the Company 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
Parent and certain subsidiaries are guarantors on the Company’s loans and borrowings.
A summary of the Company’s subsidiaries which are guarantors of the Company’s long-term debt is as follows:
Country
Canada
United States
Australia
Entity
Longyear Canada ULC
Boart Longyear Canada
Longyear Holdings, Inc.
Longyear TM, Inc.
Boart Longyear Company
Boart Longyear Nevada
Boart Longyear Limited
Boart Longyear Management Pty Limited
Votraint No. 1609 Pty Limited
Boart Longyear Australia Pty Limited
Switzerland
Votraint Switzerland SARL
Legal contingencies
The Company is subject to certain routine legal proceedings that arise in the normal course of its business.
Management believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone
or combined) will not materially affect the Company’s operations, liquidity, or financial position taken as a whole.
However, the ultimate outcome of any litigation is uncertain, and unfavourable outcomes could have a material
adverse impact.
114
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
27.
CONTINGENT LIABILITIES (CONTINUED)
Tax and Customs Audits
The Company is subject to certain tax and customs audits that arise in the normal course of its business.
Management believes that the ultimate amount of liability, if any, for any pending assessments (either alone or
combined) would not materially affect the Company’s operations, liquidity, or financial position taken as a whole.
However, the ultimate outcome of these audits are uncertain, and unfavourable outcomes could have a material
adverse impact. See additional disclosure in Note 9.
Other contingencies
Other contingent liabilities as at 31 December 2012 and 2011 consist of the following:
Contingent liabilities
Guarantees/counter-guarantees to outside parties
30,154
19,544
2012
US$'000
2011
US$'000
Annual Report 2012
115
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
28.
PARENT ENTITY DISCLOSURES
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Reserves
(Accumulated losses) Retained earnings
Total equity
Financial performance
(Loss) Profit for the year
Other comprehensive income
Total comprehensive (loss) income
2012
US$'000
2011
US$'000
821,946
802,449
1,330,440
2,152,386
2,232,744
3,035,193
149,574
1,238
150,812
2,001,574
111,154
214
111,368
2,923,825
2,886,462
464
(885,352)
2,001,574
2,886,462
7,643
29,720
2,923,825
2012
US$'000
(859,732)
-
(859,732)
2011
US$'000
34,556
-
34,556
During the year, Boart Longyear Limited recorded a provision against intercompany accounts of $900,000,000.
This provision has no impact on the consolidated financial statements.
Guarantees entered into by the parent entity in relation to debts of its subsidiaries
As of 31 December 2012 and 2011 Boart Longyear Limited has not entered into any deed of cross guarantee
with any of its wholly-owned subsidiaries, other than as described in Note 27.
Contingent liabilities
As of 31 December 2012 and 2011 Boart Longyear Limited did not have any contingent liabilities.
Contractual obligations
As of 31 December 2012 and 2011 Boart Longyear Limited did not have any contractual obligations.
116
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
29.
COMPANY SUBSIDIARIES
The Company’s percentage ownership of the principal subsidiaries follows:
Subsidiaries
Country of
incorporation
Business
31 Dec 31 Dec
2012
2011
A.C.N. 066 301 531 Pty Ltd
Aqua Drilling & Grouting Pty Ltd.
BLI Zambia Ltd.
BLY Gabon S.A.
BLY Ghana Limited
BLY Mali S.A.
BLY Mexico Servicios S.A. de C.V.
BLY Senegal S.A.
BLY Sierra Leone Ltd.
Boart Longyear (Cambodia) Ltd.
Boart Longyear (D.R.C.) SPRL
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.
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 Chile Limitada
Boart Longyear Colombia S.A.S.
Boart Longyear Company
Boart Longyear Cote d'Ivoire S.A.
Boart Longyear Consolidated Holdings, Inc.
Boart Longyear de Mexico, S.A. de C.V.
Boart Longyear Drilling and Products Mexico, S.A. de
C.V.
Boart Longyear Drilling Private Limited Company
Boart Longyear Drilling Products Company (Wuxi) Ltd. China
Boart Longyear Drilling Services KZ LLP
Boart Longyear EMEA Cooperatief U.A.
Boart Longyear EMEA UK Holdings Ltd
Boart Longyear Eritrea Ltd.
Boart Longyear Financial Services SARL
Boart Longyear Global Holdco, Inc
Boart Longyear GmbH & Co Kg
Boart Longyear Guinea S.A. 1
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 Liberia Corporation
Boart Longyear Limitada
Boart Longyear Limited
Boart Longyear Limited
Boart Longyear Limited
Tools and Equipment
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Australia
Australia
Zambia
Gabon
Ghana
Mali
Mexico
Senegal
Senegal
Cambodia
Dem. Rep. of Congo Drilling Products and Services
United Kingdom
Hong Kong
United Kingdom
New Zealand
Botsw ana
Australia
Australia
Canada
Argentina
Australia
Australia
Bermuda
Burkina Faso
Netherlands
Canada
Chile
Colombia
USA
Ivory Coast
USA
Mexico
Holding Company
Drilling Services
Dormant
Drilling Services
Drilling Products
Holding Company
Holding Company
Holding Company
Drilling Services
Holding Company
Drilling Services
Holding Company
Drilling Services
Drilling Products
Drilling Products and Services
Drilling Products and Services
Drilling Services
Tools, Equipment and Drilling
Drilling Services
Holding Company
Drilling Services
Mexico
Ethiopia
Kazakhstan
Netherlands
United Kingdom
Eritrea
Sw itzerland
USA
Germany
Guinea
Thailand
India
Netherlands
USA
Australia
Liberia
Brazil
Ireland
Laos
Thailand
Drilling Products and Services
Drilling Services
Drilling Products and Services
Drilling Services
Holding Company
Holding Company
Drilling Services
Products
Holding Company
Drilling Products and Services
Drilling Services
Drilling Services
Tools and Equipment
Holding Company
Holding Company
Holding Company
Drilling Services
Drilling Products
Drilling Products
Drilling Services
Drilling Services
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
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
Annual Report 2012
117
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
29.
COMPANY SUBSIDIARIES (CONTINUED)
Subsidiaries
Boart Longyear LLC
Boart Longyear Ltd
Boart Longyear Madagascar S.A.
Boart Longyear Mali Products S.A. 1
Boart Longyear Management Pty Ltd
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
Boart Longyear Saudi Arabia LLC 1
Boart Longyear Vermogensverw altung GmbH
Boart Longyear Zambia Ltd.
Cooperatief Longyear Holdings UA
Drillcorp Pty Ltd
Dongray Industrial Limited
Geoserv Pesquisas Geologicas S.A.
Grimw ood 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 Mining Services S.A.
Portezuelo S.A.
Professional Sonic Drillers (Pty) Limited T/A Prosonic
Africa
Prosonic Corporation
Prosonic International, Inc.
Votraint No. 1609 Pty Ltd
Votraint Sw itzerland SARL
(1) This entity w as formed in 2012.
Country of
incorporation
Russia Federation
Ghana
Madagascar
Mali
Australia
Netherlands
USA
Poland
Kazakhstan
Russia Federation
Chile
France
Peru
Saudi Arabia
Germany
Zambia
Netherlands
Australia
United Kingdom
Brazil
Australia
Uruguay
Mexico
Netherlands
Canada
USA
New Zealand
USA
South Africa
USA
Australia
Indonesia
Argentina
Paraguay
South Africa
USA
USA
Australia
Sw itzerland
Business
31 Dec 31 Dec
2012
2011
Drilling Services
Dormant
Drilling Services
Products
Holding Company
Holding Company
Drilling Services
Drilling Products and Services
Drilling Products
Drilling Services
Tools, Equipment and Drilling
Services
Holding Company
Drilling Products and Services
Drilling Services
Dormant
Drilling Services
Holding Company
Drilling Services
In Liquidation
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Tools and Equipment Services
Holding Company
Holding Company
Holding Company
Drilling Products and Services
Holding Company
Drilling Services
Drilling Services
Drilling Services
Drilling Services
Dormant
Drilling Services
Drilling Services
Drilling Services
Holding Company
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
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
30.
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
(b)
Businesses acquired
2012
US$'000
2011
US$'000
89,628
82,286
During the financial years ended 31 December 2012 and 2011 there were no business acquisitions.
(c)
Businesses disposed
During the financial years ended 31 December 2012 and 2011 there were no business dispositions.
31.
ASSETS CLASSIFIED AS HELD FOR SALE
The Company has classified certain assets related to non-mining environmental and infrastructure business as
assets held for sale. The sale of these assets is anticipated to be completed early in the second quarter of 2013.
On reclassification of these operations to assets held for sale, the Company has recognised an impairment loss
of $3,986,000. This business has been classified and accounted for at 31 December 2012 as a disposal group
held for sale related to the drilling services business segment
The following assets were reclassified to assets held for sale at 31 December 2012:
Trade and other receivables
Inventories
Prepaid expenses and other assets
Property, plant and equipment
Other intangible assets
Other assets
2012
US$'000
13,269
722
212
19,159
444
191
33,997
Annual Report 2012
119
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
32.
SHARE-BASED PAYMENTS
The Company has established a Long-term Incentive Plan (“LTIP”) to assist in retaining key employees and
encouraging 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-based 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 performance targets set
by the Board. For awards granted prior to 2010, the performance targets were based on cumulative EPS over a
three-year performance period. Awards granted beginning in 2010 have performance targets based on three-
year average ROE targets. The Board has set threshold and maximum targets for both the EPS and ROE
performance awards during each three-year performance period and vesting will be determined by the
Company’s actual performance against the targets. Partial vesting occurs on a pro-rata basis if the three-year
threshold target is surpassed. Full vesting occurs only if the Company’s actual performance meets or exceeds
the maximum target for the three-year period. Participants must also remain continuously employed with the
Company during the performance 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 shares will be held in trust. For grants made prior to 2012, the participant will
receive dividends paid on those shares from the time of acquisition until vesting. For grants made beginning in
2012, dividends paid on unvested share rights will be held in trust and paid when vesting occurs.
At the Company’s annual general meeting on 11 May 2010, shareholders approved a 10 for 1 share
consolidation. Trading in the consolidated shares commenced 13 May 2010. The number of share rights,
options and restricted shares have been restated in this report using the consolidated share amounts.
The total share-based expense associated with share rights granted under the LTIP for the years ended 31
December 2012 and 2011 was $6,500,000 and $5,107,000, respectively.
The Board has on certain occasions granted share options to certain senior management in order to attract,
retain and properly incentivise those individuals. During 2010, the Company granted 25,000 share options to an
employee with an exercise price of A$3.20 per share. The share-based expense associated with share options
for the years ended 31 December 2012 and 2011 was $804,000 and $748,000, respectively. $54,000 of share-
based compensation was capitalised in the fiscal year ended 31 December 2012 (2011 - $268,000).
Share Rights
The following table reflects the share rights arrangements that were in existence at 31 December 2012:
Series - Share Rights
1 - Issued 1 March 2010
2 - Issued 15 March 2010
3 - Issued 26 August 2010
4 - Issued 15 March 2011
5 - Issued 11 July 2011
6 - Issued 14 October 2011
7 - Issued 15 March 2012
Number
1,613,481
104,600
10,844
1,564,816
26,750
110,000
1,849,899
Effective
grant date
1-Mar-10
15-Mar-10
26-Aug-10
15-Mar-11
11-Jul-11
14-Oct-11
15-Mar-12
Vesting
date
1-Mar-13
15-Mar-13
26-Aug-13
15-Mar-14
11-Jul-14
14-Oct-14
15-Mar-15
Fair value at
grant date 1
US$
2.78
2.93
3.29
4.36
4.27
3.05
4.50
(1) Because share rights have no market vesting conditions and participants are entitled to dividends, share
rights are valued at the market price upon the grant date.
The following reconciles the outstanding share rights at the beginning and end of the year:
120
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
32.
SHARE-BASED PAYMENTS (CONTINUED)
Share rights
Balance at beginning of year
Granted
Forfeited
Vested
Balance at end of year
2012
Number of
rights
'000
2011
Number of
rights
'000
5,483
2,690
(1,296)
(1,597)
5,280
3,686
2,270
(151)
(322)
5,483
The following share rights vested during 2012:
Date of
vest
14-Jan-12
25-Mar-12
2-Jul-12
31-Dec-12
5-Oct-12
1-Dec-12
26-Oct-12
31-Dec-12
26-Oct-12
1-Dec-12
1-Aug-12
19-Nov-12
31-Dec-12
26-Oct-12
1-Dec-12
Number
of shares
'000
Fair value at
date of
vest
A$
1
1,170
5
101
47
33
11
70
11
11
65
5
56
6
5
3.09
4.16
2.96
1.95
1.74
1.50
1.64
1.95
1.64
1.50
2.34
1.45
1.95
1.64
1.50
Grant date
14-Jan-09
25-Mar-09
2-Jul-09
1-Mar-10
1-Mar-10
1-Mar-10
26-Aug-10
15-Mar-11
15-Mar-11
15-Mar-11
15-Apr-11
14-Oct-11
15-Mar-12
15-Mar-12
15-Mar-12
Options
The following table reflects the options arrangements that were in existence at 31 December 2012:
Fair value at
grant date
US$
Effective
grant date
Vesting
date
Series - Options
Number
1 - Issued 28 April 2008
2 - Issued 1 January 2009 1
3 - Issued 18 June 2009
4 - Issued 15 March 2010
100,000
150,000
317,500
25,000
28-Apr-08
28-Apr-08
18-Jun-09
15-Mar-10
5-Oct-12
5-Oct-12
18-Jun-12
15-Mar-13
6.87
14.50
1.43
2.24
(1) The second grant of options Mr Kipp received in conjunction with his appointment as CEO was issued
as of 1 January 2009. For purposes of compliance with Australian Accounting Standards, the effective
grant date was determined to be 28 April 2008.
The fair values of the options grants were determined using the Black-Scholes option pricing model using the
following inputs:
Annual Report 2012
121
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
32.
SHARE-BASED PAYMENTS (CONTINUED)
Grant date
share price
US$
16.30
16.30
1.90
2.93
Series 1
Series 2
Series 3
Series 4
Expected
volatility
49.86%
49.86%
97.29%
92.14%
Life of
rights
56 months
68 months
60 months
60 months
Dividend
yield
Risk-free
interest rate
0.86%
0.86%
0.00%
0.00%
5.58%
5.58%
5.59%
5.25%
The following reconciles the outstanding options at the beginning and end of the year:
Options
Balance at beginning of year
Granted
Forfeited
Exercised
Balance at end of year
Exercisable at end of year
2012
2011
Number of
options
'000
592
-
-
-
592
567
Weighted
average
exercise
price
US$
4.88
-
-
-
4.88
4.88
Number of
options
'000
592
-
-
-
592
-
Weighted
average
exercise
price
US$
4.88
-
-
-
4.88
-
122
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
333.
KEY MANAGEMENT PERSONNEL COMPENSATION
Details of key management personnel
The Directors and other members of key management personnel of the Company during the financial year were:
• David McLemore – Chair, non-executive Director, and, from 5 October 2012, interim Chief Executive
Officer
• Bruce Brook - non-executive Director
• Roger Brown - non-executive Director
• Roy Franklin - non-executive Director
•
Tanya Fratto - non-executive Director
• Barbara Jeremiah - non-executive Director
• Peter St. George - non-executive Director
• Craig Kipp – Chief Executive Officer and executive Director (resigned effective 3 October 2012)
•
•
• Brad Baker - Senior Vice President, Human Resources
• Michael Birch - Vice President, Drilling Services 1
• Alan Sides – Vice President, Products
Joe Ragan III - Chief Financial Officer
Fabrizio Rasetti - Senior Vice President, General Counsel and Company Secretary
(1) Mr Birch’s employment terminated on 31 January 2013.
The aggregate compensation made to key management personnel of the Company is set out below.
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payment
2012
US$
5,967,949
116,009
465,864
1,044,640
2,651,514
10,245,976
2011
US$
6,171,076
110,012
989,175
-
3,127,647
10,397,910
34.
RELATED PARTY TRANSACTIONS
Transactions with key management personnel
(i)
Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 33.
(ii)
Other transactions with key management personnel of the Company
None.
(iii)
Key management personnel equity holdings
Annual Report 2012
123
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
Shares
The number of shares held by Directors and other key management personnel are disclosed below.
2012
David McLemore
Bruce Brook
Roger Brown
Roy Franklin
Tanya Fratto
Barbara Jeremiah
Peter St. George
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
2011
David McLemore
Bruce Brook
Roger Brown
Roy Franklin
Tanya Fratto
Barbara Jeremiah
Peter St. George
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Balance
1 January
Net change
during year
Balance
31 December
Balance
held nominally
115,861
104,423
30,000
-
-
30,000
107,450
564,998
18,523
117,286
8,967
48,343
40,000
30,000
-
45,000
20,000
20,000
50,000
201,760
52,322
38,368
38,370
38,370
155,861
134,423
30,000
45,000
20,000
50,000
157,450
N/A 1
70,845
155,654
47,337
86,713
-
-
-
-
-
-
-
-
-
-
-
-
Balance
1 January
Net change
during year
Balance
31 December
Balance
held nominally
115,861
104,423
30,000
-
-
-
107,450
521,463
-
106,612
-
66,460
-
-
-
-
-
30,000
-
43,535
18,523
10,674
8,967
(18,117)
115,861
104,423
30,000
-
-
30,000
107,450
564,998
18,523
117,286
8,967
48,343
-
-
-
-
-
-
-
-
-
-
-
-
(1) Mr Kipp’s 31 December 2012 share balance is not reported due to his termination as a related party
effective 5 October 2012. His net change for the year is reflected through the termination date.
124
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
Share rights and restricted shares
Details of the number of share rights granted under the LTIP program and restricted shares that have been
granted as compensation to key management personnel, and the activity during the financial year, are as follows:
Held at the
beginning of
the financial
year
1,065,400
258,000
207,578
187,150
217,900
164,600
Held at the
beginning of
the Financial
year
659,291
208,000
155,428
142,150
157,900
104,600
Vested
Granted as
remun-
eration
and issued Forfeited
during the during the
year
year
681,200
90,000
(227,475)
(75,000)
90,000
75,000
90,000
70,000
(55,000)
(55,000)
(55,000)
-
(829,747)
-
-
-
-
-
Vested
Granted as
remun-
eration
and issued Forfeited
during the during the
year
year
Held at the
end of the
financial
year
689,378
273,000
242,578
207,150
252,900
234,600
Held at the
end of the
financial
year
455,580
80,000
70,000
60,000
80,000
60,000
(43,535)
(26,400)
(15,708)
(13,200)
(17,600)
-
(5,936)
1,065,400
(3,600)
(2,142)
(1,800)
(2,400)
-
258,000
207,578
187,150
217,900
164,600
2012
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
2011
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
(1) The restricted shares that vested in 2010 were awarded upon the Company’s initial public offering
in April 2007 in respect of work performed prior to the Company’s listing.
Cash rights
Details of the cash rights that have been granted under the LTIP program as compensation to key management
personnel, and the activity during the financial year, are as follows:
Held at the
beginning of Granted as
the financial
year
US$
remun-
eration
US$
Vested
and issued
during the
year
US$
1,196,300
375,000
305,000
305,000
305,000
80,000
-
-
-
-
-
-
746,300
275,000
225,000
225,000
225,000
-
Forfeited
during the
year
US$
60,300
-
-
-
-
-
Held at the
end of the
financial
year
US$
389,700
100,000
80,000
80,000
80,000
80,000
2012
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
Annual Report 2012
125
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
34.
RELATED PARTY TRANSACTIONS (CONTINUED)
Held at the
beginning of Granted as
the financial
year
remun-
eration
US$ 1
Vested
and issued
during the
year
Forfeited
during the
year
Held at the
end of the
financial
year
US$
US$
US$
2011
US$
Craig Kipp
1,196,300
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
375,000
305,000
305,000
305,000
80,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,196,300
2
375,000
305,000
305,000
305,000
80,000
(1) The cash rights vest over a three-year period from the grant date, with 50% subject to certain
performance conditions.
(2) This amount was revised in this 2012 report to correct a reporting error from the prior years. Mr Kipp’s
total number of Cash Rights granted on 25 March 2009 was 746,300 but had been previously reported
as 550,000.
The share and cash rights under the LTIP were provided at no cost to the recipient.
Options
Details of the options that have been granted as compensation to key management personnel under the LTIP
program, and the activity during the financial year are as follows:
Held at the
beginning of
the financial
Year
340,000
37,500
27,500
27,500
27,500
25,000
Held at the
beginning of
the financial
year
340,000
37,500
27,500
27,500
27,500
25,000
2012
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
2011
Craig Kipp
Joe Ragan III
Fabrizio Rasetti
Brad Baker
Michael Birch
Alan Sides
Granted as
remun-
eration
Vested
during the
year
Forfeited
during the
year
-
-
-
-
-
-
340,000
37,500
27,500
27,500
27,500
-
-
-
-
-
-
-
Granted as
remun-
eration
Vested
during the
year
Forfeited
during the
year
Held at the
end of the
financial
year
Vested and
exercisable
as at
31 December
2012
-
-
-
-
-
25,000
340,000
37,500
27,500
27,500
27,500
-
Held at the
end of the
financial
year
Vested and
exercisable
as at
31 December
2011
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
340,000
37,500
27,500
27,500
27,500
25,000
-
-
-
-
-
-
During the years ended 31 December 2012 and 2011, no shares were issued on the exercise of options
previously granted as compensation to the above individuals.
126
Boart Longyear
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2012 BOART LONGYEAR LIMITED
35.
REMUNERATION OF AUDITORS
Company auditor's remuneration
Audit and review of the financial report:
Auditor of the parent entity
Related practices of the parent entity auditor
Non-audit services:
Tax services
Review of tax returns
Due diligence and other non-audit services
2012
US$
2011
US$
1,465,000
1,434,000
2,899,000
1,541,000
539,000
61,000
2,141,000
1,369,000
1,173,000
2,542,000
2,669,000
687,000
359,000
3,715,000
Total remuneration to Company auditor
5,040,000
6,257,000
Remuneration to other accounting firms
Audit services
Non-audit services:
Tax services
Internal audit
Global mobility
Accounting and payroll services
Other
Total remuneration to other accounting firms
356,000
272,000
2,069,000
474,000
2,009,000
232,000
208,000
5,348,000
2,457,000
1,339,000
885,000
439,000
430,000
5,822,000
The auditor of Boart Longyear Limited is Deloitte Touche Tohmatsu. The Company has employed Deloitte
Touche Tohmatsu on assignments additional to their audit duties where their expertise and experience with the
Company are important. These assignments principally have been related to tax advice and tax compliance
services, the magnitude of which is impacted by the global reach of the Company.
The Company and its Audit, Compliance & Risk Committee (“Audit Committee”) are committed to ensuring the
independence of the external auditors. Accordingly, significant scrutiny is given to non-audit engagements of the
external auditor. The Company has a formal pre-approval policy which requires the pre-approval of non-audit
services by the Chair of the Audit Committee or the Audit Committee. Additionally, the total annual fees for such
non-audit services cannot exceed the auditor’s annual audit fees without the approval of the Audit Committee.
The Audit Committee believes that the combination of these two approaches results in an effective procedure to
pre-approve services performed by the external auditor.
Consistent with the approach outlined above, the Audit Committee approved Deloitte Touche Tohmatsu’s
services on a tax-related business improvement project for the years ended 31 December 2012 and 2011. It is
expected that this project will conclude during the year ending 31 December 2013. The Company expects that
the level of non-audit services will continue to be below the audit fee in subsequent years.
36.
SUBSEQUENT EVENTS
On 15 February 2013, the Company amended its revolving bank debt facility to increase the aggregate principal
amount available under the facility to $450,000,000 from $350,000,000. The increase was completed by the
Company primarily to provide additional liquidity and flexibility as insurance against current market uncertainty. A
required reduction of $50,000,000 of commitments will occur 18 months after the closing date of the amendment,
bringing the total outstanding commitments at that time to $400,000,000. All other material terms and conditions
of the revolving credit agreement, including covenants, maturity and pricing, remain unchanged.
Annual Report 2012
127
SUPPLEMENTARY INFORMATION
ADDITIONAL INFORMATION as at 21 March 2013.
Substantial shareholders
The substantial shareholders as disclosed to the Company in substantial holders notices are:
Holder
Paradice Investment Management Pty Ltd
Beutel Goodman and Company Ltd
Number of Ordinary Shares in
which relevant interest held
27,462,119
33,608,857
Number of holders of equity securities
(a) Ordinary share capital
There are 461,163,412 fully paid ordinary shares on issue, held by 19,052 individual shareholders.
Each ordinary shareholder present at a general meeting (whether in person or by proxy or representative) is
entitled to one vote on a show of hands or, on a poll, one vote for each fully paid ordinary share held.
(b) Share rights and share options
592,500 share options are held by 11 individual option holders. 250,000 of the foregoing options are due to
expire on 5 April 2013 if not exercised before that time. Options do not carry rights to vote.
Distribution of holders of equity securities
Range
Holders - Fully Paid
Ordinary Shares
Holders -
Share Options
1-1000
1,001-5000
5,001-10,000
10,001-100,000
100,001 and over
7,138
7,207
2,658
1,934
115
19,052
-
-
-
10
1
11
There are 4,018 shareholders holding less than a marketable parcel of ordinary shares.
128
Boart Longyear
SUPPLEMENTARY INFORMATION
TOP 20 HOLDERS
Fully Paid
Ordinary Shares
Percent of
Issued Capital Held
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
ECAPITAL NOMINEES PTY LIMITED
BAND AND CO
SHARE DIRECT NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DARRELL JAMES PTY LTD
BOND STREET CUSTODIANS LIMITED
SNOWSIDE PTY LTD
CS FOURTH NOMINEES PTY LTD
BOND STREET CUSTODIANS LIMITED
QIC LIMITED
UBS WEALTH MANAGEMENT
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
BOND STREET CUSTODIANS LTD
AMP LIFE LIMITED
EQUITY TRUSTEES LIMITED
TOTAL FOR TOP 20
137,433,496
85,378,511
53,336,488
22,395,978
6,217,210
5,663,117
5,624,007
5,488,833
4,923,111
3,000,000
2,838,103
2,600,000
2,338,413
2,268,633
1,897,408
1,730,424
1,622,342
1,419,769
1,176,986
1,029,252
348,382,081
29.80%
18.51%
11.57%
4.86%
1.35%
1.23%
1.22%
1.19%
1.07%
0.65%
0.62%
0.56%
0.51%
0.49%
0.41%
0.38%
0.35%
0.31%
0.26%
0.22%
75.54%
Annual Report 2012
129
This page has been left blank intentionally.
130
Boart Longyear
This page has been left blank intentionally.
Annual Report 2012
131
This page has been left blank intentionally.
132
Boart Longyear
CORPORATE INFORMATION
Headquarters
Principal Administrative Offi ce
10808 South Riverfront Parkway #600
South Jordan, Utah 84095
Tel: +1 801 972 6430
Fax: +1 801 977 3374
Registered Offi ce
26 Butler Boulevard, Burbridge Business Park
Adelaide Airport, South Australia 5950
Tel: +61 8 8375 8375
Fax: +61 8 8375 8498
Auditor
Deloitte Touche Tohmatsu
Company Secretaries
Fabrizio Rasetti
Paul Blewett
Shareholder Enquiries
Boart Longyear Investor Relations
10808 South Riverfront Parkway #600
South Jordan, Utah 84095
Australia: +61 8 8375 8300
Others: +1 801 401 3712
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 12, 680
George Street, Sydney NSW 2000
Tel: +61 2 8280 7111
Annual Meeting
The Annual General Meeting of Boart Longyear
will be held at:
Sofi tel Hotel Melbourne
West Tower Suite
25 Collins Street
Melbourne, VIC 3000
Australia
Commencing at 1:00 pm on 21 May 2013.
Website
www.boartlongyear.com
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 fi lings with the
Australian Securities Exchange. Signifi cant risks and uncertainties
may relate to, but are not limited to, fi nancial, 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 defi nitive 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.