ANNUAL REPORT 2019
CONTENTS
2019 Overview
Chairman’s Report
CEO’s Report
Financial Report
Directors’ Report
Review of Operations
Remuneration Report
Board of Directors
Executive Management Team
Independent Auditor’s Report
Directors’ Declaration
Financial Statements
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IV
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Supplementary Information
Corporate Information
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BC
CORPORATE GOVERNANCE STATEMENT
Our Corporate Governance Statement may be found
at www.boartlongyear.com/corporate-governance
BOART LONGYEAR 2019 ANNUAL REPORT
BOART LONGYEAR 2018 ANNUAL REPORT
WHO WE ARE
Established in 1890, Boart Longyear
is celebrating its 130th year as the
world’s leading provider of drilling
services, orebody-data-collection
technology, and innovative, safe and
productivity-driven drilling equipment.
With its main focus in mining and
exploration activities spanning a
wide range of commodities, including
copper, gold, nickel, zinc, uranium,
and other metals and minerals, the
company also holds a substantial
presence in the energy, oil sands
exploration, and environmental
sectors.
The Global Drilling Services division
operates for a diverse mining customer base
with drilling methods including diamond
coring exploration, reverse circulation, large
diameter rotary, mine dewatering, water
supply drilling, pump services, production,
and sonic drilling services.
The Geological Data Services division
utilizes innovative scanning technology and
down-hole instrumentation tools to capture
detailed geological data from drilled core
and chip samples. This valuable orebody
knowledge gives mining companies the
ability to make timely decisions for more
efficient exploration activities.
The Global Products division offers
sophisticated research and development
and holds hundreds of patented designs to
manufacture, market, and service reliable
drill rigs, innovative drill string products,
rugged performance tooling, durable
drilling consumables, and quality parts for
customers worldwide.
*EBITDA, Adjusted EBITDA and Adjusted EBIT are non IFRS
measures and are used internally by management to assess
the performance of the business.
Cash from Operations excludes interest and tax.
Copyright © 2020 Boart Longyear. All rights reserved.
2019 OVERVIEW
2019 OVERVIEW
2019 2018 2017
Revenue
US$745m
Adjusted Gross Margin
US$144m
Adjusted EBITDA
US$87m
Gross Margin US$139m
EBITDA US$67m
Net Profit After Tax
US$-45m
745
770
739
139
144
131
142
67
87
54
81
-45
-44
111
113
-37
43
-150
Cash from Operations
US$77m
Number of Employees
5,194
Safety
TCIR 1.37
Safety
LTIR 0.02
77
5,194
24
-40
4,637
4,604
1.37
1.90
1.62
0.02
0.10
0.22
Drilling Services
Revenue
US$516m
Drilling Services
EBITDA
US$90m
Products
Revenue
US$229m
Products
EBITDA
US$31m
516
534
501
90
83
69
229
237
239
31
31
11
Company Revenue
(Products and Services)
Company Revenue
by Region (Products
and Services)
Drilling Services
Revenue by Stage
Drilling Services
Revenue by Commodity
Surface Coring
Performance Tooling
Rotary/RC
Underground Coring
Drilling Equipment
Production Drilling
Other
26%
23%
20%
16%
7%
5%
3%
USA
Asia Pacific
Canada
EMEA
Latin America
27%
23%
19%
18%
13%
Development
(Near Mine/Brownfield)
Production (In-Pit)
58%
23%
Exploration (Greenfield)
12%
Non-Mining
7%
Gold
Copper
Non-Mining Water
Other Metals
Energy
Nickel
Iron
Other
63%
18%
7%
5%
3%
2%
1%
1%
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BOART LONGYEAR 2019 ANNUAL REPORT Dear Shareholders,
It’s an honour to be a part of the Board of
Directors for Boart Longyear, and I am pleased
to share with you the Company’s financial
results for year ended 2019.
Despite revenue being up only 1.3% over 2018,
we saw an 8% increase in adjusted EBITDA.
With a weaker second half, management
remained focused on winning new customers
while reducing operating costs to increase
margins and profitability. Jeff Olsen, Boart
Longyear’s CEO, will cover more about the
financials in the following pages.
2019 definitely had its challenges resulting in
a material decline in global demand through
the second half of the year. We attribute most
of this decline to increased uncertainty as US/
China trade agreements were renegotiated, as
well as several large mergers and acquisitions
within our key customer base. These transitions
delayed mineral exploration spend and caused
a notable reduction in overall market activity.
The silver lining to the merger and acquisition
activity is that we anticipate there will be medium
to long-term benefits to Boart Longyear with
demand improving as major and intermediate
mining houses expand their exploration
investments. Key industry metrics around
commodity price, reserve replacement ratios, and
improved customer balance sheets, all indicate
the need to reinvest in exploration activities.
Gold prices continue to strengthen, offsetting
some of the weaker commodities. This is
encouraging, as gold exploration projects
for the Company make up approximately
63% of the Company’s revenue. S&P Global
recently reported, “In spite of the decline of
drilling activity, grassroots drilling for gold
and copper increased in 2019, highlighting a
shift in explorers’ focus.” (S&P Global Market
Intelligence, World Exploration Trends 2019,
March 2020)
our customers, employees, and all stakeholders
in order to best manage the situation while
ensuring the future viability of the company.
In spite of current market conditions, the
Company’s initiatives are bearing fruit.
We continue to invest in advanced drilling
techniques and promote the benefits of the
Company’s data collection innovations and
instrumentation to assist mining companies with
their exploration decisions.
The coming years are critical in exploration
and we are streamlining the business to be
agile and lean for what lies ahead. We remain
cash positive and are on a very good course to
better margins so that we can best address our
maturities and overall debt.
We have an experienced board of directors with
vast knowledge of the mining industry’s trends,
cycles, and needed improvements to carry us
through these tough times and on to increased
profitability. I’ve felt welcome and feel privileged
to work with directors Jeff Olsen (CEO),
Tye Burt, Jason Ireland, James Kern, Rubin
McDougal, Robert Smith, and Conor Tochlin.
Together, our board and dedicated
Company management team
continue to work diligently
to bring greater value
to the Boart Longyear
brand and to your
investment.
We are entering new territory, as government
and industry interventions have been enacted
to prevent the spread of COVID-19. The full
duration and implications of the COVID-19
outbreak remain to be seen. Material challenges
have affected our customers, and the business
impacts will likely vary by region depending on
each local situation. We continue to work with
Sincerely,
Kevin McArthur
Chairman
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Dear Shareholders,
At Boart Longyear, we continue our
commitment to improving our financial,
operating, and safety performance. This
increased emphasis on these important
areas in turn provides greater value to our
shareholders. I’m pleased to report our team
has worked diligently to deliver on these
commitments during 2019 as will be shown
in this annual report.
Each of our divisions—Drilling Services,
Drilling Products, and Geological
Data Services (GDS)—showed
stable growth during 2019
despite delays in exploration
spend seen in the latter part
of the year. Drilling activity
remains in demand but
was marginally down due
to delays in customer
decisions impacted by
large mergers in the
mining sector, and
a continued lack of
funding for junior mining
companies in certain
jurisdictions.
The positive news is that
we were able to increase
Adjusted EBITDA and cash
flow from Operations despite
lower revenue than 2018. Our
Adjusted EBITDA increased
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BOART LONGYEAR 2019 ANNUAL REPORT
BOART LONGYEAR 2019 ANNUAL REPORT
from US$81M to US$87M, as a result of
focusing on a number of operational initiatives
to reduce cost, deplete older inventory, increase
workflow efficiency, and improve margins, while
continuing to supply competitive pricing to the
marketplace. Variations due to the adoption of
the AASB 16 accounting standard during 2019
was also considered.
However, overall Revenues for the year closed
lower compared to the prior year as they
were impacted by foreign exchange currency
movements, discontinued operations and higher
2018 sales from initiatives to reduce slow
moving inventory.
Net Profit After Tax closed at a loss of $45M
which was $1M lower over the same period
of 2018 due to impairment of intangibles of
$9M and additional tax expense of $16M. We
experienced a notable improvement in cash
from operations through December of $31M
($35M generated through December 2019
compared to $4M through December 2018).
As of 31 December 2019, Liquidity was at
$45M, which was comprised of cash balances
totaling $20M and a further $25M of availability
under the Company’s asset-based loan facility.
While we have been fortunate through the
first few months of the year to see increasing
demand over what the business witnessed
across the back half of 2019, we are monitoring
the impact of COVID-19. Before COVID-19 we
were anticipating a strong commercial pipeline
for 2020, but the current market conditions
are fluid. We are monitoring the global impact
of COVID-19 on a region-by-region basis and
believe that there will be negative impacts,
which may be significant.
On a very positive note, Boart Longyear achieved
a tremendous safety milestone in 2019 with the
accomplishment of over 14.5 million man-hours
worked with no Lost Time Injuries (LTI). This
included more than 16 consecutive months of
completely LTI-free work—a record running from
mid-2018 through late 2019. Respected by the
industry, excellence in safety is an integral part of
Company culture and is the expected standard
for drilling and mining customers. The Company
continues to place safety as a high priority in
2020 and promote its impressive track record
which continues to create opportunities for our
drilling services and products.
With a renewed emphasis on sustainable
solutions and streamlining our operations
for greater productivity, our executive team,
board, and employees are committed to further
improving efficiencies to deliver more value to
our Customers and to our Shareholders.
Yours sincerely,
Jeff Olsen
President and CEO
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BOART LONGYEAR LIMITED
A.B.N. 49 123 052 728
ANNUAL FINANCIAL REPORT
YEAR ENDED 31 DECEMBER 2019
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BOART LONGYEAR 2019 ANNUAL REPORT
CONTENTS
DIRECTORS’ REPORT
REVIEW OF OPERATIONS
REMUNERATION REPORT
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT TEAM
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDITOR’S REPORT
DIRECTORS’ DECLARATION
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
3
5
19
33
37
38
41
46
47
48
49
50
52
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BOART LONGYEAR 2019 ANNUAL REPORT
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Boart Longyear Limited Annual Report 2019
BOART LONGYEAR LIMITED ANNUAL REPORT 2019
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 2019 (the “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 at the date of this report are set out
below.
Directors
Position
Marcus Randolph
Kevin McArthur 1
Tye Burt 2
Kyle Cruz
Executive Chairman (retired 1 September 2019)
Non-executive Chairman (appointed effective 1 September 2019)
Non-executive Director (appointed effective 23 August 2019)
Non-executive Director (retired 31 December 2019)
Jason Ireland
Non-executive Director
James Kern
Gretchen McClain
Jeffrey Olsen
Robert Smith
Conor Tochilin
Richard Wallman
Eric Waxman
Non-executive Director
Non-executive Director (retired 23 August 2019)
Executive Director
Non-executive Director
Non-executive Director (appointed effective 17 January 2020)
Non-executive Director
Non-executive Director (retired 20 May 2019)
(1) Kevin McArthur replaced Marcus Randolph as Chairman of the Board on 1 September 2019
(2) Tye Burt replaced Gretchen McClain as Non-executive Director on 23 August 2019
For a summary of experience and qualifications for each Director, see the Board of Directors section on page 33 of this
Report.
COMPANY SECRETARIES
Robert Closner
Philip Mackey
PRINCIPAL ACTIVITIES
Boart Longyear is the global leading integrated provider of drilling services, drilling equipment and performance tooling for
mining and mineral drilling companies. The Company offers a comprehensive portfolio of technologically advanced and
innovative drilling services and products. The Company operates through two divisions -- “Global Drilling Services” and
“Global Products” -- and believes that its market-leading positions in the mineral drilling industry are driven by a variety of
factors, including the performance, expertise, reliability and high safety standards of Global Drilling Services, the technological
innovation, engineering excellence and global manufacturing capabilities of Global Products and the Company’s vertically
integrated business model. These factors, combined with the Company’s global footprint, have allowed the Company to
establish and maintain long-standing relationships with a diverse and blue-chip customer base worldwide that includes many
insignia
of the world’s leading mining companies. With more than 129 years of drilling expertise, the Company believes its
and brand represent the gold standard in the global mineral drilling industry.
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Boart Longyear Limited Annual Report 2019
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 18 June 2019 Ares Management Group of Companies ceased being a substantial shareholder of the Company.
On 25 July 2019 it was announced that the Company has agreed on commercial terms with its financiers to increase and
extend its Asset Back Lending Revolver and Backstop Term Loan Facility. The amended facilities provide the Company with
(i) access to additional liquidity on the ABL which is provided by PNC Bank and (ii) extension of existing facility maturities from
2020 to 2022.
On 30 October 2019 the Company completed a consolidation of the issued capital on a basis that every 300 shares be
consolidated into 1 share. Refer to Footnote 22 for the number of warrants on issue and the impact of the share consolidation.
EVENTS SUBSEQUENT TO REPORTING DATE
No subsequent events.
DIVIDENDS
No dividends have been paid during the financial year.
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Boart Longyear Limited Annual Report 2019
REVIEW OF OPERATIONS 1
1. Safety Performance, Market Conditions and Strategies
1.1 Overview
Boart Longyear is the world’s leading integrated provider of drilling services, drilling equipment and performance tooling for
mining and mineral drilling companies globally. We conduct our business activities through two segments, Global Drilling
Services and Global Products, which includes our Geological Data Services. Geological Data Services is a rapidly growing
segment of Boart Longyear that provides industry leading digital technologies to aid in understanding drilling and ore body
properties in real time.
We aim to create value for our customers through a comprehensive portfolio of technologically advanced and innovative
drilling services and products. We believe that our market leading positions in the mineral drilling industry are driven by a
variety of factors, including the performance, expertise and high safety standards of Global Drilling Services and the
innovation, engineering excellence and global manufacturing capabilities of Global Products.
Our operating and commercial priorities include continued focus on areas of unique competitive advantage including safety
performance, productivity enhancements and operating improvements in our Global Drilling Services division, to meet the
needs of our customer base. Similarly, technology and product innovation are central to the future growth of our Global
Products division, and we continue to pursue product improvements to meet customer needs. Our successes include the
LF160 surface coring drill paired with our Freedom Loader which has set a new benchmark in productivity and hands-free rod
handling. Launched in the second half of 2017, our patented Longyear™ coloured diamond bits continue to show improved
productivity by lasting longer and cutting faster. Commercial launch of the new XQ™ coring rod continues globally, featuring a
greater depth capacity than the RQ™ rod, and faster, easier joint make/breaks for higher productivity. TruCore™ core
orientation tools continue to expand geographically and are available globally. The TruShot™ magnetic survey instrument, the
second in a future suite of tools, was launched in the first half of 2018 and we are now using our TruScanTM geological sample
field screening technology at mine sites with numerous mining customers. These instruments are part of our strategy to be the
global technology leader in providing subsurface resource information to mining companies through our Geological Data
Services business.
Our capital structure exposes us to a variety of market, operational and liquidity risks. As at 31 December 2019, cash flows
from operating activities was $35.3 million. This represents an improvement of $31.6 million over 2018 cash flows from
operating activities of $3.7 million. This significant improvement was achieved through continued discipline on cost control and
capital management, focused cost reductions, productivity enhancements and working capital management.
1.2 Safety Performance
Boart Longyear strives to continuously improve safety performance each year. The Company is driving culture and
consistency across the globe through improved systems and programs designed to focus on controlling critical risks and
enhancing our competency training programs.
For the year ending 31 December 2019, the Company’s performance on key indicators includes a Total Case Incident Rate
(TCIR) of 1.37 and Lost Time Injury Rate (LTIR) of 0.02, compared to corresponding rates of 1.90 and 0.10 in 2018. Both
TCIR and LTIR are rates calculated based on 200,000 hours worked. Our employees worked over 14 million hours before
recording one lost time injury in Q4 2019. Leadership accountability and ownership of safety has led to favourable trends in
our injury rates. 2019 is the lowest LTIR in our Company recorded history. The majority of recordable injuries are low severity
and are made up of sprain or strain injuries or lacerations to hands.
The Company’s injury rate improvements made this year are primarily due to the focus shift from lagging indicators to
proactive leading indicator programs. Boart Longyear’s key leading indicator programs focused on critical control verifications
and inspections, EHS employee training (BITS), non-conformance corrective action monitoring, and vehicle driver
performance – monitored with a fleet of In-Vehicle Monitoring Systems (“IVMS”). The 2020 KPI programs will increase the
focus on Critical Risk Management. These programs are measured and reviewed monthly by Boart Longyear’s Executive
Committee who drive overall performance. These systems reflect our ongoing priority to identify and mitigate significant and
critical risks.
(1) The Review of Operations contains information sourced from our audited financial statements as well as additional supplemental
information that has not been subject to audit or review.
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
1.3 Impact of Market Conditions
Market conditions in 2019 were mixed. Whilst overall, the macro trends across the industry have continued to improve as
mining companies look to replenish their depleted ore reserves, the spate of M&A activity across several major customers
impacted the short-term exploration and drilling activity during the second half of 2019. In the longer term, however, we
believe that this M&A activity will result in greater drilling activity across the sector as the new owners look to better understand
and expand the newly acquired assets.
During 2019, drill rig utilisation declined slightly versus prior year primarily due to lower volumes in the second half
across global operations. The Company continues to push for improved terms and conditions in each contract as they mature.
We added new exploration drill rigs to the Drilling Services fleet around the world to meet the demand of expanding
exploration budgets and we continue to evaluate opportunities where we can help our customers meet their exploration goals,
utilising the latest technology improvements that support both safety and productivity enhancements.
The Company reported a statutory loss for the period ended 31 December 2019 of $45.4 million (2018: $43.5 million loss) and
continues to focus on cost control and productivity improvements. The year ended in a loss, despite reporting a small profit of
$2.3 million in June 2019, as a result of softer market conditions in the second half of the year.
Objectives and Strategies
In addition to our prime goal of returning our employees home safely each day, we continue to position the business to operate
more efficiently across all phases of the mining cycle. Key elements of this strategy include focusing more closely on cash
generation, achieving and maintaining sustainable EBITDA margins, improving returns on capital through disciplined variable
and fixed cost management and capital spending programs, and maintaining a rigorous focus on working capital, particularly
inventory and accounts receivable.
We are committed to driving long-term shareholder value by executing on several initiatives to improve our commercial
practices in both our divisions and safety, productivity and profitability in our Global Drilling Services division, including
through:
focusing on operational efficiencies and productivity at the drill rig level;
1.
2. optimising the commercial organisation to drive value through contracting and pricing processes;
3.
4. controlling SG&A and other overhead related costs.
leveraging the supply chain function across the business; and
We are also pursuing market leadership in providing subsurface resource information to our mining customers in an
integrated, real-time and cost-effective manner through our Geological Data Services business.
Ultimately, our goal is to help our customers build their ore body knowledge. Through our focus on operational excellence, we
will address the risks and challenges of the mining industry cycle while also preserving the significant upside that we may
realise in our operations as market conditions improve, combined with a significantly improved cost structure and operating
performance. We are also capitalising on longer-term growth opportunities through investment in technologies that will
broaden our customer offerings.
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Boart Longyear Limited Annual Report 2019
2. Financial and Operating Highlights
For the year ended 31 December
2019
2018
US$ Millions
US$ Millions
$ Change
% Change
Key financial data
Revenue
NPAT(1)
EBITDA(2)
Adjusted EBITDA(2)
Operating profit (loss)
Cash provided by operations
Net cash flows generated operating activities
Capital expenditures (accrual)
Capital expenditures (cash)
Weighted Average number of ordinary shares (3)
(4)
(4)
745.0
(45.4)
66.5
87.3
27.2
77.0
35.3
52.3
50.7
87.7
770.2
(43.5)
54.1
80.6
17.6
24.1
3.7
40.9
39.1
82.2
(25.2)
(1.9)
12.4
6.7
9.6
52.9
31.6
11.4
11.6
5.5
Earnings per share (basic and diluted)
(51.8) cents
(52.9) cents
1.1 cents
Average BLY rig utilisation
Average Fleet size
41%
691
46%
676
-5%
15
-3.3%
-4.4%
22.9%
8.3%
54.5%
219.5%
854.1%
27.9%
29.7%
6.7%
2.1%
-10.9%
2.2%
(1) NPAT is 'Net profit after tax'.
(2) EBITDA is 'Earnings before interest, tax, depreciation and amortisation'. Adjusted EBITDA is 'Earnings before interest, tax, depreciation
and amortisation and before major restructuring initiatives, impairments of assets, and other significant and non-recurring transactions
outside the ordinary course of business'. These items are identified by management as not representing the underlying performance of
the business. See reconciliation in section 3.3 'Significant Items'.
(3) Reverse stock split of 300 to 1 occurred on 30 October 2019.
(4) The adoption of AASB 16 improves EBITDA and Adjusted EBITDA in 2019 by $9.2 million relative to 2018.
3. Discussion and Analysis of Operational Results and the Income Statement
3.1 Revenue
Revenue for the year ended 31 December 2019 of $745.0 million decreased by 3.3%, or $25.2 million, compared to revenue
for the prior year ended 31 December 2018 of $770.2 million.
A majority of the revenue for both Global Drilling Services and Global Products is derived from providing drilling services and
products to the mining industry and is dependent on mineral exploration, development and production activities.
Revenue during 2019 was lower than 2018 because the second half of 2019 saw several significant mergers and acquisitions
within the mining industry, which in turn delayed mineral exploration projects and reduced overall market activity.
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Boart Longyear Limited Annual Report 2019
3.2 Cost of Goods Sold, Sales and Marketing Expense, and General and Administrative Expense
The following pro forma income statement shows the effects of removing significant items from their respective income
statement line. The adjusted balances will be used in the following narrative to reflect cost categories after removing the
impact of significant items.
For the year ended 31 December
2019
As Reported
Significant
Items
Adjusted
Balance
As Reported
2018
Significant
Items
Adjusted
Balance
Continuing operations
Revenue
Cost of goods sold
Gross margin
Other income
General and administrative expenses
Sales and marketing expenses
Significant items
Other expenses
Operating profit (loss)
745.0
(606.3)
138.7
6.8
(83.0)
(20.3)
-
(15.0)
27.2
-
5.2
5.2
-
15.6
-
(20.8)
-
-
745.0
(601.1)
143.9
6.8
(67.4)
(20.3)
(20.8)
(15.0)
27.2
770.2
(639.1)
131.1
10.4
(80.6)
(22.1)
-
(21.2)
17.6
-
11.2
11.2
-
14.5
0.8
(26.5)
-
-
770.2
(627.9)
142.3
10.4
(66.1)
(21.3)
(26.5)
(21.2)
17.6
Gross margin in 2019 improved to 19.3% compared to 18.5% in 2018. The higher margin is related to cost savings from key
improvement initiatives as well as improved margins on fixed costs.
The total of other income, general and administrative expenses (“G&A”), sales and marketing expenses (“S&M”) and other
expenses (adjusted for significant items) of $95.9 million in 2019 was 2.3% less than 2018 of $98.2 million. The lower cost
structure is driven by lower expenses as a result of continued emphasis on cost savings and delivery of key value initiatives.
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Boart Longyear Limited Annual Report 2019
3.3 Significant Items
During the years ended 31 December 2019 and 2018, the Company incurred the following restructuring expense,
recapitalisation costs and impairment charges:
US$ Millions
EBITDA(1)
Impairments
Property, plant and equipment
Intangible assets
Inventories
Employee and related costs
Legal provisions
Other restructuring expenses
Onerous lease
Total of significant and non-recurring items
Adjusted EBITDA(1)
For the year ended 31 December
2019
2018
US$ Millions
US$ Millions
66.5
(2)
0.2
9.0
0.8
1.7
2.6
6.2
0.3
20.8
87.3
(2)
54.1
0.1
-
10.9
2.6
-
12.9
-
26.5
80.6
(1) EBITDA is 'Earnings before interest, tax, depreciation and amortisation'. Adjusted EBITDA is 'Earnings before interest, tax,
depreciation and amortisation and before major restructuring initiatives, impairments of assets, and other significant and non-
recurring transactions outside the ordinary course of business'. These items are identified by management as not representing the
underlying performance of the business.
(2) The adoption of AASB 16 improves EBITDA and Adjusted EBITDA in 2019 by $9.2 million relative to 2018.
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Boart Longyear Limited Annual Report 2019
4. Discussion and Analysis of Cash Flow
Cash provided by operations
Net cash flows provided by operating activities
Net cash flows used in investing activities
Net cash flows (used in) provided by financing activities
4.1 Cash Flow used in Operating Activities
For the year ended 31 December
2019
2018
US$ Millions US$ Millions
$ Change
% Change
77.0
35.3
(44.9)
(11.0)
24.1
3.7
(25.4)
11.6
52.9
31.6
(19.5)
(22.6)
219.5%
854.1%
-76.8%
-194.8%
Cash flow from operating activities for the year ended 31 December 2019 was $35.3 million, which is an improvement of $31.6
million compared to 2018 of $3.7 million. The primary reason for the improvement in cash flows from operating activities is due
to working capital changes.
We have invested $50.7 million in capital equipment and research and development to support existing operations during
2019, which is higher than the comparable prior period (2018: $39.1 million). Of the 2019 amount, approximately $42.9 million
was spent on activities relating to refurbishing the rig fleet and investments in other equipment, $3.8 million was spent on
growth equipment in the Geological Data Services business and $4.0 million was spent on product development and intangible
assets, including engineering, Globaltech and patent maintenance. The 2019 capital expenditures have been partially offset
by proceeds from the sale of property, plant and equipment of $5.8 million (2018: $13.7 million).
The decrease in cash flows provided by financing activities is primarily due to higher repayment of borrowings and lease
payments from the adoption of AASB 16.
5. Discussion of the Balance Sheet
The net liabilities of the Company increased by $49.9 million, to $364.8 million as at 31 December 2019, compared to $314.9
million as at 31 December 2018. This increase results primarily from the global comprehensive loss for the year of $49.9
million.
Total assets of $642.0 million were $4.8 million higher than 2018 of $637.2 million primarily as a result of higher property, plant
and equipment from the adoption of AASB 16 offset by decreases in intangible assets, tax assets and cash.
Total liabilities increased by $54.7 million to $1.0 billion compared to $952.0 million in 2018. This is primarily driven by
accreted interest for the period.
__________________________________________________________________________________________
10
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
Liquidity and Debt Facilities
The Company’s debt is comprised of the following instruments:
Description
Principal
Outstanding
as at 31
December
2019
(millions)
Accreted
Interest
as at 31
December
2019
(millions)
Interest
Rate
Scheduled
Maturity
Security
Senior Secured Notes
$217.0
$36.6
10%2
December 2022
Second lien on the accounts receivable,
inventories, deposit accounts and cash
(“Working Capital Assets”) of the Term Loan
B and Senior Secured Notes guarantors that
are not ABL or Backstop ABL guarantors, a
third lien on the Working Capital Assets of
the Term Loan B and Senior Secured Notes
issuer and the other Term Loan B and
Senior Secured Notes guarantors that are
also ABL or Backstop ABL guarantors, and a
first lien on substantially all of the other
tangible and intangible assets (“Non-
Working Capital Assets”) of the Term Loan B
and Senior Secured Notes issuer and other
guarantors, including equipment, intellectual
property, the capital stock of subsidiaries
and certain owned real property (in any
case, excluding assets of BLY IP, Inc.)
Term Loan – Tranche B
$159.97
$13.4
8%3
December 2022 Same as Senior Secured Notes
ABL8
$34.91
Nil
Variable4
23 July 2022
Term Loan – Tranche A
$132.57
$11.1
8%3
December 2022
First lien on the Working Capital Assets of
the ABL borrower and guarantors and a third
lien on substantially all of the Non-Working
Capital Assets of the ABL borrower and
guarantors, including equipment, intellectual
property and the capital stock of subsidiaries
(but excluding real property), and in any
case excluding assets of BLY IP, Inc., Boart
Longyear Suisse Sarl and Boart Longyear
S.A.C.
First lien on the Working Capital Assets of
the Term Loan A guarantors that are not
ABL or Backstop ABL guarantors, a second
lien on the Working Capital Assets of the
Term Loan A issuer and the other Term
Loan A guarantors that are also ABL and
Backstop ABL guarantors, and a second lien
on substantially all of the Non-Working
Capital Assets of the Term Loan A issuer
and guarantors, including equipment,
intellectual property, the capital stock of
subsidiaries and certain owned real property
(in any case, excluding assets of BLY IP,
Inc.)
Backstop ABL8
$45.0
$7.2
11%5
23 October
20225
Same as ABL but including any real property
required to be pledged as security for the
Senior Secured Notes
Senior Unsecured
Notes
$88.9
$3.2
1.5%6
December 2022 Unsecured
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
$5.6 million in letters of credit were issued in addition to the $34.9 million borrowings that were outstanding.
Interest in cash at a reduced interest rate of 10% per annum from 1 January 2019.
Interest is 8% payable-in-kind.
Based on LIBOR + margin (grid-based margin is currently 3.25%).
Interest is payable-in-kind at 11% at Company’s election or 10% cash. Maturity Date is 23 October 2022 or 90 days after the ABL due date.
Interest is 1.5% payable-in-kind at Company’s election until maturity.
The secured amounts under Term Loan A and Term Loan B are capped at the base principal amounts as agreed in the 2017 recapitalisation amendments.
In July 2019 the Company amended terms to provide the Company additional liquidity and extend maturities from July 2020 to July 2022 and from October 2020 to October
2022 for the ABL and Backstop facilities, respectively. See Note 19 for more information.
__________________________________________________________________________________________
11
11
BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
6. Review of Segment Operations
The following table shows our third-party revenue and revenue from inter-segment sales by our Global Drilling Services
division. Segment profit represents earnings before interest and taxes.
2019
US$ Millions
Segment Revenue
2018
Segment Profit
2019
2018
US$ Millions
US$ Millions
US$ Millions
Drilling Services
516.3
533.6
63.1
57.1
Global Products revenue
Products third party revenue
Products inter-segment revenue (1)
Total Global Products
Less Global Product sales to Global Drilling Services
Total third party revenue
Total segment profit
228.7
56.9
236.6
56.0
285.6
(56.9)
745.0
292.6
24.5
23.5
(56.0)
770.2
87.6
80.6
(1) Transactions between segments are carried out at arm’s length and are eliminated on consolidation.
__________________________________________________________________________________________
12
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
6.1 Review of Segment Operations - Global Drilling Services
For the year ended 31 December
2019
2018
US$ Millions
US$ Millions
$ Change
% Change
516.3
533.6
(17.3)
-3.2%
405.9
25.9
431.8
83.6%
76.9
14.9%
7.6
13.1
90.3
284
691
423.9
23.6
447.5
83.9%
77.6
14.5%
8.6
17.3
82.9
310
676
(18.0)
2.3
(15.7)
-0.3%
(0.7)
0.4%
(1.0)
(4.2)
7.4
(26)
15
-4.2%
9.7%
-3.5%
-0.4%
-0.9%
2.8%
-11.6%
-24.3%
8.9%
-8.4%
2.2%
Financial Information
Third party revenue
COGS
Materials/labor/overhead/other
Depreciation and amortisation
Total COGS
COGS as a % of Revenue
Contribution margin $
Contribution margin %
Business unit SG&A
Allocated SG&A
EBITDA
Other Metrics
Average # of Operating Drill Rigs
Average # of Drill rigs
Safety
The Global Drilling Services division’s TCIR for 2019 was 1.51, compared to 2.04 for the comparable period in 2018. The
LTIR for 2019 was 0.02, compared to 0.09 for the comparable period in 2018. Our focus is on quality Critical Control
Verifications and Inspections; applying meaningful corrective actions globally and in a timely manner; increasing vehicle
monitoring and improving driver behaviors; increasing supervisory and field level employees’ competencies through
Competency Training Programs; reinforcing our EHST fundamentals via regular BITS training specific to regional risk profiles;
and improving EHST Internal Audit protocols.
Revenue
Global Drilling Services’ revenue in 2019 was $516.3 million, down 3.2% from $533.6 million in 2018. The revenue decrease
was driven by volume, primarily due to existing customers cancelling or significantly reducing their programs. The reductions
were not specific to a particular region, but several of the decreases were likely the result of M&A activity. In terms of drilling
discipline, surface coring and reverse circulation were down year over year primarily due to the reasons listed above. The
other disciplines: underground core, percussive, sonic, and water well were relatively flat year over year.
Approximately 85% of Global Drilling Services’ revenue for 2019 was derived from major mining companies, including Barrick,
Newmont, BHP, Rio Tinto, Goldfields, Kinross, and Freeport. Our top 10 Global Drilling Services customers represented
approximately 56% of the division’s revenue in 2019, with no single contract contributing more than 10% of our consolidated
revenue.
Margins
With revenues decreasing from $533.6 million in 2018 to $516.3 million in 2019, Global Drilling Services also saw a
corresponding decrease in contribution margin. The 2019 contribution margin was $76.9 million compared to $77.6 million in
2018, a decrease of 0.9%. Throughout 2019 the business continued to focus on improving meters per shift, non-billable hours
and revenue per shift while reducing variable and fixed costs to maintain a flat cost structure from a percent of revenue.
______________________________________________________________________________________
13
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
6.2 Review of Segment Operations - Global Products
Financial Information
Third party revenue
COGS
Materials/labor/overhead/other
Inventory obsolescence
Depreciation and amortisation
Total COGS
COGS as a % of Revenue
Contribution margin $
Contribution margin %
Business unit SG&A
Allocated SG&A
EBITDA
Other Metrics
Manufacturing plants
Average backlog
Inventories 1
For the year ended 31 December
2019
2018
US$ Millions
US$ Millions
$ Change
% Change
228.7
236.6
170.9
0.9
3.7
175.5
76.7%
33.6
14.7%
16.2
14.7
31.0
6
29.5
163.1
175.4
0.3
4.7
180.4
76.2%
39.3
16.6%
16.9
14.3
30.7
6
27.7
165.4
(7.9)
(4.5)
0.6
(1.0)
(4.9)
0.5%
(5.7)
-1.9%
(0.7)
0.4
0.3
-
1.8
(2.3)
-3.3%
-2.6%
200.0%
-21.3%
-2.7%
0.7%
-14.5%
-11.4%
-4.1%
2.8%
1.0%
0.0%
6.5%
-1.4%
(1) Represents total Company inventories including Global Drilling Services, Global Products and Geological Data Services.
Safety
In 2019, the TCIR for the Global Products and Manufacturing combined segment was 0.69 recordable incidents per 200,000
hours worked compared to 1.60 in 2018. The LTIR was 0.00, compared to 0.40 for 2018. As with the Global Drilling Services
division, these results reflect the positive impact the Company’s continued focus on Leading Indicator programs have had on
injury rates.
Revenue
Revenue of $228.7 million in 2019 is 3.3% lower than 2018 revenue of $236.6 million for the Global Products division.
Revenues generated from coring tooling and production tooling were slightly weaker in 2019 relative to the prior period.
Margins
While revenue for Global Products was down compared to 2018, EBITDA for the year ended 31 December 2019 increased by
$0.3 million or 1.0%, primarily driven by Geological Data Services patent defense and ramp up costs, and Products volume
decrease, offset by favourable flow through of disciplined cost control in both variable and fixed SG&A and material cost
decreases. We continue to operate our manufacturing facilities at lean levels, only producing what is required to meet market
demand.
Backlog
At 31 December 2019, Global Products had a backlog of product orders valued at $35.9 million. This compares to $30.0
million at 31 December 2018. Average backlog during the second half of 2019 was $28.4 million compared to $30.6 million
during the first half of 2019. The increase in our backlog year over year – which we define as product orders we believe to be
firm – was driven by an increase in demand for consumables. It should be noted that an order shipped within the same month
the order is received does not show up in backlog. Also, there is no certainty that orders in our backlog will result in actual
sales at the times or in the amounts ordered.
______________________________________________________________________________________
14
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
Intellectual Property
We rely on a combination of patents, trademarks, trade secrets and similar intellectual property rights to protect the proprietary
technology and other intellectual property that are instrumental to our Global Products business. As at 31 December 2019, we
had 399 issued patents, 452 registered trademarks, 155 pending patent applications and 15 pending trademark applications.
One of the most significant products for which we have obtained patent protection during 2018 is our XQ™ wireline coring rod.
The XQ™ wireline coring rods feature self-aligning double start threads, rod joints that engage smoothly without wedging or
jamming, and exclusive heat treatments to provide stronger, longer lasting rods. We do not consider our Global Products
business, or our business as a whole, to be materially dependent upon any particular patent, trademark, trade secret or other
intellectual property.
Research and Development
Our Global Products division employs engineers and technicians to develop, design and test new and improved products. We
work closely with our customers, as well as our Global Drilling Services division, to identify opportunities and develop technical
solutions for issues that arise on site. We believe that sharing best practices amongst our divisions accelerates innovation and
increases safety and productivity in the field. This integrated business model provides us with an advantage in product
development, and we believe it enables us to bring new technology to the market with speed and reliability. Prior to their
introduction, new products are subjected to extensive testing in various environments, again with assistance from our Global
Drilling Services network. New product development efforts remain focused on product changes that continue to drive
increased safety and productivity, so customers see real added value regardless of the business environment. Our recent
successes include the LF™160 surface coring drill paired with our Freedom™ Loader which has set a new benchmark in
productivity and hands-free rod handling. Launched in the second half of 2017, our patented Longyear™ diamond bits
continue to show improved productivity by lasting longer and cutting faster. Commercial launch of the new XQ™ coring rod
continues globally, featuring a greater depth capacity than the RQ™ rod, and faster, easier joint make/breaks for higher
productivity. The easier joint make/breaks also enables hands-free rod handlers to be used successfully with XQ™ due to our
patented thread entry design.
Under our Geological Data Services business, TruCore™ core orientation tools continue to expand geographically and are
available globally. The TruShot™ magnetic survey technology, the second in a future suite of tools, was launched in 2018 and
is available globally. Our TruScanTM matrix calibrated XRF and Photo Sample Scanning Technology is currently being used at
several locations globally with long term 24/7 utilisation producing results that are being used for real time decision making by
the mining client. TruScanTM continues to spread its footprint globally with units deployed in Australia as well as North and
South America.
TruScanTM improvements in 2019 include chip scanning ability, calibration enhancements, and a quality data environment to
assist our clients in targeting ore bodies.
These technologies are part of our strategy to provide real-time subsurface resource defining information to mining companies.
Inventories
Cash continued to be generated from inventory in 2019 due to continued management of demand in our supply chain
organisation and continuous efforts to reduce excess inventory. There was a continued push to scrap product that cannot be
utilised in the business. The Supply Chain teams scrapped $4.2 million of product that will result in decreased operating
expenses and carrying costs. The Company also generated $8.6 million of cash related to third-party sales and consumption
in our Global Drilling Services division. As a result of efforts to generate cash and scrap old product, days on hand improved
slightly by two days in 2019. There will be ongoing focus in 2020 to increase inventory turnover and improve overall inventory
health. The Company also continues to monitor and set appropriate re-order point levels throughout the regions to support the
business with leaner inventory levels.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT Boart Longyear Limited Annual Report 2019
7. Outlook
7.1 Our 2020 Priorities
Continue to eliminate job related injuries and significant safety risks by maintaining and enhancing our strong safety
and compliance record. Safety is critical to the Company, our employees and our customers, both in determining the
success of our business and in ensuring the ongoing well-being of our employees and others with whom we come into
contact. We are dedicated to providing a safe work environment for every employee and contractor and implementing state-
of-the-art safety tools and practices to become the safety leader in our industry. We are particularly focused on critical risks,
continually seeking ways to mitigate those risks and ensuring that, when significant incidents or high-potential near-misses
occur, we thoroughly investigate the root causes of those incidents and apply the lessons learned from them broadly. We also
promote a culture where employees and managers at all levels are actively engaged in promoting safe work practices.
The areas of focus for safety for 2020 will be the continuous improvement of the EHST Lead Indicator KPI’s which include:
Critical Risk Management – Critical Control Verifications and Inspections, BITS assigned training modules, In-Vehicle
Monitoring System focused on Driver Behavior Improvements, and Corrective Action closure metrics. A Competency Training
Program will be implemented to focus on developing and documenting our entry level employee’s abilities to perform tasks
safely.
Expand our mining and minerals drilling customer base by focusing on efficiency and productivity.
We remain focused on providing our customers with a full range of drilling services offerings. Our commitment is underpinned
by initiatives to improve the efficiency and productivity with which we deliver services and information to our customers.
Specifically, our goal is to increase our business with our existing customers and find new ways to partner with existing and
potential new customers to grow our business.
Effectively manage customer relationships, pricing and contract terms. Our Global Drilling Services and Global Products
businesses have implemented rigorous internal processes to ensure our products and services reflect the full value delivered
to our customers and to solidify and create lasting customer relationships.
Create new products and respond to new opportunities within a constrained capital budget. We will continue to pursue
disciplined investments in our business to drive returns and capitalise on high-value opportunities in which we can leverage
distinctive competencies. We also will continue to pursue strategic technologies and high value-added and more profitable
activities, such as expanding our product and services offerings to provide subsurface resource information to our mining
customers through our Geological Data Services business.
Improve cash generation in 2020, with the goal to continue to be cash positive, through careful management of
liquidity and costs. Ongoing improvement in cash generation in 2020 is a primary goal for the business, which we intend to
achieve through continued disciplined expense and capital management, opportunistic cost reductions and productivity
enhancements. We will continue to drive business initiatives focused on improving our fixed and variable cost structures in
keys areas of the business and we expect these benefits to improve liquidity in 2020 and beyond. Furthermore, we will
continue to focus on process improvements, streamlined working capital management and structural changes to improve
customer support and responsiveness and drive long-term efficiencies by embedding a cash return on investment metric
throughout the organisation.
7.2 Outlook and Future Developments
We are not providing an outlook for 2020 revenue or EBITDA. However, a stronger industry outlook, in combination with our
productivity and commercial initiatives are making a positive impact. We anticipate seeing ongoing gains from those identified
initiatives which we continue to actively manage.
The mining industry is cyclical and 2019 continued to show signs of marking a return to the longer-term growth outlook for the
industry, underpinned by:
•
•
•
•
•
•
continued industrialisation and urbanisation of developing economies, which are expected to support structural
increases in demand for minerals and metals broadly in line with global GDP;
improving cash and balance sheet strength of our key customers;
improving commodity prices and corresponding customer margins relative to those of recent years;
improving supply/demand fundamentals in key commodities like copper;
reduced reserve to production ratios at many gold mines; and
growing attractiveness of the commodities / mining sector as an investment asset class.
______________________________________________________________________________________
16
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
As a result, we retain confidence in our belief that natural resources companies will continue to produce throughout the cycle.
This will continue to drive the need to both replace and supplement ongoing depletion of reserves and resources, driving future
investment in exploration, development and capital spending. As the leading global drilling services provider to the mineral
industry, we continue to drive operational improvements and technological innovation across our global fleet of assets, which
we believe will continue to benefit the business through increased market opportunities.
We remain focused on our core mining markets and intend to continue to invest in growth opportunities in a selective and
disciplined manner. We will continue to invest to develop the next generation of rod-handling solutions across our range of
drilling rigs and expand the provision of subsurface resource information to our mining customers through our Geological Data
Services business. In addition, we continue to pursue operational enhancements through safety and productivity
improvements to deliver value to our customers and improve bottom line operating performance of our business.
Further information about likely developments in the operations of the Company in the future years, expected results of those
operations, and strategies of the Company and its prospects for future financial years have been omitted from this report
because disclosure of the information would be speculative or could be prejudicial to the Company.
7.3 Key Risks
The Company maintains an Enterprise Risk Management (“ERM”) system by which we systematically assess the
consequences of risk in areas such as market, health and safety, environment, finance, legal compliance, and reputation. We
also identify and track appropriate mitigation actions for identified risks. A range of material risks have been identified, as
follows, that could adversely affect the Company. These risks are not listed in order of significance, nor are they all-
encompassing. Rather, they reflect the most significant risks identified at a whole-of-entity or consolidated level.
Market Risk. The Company’s operating results, financial condition and ability to achieve shareholder returns are directly
linked to underlying market demand for drilling services and drilling products. Demand for our drilling services and products
depends in significant part upon the level of mineral exploration, production and development activities conducted by mining
companies, particularly with respect to gold, copper and other base metals. In prior years we have experienced significant
declines in our financial performance as a result of the global contraction in exploration and development spending in the
commodities sector, and the subsequent impact on our mining customers. Mineral exploration, production and development
activities remain uncertain and could remain at current levels for an extended period of time or decline even further, resulting
in adverse effects on our operating results, liquidity and financial condition.
We seek to mitigate the risk associated with volatility and weak demand conditions in our core mining markets by selectively
pursuing opportunities in other markets, such as infrastructure and geotechnical applications for our Global Products business,
and new technology offerings such as our Geological Data Services business. In addition, our business priorities include
ongoing initiatives to further improve the underlying cost structure and simplify the business. We also seek to gain market
share and expand our customer base in our core mining market by improving the efficiency and productivity with which we
deliver services and information and improve commercial practices for better alignment with our customers’ needs.
Operational Risks. The majority of our drilling contracts are either short-term or may be cancelled upon short notice by our
customers, and our products backlog is subject to cancellation. We seek to strengthen customer relationships and lessen
retention risks through active customer selection, improved commercial practices and ongoing initiatives targeted at
strengthening our operational and safety performance. We also pursue contracting practices to minimise the financial cost
associated with the termination or suspension of customer contracts or orders. The degree to which we can allocate
termination risks and obligations to our customers remain somewhat limited by industry practice.
We have implemented significant cost savings, productivity improvements and efficiencies over the past five years, but our
future operating results, financial condition and competitiveness depend on our ability to sustain previously implemented
reductions and realise additional savings and improvements from ongoing and future productivity initiatives. We may not be
able to achieve expected cost savings and operational improvements in anticipated amounts or within expected time periods,
and, if achieved, we may not be able to sustain them. Accordingly, we have implemented a project management organisation
and rigorous monitoring processes around our key operational improvement programmes to track progress against project
objectives, quantify results that are being achieved and ensure process improvements are sustainable.
Risks Related to Liquidity and Indebtedness. At 31 December 2019, our net debt was $764.1 million, with $784.3 million in
gross debt and $20.2 million of cash on hand. The Company also has an additional $24.5 million of liquidity available through
the Asset-Based Loan (“ABL”) facility. The instruments comprising the Company’s debt and their terms are set out in detail in
Note 19 of the financial statements.
______________________________________________________________________________________
17
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
The annual financial report has been prepared on a going concern basis, which contemplates the realisation of assets and the
settlement of liabilities in the ordinary course of business. The Directors reaffirm that current and expected operating cash
flow, cash on hand and available drawings under the Company’s asset-based loan facility provide sufficient liquidity to meet its
debts as and when they fall due.
Tax Risk. As previously disclosed and further detailed in Note 10 of the financial statements, the Company is contesting a
series of tax audits performed by the Canada Revenue Agency (“CRA”). We also are responding to audits that are underway
or anticipated to be performed by the CRA. The resolution of existing and potential assessments by Canadian tax authorities
may adversely affect our liquidity. While the timing and resolution of the Company’s appeals of the CRA’s assessments are
uncertain, we are pursuing strategies to mitigate the risks of an adverse outcome with the assistance of our external legal and
tax counsel.
Government and Regulatory Risk. Changes in, or failure to comply with, the laws, regulations, policies or conditions of any
jurisdiction in which we conduct our business could have a material adverse effect on our financial condition, liquidity, results
of operations and cash flows. Our operations are subject to numerous laws, regulations and guidelines (including anti-bribery,
tax, health and safety, human rights and modern slavery, and environmental regulations) that could result in material liabilities
or increases in our operating costs or lead to the decline in the demand for our services or products. We therefore carefully
monitor, and educate our employees and business partners about, legal requirements and developments to make sure our
operations remain aware of applicable laws and regulations at all times. Further, we have implemented various internal and
external resources and controls to promptly detect and address any potential non-compliance.
Climate Related Risks. The potential impacts of climate change may affect the execution and performance of business
strategies as well as the Company’s ability to operate and provide goods and services globally. The Company is currently
evaluating the potential impacts of climate change on our strategies, customers and markets in which we operate. However,
an assessment of these impacts on global markets, regulatory policies, and technologies are not clear due to the wide range
of issues and potential outcomes.
Information and Technology Risk: The legal, regulatory and contractual environment surrounding information security,
privacy and fraud is constantly evolving and companies that collect and retain information are under increasing attack by
cyber- criminals around the world. We are dependent on information technology networks and systems, including the Internet,
to process, transmit and store electronic information and, in the normal course of our business, we collect and retain certain
information, including financial information and personally identifiable information, from and pertaining to our customers,
partners, vendors, and employees. The protection of data is important to us, and we have information security policies to
protect our information and information systems. However, the policies and security measures that we put in place could prove
to be inadequate and cannot guarantee security, and our information technology infrastructure may be vulnerable to criminal
cyber-attacks or data security incidents due to employee negligence, error, malfeasance, or other vulnerabilities. Cyber
security attacks are increasingly sophisticated, change frequently, and often go undetected until after an attack has been
launched. We may fail to identify these new and complex methods of attack or fail to invest sufficient resources in security
measures. We have and will continue to experience cyber-attacks, and we cannot be certain that advances in cyber-
capabilities or other developments will not compromise or breach the technology protecting our networks.
Public Health Risk: From time to time, various diseases such as the avian flu and recent COVID-19 outbreak, have spread
across the world. The Company has global manufacturing facilities, employees, suppliers and customers, and if a disease
spreads sufficiently to cause a pandemic (or to cause the fear of a pandemic to rise) or governments regulate or restrict the
flow of labour or products, the Company's operations, employees, suppliers, and customers could be severely impacted. Such
a pandemic could also have an adverse impact on consumer demand and commodity prices. Any material changes in the
Company's supply or demand for products could materially and adversely affect the Company's results of operations and
liquidity.
7.4 Forward Looking Statements
This report contains forward looking statements, including statements of current intention, opinion and expectation regarding
the Company’s present and future operations, possible future events and future financial prospects. While these statements
reflect expectations at the date of this report, they are, by their nature, not certain and are susceptible to change. The
Company makes no representation, assurance or guarantee as to the accuracy of or likelihood of fulfilling any such forward
looking statements (whether express or implied), and, except as required by applicable law or the Australian Securities
Exchange Listing Rules, disclaims any obligation or undertaking to publicly update such forward looking statements.
______________________________________________________________________________________
18
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
REMUNERATION REPORT
This remuneration report has been prepared in accordance with section 300A of the Australian Corporations Act 2001 and
summarises the arrangements in place for the remuneration of directors, Key Management Personnel (“KMP”) and other
employees of Boart Longyear for the period from 1 January 2019 to 31 December 2019.
Changes in 2019
In late 2018 Brendan Ryan transitioned to the role of Chief Business Development Officer. Additionally, Miguel Desdin
replaced Mr Ryan as Chief Financial Officer on 7 January 2019. This change was carefully designed to support the key
strategic, financial, growth and human resources objectives of the Company.
1.1 2019 REMUNERATION OVERVIEW
The principles guiding our decisions about executive remuneration at Boart Longyear are:
• Performance Driven: foster a culture that is aligned with Boart Longyear’s strategic objectives and performance.
• Alignment: remuneration should be aligned with shareholder’ interests of creating shareholder value.
•
The Boart Longyear Culture: drive leadership performance and behaviors to create a culture that promotes safety,
diversity, retention and employee satisfaction.
• Remuneration should be market based for the business context, geography and the industry.
This Report sets out the remuneration arrangements in place for the 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.
1.2 DIRECTORS AND SENIOR EXECUTIVES
Directors and senior executives who were KMP during the year ended 31 December 2019 were:
Directors
Position
Senior Executives Position
Marcus Randolph
Executive Chairman (retired 1 September 2019)
Jeffrey Olsen
President and Chief Executive Officer
Kevin McArthur
Non-executive Chairman (appointed effective 1 September 2019)
Denis Despres
Chief Operating Officer
Tye Burt
Kyle Cruz
Non-executive Director (appointed effective 23 August 2019)
Miguel Desdin
Chief Financial Officer (appointed effective 7 January 2019)
Non-executive Director (retired 31 December 2019)
Robert Closner
Vice President, General Counsel & Company Secretary
Jason Ireland
Non-executive Director
James Kern
Non-executive Director
Gretchen McClain
Non-executive Director (retired 23 August 2019)
Jeffrey Olsen
Robert Smith
Executive Director
Non-executive Director
Richard Wallman
Non-executive Director
Eric Waxman
Non-executive Director (retired 20 May 2019)
Kari Plaster
Chief Human Resources Officer
Brendan Ryan
Chief Business Development Officer
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
1.3 REMUNERATION OUTCOMES
The actual remuneration earned by executives is set out below. This information is considered to be relevant as it provides
shareholders with a view of the remuneration actually paid to executives for performance for the year ended 31 December
2019. This differs from the remuneration details prepared in accordance with statutory obligations and accounting standards,
which are reported on page 28 of this Report. The remuneration calculations reported there 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.
Compensation represents base salary. Short Term Incentives (“STI”) represents the cash paid in respect of the executive’s
STI award earned for the prior year’s performance but paid in the current reporting year, and Other represents benefits such
as US 401(k) retirement plan, car allowance, relocation pay, tax preparation service reimbursements, sign-on bonuses and
other bonuses granted and paid in 2019.
Sr. Executive Remuneration
US$
Compensation
STI1
Jeffrey Olsen
Denis Despres
Miguel Desdin
Robert Closner
Kari Plaster
Brendan Ryan
675,000
400,000
384,616
263,609
290,000
400,000
767,981
295,200
-
99,187
135,546
226,320
Special
Retention
Bonus 2
550,685
-
-
77,054
-
-
Other
Total
39,569
197,761
249,477
24,968
29,050
29,198
2,033,235
892,961
634,093
464,818
454,596
655,518
(1) Represents the cash paid in respect of the executive’s STI earned for the prior year’s performance but paid in the current reporting
year. For further details of the STI plan, see section 3.2.
(2)
In March 2016, the Board approved Special Strategic Retention Awards to certain key employees. Mr Olsen’s and Mr Closner’s
awards vested and were paid during 2019.
1.4 EXECUTIVE REMUNERATION STRATEGY
The Board recognises that appropriate remuneration for BLY executives and other employees is linked to the attraction,
development, performance and retention of top-level talent and human capital. Given the current economic climate and the
ongoing skills shortage, it is essential that adequate measures are in place to attract and retain the required skills. In order to
meet the strategic objectives of a high-performance organisation, the remuneration philosophy is positioned to reward strong
performance and to maintain that performance over time.
The primary objectives of Boart Longyear’s policy are to:
•
•
•
•
attract, motivate, reward and retain key talent;
promote the organisation’s strategic objectives, within its risk appetite;
promote positive outcomes across the geographies where we operate;
promote an ethical culture and behaviour that are consistent with values and which encourage responsible corporate
citizenship.
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
2. REMUNERATION FRAMEWORK AND STRATEGY
This section outlines the Company’s remuneration governance framework and strategy and explains how the Board and
Remuneration, Nominations and Governance Committee (“Remuneration Committee” or “Committee”) make remuneration
decisions that underpin the remuneration for senior executives, including the use of external remuneration consultants.
The diagram below illustrates the primary design features of the Company’s executive remuneration strategy and how the
components of overall remuneration have been designed to support them:
Attraction and Retention
Best Practice
Fairness and Alignment
Pay for Performance
▪ Accurate and up-to-date
market information and
information on trends is
a crucial factor in
determining the quantum
of the remuneration
packages.
▪ Remuneration levels are
competitive with similar
roles in the markets in
which the Company
competes for talent.
▪ Fixed and at-risk
remuneration is
appropriately industry
and market competitive.
▪ Long-term incentive
compensation provides
for meaningful retention.
▪ The long-term incentive
component is delivered
through the
Management Incentive
Plan.
▪ Reward packages and
practices reflect local
and international best
practice, where
appropriate and
practical.
▪ There is a significant
amount of total
executive remuneration
which is at-risk and
dependent upon
achieving challenging
key business objectives
and safety targets.
▪ Performance
management assists in
indicating the overall
total rewards for each
ExCo member.
▪ Compensation is
relevant and meaningful
to the Executive
receiving it.
▪ Remuneration
▪ The framework
Committee regularly
performs executive
compensation
benchmarking utilising
independent
compensation
consultants.
▪ Reward measures for
executives are aligned
with, linked to and
influenced by the
interests and strategies
of BLY and its
shareholders.
▪ The aspiration is that our
remuneration
philosophy, policy and
practices, as well as the
processes to determine
individual pay levels are
transparent.
▪ Clawback: where
performance
achievements are
subsequently found to
have been misstated,
provisions are made for
redress.
▪
▪
encourages consistency,
and allows for
differentiation where it is
fair, rational and
explainable.
Incentive based
compensation is
designed to reward
executives for delivered
performance against
important Company,
safety, financial and
strategic objectives.
Incentive plans utilise an
appropriate mix of
challenging performance
measures designed to
deliver value to
executives when
performance is achieved
over short and longer
terms.
▪
Incentive based
compensation provides
for upside potential with
strong performance.
2.1 HOW REMUNERATION DECISIONS ARE MADE
Board Responsibility
The Board acknowledges its responsibility for the remuneration arrangements of the Executive team and ensures that those
arrangements 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 informed by and considers input from management
but retains independent decision-making authority. To assist in making decisions related to remuneration, the Board has
established a Remuneration Committee.
Remuneration Committee
The 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. The Committee 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 and create value for shareholders and
support the Company’s remuneration related principles.
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
The Remuneration Committee’s responsibilities include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
review of strategic objectives;
reviewing, monitoring and overseeing the implementation of the executive remuneration policy;
reviewing all aspects of remuneration of the CEO and the proposed remuneration of other KMP, including any
proposed change to the terms of their employment and any proposed termination payments;
reviewing executive incentive plans, including equity-based plans and including consideration of performance
thresholds and regulatory and market requirements;
developing performance thresholds for the CEO and reviewing proposed performance thresholds for other KMP;
reviewing and approving performance achievement relative to executive incentive plans;
overseeing strategies for recruitment, retention and succession planning for Directors and key executive positions;
reviewing the composition of the Board and monitoring the performance of the Board and the Directors;
overseeing the Company’s compliance and ethics program, including compliance with legal and regulatory
requirements other than those related to accounting or financial reporting (which are the responsibility of the Audit
Committee), and from time to time, discuss with management, the Company’s compliance and ethics program, as well
as the status of pending litigation and/or investigations related to the compliance hotline as well as environmental
issues and other areas of oversight, as may be appropriate;
overseeing the Company’s policies and initiatives related to Corporate, Environmental and Social Responsibility and
General Corporate Governance;
overseeing the Company’s compliance with the Code of Conduct, including periodically reviewing and updating the
Code of Conduct, and evaluating any actual or potential conflicts of interest of directors, and management’s activities
to monitor compliance with the Code of Conduct;
identifying the qualities and characteristics the boards needs and drafting recruitment plans to draw qualified board
director candidates to them;
arranging for board trainings and development; and
reviewing and implementing board policies and procedures.
The charter of the Remuneration Committee is set out in full on the Company’s website at www.boartlongyear.com.
The Committee members as at the date of this Report are Mr Tye Burt, Chairman, Mr Conor Tochilin, and Mr Jason Ireland.
The CEO, the Chief Human Resources Officer 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 and/or External Advisors
Where appropriate, the Board seeks and considers advice from independent remuneration consultants and external advisors.
Remuneration consultants are engaged by, and report directly to, the Remuneration Committee and support it in assessing
market practice so that base salary and targeted short-term and long-term compensation are in line with comparable roles.
When remuneration consultants are engaged, the Committee ensures their independence, as necessary, from Company
management in accordance with the assignment or advice being sought. Thus, the Committee may determine that complete
independence from management is required, or it may direct the consultant to work with Company management to obtain
relevant information or input in order to formulate advice or recommendations to the Committee.
The Committee has also established a formal Protocol that summarises the policy and procedures the Company has adopted
to govern the relationship between the independent remuneration consultant, the Committee and management. The Protocol
was developed in compliance with the obligations under Part 2D.8 of the Corporations Act 2001 and ensures that the
remuneration consultant remains free from any undue influence by any member of the KMP to whom the recommendations
relate. Consultant remuneration recommendations are provided directly to the Committee.
In 2018, the Committee relied on the external review of Mercer subject matter experts as well as key Centerbridge Partners in
the creation and administration of the new Management Incentive Plan (“MIP”). In addition, the Committee continued to rely on
the independent market review of KMP compensation obtained from Mercer Consulting. The Company also utilises the AON
Radford Network for global rewards benchmarking, workforce metrics and analytics.
2.2 REMUNERATION COMPENSATION STRATEGY
There are several components of an executive’s total compensation opportunity: fixed compensation, short and long-term
incentives as well as non-monetary benefits.
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
Fixed Remuneration: guaranteed package delivered as a cash salary and mix of compulsory and discretionary benefits
reflects market-relatedness in conjunction with the individual’s background, competence and potential. This component
provides:
• A predictable base level of compensation commensurate with the executive’s scope of responsibilities, leadership
skills, values, performance and contribution to the Company.
•
Targets near the median of the competitive talent market using external benchmarking data. Since the majority of the
Company’s executives (and a majority of the executive KMP) are located in the US, the competitive talent market is
determined to be the US market.
• Variability around the median based on the experience, performance, skills, position, business unit size and/or
complexity and unique market considerations, where necessary.
Short Term Incentive Program: creates a high-performance culture by providing a cash bonus annually. This is determined
based on role and responsibility as well as achievement against predetermined performance hurdles for business and
personal goals.
•
This component of compensation is “at-risk” and earned when certain performance metrics are achieved.
• Key performance metrics are determined annually, in alignment with the Company’s business strategy. They include
some measure of the following (or related) metrics: cash return on investment, adjusted EBITDA, safety performance,
and individual strategic goals.
•
•
•
These metrics were designed to reflect corporate as well as business unit level performance. This helps to ensure
rewards are relevant and affordable as well as reflective of performance. The metrics weight performance in areas
which build and promote collaboration and ensure alignment to strategy and shareholder interests.
Individual strategic goals can include financial, operational, strategic or project-based targets. Examples include items
such as, milestone achievement, revenue growth, cost control goals, cash flow generation, geographic expansion, and
productivity programs.
The STI is awarded in cash and will either be paid all at once, or in a staggered fashion, dependent on key business
factors at the discretion of the Board.
Long Term Incentive Program: based on the individual’s performance and value to the business. It is achieved through
achievement and alignment with shareholder interests. See section 3.3 of the Remuneration report for more information.
•
•
This component of compensation is “at-risk” and earned only if challenging performance metrics are achieved and/or
continued service requirements are met over a multi-year performance period.
In January of 2018, the long-term incentive plan design changed where LTIP was replaced with the new MIP. The MIP
is driven by Total Enterprise Value (“TEV”). The MIP creates value for participants when specific criteria are reached
for performance as well as time vesting. The MIP enables cash and/or share releases to participants as and when its
shareholders monetise their shareholdings at various volumes.
Other Benefits (Monetary and Non-monetary): provided to ensure executive compensation remains relevant and
Executives are well cared for.
Non-monetary Benefits include: meaningful work, access to continuous learning and professional growth, recognition and
appreciation, career advancement and in some cases flex schedules and/or tele-commuting.
Additional Monetary Benefits include: various types of insurance: D&O, life, and regionally based health and welfare insurance
for employee and family members; as well as vehicle allowances and/or other regionally based perks.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
3. COMPONENTS OF EXECUTIVE REMUNERATION
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 (“CBP”); and
•
LTI – being incentives which are tied to vesting conditions, such as EBITDA performance hurdles, and TEV.
The relevant proportion of fixed to at-risk components for senior executive remuneration during 2019 are shown below. The
table illustrates the annualised remuneration mix for executive KMP, including annualised fixed salary, target STI (assuming
that 100% of target bonus performance is achieved).
100%
80%
60%
40%
20%
0%
42%
58%
32%
31%
24%
24%
29%
68%
69%
76%
76%
71%
J E F F R E Y
O L S E N
D E N I S
D E S P R E S
M I G U E L
D E S D I N
R O B E R T
C L O S N E R
K A R I
P L A S T E R
B R E N D A N
R Y A N
Fixed
At Risk STI Potential
3.1 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 the United States’
401(k) defined contribution retirement plan.
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 to make adjustments based on merit in accordance with the CEO’s
recommendation. Base salaries are benchmarked against external data.
3.2 SUMMARY OF THE SHORT-TERM INCENTIVE PROGRAM
The Short-Term Incentive program, or CBP, provides certain employees with the potential to receive an annual bonus if the
Company meets annual financial and safety objectives, which are reviewed and approved by the Remuneration Committee.
Potential target incentives under the CBP range between 10% and 100% of an employee’s base salary depending on the
employee’s role. 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 established annual objectives and targets, as detailed more fully below.
There are four key Company performance components: (1) cash return on investment; (2) adjusted EBITDA; (3) Safety; and
(4) an individual component. Each component has a threshold performance level; a target level of performance, and a
maximum stretch level of performance whereby superior results can drive a pay-out up to 200% of that component of the
bonus. All bonuses awarded under the CBP are paid in cash.
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
The CBP performance components for 2019 and their relative weighting are:
(1) Corporate Financial Target - Cash Return on Investment (CRI) - 25% of the Company’s CBP opportunity is linked to
the Company’s CRI performance. For the purposes of calculating CRI, the statutory CRI is adjusted to eliminate the
impact of items such as cash restructuring costs, pension plan pre-funding, interest and income tax receipts or
payments, acquisition or disposals of subsidiaries, and cash flows from financing activities, including, but not limited
to, proceeds from equity raisings and borrowings.
The CRI metric was selected to ensure appropriate focus on the critical need to generate cash to fund ongoing
operations and reduce debt.
(2) Corporate Financial Target – Adjusted EBITDA - 60% of the Company’s CBP opportunity is linked to the Company’s
Adjusted EBITDA performance. For the purposes of calculating Adjusted EBITDA, Statutory EBITDA plus significant
items, impairment of assets and other significant non-restructuring transactions outside the ordinary course of
business = Adjusted EBITDA.
(3) Corporate Non-Financial Target - Safety - 15% of the Company’s CBP opportunity is dependent upon the Company’s
overall safety performance.
The Board and management believe that a component of the CBP based on safety results appropriately focuses
Company employees on adopting safe work practices, continuously identifying ways to reduce or eliminate hazards
or unsafe behaviours and getting employees home safely every day. Further, safety is paramount to the Company’s
customers, and the Company’s ability to secure or retain work is impacted by its safety performance.
For 2019, the Board agreed, on the recommendation of its Audit, Safety and Risk Committee to use TCIR, LTIR,
Critical Risk Incident Rate and a set of leading indicators as the measurements of safety performance for the CBP.
(4) Individual Strategic Objectives - 100% of the Individual Strategic Objective CBP opportunity is dependent upon
performance against strategic objectives relevant to the employee’s operational or functional responsibility.
Examples of strategic objectives may include operational or functional cost targets, geographic or targeted market
segment or customer growth, new product introductions, leadership, talent retention and development and specific
project or initiative progress. Individual objectives carry individual proportions of 100%.
Strategic objectives are utilised to reinforce continued focus on critical initiatives and operational or functional
priorities that have a positive impact on current and/or future business performance. Stretch performance on strategic
objectives can be achieved to a maximum of 200% of the weighting of this component. Depending on the nature of
the objective, stretch performance can be defined when the objective is approved at the beginning of the year, or in
some circumstances be determined by the CEO and approved by the Board at the end of the year. The Board has
discretion to modify the amount of the strategic objective award up or down as appropriate.
3.3 SUMMARY OF THE LONG-TERM INCENTIVE PROGRAM
On 31 December 2017 the Long-Term Incentive Plan (“LTIP”) and Retention Incentive Grant Agreement (“RIGA”) programs
ceased. Retention based awards, under LTIP, were calculated on a pro-rata basis as of 31 December 2017 and will be paid
on the original payment date as per the award agreement. Performance based awards and stock option plans, under the LTIP,
were cancelled as of 31 December 2017.
Effective 1 January 2018 the Board approved a resolution to introduce a new long-term incentive plan, the MIP.
The MIP is a long-term incentive plan similar in design to a stock option plan, that allows participants to share in the growth of
the Company’s value over time. The executives eligible to participate in the MIP are senior management and corporate
executives, including the KMP. The percentage of the MIP payouts vary depending on the participant’s position, skills and
contributions to the Company. The percentage amounts are generally based on market averages for comparable roles at
similar-sized companies.
There are both time and performance vesting hurdles in the MIP.
The time vesting portion of the MIP represents 33.3% of the plan and is spread over a 5-year time window.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
The performance vesting portion of the MIP represents 66.7% of the plan and is based on the Company’s gain in TEV, above
a baseline of $650 million.
The MIP includes two-tiered performance vesting criteria; one set at $900 million TEV, representing 33.3% of the award and
the other set at $1.1 billion TEV, which represents the final 33.3% of the award.
Performance vesting is based on events aligned with sale of ownership at certain predetermined levels. Upon these events,
TEV will be measured and if the criteria are met, business leaders will be paid a percentage of the value accretion, based on
their MIP allocation.
There has been no trigger event with respect to performance vesting units in accordance with the plan documents. As such,
no performance units have vested for 2018 or 2019 and no amounts have been recorded in the Company’s records.
When MIP performance units vest, they will be paid in either cash or shares at the discretion of the Board.
3.4 EXECUTIVE REMUNERATION CLAWBACK POLICY
The Company has an incentive compensation clawback policy applicable to current and former senior executives, including
the KMP listed in this report, as well as any other management of the Company who participated in the Company’s incentive
compensation plans. The policy is applicable to incentive compensation including bonuses, awards or grants of cash or equity
under any of the Company’s short or long-term incentive or bonus plans where bonuses, awards or grants are based in whole
or in part on the achievement of financial results. If the Board determines that a covered employee was overpaid as a result of
his or her fraud or willful misconduct that requires a restatement of the reported financial results, the Board may seek to
recover the amount of the overpayment by a repayment or through a reduction or cancellation of outstanding future bonus or
awards. The Board can make determinations of overpayment at any time through the third fiscal year following the year for
which the inaccurate performance criteria were measured.
4. PERFORMANCE AND RISK ALIGNMENT
Below is a summary of the year-over-year operating performance which underpins the compensation program.
Net debt excludes the impact of recapitalisation transactions, letters of credit, CRA & IRS obligations, strategic asset
acquisitions and disposals, equity raise, and potential asset backed loans. Dividends per share are calculated as basic EPS
divided by closing share price.
Financial
Year
2019
2018
Closing
Share Price1
$A
1.63
1.20
Dividend
p/share
US$
-
-
EPS %
(45.4%)
(62.7%)
Revenue
US$ millions
Adj. EBITDA 2
US$ millions
745
770
87
81
ROE
(11.1%)
(15.3%)
Net Debt
US$ millions
764
683
(1) On 30 October 2019 the Company completed a consolidation of the issued capital on a basis that every 300 shares be consolidated
into 1 share. Closing share price for each year has been adjusted for the share consolidation.
(2) Adjusted EBITDA is 'Earnings before interest, tax, depreciation and amortisation and before significant and other non-recurring
items.
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
4.1 PERFORMANCE AGAINST SHORT AND LONG-TERM INCENTIVE MEASURES
As noted above, a combination of financial and non-financial measures is used to measure performance for STI awards.
Business and individual performance against those measures was measured on a weighted average basis. The average
proportion of STI awarded, 2015 through 2019 is below:
% of target STI awarded
2015
114%
2016
90%
2017
53%
2018
103%
2019
72%
STI earned during the year ended 31 December 2019:
STI Earned in 2019
STI Earned
US$
Target STI
US$
STI Earned
as % of
Target
% of STI
Forfeited
STI as % of
Max STI 1
% of Max
STI
Forfeited
Jeffrey Olsen
Denis Despres
Miguel Desdin
Robert Closner
Kari Plaster
Brendan Ryan
494,775
184,800
168,960
81,802
92,104
165,840
675,000
280,000
240,000
111,600
116,000
240,000
73%
66%
70%
73%
79%
69%
27%
34%
30%
27%
21%
31%
37%
33%
35%
37%
40%
35%
63%
67%
65%
63%
60%
65%
(1) The maximum potential award assuming superior performance against all CBP metrics is 200% of target STI.
4.2 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, which may be found in the Corporate Governance section on the
Company website at www.boartlongyear.com.
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Boart Longyear Limited Annual Report 2019
5. EXECUTIVE REMUNERATION IN DETAIL
Details of each senior executive’s remuneration during the years ended 31 December 2019 and 2018 are set out in the table
below. The remuneration calculations reported in this table 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.
Short term benefits 1
Post-employment benefits
Other long-term benefits
Cash-based compensation
Compensation
US$
675,000
625,962
400,000
400,000
Annual
bonus 2
US$
494,775
767,981
184,800
295,200
Other 3
US$
31,319
28,705
189,511
122,695
384,616
168,960
241,227
263,609
240,941
290,000
271,154
400,000
400,000
81,802
99,187
92,104
135,546
165,840
226,320
24,968
20,543
20,800
40,800
20,948
20,800
Jeffrey Olsen
2019
2018
Denis Despres
2019
2018
Miguel Desdin
2019
Robert Closner
2019
2018
Kari Plaster
2019
2018
Brendan Ryan
2019
2018
Super-
annuation
benefits 4
US$
Other
US$
8,250
8,250
8,250
6,250
8,250
-
-
8,250
5,726
8,250
6,250
-
-
-
-
-
-
-
-
-
-
-
Retention
Cash Rights
5
US$
550,685
-
-
66,667
-
77,439
-
-
-
-
-
Perform-
ance Cash
Rights
US$
-
-
-
-
-
-
-
-
-
-
-
Total
US$
1,760,029
1,430,898
782,561
890,812
803,053
447,818
360,671
411,154
453,226
595,038
653,370
(1) There were no non-monetary benefits provided.
(2) The 2019 amount represents cash STI payments earned by the executive during the year ended 31 December 2019, which are expected
to be paid in 2020 and were approved by the Board in February 2020. The 2018 amount represents cash STI payments earned by the
executive during the year ended 31 December 2018, which were paid in 2019.
(3)
Includes sign-on bonuses, automotive allowances, relocation and reimbursements of financial and tax preparation assistance.
(4)
Includes 401(k) plan matching contributions made by the employing entity in the United States.
(5)
In March 2016, Mr Olsen and Mr Closner received Special Strategic Retention Awards. These vested and were paid during 2019. Also,
Mr Closner received $385 in cash for vested retention shares. This amount is included his total retention cash right amount.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
5.1 SERVICE CONTRACTS AND TERMINATION PROVISIONS
Name and
position held at
the end of the
financial year
Duration
of
contract
Notice
period by
Company
Notice
period by
executive
Chief Executive
Officer
No fixed
term
None
required
180 days
Vice President,
General Counsel
and Company
Secretary
No fixed
term
None
required
90 days
No fixed
term
None
required
90 days
Chief Financial
Officer;
Chief Human
Resources
Officer;
Chief Operating
Officer, Chief
Business
Development
Officer
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:
• One month per year of service with a minimum of 12
months and a maximum of 24 months.
• 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
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 at the time
of termination for the term of the extension.
5.2 SPECIAL STRATEGIC RETENTION AWARDS FOR KEY EMPLOYEES (including the KMP)
In March 2016, the Board approved special strategic retention awards to certain key employees that include the KMP. All
awards granted were reduced on a pro-rata basis due to the new MIP plan implemented in 2018. These awards were granted
in the form of cash retention vesting on the third anniversary of the award. Mr Olsen’s and Mr Closner’s awards of $550,685
and $77,054, respectively, vested and were paid out during 2019.
Furthermore, in 2018, the Board approved a one-time additional bonus incentive for certain members of senior leadership. The
performance bonus is payable upon the Company achieving metrics for the fiscal year ending 2020 which are materially above
budget. In the event the Company achieves the performance targets, eligible participants will receive a one-time $200,000
cash payment which would become payable in 2021. All KMP with the exception of the CEO are eligible to participate in this
bonus plan. As of 31 December 2019, it is not probable that the Company will achieve the required performance targets.
Therefore, the Company has not recognised an expense or accrued a liability for these one-time bonus incentives.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
5.3 SHARE HOLDINGS
Shareholdings as at the end of the financial year and activity during the financial year, are as follows:
Balance
1 January
Granted as
remuneration
Net other change
during year
Consolidaiton
of share capital 1
Cessation as
Non-executive Director
Balance
31 December
Balance
held nominally
2019
Kevin McArthur
Marcus Randolph 2
Tye Burt
Kyle Cruz
Jason Ireland
James Kern
Gretchen McClain 2
Robert Smith
Richard Wallman
Eric Waxman
Jeffrey Olsen
Denis Despres
Miguel Desdin
Robert Closner
Kari Plaster
Brendan Ryan
-
10,328,767
-
-
-
-
1,966,062
-
9,620,233
-
520,871
-
-
86,285
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61,285,960
(71,376,011)
-
-
7,119,285
60,780,330
-
7,199,285
150,640,438
-
-
-
(7,095,554)
(60,577,728)
(1,959,508)
(7,175,554)
(159,726,468)
-
81,040,438
(81,289,437)
65,778
65,282
-
10,425
61,464
-
(85,999)
-
-
-
(238,716)
-
-
-
-
(6,554)
-
-
-
-
-
-
-
-
-
-
-
-
-
23,731
202,602
-
23,731
534,203
-
271,872
65,778
65,282
286
10,425
61,464
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) On 30 October 2019 the Company completed a consolidation of the issued capital on a basis that every 300 shares be consolidated into
1 share.
(2) Marcus Randolph and Gretchen McClain retired 1 September 2019 and 23 August 2019, respectively.
5.4 CASH RIGHTS
Cash rights as at the end of the financial year, and activity during the year, are as follows:
Name
Jeffrey Olsen
Brendan Ryan
Robert Closner
Grant
date
1-Mar-16
15-Mar-17
15-Mar-17
1-Mar-16
15-Mar-17
Vesting date
1-Mar-19
15-Mar-20
15-Mar-20
1-Mar-19
15-Mar-20
Denis Despres
1-Sep-16
1-Sep-19
15-Mar-17
15-Mar-20
Held at the
beginning of
the financial
year
Number of
Cash Rights
granted as
remuneration
Number of
Cash
Rights
vested
Value of
Cash Rights
vested
US$
550,685
132,755
66,378
77,054
7,965
100,000
66,378
-
-
-
-
-
-
-
550,685
550,685
-
-
77,054
-
-
-
77,054
-
100,000
100,000
-
-
Number of
Cash Rights
Value of
Cash
Rights
forfeited
US$
forfeited
-
-
-
-
-
-
-
Held at the
end of the
financial year
-
132,755
66,378
-
7,965
-
66,378
-
-
-
-
-
-
-
5.5 SHARE RIGHTS
At 31 December 2018, Robert Closner held 126,530 retention share rights. The rights were granted on 1 July 2015 and
vested on 15 March 2019. Robert received $385 in cash in consideration for his share rights. There were no outstanding
share rights as of 31 December 2019.
5.6 OPTIONS
Name
Effective
grant
date
Vesting
date
Fair Value
per Option
at Grant
Date
USD$
Held at the
beginning of
the financial
year
Number of
options granted
as remuneration
Consolidaiton
of
share capital 1
Exercise
price per
option
USD$ 1
Number of
options
forfeited
Jeffrey Olsen
1-Apr-14
1-Apr-17
0.25
324,204
-
(323,123)
96.00
-
(1) At 31 December 2018, Jeffrey Olsen held 324,204 options which were vested and exercisable as of 31 December 2018. Due to the
equity consolidation on 30 October 2019, the number of vested options Mr Olsen holds was reduced to 1,081. The options vested on 1
April 2017 and will expire on 1 April 2024. Upon the equity consolidation, the exercise price of each option was adjusted from AUD $0.32
to USD $96.00.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
6. NON-EXECUTIVE DIRECTORS’ FEE STRUCTURE
Non-Executive Directors (“NED”) are remunerated by a fixed annual base fee with additional fees paid for serving on Board
committees. NED who are also employees of Centerbridge, Ares or Ascribe do not receive any Director fees. The Chairman
may attend any committee meetings but does not receive any additional committee fees in addition to base fees.
The fees are determined within a maximum aggregate fee pool that is approved by shareholders. The approved fee pool limit
is US$2.0 million, which aside from changing the currency exchange rate at the 2015 general meeting has not changed in
quantum since the Company’s initial public offering in 2007. During the financial year, US$1.0 million of the pool was utilised
for Non-Executive Director fees, being approximately 50% of the fee pool limit.
No shares rights were awarded as remuneration in 2019.
6.1 COMPONENTS OF NON-EXECUTIVE DIRECTOR REMUNERATION
Component
Explanation
Board fees
Current base fees per annum are:
• US$160,000 for Non-Executive Directors other than the Board Chairman and the resident
Australian Directors;
• US$300,000 for the Board Chairman (paid in cash and shares); and
• AUS$200,000 for the resident Australian Directors.
Committee fees Current committee fees for Non-Executive Directors (other than the Board Chairman) are:
• US$7,500 annually for committee members; and
• US$15,000 annually for committee chairs.
Where the Board Chairman sits on a committee, he or she does not receive any additional fee.
Other
fees/benefits
Non-Executive Directors are entitled to be reimbursed for all reasonable out-of-pocket expenses
incurred in carrying out their duties, including travel costs. The Board Chairman also is entitled to
reimbursement for office and secretarial support.
Non-Executive Directors may also, with the approval of the Board, be paid additional fees for extra
services or special exertions for the benefit of the Company.
Non-Executive Directors are not entitled to receive any performance-related remuneration, such as
short-term or long-term incentives.
Post-
employment
benefits
Compulsory superannuation contributions for Australian-resident Non-Executive Directors are
included in the base fee and additional committee fees set out above.
Non-Executive Directors do not receive any retirement benefits other than statutory superannuation
contributions.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
6.2 REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Details of Non-Executive Directors’ remuneration for the year ended 31 December 2019 and 2018 are set out in the table
below.
Non Executive Directors
Remuneration
US$
Marcus Randolph
2019 (up to 1 September 2019)
2018
Kevin McArthur
2019
Tye Burt
2019
Jason Ireland
2019
2018
James Kern
2019
2018
Gretchen McClain
2019 (up to 23 August 2019)
2018
Robert Smith
2019
2018
Richard Wallman
2019
2018
Fees (Including
committee fees)
Superannuation
Contributions
Shares
Total
319,983
481,879
62,500
41,946
139,057
149,671
167,500
167,500
125,000
186,667
138,410
149,725
175,000
157,500
1,154
1,277
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,500
22,813
1
1
-
-
-
-
-
-
-
-
-
17,500
321,137
483,156
100,000
64,759
139,057
149,671
167,500
167,500
125,000
186,667
138,410
149,725
175,000
175,000
(1) The Board fees have been earned and expensed in 2019 and the shares will be issued in 2020.
Mr Cruz and Mr Waxman are not included in the table above as they are employees of Centerbridge and Ares Management,
respectively, and therefore did not receive Director fees.
Mr Randolph’s remuneration includes director fees of $225,000 and cash salary of $94,983 up to 1 September 2019 (date
retired). In 2018, he received director fees of $300,000, and a cash salary of $181,879.
Ms McClain remuneration includes director fees of $125,000 up to 23 August 2019 (date retired). In 2018, Ms McClain was
appointed the Lead Independent Director. In February 2018, she received an additional $5,000 in committee fees for the
appointment.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
Board of Directors
A brief summary of the Directors’ work experience and qualifications is as follows.
Kevin McArthur
Kevin McArthur was appointed a Director of the Company and Chair on 1 September 2019. As Chairman of the Board, Mr
McArthur brings more than 35-years’ experience in the global mining industry and over 20 years in CEO and Director
positions. Most recently he held roles as the Founder, President and CEO of Tahoe Resources Inc. and prior to that was the
President & CEO of Goldcorp Inc.
Mr McArthur is a graduate of the University of Nevada where he received a Bachelor of Mining Engineering.
Tye Burt
Tye Burt was appointed a Director of the Company on 23 August 2019. Mr Burt also became Chair of the Company’s
Remuneration Committee and became a member of the Audit Safety and Risk Committee. Mr Burt’s career includes more
than 30-years’ experience in the global mining and finance industries in both executive management roles and serving on
several boards. From 2005 to 2012 Mr Burt held the role of President and CEO of Kinross Gold Corporation. Prior to joining
Kinross Gold, Mr Burt held the position of Vice Chairman and Executive Director of Corporate Development at Barrick Gold
Corporation. Other previous positions include: Chairman, Deutsche Bank Canada and Deutsche Bank Securities Canada;
global Managing Director, global metals and mining for Deutsche Bank AG; and Managing Director and Co-head of the global
mining group at BMO Nesbitt Burns.
Mr Burt is a graduate of Osgoode Hall Law School in Toronto and a member of the Law Society of Ontario. He holds a
Bachelor of Arts from the University of Guelph.
Kyle Cruz
Kyle Cruz was appointed a Director of the Company on 1 September 2017. He is a member of the Remuneration Committee.
Mr Cruz retired from the Board of Directors on 31 December 2019. Mr Cruz is a Senior Managing Director at Centerbridge
Partners, L.P., the Company’s largest shareholder and investor. Prior to joining Centerbridge in 2007, he served as Vice
President at Diamond Castle Holdings, a private equity firm founded by former senior professionals of DLJ Merchant Banking
(DLJMB). Previously, he worked as an Associate at DLJMB and J.W. Childs Associates, a Boston-based private equity firm.
He began his career as an analyst in the Mergers and Acquisitions department of Goldman Sachs.
Mr Cruz holds a B.B.A from the University of Michigan with high distinction, and a Master’s in Business Administration from the
Wharton School of the University of Pennsylvania, with honors.
Jason Ireland
Jason Ireland was appointed a Director of the Company on 1 September 2017. He is a member of the Remuneration and
Nominations Committee. Mr Ireland is the Head of McGrath Nicol’s Advisory Business and is based in Sydney, Australia. He
has over 25 years of experience in strategic reviews and implementation of performance improvement and restructuring
initiatives across a range of industries. In the past five years, he has spent considerable time in the mining services sector,
advising boards and financiers on operations in key mining regions around the world. Prior to joining McGrath Nicol in 2005,
Mr Ireland was a Senior Manager at KPMG.
Mr Ireland holds a Bachelor of Business from Charles Sturt University and is a member of the Institute of Chartered
Accountants in Australia.
James Kern
James Kern was appointed as a Director of the Company on 20 February 2018. He is a member of the Audit, Safety & Risk
Committee. Mr Kern has served as Managing partner of Majestic Ventures 1 LLC, a consulting and investment partnership
focused on early stage growth companies, since 2014. In addition, he currently serves on boards of THL Credit Inc.
(NASDAQ), a middle market lending company, PlaySight Interactive, an Israeli-based sports data analytics business and
Basic Energies Services (NYSE), an oilfield services company.
From 2010 to 2014, Mr Kern was a Managing Director at Nomura Securities, serving as Head of Global Finance Financial
Institution Group (“FIG”) and Specialty Finance Investment Banking for the Americas. He previously served as Managing
Director at J. P. Morgan securities within the FIG practice and was focused on Asset Management and Specialty Finance
clients. From 1994-2008, he was a Senior Managing Director at Bear Stearns, where he held several positions, including
Head of Strategic Finance-FIG, head of Corporate Derivatives and was a founding member of the firm’s Structured Equity
Products group.
Mr Kern has a B.S. from the Marshall School of Business at the University of Southern California.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
Jeffrey Olsen
Jeffrey Olsen was appointed President and Chief Executive Officer on 1 March 2016 after serving as Chief Financial Officer
since 2014. Before joining Boart Longyear, he served as Chief Commercial Officer for Rio Tinto’s Iron & Titanium business
since 2010. Prior to that time, he was Chief Financial Officer for Rio Tinto’s Borax and Minerals divisions for approximately
eight years and held other financial roles at Rio Tinto. Mr Olsen’s experience also includes financial roles at General Chemical
Corporation and Xerox Corporation in the United States.
Mr Olsen holds a Bachelor of Arts degree from the University of Utah and a Master of Business Administration from the Simon
School of Business at the University of Rochester.
Robert Smith
Robert Smith was appointed a Director of the Company on 1 September 2017. He is a member of the Audit, Safety & Risk
Committee. Mr Smith is a Partner of McGrath Nicol. Based in Melbourne, Australia, he specialises in business restructuring
and performance improvement and has led numerous complex assignments often involving prominent listed entities and/or
multi-lender banking syndicates. Mr Smith’s experience covers a wide variety of industries, including mining and mining
services, energy, power and utilities, manufacturing, retail, media, information technology and financial services. Prior to
joining McGrath Nicol in 2009, Mr Smith was an Associate Director in Ernst & Young’s Transaction and Assurance divisions.
Mr Smith began his career as an accountant with Arthur Andersen.
Mr Smith is a Member of Chartered Accountants Australia and New Zealand, a Member of the Australian Institute of Company
Directors and a Registered Liquidator. He holds a Bachelor of Commerce from the University of Melbourne and a Graduate
Diploma in Applied Finance and Investment.
Richard Wallman
Richard Wallman was appointed a Director of the Company on 1 September 2017 and is Chair of the Audit, Safety and Risk
Committee. Mr Wallman’s distinguished career includes senior executive roles in finance, as well as Non-Executive Director
roles at several large, publicly listed US companies. His executive experience includes serving as the Chief Financial Officer
and Senior Vice President at Honeywell International, Inc. and its predecessor, AlliedSignal, from 1995 until his retirement in
2003. He also has held senior financial positions with the IBM Corporation and Chrysler Corporation and worked at Ford
Motor Company earlier in his career.
Mr Wallman currently is a Non-Executive Director of Roper Technologies, Inc. (NYSE), Charles River Laboratories
International, Inc. (NYSE), Wright Medical Group, Inc. (NASDAQ) and Extended Stay America, Inc (NYSE). Mr Wallman holds
a Bachelor of Engineering degree from Vanderbilt University in the United States and also holds a Master of Business
Administration from the University of Chicago.
Company Secretaries
Robert Closner
Robert Closner was appointed Vice President, General Counsel in October 2017 and later appointed as Company Secretary
on 7 December 2017. He began his career as an associate at one of the leading law firms in Toronto, Canada and prior to
joining Boart Longyear served as the General Counsel and Corporate Secretary of Ivernia Inc. Since joining the Company in
2008, Mr Closner has served in several key leadership positions including Regional General Counsel, responsible for the
Americas where he oversaw compliance matters, provided legal guidance and corporate commercial support. Prior to his Vice
President appointment, Mr Closner held the position of Interim Chief Commercial Officer.
Mr Closner received a Bachelor of Arts in Economics and Political Science from McGill University in Montreal, Quebec and
attained his Juris Doctorate in Law from Queen’s University in Kingston, Ontario.
Philip Mackey
Philip Mackey was appointed Company Secretary on 29 January 2016. He has over three decades of company secretarial
and commercial experience and is a member of the Company Matters’ secretariat team. Previously, he served as Company
Secretary of ASX & SGX dual listed Australand Group Limited and Deputy Company Secretary of AMP Limited. Mr Mackey’s
commercial experience includes appointment as Chief Operating Officer (Specialised Funds) of Babcock & Brown and at
Bressan Group. He is a Fellow of Governance Institute Australia and a Graduate Member of the Australian Institute of
Company Directors.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
DIRECTORS’ MEETINGS
The following tables set out for each Director the number of meetings (including meetings of Board committees) held and the
number of meetings attended during the financial year while he/she was a Director or committee member. The tables do not
reflect the Directors’ attendance at committee meetings in an “ex-officio” capacity. The tables also do not reflect special or
informal meetings of the Board or its committees.
Board of
Directors
Held
Attended
Remuneration, Nominations
Audit, Safety
Annual Meeting
& Governance Committee
Attended
Held
& Risk Committee
Held
Subcommittee
Attended Held Attended
Tye Burt
Kyle Cruz
Jason Ireland
James Kern
Kevin McArthur
Gretchen McClain
Marcus Randolph
Robert Smith
Richard Wallman
Eric Waxman
Jeffrey Olsen
2
5
5
5
2
3
3
5
5
2
5
2
5
5
5
2
3
3
5
5
2
5
DIRECTORS’ SHAREHOLDINGS
1
5
5
4
3
1
5
5
4
3
1
4
3
4
4
1
4
3
4
4
1
1
3
3
3
1
1
3
3
3
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.
Kevin McArthur
Tye Burt
Kyle Cruz
Jason Ireland
James Kern
Jeffrey Olsen
Robert Smith
Conor Tochilin
Richard Wallman
Fully paid
ordinary shares
-
-
-
23,731
202,602
271,872
23,731
-
534,203
Rights offering
ordinary shares
Rights and
options
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,081
-
-
-
Total
-
-
-
23,731
202,602
272,953
23,731
-
534,203
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
At the Annual General Meeting of Shareholders held in May 2018, Shareholders approved a Non-Executive Director share
purchase plan (the “Plan”) which allows current and future Non-Executive Directors to elect to receive up to 100% of their
director fees in shares in the Company in lieu of cash payments. The election of Non-Executive Directors to receive all or a
portion of their compensation in shares of the Company in lieu of cash pursuant to the plan does not result in any additional
remuneration for the Non-Executive Directors. It is merely a mechanism for the Non-Executive Directors to elect to invest
some of the fees to which they are otherwise entitled in the Company.
Under the terms of the Plan, if a Director elects to participate in the Plan, NED Shares are issued quarterly (or at other
intervals in compliance with insider trading laws and the requirements of the Company’s Securities Trading Policy) at
______________________________________________________________________________________
35
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
predetermined dates throughout the year. Following issue, Non-Executive Directors are not able to deal in the shares for a 12-
month period. After this period, they will be free to deal in the shares subject to the Company’s Securities Trading Policy and
any minimum shareholding requirements adopted by the Board.
The number of NED Shares to be allocated to Non-Executive Directors who elect to participate in the Plan each quarter is
calculated by dividing the amount of director's fees which the relevant Non-Executive Director has elected to contribute to the
Plan by the arithmetic average of the daily volume weighted average sale price of the Company’s shares sold on ASX on the
ordinary course of trading during the five trading days preceding the issue date of the shares.
During 2019, Mr McArthur and Mr Burt participated in the plan and elected to receive $37,500 and $22,813 of their director
compensation to be paid in shares, respectively. The shares for these fees will be issued in 2020.
During 2018 Mr Wallman participated in the plan and elected to receive $17,500 of his director compensation paid in shares
(6,420,233 shares).
Shares and rights granted to executives of the Company are included in the Remuneration Report. As of 31 December 2019,
Mr Olsen held 1,081 of vested options. The options were granted on 1 April 2014 and vested on 1 April 2017. They have an
exercise price of $96 USD and expire on 1 April 2024. No shares or interests have been issued during the financial year as a
result of the 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 the financial statements.
INDEMNIFICATION OF DIRECTORS, 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 the Directors and officers of the Company and any related body 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.
______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
EXECUTIVE MANAGEMENT TEAM
Jeffrey Olsen
Jeffrey Olsen’s experience and qualifications are summarised above on page 34.
Miguel Desdin
Miguel Desdin was appointed the Company’s Chief financial officer on 7 January 2019. Mr Desdin served more than seven
years as CFO and Senior Vice President of TPC Group, a two-billion-dollar chemical company based in Houston, Texas.
During his tenure, he helped transition and position the company to take advantage of the cyclical recovery during a downturn
in commodity prices. This included serving as interim CEO during the latter part of 2015. Mr Desdin’s career has led him
through several key executive and financial roles within the industrial chemicals and related industries including working for
Furmanite Corporation, Celanese Corporation, Great Lakes Chemical Corporation, and AlliedSignal, Inc.
He earned his MBA in Finance from the Wharton School at the University of Pennsylvania, and a Bachelor of Science in
Industrial and Systems Engineering from the University of Florida.
Denis Despres
Denis Despres was appointed the Company’s Chief Operating Officer on 6 September 2016. He began his career with Boart
Longyear in 1981 and held various positions with progressive responsibility in the Company’s Drilling Services and Products
divisions over the next 26 years, including as Senior VP, Drilling Services. After leaving Boart Longyear in 2007, Mr Despres
founded his own drilling business, which was acquired by Major Drilling in 2010. He most recently served as Major’s Chief
Operating Officer prior to rejoining Boart Longyear.
Mr Despres studied in Ontario, Canada, and received a diploma in mechanical engineering technology from Algonquin
College, a Bachelor of Engineering from Lakehead University and a Master of Business Administration from Queen’s
University, all of which are in Ontario, Canada.
Brendan Ryan
Brendan Ryan was appointed Chief Financial Officer on 6 September 2016 and in late 2018 was appointed Chief Business
Development Officer. Mr Ryan’s experience includes over 24 years within the mining industry, spent predominantly with Rio
Tinto and Shell / Anglo Coal, working in a variety of key commercial and operating roles. Prior to a year working with Private
Equity, Mr Ryan held the role of Global Head of Business Evaluation for Rio Tinto in London where he was accountable for
managing the group capital planning and allocation process. Earlier roles during his 13 years with Rio Tinto included Head of
Business Development for the Rio Tinto Copper & Diamonds Group in London, VP Projects & Expansion at Kennecott Utah
Copper in Salt Lake City, as well as other Business Evaluation and Business Analysis roles in London and Australia.
Mr Ryan holds a Master of Business Administration degree from the University of Oxford, UK as well as a Bachelor of
Engineering (Mining) honors degree from the University of Queensland, Australia.
Robert Closner
Robert Closner’s experience and qualifications are summarised above on pages 34.
Kari Plaster
Kari Plaster was appointed Chief Human Resources Officer on 30 October 2017. Most recently, Ms Plaster served as CEO
and Founder of Kindling Potential, a private coaching and consulting business using brain-based strategies to help businesses
and people to thrive. Prior to this, Ms Plaster held several senior HR roles within Rio Tinto including General Manager,
Leadership Model; VP HR, HSE Governance and External Relations; and Americas Director, Capability Development. She
has worked in many different locations and businesses including Kennecott Utah Copper, US Borax and Iron Ore Company of
Canada.
Ms Plaster holds a Bachelor of Science Degree from Boise State University in Criminal Justice Administration and has
designed and attended several senior leadership programs for Rio Tinto in cooperation with Duke’s Corporate Education
Programs.
______________________________________________________________________________________
37
37
BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
AUDITOR
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 40 of this report.
NON-AUDIT SERVICES
Details of amounts paid or payable for non-audit services provided during the year by the auditor are outlined in Note 7 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, Safety & Risk Committee (“Audit Committee”) are committed to ensuring the independence of the
external auditor. Accordingly, significant scrutiny is given to non-audit engagements of the external auditor. The Company
has a formal pre-approval policy that requires the pre-approval of non-audit services by the Chairman of 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 control services performed by the external auditor.
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 7 to the financial statements, do not compromise the
external auditor’s independence.
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.
ROUNDING OF AMOUNTS
Boart Longyear Limited is a company of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Report)
Instrument 2016/191, 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 Instrument, unless
otherwise indicated.
______________________________________________________________________________________
38
38
BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
REMUNERATION
The Remuneration Report is included beginning at page 19 and forms part of this Directors’ Report.
Signed in accordance with a resolution of the Directors.
On behalf of the Directors
Kevin McArthur
Chairman
28 February 2020
______________________________________________________________________________________
39
39
BOART LONGYEAR 2019 ANNUAL REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
u
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Directors
Boart Longyear Limited
26 Butler Boulevard
Adelaide Airport SA 5650
Australia
28 February 2020
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 audit partner for the audit of the financial statements of Boart Longyear Limited for the financial year
ended 31 December 2019, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i)
(ii)
The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
__________________________________________________________________________________________
40
40
BOART LONGYEAR 2019 ANNUAL REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report
To the members of Boart Longyear Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Boart Longyear Limited (the “Company”) and its subsidiaries (the
“Group”), which comprises the consolidated statement of financial position as at 31 December 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report for the current period. These matters were addressed in the context of our audit of
the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
____________________________________________________________________________________
41
41
BOART LONGYEAR 2019 ANNUAL REPORT
Key Audit Matter
Liquidity
As detailed in note 1, the Group
recorded a total comprehensive loss for the
year of $49.9 million. As at 31 December 2019
the Group had net liabilities of $364.8 million
due to non-current loans and borrowings of
$784.3 million and net current assets of $173.8
million.
The Group continues to manage its liquidity
closely as disclosed in Note 1 to the financial
statements. This requires the achievement of
budgets and cash flow forecasts, which include
assumptions about those future cash flows and
the forecast results, which are inherently
uncertain.
Taxation
The Group operates across a large number of
jurisdictions, each with its own taxation regime
and is subject to periodic challenges by local
tax authorities on a range of tax matters during
the normal course of business including
application of transfer pricing rules, indirect
taxes, and transaction-related tax matters as
disclosed in Notes 10, 20 and 26.
As at 31 December 2019, the Group has
recorded an income tax expense of $8.5
million, current and non-current tax receivables
of $2.5 million and $10.8 million and a net
current tax payable of $5.4 million.
How the scope of our audit responded to
the Key Audit Matter
Our audit procedures included, but were not
limited to:
•
Evaluating managements plans in relation
to its going concern assessment, whether
the outcome of these plans is likely to
improve the situation and whether
managements plans are feasible;
• Assessing last year’s budget with actual
results to determine if management can
correctly forecast;
• Assessing the process undertaken by
management to develop the budget and
cash flow forecasts for the forecast for a
period that is not less than 12 months
beyond the date of these financial
statements are approved;
•
•
•
Evaluating the key assumptions used by
the Group in their cash flow forecast for a
period that is not less than 12 months
beyond the date of these financial
statements are approved;
Evaluating performance in the period from
year end to the audit opinion date against
the FY19/FY20 budget;
Performing sensitivity analysis to determine
the robustness of the cash flow forecast
and the impact of changing key
assumptions; and
• Assessing the appropriateness of the
disclosures included in Note 1 to the
financial statements.
Our procedures performed in conjunction with
internal tax specialists, included but were not
limited to:
•
Testing key controls relating to the
accounting for and the disclosure of tax
related transactions and matters;
• Obtaining an understanding of the process
that management has taken to determine
the taxation balances recognised in the
financial statements;
• Assessing the appropriateness of the
treatment of selected specific transactions
in the Group’s tax expense calculations and
the rationale on which deferred tax assets
and liabilities were recognised;
________________________________________________________________________________________
42
42
BOART LONGYEAR 2019 ANNUAL REPORT
Key Audit Matter
In notes 10, 20 and 26, the Group has
disclosed its assessment of tax-related
contingent liabilities and that they are subject
to certain tax and customs audits that arise in
the normal course of its business. As at 31
December 2019, the group has recorded a
provision for tax contingencies of $63.8 million.
The above matters give rise to complexity and
uncertainty in respect of the determination of
income taxes, deferred income tax assets, the
Group’s interpretation of tax law in multiple
countries as well as the consideration of
contingent liabilities associated with tax years
open to audit. This requires significant
judgement estimating tax exposures and/or
contingent liabilities.
How the scope of our audit responded to
the Key Audit Matter
•
•
•
Evaluating the Group’s tax obligations;
Evaluating the appropriateness of
management’s assumptions and estimates
in relation to the likelihood of generating
future taxable income to support the
recognition of deferred income tax assets
with reference to forecast taxable income;
Evaluating the consistency of the forecast
used by management to derive forecast
taxable income to support the recognition
of deferred tax assets against the forecast
used for assessing the carrying value of
intangible assets and property, plant and
equipment;
• Challenging and evaluating management’s
assessment of uncertain tax positions
including contingent liabilities and
conclusions on complex tax arrangements
through enquiries of the Group Taxation
department, obtaining and considering the
Group’s correspondence with local tax
authorities; and
• Assessing the appropriateness of the
Group’s Note disclosures regarding current
and deferred taxes, uncertain tax positions
and tax-related contingencies in the
financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the Directors’ Report
and Review of Operations, which we obtained prior to the date of this auditor’s report, and also includes the
following information which will be included in the Company’s annual report (but does not include the financial
report and our auditor’s report thereon): Company overview, Chairman’s Report, CEO’s Report and
Shareholder Information, which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on
the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
When we read the Company overview, Chairman’s Report, CEO’s Report and Shareholder Information, if we
conclude that there is a material misstatement therein, we are required to communicate the matter to the
directors and use our professional judgement to determine the appropriate action.
________________________________________________________________________________________
43
43
BOART LONGYEAR 2019 ANNUAL REPORT
Directors’ Responsibilities 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 preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for
our audit opinion.
________________________________________________________________________________________
44
44
BOART LONGYEAR 2019 ANNUAL REPORT
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 19 to 32 of the Directors’ Report for the year
ended 31 December 2019.
In our opinion, the Remuneration Report of Boart Longyear Limited, for the year ended 31 December 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Perth, 28 February 2020
________________________________________________________________________________________
45
45
BOART LONGYEAR 2019 ANNUAL REPORT
Boart Longyear Limited Annual Report 2019
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 1 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.
On behalf of the Directors
Kevin McArthur
Chairman
28 February 2020
________________________________________________________________________________________
46
46
BOART LONGYEAR 2019 ANNUAL REPORT
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
Continuing operations
Revenue
Cost of goods sold
Gross margin
Other income
General and administrative expenses
Sales and marketing expenses
Other expenses
Operating profit
Interest income
Finance costs
Loss before taxation
Note
2019
US$'000
2018
US$'000
3
4
4
5
5
744,982
(606,326)
138,656
6,788
(82,997)
(20,331)
(14,962)
27,154
50
(64,119)
(36,915)
770,167
(639,100)
131,067
10,360
(80,634)
(22,138)
(21,080)
17,575
889
(69,482)
(51,018)
Income tax (expense) / benefit
10
(8,456)
7,495
Loss for the year attributable
to equity holders of the parent
Loss per share:
Basic loss per share
Other comprehensive loss
Loss for the year attributable to equity holders of the parent
Items that may be reclassified subsequently to profit or loss
Exchange loss arising on translation of foreign operations
Items that will not be reclassified subsequently to profit or loss
Actuarial (loss) gain related to defined benefit plans
Income tax on income and expense recognised directly through equity
Other comprehensive loss for the year, net of tax
21
10
Total comprehensive loss for the year attributed
to equity holders of the parent
(45,371)
(43,523)
11
(51.8) cents
(52.9) cents
(45,371)
(43,523)
(1,566)
(15,121)
(1,910)
(1,047)
(4,523)
414
(104)
(14,811)
(49,894)
(58,334)
See accompanying Notes to the Consolidated Financial Statements included on pages 52 to 99.
_______________________________________________________________________________________
47
47
BOART LONGYEAR 2019 ANNUAL REPORT
Consolidated Statement of Financial Position
As at 31 December 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as of 31 December 2019
BOART LONGYEAR LIMITED
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivable
Prepaid expenses and other assets
Asset classified as held for sale
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Non-current tax receivable
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 liabilities
Equity
Issued capital
Reserves
Other equity
Accumulated losses
Total deficiency in equity
Non-controlling interest
Total equity
Note
30
12
13
10
15
16
17
10
10
18
20
10
19
19
10
20
22
2019
US$'000
2018
US$'000
20,240
113,738
163,088
2,504
13,574
313,144
-
313,144
165,037
104,458
27,634
16,875
10,811
4,008
328,823
641,967
111,123
14,437
5,424
8,328
139,312
775,985
16,878
74,544
867,407
1,006,719
(364,752)
1,468,776
(117,797)
(137,182)
(1,578,162)
(364,365)
(387)
(364,752)
38,942
119,582
165,410
268
12,813
337,015
467
337,482
114,098
103,859
37,763
20,709
16,284
6,975
299,688
637,170
104,982
19,891
8,739
1,183
134,795
720,268
17,502
79,463
817,233
952,028
(314,858)
1,468,776
(116,231)
(137,182)
(1,532,651)
(317,288)
2,430
(314,858)
See accompanying Notes to the Consolidated Financial Statements included on pages 52 to 99.
_______________________________________________________________________________________
48
48
BOART LONGYEAR 2019 ANNUAL REPORT
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S
BOART LONGYEAR 2019 ANNUAL REPORT
Consolidated Statement of Cash Flows
CONSOLIDATED STATEMENT OF CASH FLOWS
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
Cash flows from operating activities
Loss for the year
Adjustments provided by operating activities:
Income tax expense / (benefit) recognised in profit
Finance costs recognised in profit
Depreciation and amortisation
Interest income recognised in profit
Gain on sale or disposal of non-current assets
Other non-cash items
Shares issued to directors
Impairment of current and non-current assets
Non-cash foreign exchange (gain)/loss
Changes in net assets and liabilities, net of effects
from acquisition and disposal of business:
(Increase) decrease in assets:
Trade and other receivables
Inventories
Other assets
(Decrease) increase in liabilities:
Trade and other payables
Provisions
Cash provided by operations
Interest paid
Interest received
Income taxes paid
Net cash flows generated in operating activities
Note
2019
US$'000
2018
US$'000
(45,371)
(43,523)
5
6
5
6
5
8,456
64,119
39,348
(50)
(3,161)
(6,623)
-
9,972
(167)
2,184
6,415
1,161
7,798
(7,056)
77,025
(30,840)
50
(10,927)
35,308
(7,495)
69,482
36,587
(889)
(7,794)
(17,110)
18
11,493
2,062
3,037
4,023
(980)
(18,944)
(5,818)
24,149
(6,095)
889
(15,231)
3,712
See accompanying Notes to the Consolidated Financial Statements included on pages 52 to 99.
____________________________________________________________________________________
50
50
BOART LONGYEAR 2019 ANNUAL REPORT
Consolidated Statement of Cash Flows
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
2019
US$'000
2018
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 debt issuance costs
Proceeds from borrowings
Repayment of borrowings
Net cash flows (used in) provided by financing activities
Net 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
30
(47,061)
5,815
(3,625)
(44,871)
(1,432)
31,350
(40,881)
(10,963)
(20,526)
38,942
1,824
20,240
(37,095)
13,738
(2,016)
(25,373)
-
16,964
(5,345)
11,619
(10,042)
43,758
5,226
38,942
See accompanying Notes to the Consolidated Financial Statements included on pages 52 to 99.
_______________________________________________________________________________________
51
51
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
1. GENERAL INFORMATION
BOART LONGYEAR LIMITED
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
four geographic regions, which are defined as North America, Latin America, Asia Pacific, and Europe/Africa (EMEA).
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
Basis of Preparation
Principal place of business
2455 South 3600 West
Salt Lake City, Utah 84119
United States of America
Tel: +1 (801) 972 6430
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, Accounting Standards and Interpretations, and comply with other
requirements of the law. Accounting Standards include Australian Accounting Standards. Compliance with Australian
Accounting Standards ensures that the financial statements and notes of the Company comply with IFRS. The financial
report includes the consolidated financial statements of the Company. For purposes of preparing the consolidated
financial statements, the Company is a for-profit entity;
- is presented in United States dollars, which is Boart Longyear Limited’s functional and presentation currency. All
values have been rounded to the nearest thousand dollars (US’000) unless otherwise stated, in accordance with ASIC
Corporations (Rounding in Financial/Directors’ Reports) instrument 2016/191. The financial statements were
authorised for issue by the Directors on 28 February 2020;
- applies accounting policies 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;
- is 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 10 ‘Consolidated 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 (a) has power over the investee (b) is exposed or has rights, to
variable returns from involvement with the investee and (c) has the ability to use its power to affect its return. All three
of these criteria must be met for the Company to have control over the investee. 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.
- all inter-company balances and transactions, and unrealised income and expenses arising from inter-company
transactions, are eliminated.
- adopted AASB 16 Leases. The accounting policies have been updated for changes resulting from the adoption of this
standard. Refer to Note 25 for further details on the change in accounting policy.
- adopted IFRIC 23 Uncertainty Over Income Tax Treatments from 1 January 2019. As part of the adoption of IFRIC 23
and review of the historical classification of provisions for tax contingencies within current tax payables, $6.1 million has
been reclassified from trade and other payables compared to $6.2 million in 2018 to non-current provisions. In addition,
$57.7 has been reclassified from current tax payable compared to $62.5 million in 2018 to non-current provisions. The
impact of the adoption of this standard is discussed in footnote 10.
- does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet
effective. Refer to Note 32 for further details.
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. The financial
report has also been prepared on the basis that the Company is a going concern, which assumes continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
_______________________________________________________________________________________
52
52
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
1. GENERAL INFORMATION (CONTINUED)
Going Concern
BOART LONGYEAR LIMITED
The financial report has been prepared on a going concern basis, which contemplates the realisation of assets and the
settlement of liabilities in the ordinary course of business.
During the year ended 31 December 2019, the Company recorded a total comprehensive loss for the year of $49.9 million
(2018: loss of $58.3 million), cash inflows from operations of $35.3 million (31 December 2018: $3.7 million), and cash
outflows from investing activities of $44.9 million (31 December 2018: $25.4 million). As at 31 December 2019 the
Company had net liabilities of $364.8 million (2018: net liabilities of $314.9 million) due to non-current loans and borrowings
of $784.3 million (2018: $721.5 million). At 31 December 2019 the Company had net current assets of $173.8 million
(2018: $202.7 million as at 31 December).
As set out in Note 10 and Note 26, 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 and the Company’s cash flow forecasts include the amounts management believes may be payable during the
forecast period. However, the ultimate outcome of these audits is uncertain and unfavourable outcomes in excess of
management’s estimate could have a material adverse impact.
In preparing the financial report, the Directors have made an assessment of the ability of the Company to continue as a
going concern. The Company’s ability to continue as a going concern is dependent on the successful outcomes of the tax
and customs audits, achieving its forecast cash flows by sustaining previously implemented cost reductions, realising cost
savings from ongoing and future cost-reduction activities and actively managing cash flows.
The Directors reaffirm that current and expected operating cash flow, cash on hand and available drawings under the
Company’s asset-based loan facility provide sufficient liquidity to meet its debts as and when they fall due.
Cash flow Forecasts
The Company has prepared detailed cash flow forecasts which incorporate the financial impact of continued actions to
address the market environment and estimate amounts payable in regard to the tax and customs audits. In preparing the
cash flow forecasts the Company has used best estimate assumptions. The Directors have assessed the Company’s cash
flow forecasts and revenue projections based on current market conditions and on results achieved to date attributable to
ongoing cash-generating actions as well as continuing to evaluate risks and opportunities to this best estimate. Some of
the key assumptions underpinning the cash flow forecasts and revenue projections are inherently uncertain and are subject
to variation due to factors which are outside the control of the Company.
Market risk
The Company experienced significant declines in financial performance through mid-2016, as a result of declining demand
for, and global oversupply of, the Company’s services and products. This decline was driven by the global contraction in
exploration and development spending across the commodities sector and by mining customers in particular. We have
seen an improvement in the market through 2018, 2019 and into 2020; however, despite recent improvements in the
market, and increasing revenues, mineral exploration, production and development activities and contract pricing could
remain at depressed levels for an extended period of time or decline, resulting in adverse effects on the Company’s
operating results, liquidity and financial condition.
Operational risk
In response to the recent improvements in the market, the company is seeing higher working capital demand. In order
to meet these working capital and payment obligations, the Company has implemented significant cost savings and cash
management initiatives. These initiatives are aggressively managing fixed, variable and capital costs and, in particular,
improving operational efficiencies and commercial practices.
The cash flow forecasts assume that the Company is able to maintain and improve on current volumes of work, sustain
previously implemented reductions and realise additional cost savings from both ongoing and future cost-reduction and
efficiency initiatives.
Notwithstanding the uncertainties set out above, the Directors believe at the date of signing of the financial report that there
are reasonable grounds to continue to prepare the financial report on the going concern basis.
_______________________________________________________________________________________
53
53
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
1. GENERAL INFORMATION (CONTINUED)
Key Judgements and Estimates
BOART LONGYEAR LIMITED
In applying Australian Accounting Standards, management is required to make judgments, 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 judgments and estimates in relation to assets,
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 judgments 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 judgments, estimates and assumptions that have or could have the most significant effect on the amounts
recognised in the financial statements, are found in the following notes:
Note 10
Note 16
Income Tax
Goodwill and Other Asset Impairment Considerations
Foreign Currency
The Company’s presentation currency is the US dollar. 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
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 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. The cumulative currency translation is transferred to the income statement
when a subsidiary is disposed of or liquidated.
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. Where an inter-company balance is, in substance, part of the Company’s net investment
in an entity, exchange gains and losses on that balance are taken to the FCTR.
Other Accounting Policies
Significant and other accounting policies that summarise the measurement basis used and are relevant to an
understanding of the financial statements are provided throughout the notes to the financial statements.
_______________________________________________________________________________________
54
54
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
2. SEGMENT REPORTING
BOART LONGYEAR LIMITED
Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of
segment performance is based on the Company’s two general operating activities: Global Drilling Services and Global
Products. The Global Drilling Services segment provides a broad range of drilling services to companies in mining, energy
and other industries. The Global Products segment 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 profit shown below is consistent with the income reported to the
chief operation decision maker for the purposes of resource allocation and assessment of segment performance. Segment
profit represents earnings before interest and taxes.
Segment revenue and results
Global Drilling Services
516,313
533,606
Segment Revenue
2019
US$'000
2018
US$'000
Segment Profit
2019
US$'000
63,065
2018
US$'000
57,137
Global Products revenue
Products third party revenue
Products inter-segment revenue 1
Total Global Products
Less Global Product sales to Global Drilling Services
Total third party revenue
Total segment profit
Unallocated costs 2
Significant items
Finance costs
Interest income
Loss before taxation
228,669
56,898
236,561
56,021
285,567
(56,898)
744,982
292,582
24,468
23,493
(56,021)
770,167
87,533
80,630
(39,571)
(20,808)
(64,119)
50
(36,915)
(36,554)
(26,501)
(69,482)
889
(51,018)
(1) Transactions between segments are carried out at arm's length and are eliminated on consolidation.
(2) Unallocated costs include corporate general and administrative costs, as well as, other expense items such as foreign
exchange gains or losses.
Other segment information
Depreciation and amortisation
of segment assets
2019
US$'000
2018
US$'000
Additions to non-current
assets 2
2019
US$'000
2018
US$'000
28,515
7,350
35,865
3,483
39,348
25,768
7,175
32,943
3,644
36,587
52,794
29,438
82,232
10,612
92,844
27,932
3,013
30,945
10,427
41,372
Global Drilling Services
Global 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 and post-employment assets. For 2019, the amount includes the
recognition of $41.5 million in additions of right-of-use assets due to the implementation of AASB 16.
_______________________________________________________________________________________
55
55
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
2. SEGMENT REPORTING (CONTINUED)
Geographic information
BOART LONGYEAR LIMITED
The Company’s two business segments operate in four principal geographic areas – North America, Asia Pacific, Latin
America and EMEA. The Company’s revenue from external customers and information about its segment assets by
geographical locations are detailed below:
North America
Asia Pacific
Latin America
EMEA
Total
Revenue from
external customers
2019
US$'000
2018
US$'000
341,041
172,001
97,555
134,385
744,982
353,206
169,031
110,066
137,864
770,167
Non-current assets 1
2019
2018
US$'000
US$'000
214,841
44,967
23,005
29,135
311,948
201,767
39,922
18,349
18,941
278,979
(1) Non-current assets excluding deferred tax assets and post-employment assets.
_______________________________________________________________________________________
56
56
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
3. REVENUE
BOART LONGYEAR LIMITED
Boart Longyear operates two different business units throughout various geographical locations – Global Drilling Services
and Global Drilling Products.
Global Drilling Services
The Company performs various types of drilling services within the mining and minerals industry. Contracts entered into
can cover services which involve different processes and continuous drilling services activities in a sequential set of
mobilisation, drilling, and demobilisation activities which are invoiced to the customer as those activities progress. These
processes and activities are highly inter-related, and the Company provides a significant service of integration of such
activities. Where this is the case, these activities and processes are accounted for as one performance obligation.
Revenue from services rendered is recognised in the statement of profit and loss and other comprehensive income over
time. Boart Longyear has a contractual right to consideration from a customer for an amount that corresponds directly with
the value to the customer of the performance completed to date (for example, number of meters drilled). As a result, Boart
Longyear applies the practical expedient under AASB 15.B16 to recognise revenue at the amount which it has the right
to invoice.
Customers are invoiced on a fortnightly basis and revenue is recognised in the accounting period in which the right to
invoice is obtained. Payment is received following invoice according to standard payment terms, which are generally
between 30 to 60 days. There are no significant financing components. Most drilling services contracts do not include
variable payment terms. Where variable payment terms exist, these are usually in the form of penalties for late
completion. Variable consideration is only recognised to the extent that it is considered highly probable that such
amounts will not reverse in the future and is estimated using the expected value approach.
Global Drilling Products
The Company manufactures, distributes and sells equipment that is necessary for the mining and mineral industry. Sales
orders are completed across multiple geographies for products, such as large drill rigs, and drilling components, such as
bits and coring rods. Each product promised to the customer is distinct under the contract according to AASB 15.27 and
gives rise to a separate performance obligation. Revenue is recognised when control of the products has transferred to
the customer. Transfer of control happens at the point the products are delivered to the customer for drilling rigs and at
the point the products are shipped to the customer’s specific location for drilling components. The transaction price is
allocated to each product on stand-alone basis.
Payment is received following invoice according to standard payment terms, which are generally between 30 to 60 days.
There are no significant financing components and there is no significant reversal of variable consideration expected at
the point of revenue recognition.
The components of revenue are as follows:
Revenue from the rendering of services
Revenue from the sale of goods
2019
US$'000
516,313
228,669
744,982
2018
US$'000
533,606
236,561
770,167
There were no customer(s) that contributed 10% or more to the Company’s revenue in 2019 and 2018.
_______________________________________________________________________________________
57
57
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
4. OTHER INCOME / EXPENSE
The components of other income are as follows:
BOART LONGYEAR LIMITED
Gain on disposal of property, plant and equipment
Gain on disposal of scrap
Other
The components of other income are as follows:
Amortisation of intangible assets (1)
Value added tax
Loss on foreign currency exchange differences
Impairment of fixed assets (2)
Impairment of Intangible Assets (3)
Environmental fees
Other
Total other expenses
2019
US$'000
2018
US$'000
3,161
610
3,017
6,788
7,794
326
2,240
10,360
2019
US$'000
2018
US$'000
2,587
-
3,879
-
5,787
-
2,709
14,962
4,216
2,938
11,615
79
-
24
2,208
21,080
(1) Total amortization of intangible assets for the year is $4.6 million, as presented in Note 17. Note that $2.0
million of amortization expense for development assets were recorded within research and development
expenses, while $2.6 million of amortization was recorded within other expenses. In the year ended 31 December
2018 amortization totalled $5.4 million, while $1.2 million was recorded in research and development, and $4.2
million was recorded within other expenses.
(2) Note that fixed asset impairments of $210 thousand were recorded during the year ended 31 December 2019.
This impairment was recorded within general and administrative expenses. Impairments of $79 thousand in the
year ended 31 December 2018 were recorded in other expenses because these impairments were related to the
restructure of certain entities.
(3) Total impairment of intangible assets for the year ended 31 December 2019 was $9.0 million, as presented in
Note 17. Note that $2.5 million of patent impairments were recorded within general and administrative expenses,
and $0.7 million of development asset impairments were recorded within research and development expenses,
while the remaining $5.8 million of impairments were recorded within other expense. In the year ended 31
December 2018 $0.4 million of intangibles impairments were recorded within research and development
expenses, while the remaining intangible asset impairment was recorded to general and administrative expenses.
See Note 17.
_______________________________________________________________________________________
58
58
BOART LONGYEAR 2019 ANNUAL REPORT
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
5.
INTEREST INCOME / FINANCE COSTS
BOART LONGYEAR LIMITED
Interest income is as follows:
Interest income:
Bank deposits
Finance costs are as follows:
Finance costs:
Interest on loans and bank overdrafts
Amortisation of debt issuance costs
Interest on obligations under leases (1)
Total finance costs
2019
US$'000
2018
US$'000
50
889
2019
US$'000
2018
US$'000
59,588
1,374
3,157
64,119
67,432
1,902
148
69,482
(1) The Company adopted AASB 16 – Leases as of 1 January 2019 (see Note 25), resulting in an increase in interest expense in 2019.
6. LOSS FOR THE YEAR
Loss for the year includes the following:
(a)
Gains and losses
Loss for the year includes the following gains and (losses):
Gain on disposal of property,
plant and equipment
Net foreign exchange losses
2019
US$'000
2018
US$'000
3,161
7,794
(3,879)
(11,615)
Net change in bad debt expense
305
(228)
(b)
Employee benefits expenses
Salaries and wages
Post-employment benefits:
Defined contribution plans
Defined benefit plans
Termination benefits
Other employee benefits 1
2019
US$'000
2018
US$'000
(244,125)
(244,925)
(9,046)
(1,514)
(3,222)
(64,025)
(321,932)
(6,411)
(1,506)
(3,164)
(66,970)
(322,976)
(1) For 2019, other employee benefits include items such as medical benefits, workers’ compensation, other fringe
benefits and state taxes. The 2018 amount for equity-settled share-based payments for long-term incentive plans of
$25 thousand was included in Other Employee Benefits.
(c)
Other
Depreciation of non-current assets
Amortisation of non-current assets
Rental expense
2019
US$'000
2018
US$'000
(34,764)
(4,584)
(16,491)
(31,129)
(5,446)
(25,696)
_______________________________________________________________________________________
59
59
BOART LONGYEAR 2019 ANNUAL REPORT
Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
7. REMUNERATION OF AUDITORS
BOART LONGYEAR LIMITED
Company auditor's remuneration
Audit and review of the financial report:
Auditor of the parent entity
Related practices of the parent entity auditor
Non-audit services:
Tax Consultation
Tax Compliance
Tax Audit Support
2019
US$'000
2018
US$'000
833
771
1,604
96
269
298
663
835
757
1,592
65
429
361
855
Total remuneration to Company auditor
2,267
2,447
Boart Longyear Limited’s auditor is Deloitte Touche Tohmatsu. The Company has employed Deloitte Touche Tohmatsu
on assignments in addition to their audit duties where their expertise and experience with the Company are important.
These assignments principally have been related to tax advice and tax compliance services, the magnitude of which is
impacted by the global reach of the Company.
The Board and its Audit, Safety & Risk Committee are committed to ensuring the independence of the external auditor.
Accordingly, significant scrutiny is given to non-audit engagements of the external auditor. The Company has a formal
pre-approval policy which requires the pre-approval of non-audit services by the Chairman of the Audit Committee.
Additionally, the total annual fees for such non-audit services cannot exceed the auditor’s annual audit fees without the
approval of the Audit Committee. The Audit Committee believes that the combination of these two approaches results in
an effective procedure to pre-approve services performed by the external auditor.
_______________________________________________________________________________________
60
60
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
8. KEY MANAGEMENT PERSONNEL COMPENSATION
BOART LONGYEAR LIMITED
The aggregate compensation made to key management personnel of the Company is set out below.
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
9. EMPLOYEE LONG TERM INCENTIVE PAYMENTS
2019
US$'000
2018
US$'000
5,301
42
628
60
6,031
4,989
28
67
17
5,101
Effective 1 January 2018 the Board approved a resolution to introduce a long-term incentive plan, the MIP.
The MIP is a long-term incentive plan, which is similar in design to a stock option plan, and consistent with many incentive
plans in private equity, in that it allows participants to share in the gain of Boart Longyear’s value over time. The MIP was
created to give senior leaders an opportunity to share in the growth and value of Boart Longyear’s business success.
The executives eligible to participate in the MIP are senior management and corporate executives, including the KMP.
The percentage of the MIP payouts vary depending on the participant’s position, skills and contributions to the Company.
The percentage amounts are generally based on market averages for comparable roles at similar-sized companies.
There are both time and performance vesting hurdles in the MIP. The time vesting portion of the MIP represents 33.3% of
the plan and is spread over a 5-year time window.
The performance portion of the MIP is based on Boart Longyear’s gain in TEV, which has been set at a baseline of $650
million.
The MIP has two performance vesting criteria; one set at $900 million TEV, representing 33.3% of the award and the
other set at $1.1 billion TEV, which represents the final 33.3% of the award.
Upon sale of ownership at certain predetermined levels, TEV will be measured and if the criteria are met, business
leaders will be paid a percentage of the value based on their MIP allocation.
No trigger events took place in 2018 or 2019, so no amounts were recorded in the financial statements as of 31
December 2018 and 31 December 2019.
The MIP will be paid in either cash or shares at the discretion of the Board.
As of 31 December 2019, the Company had no outstanding share rights.
As of 31 December 2019, the Company had outstanding cash rights in the amount of $626,000. The cash rights will vest
and be paid on 15 March 2020.
As of 31 December 2019, the Company had 90,150 outstanding options. The options have grant dates varying from 15
March 2014 to 18 January 2016. Options totaling 43,158 have vested and will expire on various dates in years 2024
through 2026. They have exercise prices varying from USD $57.60 to USD $96.00. On 15 March 2020, the additional
46,992 options will vest. They expire on 26 May 2025 and also have exercise prices varying from USD $57.60 to USD
$96.00.
_______________________________________________________________________________________
61
61
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
10. INCOME TAXES
Income Taxes
The Company is subject to income taxes in Australia and other jurisdictions around the world in which the Company
operates. Significant judgment is required in determining the Company’s tax assets and liabilities. Judgments are
required about the application of income tax legislation and its interaction with income tax accounting principles. Tax
positions taken by the Company are subject to challenge and audit by various income tax authorities in jurisdictions in
which the Group operates.
Judgment is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on
the Statement of Financial Position. 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.
These judgments 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 Statement of Financial Position. 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 Statement of
Profit or Loss and Other Comprehensive Income.
Current and deferred taxation
Income tax expense includes current and deferred tax expense (benefit) and is recognised in Statement of Profit or Loss
and Other Comprehensive Income except to the extent that 1) amounts relate to items recognised directly in equity, in
which case the income tax expense (benefit) is also recognised in equity, or 2) amounts that relate to a business
combination, in which case the income tax expense (benefit) is recognised in goodwill.
Current income 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 income tax is provided on 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.
Deferred tax assets are 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 sufficient taxable profit will be available to all or part of
the deferred tax asset to be realised.
_______________________________________________________________________________________
62
62
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
10. INCOME TAXES (CONTINUED)
Tax consolidation
BOART LONGYEAR LIMITED
The Company includes tax consolidated groups for the entities incorporated in Australia and the United States. The
Parent Entity and its wholly-owned Australian resident entities are part of the same tax-consolidated group and are
therefore taxed as a single entity. 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.
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 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.
(a) Income tax (benefit)/expense is comprised of:
Income tax expense/(benefit):
Current tax expense/(benefit)
Adjustments recognised in the current year
in relation to the current tax of prior years
Deferred tax expense/(benefit)
2019
US$'000
2018
US$'000
8,160
(1,597)
1,893
8,456
(5,585)
(1,920)
10
(7,495)
(b) Reconciliation of the prima facie income tax expense on pre-tax accounting profit to the income tax
expense in the financial statements:
Loss before taxation
Income tax benefit calculated at
Australian rate of 30%
Impact of non-Australia tax rates
Net non-deductible/non-assessable items
Net unrecognised tax losses and tax credits for the current year 1
Recognition of deferred tax assets arising in prior years
Other 2
(Over) / under provision from prior years
Income tax expense/(benefit) per the Consolidated
(36,915)
(51,018)
(11,075)
3,528
6,618
10,358
(90)
714
10,053
(1,597)
(15,305)
(2,292)
13,166
23,452
(6,168)
(18,428)
(5,575)
(1,920)
Statement of Profit or Loss and Other Comprehensive Income
8,456
(7,495)
(1) Due to the group being in a tax loss position in many jurisdictions during the current financial year, the Company has not
recognised a tax benefit for current period losses.
(2) The majority of the adjustment in the prior year relates to effectively settling a portion of the disputes in the Canada Revenue
Agency tax audit for tax years 2007-2012 (See the Canada note below).
_______________________________________________________________________________________
63
63
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
10. INCOME TAXES (CONTINUED)
BOART LONGYEAR LIMITED
(c) 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 recognised in equity:
Actuarial movements on defined benefit plans
(d) Tax assets and liabilities
Tax assets:
Income tax receivable attributable to:
Other entities (1)
Current tax liabilities:
Income tax payable attributable to:
Parent
Entities other than parent
and entities in the consolidated group
2019
US$'000
2018
US$'000
(1,047)
(104)
13,315
16,552
1,387
4,037
5,424
1,398
7,341
8,739
(1)The income tax receivable for 2019 is $13.3 million (2018: $16.6 million) of which $2.5 million is classified as
current tax receivable and $10.8 million is classified as non-current tax receivable (2018: $0.3 million and $16.3
million respectively).
(e) Deferred tax balances
Deferred tax comprises:
Temporary differences
Unused tax losses and credits
(f) Provision for tax contingencies
(13,291)
13,288
(3)
(5,122)
8,329
3,207
Provision for tax contingencies (Note 20)
63,792
68,671
The Company has applied Interpretation 23 from 1 January 2019. The recognition, measurement and disclosure
requirements of the standard have been applied to any Uncertain Tax Positions which were under consideration for the
period ended 31 December 2019. No material impacts to the financial statements have arisen from the adoption of
Interpretation 23. The Company has chosen to present the provision for tax contingencies in non-current provisions
(previously classified in current tax payable within current liabilities). The prior year has been amended to reflect the
current year presentation. See Note 1. The provision for tax contingencies relates to various jurisdictions.
_______________________________________________________________________________________
64
64
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
10. INCOME TAXES (CONTINUED)
BOART LONGYEAR LIMITED
Opening Recognised
balance
US$'000
FX
in income differences disposed
US$'000
US$'000
Acquired/ Recognised Closing
balance
in equity
US$'000
US$'000
US$'000
-42.4
2019
Deferred tax assets (liabilities)
temporary differences
Property, plant and equipment
Provisions
Doubtful debts
Other intangible assets
Accrued liabilities
Pension
Inventories
Investments in subsidiaries
Unrealised foreign exchange
Other
Unused tax losses and credits:
Tax losses
4,087
2,744
16
(16,471)
2,464
(346)
1,977
-
(275)
682
(5,122)
8,329
3,207
(257)
(2,020)
(16)
(907)
(2,228)
(161)
186
(240)
(888)
(321)
(6,852)
4,959
(1,893)
(95)
(64)
-
-
(57)
8
(46)
-
-
(16)
(270)
-
(270)
-
-
-
-
-
-
-
-
-
-
-
-
-
Presented in the statement of financial position as follows:
Deferred tax asset
Deferred tax liability
-
-
-
-
-
(1,047)
-
-
-
-
(1,047)
3,735
660
-
(17,378)
179
(1,546)
2,117
(240)
(1,163)
345
(13,291)
-
(1,047)
13,288
(3)
16,875
(16,878)
(3)
Where deferred tax assets have been recognised, it is considered probable that the Company will generate sufficient
future taxable income to utilise the assets.
_______________________________________________________________________________________
65
65
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
10. INCOME TAXES (CONTINUED)
BOART LONGYEAR LIMITED
2018
Deferred tax assets (liabilities)
temporary differences
Property, plant and equipment
Provisions
Doubtful debts
Other intangible assets
Accrued liabilities
Pension
Inventories
Investments in subsidiaries
Unrealised foreign exchange
Other
Unused tax losses and credits:
Tax losses
Opening Recognised
balance
US$'000
FX
in income differences disposed
US$'000
US$'000
Acquired/ Recognised Closing
balance
in equity
US$'000
US$'000
US$'000
3,568
3,326
64
(13,885)
3,314
(441)
1,940
-
171
695
(1,248)
8,406
7,158
941
(188)
(40)
(228)
(458)
147
267
-
(446)
72
67
(77)
(10)
(422)
(394)
(8)
-
(392)
52
(230)
-
-
(85)
(1,479)
-
-
-
(2,358)
-
-
-
-
-
-
(2,358)
-
-
-
-
-
(104)
-
-
-
-
(104)
4,087
2,744
16
(16,471)
2,464
(346)
1,977
-
(275)
682
(5,122)
-
-
-
8,329
(1,479)
(2,358)
(104)
3,207
Presented in the statement of financial position as follows:
Deferred tax asset
Deferred tax liability
20,709
(17,502)
3,207
Unrecognised deferred tax assets
Tax benefit of unused losses 1
Tax benefit of unused capital losses 2
Unused tax credits 3
Tax benefit of temporary differences
2019
US$'000
2018
US$'000
282,843
388,707
15,939
49,526
737,015
217,284
4,071
16,698
63,415
301,468
(1) $79.0 million of the tax benefit of unused losses expire within 3-20 years and $203.8 million related to tax losses that
do not expire (2018: $93.0 million and $124.3 million respectively).
(2) The losses in the current year arose due to the disposal of shares and intercompany debt. The tax basis was
established with reference to historic 2007 initial public offering values. Capital losses can only be offset against
capital gains in most jurisdictions.
(3) All of the unused tax credits expire within 1-10 years.
_______________________________________________________________________________________
66
66
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
10. INCOME TAXES (CONTINUED)
Canadian income tax audits
BOART LONGYEAR LIMITED
As previously disclosed by the Company, the Canada Revenue Agency (“CRA”) has reassessed the 2007 through 2014
tax years. The Company has resolved the 2007 through 2009 tax years, resulting in a final assessment of additional tax,
penalties and interest of C$7.4 million, of which C$1.2 million remains outstanding at the end of 2019. Tax years 2010
through 2014 remain in various stages of appeal with the CRA or are proceeding under the mutual agreement procedure,
which is a negotiation between Canada and Switzerland on the allocation of taxable profits between the countries. The
remaining unsettled tax, penalties and interest for these years could result in a maximum remaining assessment of C$47
million. After the application of tax credits and payments, the maximum future cash outlay could be C$34 million for the
remaining 2010-2014 unsettled issues. The Company plans to vigorously dispute these reassessments.
11. LOSS PER SHARE
Basic loss per share
Basic loss per share
The loss and weighted average number of ordinary shares
used in the calculation of basic loss per share are as follows:
Loss used in the calculation of basic EPS
2019
US cents
per share
2018
US cents
per share
(51.8)
(52.9)
2019
US$'000
2018
US$'000
(45,371)
(43,523)
On 30 October 2019, the Company completed a consolidation of the Company’s issued capital on a basis that every 300
shares be consolidated into 1 share. The share consolidation reduced the number of outstanding shares by
26,208,559,146. The number of weighted average shares used in the calculation of loss per share for 31 December 2019
and 31 December 2018 were 87,656,260 and 82,203,453, respectively.
_______________________________________________________________________________________
67
67
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
12. TRADE AND OTHER RECEIVABLES
BOART LONGYEAR LIMITED
Trade receivables are recorded at amortised cost. The Company reviews collectability of trade receivables on an ongoing
basis and provides allowances for credit losses when there is evidence that trade receivables may not be collectible.
These losses are recognised in the income statement within operating expenses. When a trade receivable is determined
to be uncollectible, it is written off against the allowance for doubtful accounts. Subsequent recoveries of amounts
previously written off are recorded in other income in profit or loss.
Trade receivables
Loss allowance
Goods and services tax receivable
Other receivables
The ageing of trade receivables is detailed below:
Current
Past due 0 - 30 days
Past due 31 - 60 days
Past due 61 - 90 days
Past due 90 days
2019
US$'000
2018
US$'000
102,054
(1,015)
10,183
2,516
113,738
109,195
(1,391)
7,056
4,722
119,582
2019
US$'000
2018
US$'000
90,525
8,655
1,325
480
1,069
102,054
89,315
13,106
2,166
1,243
3,365
109,195
The Company always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit
losses (ECL). The expected credit losses on trade receivables are estimated using a provision matrix by reference to
past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that
are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment
of both the current as well as the forecast direction of conditions at the reporting date. The Company has recognised a
loss allowance of 100% against all receivables over 120 days past due because historical experience has indicated that
these receivables are generally not recoverable.
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. No interest is charged on trade receivables.
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 advance 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. No
derivative financial instruments were entered into during 2019 or 2018.
13. 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.
_______________________________________________________________________________________
68
68
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
13. INVENTORIES (CONTINUED)
BOART LONGYEAR LIMITED
Allowances are recorded for inventory considered to be excess or obsolete and damaged items are written down to the
net realisable value. Due to the decline in the demand for products, and consumables used in our Global Drilling Services
business, and the high inventory balances across the group and the speed at which inventory is turning in the current
market, significant judgment is required in determining net realisable value of inventory.
Raw materials
Work in progress
Finished products
2019
US$'000
2018
US$'000
28,938
5,404
128,746
163,088
30,836
5,488
129,086
165,410
Obsolescence provisions were $20.3 million and $18.7 million as at 31 December 2019 and 2018, respectively.
14. FINANCIAL RISK MANAGEMENT
Capital risk management
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 19,
cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves,
and accumulated losses/retained earnings.
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 throughout these notes.
Credit risk management
The Company reviews the recoverable amount of each trade debt on an individual basis at the end of the reporting period
to ensure that adequate loss allowance is made for irrecoverable amounts. In this regard, the directors of the Company
consider that the Group’s credit risk is significantly reduced. Trade receivables consist of a large number of customers,
spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial
condition of accounts receivable.
Of the outstanding loans and borrowings, Centerbridge Partners, L.P. accounted for $292.4 million of Term Loans
outstanding with $24.5 million of accreted interest. Centerbridge Partner, L.P., and Ascribe Capital hold $17.3 million of
the backstop ABL with $3.0 million of accreted interest. There are no significant concentrations of credit risk. The carrying
amount reflected above represents the Company’s maximum exposure to credit risk for trade and other receivables.
Financial risk management objectives
The Company’s corporate treasury function provides services to the business, coordinates access to domestic and
international financial markets, and monitors and manages the financial risks relating to the operations of the Company
through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk
(including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
_______________________________________________________________________________________
69
69
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk
BOART LONGYEAR LIMITED
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates.
Foreign currency risk management
Company subsidiaries undertake certain transactions denominated in currencies other than their functional currency,
hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy
parameters. The Company did not utilise any derivative instruments during the years ended 31 December 2019 or 2018.
The most significant carrying amounts of monetary assets and monetary liabilities (which include intercompany balances
with other subsidiaries) that: (1) are denominated in currencies other than the functional currency of the respective
Company subsidiary; and (2) cause foreign exchange rate exposure, at 31 December are as follows:
Assets
2019
US$'000
2018
US$'000
Liabilities
2019
US$'000
2018
US$'000
48,180
46
9,942
451,962
170,842
269
27,593
143,756
83,294
11,269
19,334
187,169
55,519
22,933
158,496
153,168
Australian Dollar
Canadian Dollar
Euro
US Dollar
Foreign currency sensitivity
The Company is mainly exposed to exchange rate fluctuations in the Australian Dollar (AUD), Canadian Dollar (CAD),
Euro (EUR) and United States Dollar (USD). The Company is also exposed to translation differences as the Company’s
presentation currency is different from the functional currencies of various subsidiaries. However, this represents a
translation risk rather than a financial risk and consequently is not included in the following sensitivity analysis.
The following tables reflect the Company’s sensitivity to a 10% change in the exchange rate of each of the currencies
listed above. This sensitivity analysis includes only outstanding monetary items denominated in currencies other than the
respective subsidiaries’ functional currencies and remeasures these at the respective year end to reflect a 10% decrease
in the indicated currency against the respective subsidiaries’ functional currencies. A positive number indicates an
increase in net profit and/or net assets.
Net profit
Net assets
Net profit
Net assets
10% decrease in AUD
2018
US$'000
2019
US$'000
10% decrease in CAD
2019
US$'000
2018
US$'000
4,428
3,191
(8,689)
(10,485)
1,013
1,013
1,273
2,059
10% decrease in EUR
10% decrease in USD
2019
US$'000
44
44
2018
US$'000
4,692
9,186
2019
US$'000
9,957
(24,072)
2018
US$'000
(5,818)
856
In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as the
year-end exposure may not reflect the exposure during the course of the year.
_______________________________________________________________________________________
70
70
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
Forward foreign exchange contracts
BOART LONGYEAR LIMITED
There were no open forward foreign currency contracts as at 31 December 2019 or 2018.
Interest rate risk management
Most of the Company’s loan portfolio is at fixed interest rates, as such it has less exposure to variable interest rates than
fixed interest rates.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Company’s Treasurer and Board.
The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities.
Liquidity risk
The following tables reflect the expected maturities of non-derivative financial liabilities as at 31 December 2019 and
2018. These are based on the undiscounted expected cash flows of financial liabilities based on the maturity profile per
the loan agreement. The table includes both interest and principal cash flows. The adjustment column represents the
possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the
carrying amount on the balance sheet.
Weighted
average
effective
interest
rate
%
Less
than
1 to 3
3 months
to
1 year
1 month months
US$'000 US$'000 US$'000
1 - 5 years 5+ years
US$'000
US$'000
Adjust-
ment
US$'000
Total
US$'000
31 December 2019
Non-interest bearing
payables
Variable interest rate
instruments
Fixed interest rate
instruments
Leases
31 December 2018
Non-interest bearing
payables
Variable interest rate
instruments
Fixed interest rate
instruments
Leases
-
76,338
34,785
-
-
5.3%
8.1%
6.6%
154
308
1,386
37,786
-
774
77,266
-
1,447
36,540
-
6,107
7,493
885,421
20,872
944,079
-
-
-
7,435
7,435
-
111,123
(4,733)
34,901
(170,639)
-
(175,372)
714,782
36,635
897,441
-
93,091
18,107
-
-
5.7%
8.1%
7.1%
142
283
1,274
31,008
-
98
93,331
-
196
18,586
-
884
2,158
916,232
3,765
951,005
-
-
-
-
-
-
111,198
(2,654)
30,053
(227,760)
-
(230,414)
688,472
4,943
834,666
_______________________________________________________________________________________
71
71
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
Liquidity risk (continued)
BOART LONGYEAR LIMITED
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.
2019
Non-interest bearing
receivables
Cash
2018
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
56,586
20,240
76,826
45,269
11,883
-
-
45,269
11,883
113,738
20,240
133,978
62,535
38,942
101,477
48,778
-
48,778
8,269
-
8,269
119,582
38,942
158,524
The liquidity 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:
• Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
•
•
substance of the contractual arrangements.
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.
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.
_______________________________________________________________________________________
72
72
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
15. PROPERTY, PLANT AND EQUIPMENT
BOART LONGYEAR LIMITED
The Company’s assets are held in various differing geographical, political and physical environments across the world,
therefore, the estimation of useful lives of assets is an area of significant judgment. Our current estimate 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.
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 asset, including the costs of materials and direct labour
and other costs directly attributable to bringing the asset 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. Leasehold improvement 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
5 - 10
5 - 12
1 - 5
5 - 10
years
years
years
years
years
3 - 5
1 - 7
years
years
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
Leased assets
The Company adopted AASB 16 as of 1 January 2019. The company used the “modified retrospective” approach for
adopting AASB 16, which did not require retrospective application of lease-related balances in comparative periods within
the financial statements and disclosures. Property, Plant and Equipment balances for the year ended 31 December 2018
include lease accounting under guidance in IAS 17, classifying agreements as finance leases or operating leases.
See Note 25 for a description of the effects of the adoption of AASB 16.
Under IAS 17, Leases were classified as finance leases when the terms of the leases transferred substantially all the risks
and rewards incidental to ownership of the leased assets to the Company. All other leases were classified as operating
leases.
_______________________________________________________________________________________
73
73
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
15. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land and
Buildings
US$'000
Plant and
Equipment
US$'000
Balance at 1 January 2018
Additions
Disposal
Transfer from CIP
Currency movements
Balance at 31 December 2018
Additions
Adoption of AASB 16
Disposal
Asset Classification Transfer
Transfer from CIP
Currency movements
Balance at 31 December 2019
Accumulated depreciation and impairment:
Balance at 1 January 2018
Depreciation
Impairment
Disposal
Currency movements
Balance at 31 December 2018
Depreciation
Impairment
Disposal
Asset Classification Transfer
Currency movements
Balance at 31 December 2019
Net book value at 31 December 2018
Net book value at 31 December 2019
47,673
8
(2,067)
5,754
(2,365)
49,003
-
-
(31)
(57)
1,280
364
50,559
(16,500)
(1,965)
-
1,310
1,403
(15,752)
(2,065)
-
31
259
(391)
(17,918)
33,251
32,641
595,836
1,260
(51,227)
39,084
(35,373)
549,580
2,921
-
(32,176)
(6,171)
31,741
(3,402)
542,493
(527,092)
(29,164)
(123)
46,040
28,690
(481,649)
(23,424)
(210)
29,656
-
3,025
(472,602)
67,931
69,891
Right of Use
Assets
US$'000
-
-
-
-
-
-
14,042
26,483
(785)
6,228
-
264
46,232
-
-
-
-
-
-
(9,275)
-
282
(259)
(1,375)
(10,627)
-
35,605
BOART LONGYEAR LIMITED
Construction
in Progress
US$'000
Total
US$'000
18,213
38,088
-
(44,838)
1,453
12,916
45,773
-
-
-
(33,021)
1,232
26,900
-
-
-
-
-
-
-
-
-
-
-
-
12,916
26,900
661,722
39,356
(53,294)
-
(36,285)
611,499
62,736
26,483
(32,992)
-
-
(1,542)
666,184
(543,592)
(31,129)
(123)
47,350
30,093
(497,401)
(34,764)
(210)
29,969
-
1,259
(501,147)
114,098
165,037
Property, plant and equipment is reviewed at each reporting date to determine whether there is any indication of
impairment. Assets are first considered individually to determine whether there is any impairment related to specific assets
due to factors such as technical obsolescence, declining market value, physical condition or salability within a reasonable
timeframe. As a result of this exercise, the Company recorded an impairment loss at 31 December 2019 and 31
December 2018 of $0.2 million and $0.1 million, respectively, on property, plant, and equipment. The revised carrying
values are then included in the assessment of the recoverable value of the relevant cash generating unit to which the
property, plant, and equipment relates.
_______________________________________________________________________________________
74
74
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
16. GOODWILL AND OTHER ASSET IMPAIRMENT CONSIDERATIONS
BOART LONGYEAR LIMITED
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.
Goodwill, intangible assets and property, plant and equipment
The Company determines whether goodwill is impaired on an annual basis and assesses impairment of all other assets at
each reporting date by evaluating whether indicators of impairment exist. This evaluation includes consideration of the
market conditions specific to the industry in which the group operates, the increase, or decline in demand for our drilling
services and rig utilisation rates, the political environment in countries in which the group operates, technological changes,
expectations in relation to future cash flows and the Company’s market capitalisation. Where an indication of impairment
exists the recoverable amount of the asset is determined. Recoverable amount is the greater of fair value less costs to
sell and value in use. Impairment is considered for individual assets, or Cash Generating Units (“CGU”). Judgments are
made in determining appropriate cash generating units. When considering whether impairments exist at a CGU, the
Company uses the value in use methodology.
The value in use calculation requires the Company to estimate the future cash flows expected to arise from a 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.
Goodwill
Gross carrying amount:
Balance at 1 January 2018
Acquisiton of business
Currency movements
Balance at 31 December 2018
Balance at 1 January 2019
Currency movements
Balance at 31 December 2019
Note
US$'000
33
101,196
3,940
(1,277)
103,859
103,859
599
104,458
_______________________________________________________________________________________
75
75
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
16. GOODWILL AND OTHER ASSET IMPAIRMENT CONSIDERATIONS (CONTINUED)
Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to individual cash-generating units. The carrying amount of
goodwill by geographic segment allocated to cash-generating units that are significant individually or in aggregate is as
follows:
Goodwill by cash-generating units
North America Drilling Services
Geological Data Services (GDS)
2019
US$'000
100,549
3,909
104,458
2018
US$'000
99,919
3,940
103,859
The carrying amount of goodwill is tested for impairment annually at 31 December and whenever there is an indicator that
the asset may be impaired. If goodwill is impaired, it is written down to its recoverable amount.
Goodwill impairment by cash-generating units
Goodwill and intangible assets in the EMEA, Latin America and Asia Pacific Drilling Services CGUs have been fully
impaired. For the North America Drilling Services CGU, the Company performed a goodwill impairment test at 31
December 2019 and the recoverable amount for the North America Drilling Services CGU exceeded the carrying amount.
Goodwill arising from the acquisition of Globaltech was also tested for impairment and the recoverable amount for the
Geological Data Services CGU exceeded the carrying amount. Consequently, no goodwill impairments were recorded for
the years ended 31 December 2019 and 2018.
Key assumptions
Certain key assumptions are used for CGU impairment testing and are described below.
In its impairment assessment, the Company calculates the recoverable amounts based on value-in-use calculations. Cash
flow projections are based on the Company’s expected performance over a ten-year period, which approximates the
length of a typical mining business cycle based on historical industry experience, with a terminal value. Central to the
approach adopted is the assumption that the mining industry will continue to follow its historical trend of cycles. In
assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount
rate that reflects the current market assessments of the time value of money and risks specific to the asset. The post-tax
discount rate is applied to post tax cash flows that include an allowance for tax based on the respective jurisdictions’ tax
rate. No allowance is made for existing timing differences or carry-forward losses.
This method is used to approximate the requirement of the accounting standards to apply a pre-tax discount rate to pre-
tax cash flows as the Company determined it was not feasible to calculate a stand-alone pre-tax discount rate.
_______________________________________________________________________________________
76
76
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
16. GOODWILL AND OTHER ASSET IMPAIRMENT CONSIDERATIONS (CONTINUED)
Revenue – NAM Drilling Services
In determining the growth rates applied to revenue through the mining cycle, we have had regard to the following:
• Average revenue growth over previous mining cycles
• Rates of inflation in the countries where the Company does business (sourced CapIQ)
• Price and volume expectations over the forecast period
Expenses
In determining gross margin and SG&A expenses, management has considered the impacts of recent programs and other
initiatives already taken within the business and similar future initiatives to reduce operational costs. The recoverable
value assessment of the North America Drilling Services CGU is based on gross margin increasing as a result of the
reduction in costs and improved market conditions.
Working capital and capital expenditure
Working capital and capital expenditure assumptions are assumed to be in line with historic trends given the level of
utilisation and operating activity.
Discount rate and terminal growth rate
A global discount rate of 11.1% is used and adjusted on a case-by-case basis for regional variations in the required equity
rate of return. Based on information published by Bloomberg, the adjusted post-tax discount rate for the North American
region is 11.6% and the terminal growth rate of 3.0% does not exceed the long-term average growth rate for the industry.
As part of our impairment test, we have considered a number of different scenarios that consider the impact on the value-
in-use calculations if key assumptions were to vary from those used in the calculations. We individually assessed the
impact of a 20.0% decrease to revenue, a 10.0% increase to SG&A expense and a 2.0% reduction to gross margin
assumptions, each of which resulted in no impairment.
_______________________________________________________________________________________
77
77
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
17. OTHER INTANGIBLE ASSETS
Trademarks and trade names
BOART LONGYEAR LIMITED
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. 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 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 2 - 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, are 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.
_______________________________________________________________________________________
78
78
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
17. OTHER INTANGIBLE ASSETS (CONTINUED)
BOART LONGYEAR LIMITED
Gross carrying amount:
Balance at 1 January 2018
Additions
Acquisition of business
Disposals
Currency movements
Balance at 31 December 2018
Balance at 1 January 2019
Additions
Disposals
Currency movements
Balance at 31 December 2019
Accumulated amortisation:
Balance at 1 January 2018
Amortisation for the period
Disposals
Impairment for the period
Currency movements
Balance at 31 December 2018
Balance at 1 January 2019
Amortisation for the period
Disposals
Impairment for the period
Currency movements
Balance at 31 December 2019
Trademarks Patents
US$'000
US$'000
Customer
relationships
and other
US$'000
Develop-
ment
Software
assets
US$'000 US$'000
3,060
27
1
-
-
3,088
3,088
-
(1,140)
(1)
1,947
-
-
-
-
-
-
-
-
1,140
(1,140)
-
-
8,097
815
353
(52)
(7)
9,206
9,206
726
(1)
(3)
9,928
(1,984)
(388)
-
-
-
(2,372)
(2,372)
(1,036)
-
(2,479)
-
(5,887)
42,960
-
-
-
(2,206)
40,754
40,754
-
-
109
40,863
(37,089)
(1,124)
-
-
2,195
(36,018)
(36,018)
(1,019)
-
-
(108)
(37,145)
89,141
-
-
(12)
(29)
89,100
89,100
375
-
2
89,477
(85,432)
(2,693)
28
(18)
23
(88,092)
(88,092)
(532)
-
-
(4)
(88,628)
46,842
1,174
7,436
-
(244)
55,208
55,208
2,524
(12,486)
(184)
45,062
(31,486)
(1,241)
-
(410)
26
(33,111)
(33,111)
(1,997)
12,490
(5,332)
(33)
(27,983)
Total
US$'000
190,100
2,016
7,790
(64)
(2,486)
197,356
197,356
3,625
(13,627)
(77)
187,277
(155,991)
(5,446)
28
(428)
2,244
(159,593)
(159,593)
(4,584)
13,630
(8,951)
(145)
(159,643)
Net book value at 31 December 2018
Net book value at 31 December 2019
3,088
1,947
6,834
4,041
4,736
3,718
1,008
849
22,097
17,079
37,763
27,634
Other intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment.
As a result of the Company’s review of specific intangible assets, the Company recorded an impairment loss at 31
December 2019 and 31 December 2018 on trademarks, patents and development assets of $9.0 million and $0.4 million,
respectively.
The Company recognised $8.1 million of research and development expenses in the consolidated statement of profit or
loss and other comprehensive income for the year ended 31 December 2019 (2018: $6.6 million).
_______________________________________________________________________________________
79
79
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
18. TRADE AND OTHER PAYABLES
BOART LONGYEAR LIMITED
Trade payables and other payables are carried at amortised cost. They represent unsecured liabilities for goods and
services provided to the Company prior to the end of the financial period that are unpaid and arise when the Company
becomes obligated to make future payments.
Current
Trade payables
Accrued payroll and benefits
Goods and services tax payable
Accrued interest
Accrued legal and environmental
Professional fees
Accrued drilling costs
Other sundry payables and accruals
2019
US$'000
2018
US$'000
65,177
23,655
4,457
420
6,339
3,242
2,538
5,295
111,123
52,685
23,834
11,572
192
4,405
4,583
2,572
5,139
104,982
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.
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.
_______________________________________________________________________________________
80
80
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
19. LOANS AND BORROWINGS
BOART LONGYEAR LIMITED
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.
Unsecured - at amortised cost
Non-current
Senior notes
Accreted interest
Secured - at amortised cost
Current
Lease liabilities
Non-current
Senior notes
Term loans
Accreted interest
Revolver bank loans
Debt issuance costs
Original issue discount
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
Original issue discount
Debt issuance costs
2019
US$'000
2018
US$'000
88,882
3,159
88,882
1,791
8,328
1,183
217,035
292,441
68,240
79,904
(1,605)
(400)
28,329
784,313
8,328
775,985
784,313
8,328
6,897
755,044
4,436
11,613
786,318
(400)
(1,605)
784,313
217,035
292,441
43,317
75,054
(1,017)
(1,000)
3,765
721,451
1,183
720,268
721,451
1,183
83,020
1,100
637,555
610
723,468
(1,000)
(1,017)
721,451
_______________________________________________________________________________________
81
81
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
19. LOANS AND BORROWINGS (CONTINUED)
Senior notes
BOART LONGYEAR LIMITED
Senior Unsecured Notes
The Company has $88.9 million of senior unsecured notes outstanding as at 31 December 2019 and 2018. These notes
carry an interest rate of 1.5%, per annum, which is payable-in-kind (i.e. non-cash) until maturity in December 2022. 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.
Senior Secured Notes
The Company has $217.0 million of senior secured notes outstanding as at 31 December 2019 and 2018. These notes
carry an interest rate of 12% per annum which is payable-in-kind until 31 December 2018 and thereafter in cash at the
reduced interest rate of 10% per annum with a scheduled maturity date of December 2022. The Company may redeem
all or a portion of the notes prior to maturity subject to certain conditions, including in certain cases the payment of
premiums or make-whole amounts.
With respect to the senior notes issued by the Company, the indenture governing those senior notes includes covenants
that restrict the Company’s ability to engage in certain activities, including incurring additional indebtedness and making
certain restricted payments as well as a limitation on the amount of secured debt the Company may incur. The senior
notes contain certain provisions that provide the note holders with the ability to declare a default, and accelerate the
notes, should a default occur under either of the Term Loans that results in acceleration of such Term Loans. The senior
notes do not require maintenance or testing of financial covenant ratios.
Revolver Bank Loans
ABL
Available facility
Drawn (i)
Letters of credit (ii)
Availability block
Undrawn (iii)
31 December
2019
US$m
31 December
2018
US$m
75.0
34.9
5.6
10.0
24.5
75.0
50.0
30.0
5.9
-
14.1
50.0
(i)
The Company has an asset based revolving bank facility with capacity of $75.0 million (31 December 2018: $50
million) of which $34.9 million (31 December 2018: $30.0 million) was drawn. An availability block of $10.0
million applied as at 31 December 2019, (31 December 2018 no availability block was applicable). As at 31
December 2019 the Facility limit was $65.0 million (31 December 2018 the Facility limit was $50.0 million).
(ii) As at 31 December 2019, $5.6 million (31 December 2018: $5.9 million) of outstanding letters of credit were
drawn under the facility.
(iii) Facility less the availability block of 15% ($9.75 million at 31 December 2019) is to be maintained as of the last
day of any month or a trigger event may occur. If a trigger event occurs the agent can provide an activation
notice that will allow them to access all funds deposited into “Blocked Bank Accounts.” These funds will become
the property of the agent and will be applied to outstanding advances.
Interest on drawn amounts and letters of credit are based on a base rate plus margin (30-day USD LIBOR plus
3.20%).
The facility is secured by a first lien on the accounts receivable, inventories, deposit accounts and cash (“working
capital assets”) of the ABL borrower and guarantors, and a third lien over substantially all of the other tangible and
intangible assets (“non-working capital assets”) of the ABL borrower and guarantors, including equipment, intellectual
property and the capital stock of subsidiaries (but excluding real property).
Scheduled maturity date of the facility is July 2022. As at 31 December 2019 the Company was in compliance with all
of its debt covenants. (Refer below).
_______________________________________________________________________________________
82
82
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
19. LOANS AND BORROWINGS (CONTINUED)
BOART LONGYEAR LIMITED
Backstop ABL
The term loan facility has an interest rate of 11% per annum payable-in kind or 10% per annum payable in cash at the
option of the borrower. It is secured by substantially the same collateral as the ABL credit facility and contains a maturity
of October 2022. As at 31 December 2019 and 2018, the amount outstanding under this facility was $45.0 million.
As at 31 December 2019, the Company was in compliance with all of its debt covenants. (Refer below).
Term Loans
The Company has a term loan facility which is structured as Tranche A and Tranche B loans. As part of the
Recapitalisation in September 2017, the Company restructured its Term Loans. Interest on Term Loans A and B is
reduced from 12% to 10% payable-in-kind through to December 2018 and 8% payable-in-kind thereafter. Maturity was
extended until December 2022. The term loan tranches are structured to accrete interest, which is payable to the term
loan lender, Centerbridge Partners, L.P., a related party.
Since inception and until 31 December 2018, interest of $47.6 million and $34.8 million had accreted for Tranche A and
Tranche B loans, respectively. On 31 December 2018, the issuer of these loans was changed from Boart Longyear
Management Pty. Ltd. to BL Capital Management LLC and the accreted interest to 31 December 2018 was capitalised to
the principal balance. No changes to interest rates or maturity dates were made.
Tranche A
As at 31 December 2019 and 2018, the amount outstanding was $132.5 million, respectively. This tranche contains a
maturity of December 2022 and is non-callable for the first 4 years. It is secured by a first lien on the Working Capital
Assets of the Term Loan A guarantors that are not ABL guarantors, a second lien on the Working Capital assets of the
Term Loan A issuer and the Term Loan A guarantors that are also ABL guarantors, and a second lien on substantially all
of the Non-Working Capital Assets of the Term Loan A issuer and guarantors, including equipment, intellectual property,
the capital stock of subsidiaries and certain owned real property.
Tranche B
As at 31 December 2019 and 2018, the amount outstanding under Tranche B was $159.9 million, respectively. This
tranche contains a maturity of December 2022 and is non-callable for the life of the loan. It is secured by a second lien on
the Working Capital Assets of the Term Loan B and Senior Secured Notes guarantors that are not ABL guarantors, a third
lien on the Working Capital Assets of the Term Loan B and Senior Secured Notes issuer and the Term Loan B and Senior
Secured Notes guarantors that are also ABL guarantors, and a first lien on substantially all of the Non-Working Capital
Assets of the Term Loan B and Senior Secured Notes issuer and guarantors, including equipment, intellectual property,
the capital stock of subsidiaries and certain owned real property.
The Company’s Term Loans, ABL, and Backstop ABL require that obligors under the term loans account for at least 60%
of consolidated Group EBITDA and total Tangible Assets. This covenant is tested at each publicly released financial
report.
The Group’s position in relation to these metrics was as follows:
Metric
% of Consolidated EBITDA
% of Consolidated Tangible Assets
Target Range
Equal or more than 60%
Equal or more than 60%
2019
71%
73%
2018
82%
64%
_______________________________________________________________________________________
83
83
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
19. LOANS AND BORROWINGS (CONTINUED)
BOART LONGYEAR LIMITED
Further details around the Issuer/Borrower and Guarantors of the Company’s debt instruments are included below:
Description
Issuer/Borrower Guarantors
Australia: Boart Longyear Australia Pty Limited, Boart Longyear Limited, Boart Longyear Investments Pty
Limited and Votraint No. 1609 Pty Limited
Canada: Boart Longyear Canada, Boart Longyear Manufacturing Canada Ltd. and Longyear Canada, ULC
Senior
Secured
Notes
Boart
Longyear
Management
Pty Limited
Chile: Boart Longyear Chile Limitada
Peru: Boart Longyear S.A.C.
Switzerland: Boart Longyear Suisse Sarl
United States: Boart Longyear Company, Boart Longyear Manufacturing and Distribution Inc., Longyear
Holdings, Inc., BLY IP Inc., BL Capital Management LLC, BLY US Holdings Inc. and Longyear TM, Inc.
Australia: Boart Longyear Australia Pty Limited, Boart Longyear Limited, Boart Longyear Investments Pty
Limited and Votraint No. 1609 Pty Limited
Canada: Boart Longyear Canada, Boart Longyear Manufacturing Canada Ltd. and Longyear Canada, ULC
Senior
Unsecured
Notes
Boart
Longyear
Management
Pty Limited
Chile: Boart Longyear Chile Limitada
Peru: Boart Longyear S.A.C.
Switzerland: Boart Longyear Suisse Sarl
United States: Boart Longyear Company, Boart Longyear Manufacturing and Distribution Inc., Longyear
Holdings, Inc., BL Capital Management LLC, BLY US Holdings Inc. and Longyear TM, Inc.
Australia: Boart Longyear Management Pty Limited, Boart Longyear Australia Pty Limited, Boart Longyear
Limited, Boart Longyear Investments Pty Limited and Votraint No. 1609 Pty Limited
Canada: Boart Longyear Canada, Boart Longyear Manufacturing Canada Ltd. and Longyear Canada, ULC
Term Loan
A
BL Capital
Management
LLC
Chile: Boart Longyear Chile Limitada
Peru: Boart Longyear S.A.C.
Switzerland: Boart Longyear Suisse Sarl
United States: Boart Longyear Company, Boart Longyear Manufacturing and Distribution Inc., Longyear
Holdings, Inc., BLY IP Inc., BLY US Holdings Inc. and Longyear TM, Inc.
Term Loan
B
BL Capital
Management
LLC
Same as Term Loan A
Australia: Boart Longyear Australia Pty Limited, Boart Longyear Limited, Boart Longyear Investments Pty
Limited and Votraint No. 1609 Pty Limited
Canada: Boart Longyear Canada, Boart Longyear Manufacturing Canada Ltd. and Longyear Canada, ULC
ABL
Boart
Longyear
Management
Pty Limited
Chile: Boart Longyear Chile Limitada
Peru: Boart Longyear S.A.C.
Switzerland: Boart Longyear Suisse Sarl
United States: Boart Longyear Company, Boart Longyear Manufacturing and Distribution Inc., Longyear
Holdings, Inc., BLY IP Inc., BL Capital Management LLC, BLY US Holdings Inc. and Longyear TM, Inc.
Backstop
ABL
Boart
Longyear
Management
Pty Limited
Same as ABL
_______________________________________________________________________________________
84
84
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
20. PROVISIONS
BOART LONGYEAR LIMITED
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.
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 based on rates that the Company expects to
pay as at the 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 short-term employee benefits 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 the 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.
Warranties
The Company provides statutory product warranties through its contracts with customers and does not offer the option to
purchase warranties separately.
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.
Onerous contracts
Due to the adoption of AASB 16 as at 1 January 2019, onerous lease provisions were derecognised and recorded as an
adjustment to the lease right of use asset balances. Adoption of AASB 16 does not require retrospective adjustments. As
at 31 December 2018 a provision for onerous contracts was recognised when the expected benefits to be derived from a
contract were less than the unavoidable cost of meeting its obligations under the contract. The provision was 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.
The following table reflects the provision balances:
Current
Employee benefits
Restructuring and termination costs
Warranty
Onerous leases
Non-current
Employee benefits
Pension and post-retirement benefits (Note 23)
Provision for tax contingencies (Note 10)
Onerous leases
2019
US$'000
2018
US$'000
8,820
4,684
933
-
14,437
403
10,349
63,792
-
74,544
88,981
11,561
6,054
1,268
1,008
19,891
1,291
8,682
68,671
819
79,463
99,354
_______________________________________________________________________________________
85
85
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
21. PENSION AND POST-RETIREMENT BENEFITS
BOART LONGYEAR LIMITED
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 contribution plans
Pension costs represent actual contributions paid or payable by the Company to the various plans. At 31 December 2019
and 2018, there were no significant outstanding/prepaid contributions. Company contributions to these plans were $9.0
million and $6.0 million for the years ended 31 December 2019 and 2018, respectively.
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.
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 weighted-average maturity profile of the
defined benefit obligations in North America was 11.0 years and in Europe was 14.5 years for both 2019 and 2018. 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.
The Company provides defined contribution and defined benefit pension plans for the majority of its employees. It also
provides post-retirement medical arrangements in North America.
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.
Full actuarial valuations of the defined benefit pension plans were performed as at various dates and updated to 31
December 2019 by qualified independent actuaries. The estimated market value of the assets of the funded pension
plans was $207.9 million and $193.5 million at 31 December 2019, and 2018, 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 90% in 2019 and 2018 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.
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 majority of the defined benefit pension plans are closed to new participants. Under the projected unit credit method,
service cost will increase as the participant ages until retirement when it goes to zero. In addition, changes to the
discount rate can increase or decrease service cost.
_______________________________________________________________________________________
86
86
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
21. PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
BOART LONGYEAR LIMITED
Company contributions to these plans were $2.7 million and $6.0 million during the years ended 31 December 2019 and
2018, respectively. Contributions in 2020 are expected to be $3.4 million.
The principal assumptions used to determine the actuarial present value of benefit obligations and pension costs are
detailed below (shown in weighted averages):
Discount rates
Expected Average Rate Increases:
Salaries
Pensions in payment
Healthcare costs (initial)
Healthcare costs (ultimate)
2019
2018
North
America
3.3%
Europe
0.4%
North
America
4.3%
Europe
1.8%
3.5%
-
5.0%
5.0%
3.0%
1.5%
-
-
3.5%
-
5.0%
5.0%
3.0%
1.5%
-
-
Amounts recognised in profit or loss in respect of these defined benefit plans are as follows:
2019
Post-
retirement
Pension
Plan medical Plan
US$'000
1,088
415
1,503
US$'000
-
11
11
Total
US$'000
1,088
426
Pension
Plan
US$'000
1,083
411
1,514
1,494
2018
Post-
retirement
medical Plan
US$'000
-
12
12
Total
US$'000
1,083
423
1,506
Current service cost
Net interest expense
Total charge to profit
and loss account
For the financial years ended 31 December 2019 and 2018, charges of approximately $1.3 million and $1.3 million,
respectively, have been included in cost of goods sold and the remainder in general and administrative or sales and
marketing expenses.
_______________________________________________________________________________________
87
87
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
BOART LONGYEAR LIMITED
21. PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)
Changes in the present value of the defined benefit obligations were as follows:
Opening defined benefit obligation
Current service cost
Interest cost
Actuarial losses arising from
demographic assumptions
Actuarial losses(gains) arising from
financial assumptions
Exchange differences on foreign plans
Benefits paid
Closing defined benefit obligation
2019
Post-
retirement
Medical Plan
US$'000
339
-
11
Total
US$'000
202,224
1,088
6,374
2018
Post-
retirement
Medical Plan
US$'000
417
-
13
Pension
Plan
US$'000
223,271
1,083
6,243
-
11
14
(54)
321
168
231
18,296
2,124
(11,979)
218,295
(7,803)
(10,388)
(10,752)
201,885
-
(5)
(31)
(55)
339
Pension
Plan
US$'000
201,885
1,088
6,363
168
18,285
2,110
(11,925)
217,974
Changes in the fair value of the plan assets were as follows:
Opening fair value plan of assets
Expected return on plan assets
Actuarial gains (losses) arising from
financial assumptions
Administrative expenses paid from the trust
Exchange differences on foreign plans
Contributions from the employer
Benefits paid
Closing fair value of plan assets
2019
Post-
retirement
Medical Plan
US$'000
-
-
-
-
-
54
(54)
-
Pension
Plan
US$'000
193,542
6,032
16,601
(1,215)
2,261
2,650
(11,925)
207,946
Total
US$'000
193,542
6,032
16,601
(1,215)
2,261
2,704
(11,979)
207,946
Pension
Plan
US$'000
211,087
5,911
(6,910)
(1,045)
(10,647)
5,898
(10,752)
193,542
2018
Post-
retirement
Medical Plan
US$'000
-
-
-
-
-
55
(55)
-
Total
US$'000
223,688
1,083
6,256
231
(7,808)
(10,419)
(10,807)
202,224
Total
US$'000
211,087
5,911
(6,910)
(1,045)
(10,647)
5,953
(10,807)
193,542
Assumed healthcare cost trend rates impact the amounts recognised in profit or loss. A one percentage point change in
assumed healthcare cost trend rates would have the following effects:
One percentage point increase
Effect on the aggregate of the service cost and interest cost
Effect on accumulated post-employment benefit obligation
One percentage point decrease
Effect on the aggregate of the service cost and interest cost
Effect on accumulated post-employment benefit obligation
2019
US$'000
2018
US$'000
-
2
-
(2)
-
1
-
(1)
_______________________________________________________________________________________
88
88
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
22. ISSUED CAPITAL
BOART LONGYEAR LIMITED
2019
Shares
'000
US$'000
2018
Shares
'000
US$'000
Ordinary shares
Share capital
Ordinary shares, fully paid
87,656
1,463,185
26,296,215
1,463,185
Movements in ordinary shares
Balance at beginning of year
Share consolidation1
Issued to Directors
Balance at end of the year
Total shares outstanding
Shares held in trust
Balance at end of the year
Issued Warrants
Warrants issued but not exercised
Share consolidation1
Balance at end of the year
26,296,215
(26,208,559)
-
87,656
87,656
-
87,656
1,463,185
-
-
1,463,185
1,463,185
-
1,463,185
26,289,795
-
6,420
26,296,215
26,296,215
-
26,296,215
1,463,167
-
18
1,463,185
1,463,185
-
1,463,185
2019
Warrants
'000
US$'000
2018
Warrants
'000
US$'000
731,082
(728,642)
2,440
5,591
-
5,591
731,082
-
731,082
5,591
-
5,591
(1) On 30 October 2019, the Company completed a consolidation of the Company’s issued capital on a basis that every
300 shares be consolidated into 1 share.
_______________________________________________________________________________________
89
89
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
23. DIVIDENDS
BOART LONGYEAR LIMITED
No dividend has been determined for 31 December 2019 or 31 December 2018. There are no franking credits available
for the years ended 31 December 2019 or 2018.
24. COMMITMENTS FOR EXPENDITURE
The Company has the following continuing operational and financial commitments in the normal course of business:
Capital commitments
Purchase commitments for capital expenditures
Lease Commitment for short-term and low-value leases
2019
US$'000
2018
US$'000
3,531
10,574
3,560
8,426
25. LEASE COMMITMENTS
AASB 16 – Leases
General impact of application of AASB 16 Leases
AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial
statements for both lessors and lessees. AASB 16 supersedes the lease guidance including IAS 17 Leases and the
related Interpretations when it became effective for the accounting period beginning on 1 January 2019. The date of initial
application of AASB 16 for the Company was 1 January 2019.
The Company has chosen the modified retrospective application of AASB 16 in accordance with AASB 16.C5(b).
Consequently, the Company has not restated the comparative information.
Impact of the new definition of a lease
The Company has made use of the practical expedient available on transition to AASB 16 not to reassess whether a
contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue
to apply to those leases entered into, or modified, before 1 January 2019.
The change in definition of a lease mainly relates to the concept of control. AASB 16 distinguishes between leases and
service contracts on the basis of whether the use of an identified asset is controlled by the customer. Control is
considered to exist if the customer has:
•
•
The right to obtain substantially all of the economic benefits from the use of an identified asset; and
The right to direct the use of that asset.
The Company has applied the definition of a lease and related guidance set out in AASB 16 to all lease contracts entered
into or modified on or after 1 January 2019. In preparation for the first-time application of AASB 16, the Company has
carried out an implementation project. The project has shown that the new definition in AASB 16 will not change
significantly the scope of contracts that meet the definition of a lease for the Company.
Impact on Lessee Accounting
Operating leases
AASB 16 has changed how the Company accounts for leases previously classified as operating leases under IAS 17,
which were off-balance sheet.
_______________________________________________________________________________________
90
90
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
25. LEASE COMMITMENTS (CONTINUED)
BOART LONGYEAR LIMITED
On initial application of AASB 16, for all leases (except as noted below), the Company has:
a) Recognised right-of-use (ROU) assets and lease liabilities in the consolidated statement of financial position,
initially measured at the present value of the future lease payments;
b) Recognised depreciation of ROU assets and interest on lease liabilities in the consolidated statement of profit or
loss;
c) Separated the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the consolidated cash flow statement.
Lease incentives (e.g. rent-free period) will be recognised as part of the measurement of the ROU assets and lease
liabilities whereas under IAS 17 they resulted in the recognition of a lease liability incentive, amortised as a reduction of
rental expenses on a straight-line basis.
Under AASB 16, ROU assets will be tested for impairment in accordance with IAS 36 Impairment of Assets. This will
replace the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and
office furniture), the Company recognised a lease expense on a straight-line basis as permitted by AASB 16.
The Company recognised ROU assets with a net book value of $31.3 million and lease liability of $33.0 million at 1
January 2019, the adoption date of this standard, valued using a weighted average incremental borrowing rate of 9.52%.
At 31 December 2019, the Company has ROU assets with a net book value of $35.6 million and corresponding lease
liabilities of $36.6 million.
Payments for low-value and short-term leases are presented in the Consolidated Statement of Profit and Loss within
expenses contributing to Operating profit/(loss). Payments for low-value leases during 2019 totaled $0.3 million, while
payment for short-term rent leases totaled $8.1 million.
ROU assets and depreciation by asset type are as follows:
Balance at 31 December 2019
Leased Asset Cost
Lease Asset Accumulated Depreciation
Net book value at 31 December 2019
Land and
Plant and
Buildings
Equipment
Total
US$'000
US$'000
US$'000
29,516
(5,363)
24,153
16,716
(5,264)
11,452
46,232
(10,627)
35,605
2019 Depreciation Expense
5,474
3,801
9,275
The impact on profit or loss for the year ended 31 December 2019 was to decrease rent expenses by $9.2 million,
therefore increasing EBITDA by that amount. There was also an increase in depreciation by $9.3 million, and an increase
in interest expense by $2.7 million.
Under AASB 117, all lease payments on operating leases were presented as part of cash flows from operating activities.
The YTD impact of the changes under AASB 16 resulted in an increase in cashflows from operating activities by $5.6
million and a decrease in cashflows from financing activities by $6.1 million.
The Company has made use of the practical expedient to not separate non-lease and lease components at the adoption
date (AASB 16:15).
_______________________________________________________________________________________
91
91
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
25. LEASE COMMITMENTS (CONTINUED)
Finance leases
BOART LONGYEAR LIMITED
The main differences between AASB 16 and AASB 117 with respect to assets formerly held under a finance lease is the
measurement of the residual value guarantees provided by the lessee to the lessor. AASB 16 requires that the Company
recognises as part of its lease liability only the amount expected to be payable under a residual value guarantee, rather
than the maximum amount guaranteed as required by AASB 117. Management assessed this change and determined
that it does have a significant impact on the amounts recognised between AASB 117 and AASB 16. On initial application,
the Company presented equipment previously included in property, plant and equipment within the line item for ROU
assets and the lease liability, previously presented within borrowing, are presented in a separate line for lease liabilities.
See Note 19.
Impact on Lessor Accounting
Under AASB 16, a lessor continues to classify leases as either finance leases or operating leases and account for those
two types of leases differently. However, AASB 16 has changed and expanded the disclosures required, in particular
regarding how a lessor manages the risks arising from its residual interest in leased assets.
Under AASB 16, an intermediate lessor accounts for the head lease and the sublease as two separate contracts. The
intermediate lessor is required to classify the sublease as a finance or operating lease by reference to the ROU asset
arising from the head lease (and not by reference to the underlying asset as was the case under AASB 117).
The Company does not currently act as the lessor for any assets, therefore, the impacts of AASB 16 do not have a
material effect on the financial statements in either the current or prior years.
26. CONTINGENT LIABILITIES
The recognition of provisions for legal disputes is subject to a significant degree of judgment. Provisions are established
when (a) the Company has a present legal or constructive obligation as a result of past events, (b) it is probable that an
outflow of resources will be required to settle the obligation, and (c) the amount of that outflow has been reliably
estimated.
Letters of credit
Standby letters of credit primarily issued in support of commitments or other obligations as at 31 December 2019 are as
follows:
Subsidiary
Australia
Australia
Australia
Australia
United States
United States
United States
Purpose
Secure a facility rental
Secure a facility rental
Secure a facility rental
Secure credit facility
Secure workers compensation program
Secure DS bonding program
Secure insurance program
Expiration
Date
August 2020
September 2020
October 2020
April 2021
January 2020
January 2020
August 2020
Amount
US $'000
485
437
56
271
100
2,670
1,600
5,619
Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the
amount recognised as a provision or the amount initially recognised less cumulative amortisation in accordance with the
revenue recognition policies described in Note 3.
_______________________________________________________________________________________
92
92
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
26. CONTINGENT LIABILITIES (CONTINUED)
A summary of the maturity of issued letters of credit is as follows:
Less than 1 year
1 to 3 years
Guarantees
BOART LONGYEAR LIMITED
2019
US$'000
2018
US$'000
5,348
271
5,619
5,859
-
5,859
The subsidiaries of the Company provide guarantees within the normal course of business which includes payment
guarantees to cover import duties, taxes, performance and completion of contracts. In addition, the Parent and certain
subsidiaries are guarantors on the Company’s loans and borrowings. See Note 19.
Legal contingencies
The Company is subject to certain routine legal proceedings that arise in the normal course of its business. Management
believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not
materially affect the Company’s operations, liquidity, or financial position taken as a whole. However, the ultimate
outcome of any litigation is uncertain, and unfavourable outcomes could have a material adverse impact.
Tax and customs audits
The Company is subject to certain tax and customs audits that arise in the normal course of its business. Management
believes that the ultimate amount of liability, if any, for any pending assessments (either alone or combined) would not
materially affect the Company’s operations, liquidity, or financial position taken as a whole. However, the ultimate
outcome of these audits is uncertain and unfavourable outcomes could have a material adverse impact. See additional
disclosure in Note 10.
Other contingencies
Other contingent liabilities as at 31 December 2019 and 2018 consist of the following:
Contingent liabilities
Guarantees/counter-guarantees to outside parties
7,035
2,079
2019
US$'000
2018
US$'000
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net
of any allowances for losses, represents the Company’s maximum exposure to credit risk without taking account of the
value of any collateral obtained. See Note 14.
Financial assets and other credit exposure
Performance guarantees provided, including letters of credit
Maximum credit risk
2019
2018
US$'000
US$'000
12,654
7,938
_______________________________________________________________________________________
93
93
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
27. PARENT ENTITY DISCLOSURES
Financial position
BOART LONGYEAR LIMITED
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
Loss for the year
Total comprehensive loss
2019
US$'000
2018
US$'000
6,623
459,103
465,726
56,065
291,291
347,356
118,370
15,087
491,119
506,206
58,639
389,343
447,982
58,224
3,219,236
9,452
(3,110,318)
118,370
3,219,236
9,538
(3,170,550)
58,224
2019
US$'000
60,232
60,232
2018
US$'000
(37,441)
(37,441)
Guarantees entered into by the parent entity in relation to debts of its subsidiaries
Other guarantees are described in Note 26.
Contractual obligations
As at 31 December 2019 and 2018, Boart Longyear Limited did not have any contractual obligations.
Guarantees entered into by the parent entity in relation to debts of its subsidiaries
The Parent has entered into agreements with the Canada Revenue Agency and Ministry of Finance for the province of
Ontario to guarantee the payment of all amounts finally determined to be due and payable by its Canadian affiliates in
respect of contested tax assessments for the tax years from 2007 through 2012. See Note 10. Other guarantees are
described in Note 26.
_______________________________________________________________________________________
94
94
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
28. COMPANY SUBSIDIARIES
The Company’s percentage ownership of the principal subsidiaries are as follows:
BOART LONGYEAR LIMITED
Country of
incorporation
Business
31 Dec
2019
31 Dec
2018
Subsidiaries
BL Capital Management LLC
BL DDL Holdings Pty Ltd2
BL DDL II Holdings Pty Ltd1
BL Group Holdings Inc.3
BLI Zambia Ltd.
BLY Cote d'Ivoire S.A.
BLY EMEA UK Holdings Ltd.
BLY Gabon S.A.
BLY Ghana Limited
BLY Guinea S.A.2
BLY IP Inc.
BLY Madagascar S.A.2
BLY Mali S.A.
BLY Senegal S.A.
BLY Sierra Leone Ltd.
BLY US Holdings Inc.
Boart Longyear (Cambodia) Ltd.2
Boart Longyear (DRC) S.A.
Boart Longyear (NZ) Limited
Boart Longyear (Vic) No. 1 Pty Ltd
Boart Longyear (Vic) No. 2 Pty Ltd
Boart Longyear Alberta Limited
Boart Longyear Argentina S.A.
Boart Longyear Australia Holdings Pty Limited
Boart Longyear Australia Pty Ltd
Boart Longyear Burkina Faso Sarl2
Boart Longyear B.V.
Boart Longyear Canada
Boart Longyear Chile Limitada
Boart Longyear Colombia S.A.S.2
Boart Longyear Company
Boart Longyear Consolidated Holdings, Inc.1
Boart Longyear de Mexico, S.A. de C.V.
BLY Drilling Services and Products Mexico, S.A. de C.V.2
Boart Longyear Drilling Products (Wuxi) Co., Ltd.
Boart Longyear Drilling Services KZ LLP
Kazakhstan
Boart Longyear Eritrea Ltd.
Boart Longyear Finance Ltd.3
Boart Longyear Global Holdco, Inc.1
Boart Longyear GmbH & Co., KG
Boart Longyear Holdings (Thailand) Co., Ltd.2
Boart Longyear Incorporated3
Boart Longyear International B.V.
Boart Longyear International Holdings, Inc.1
Boart Longyear Investments Pty Ltd
Eritrea
Canada
USA
Germany
Thailand
Canada
Netherlands
USA
Australia
USA
Australia
Australia
Holding Company
Holding Company
Holding Company
Cayman Island
Holding Company
Zambia
Ivory Coast
Drilling Services
Drilling Services
United Kingdom
Holding Company
Gabon
Ghana
Guinea
USA
Drilling Services
Drilling Services
Dormant
Holding Company
Madagascar
Dormant
Mali
Senegal
Sierra Leone
USA
Cambodia
Drilling Services
Drilling Services
Drilling Services
Holding Company
Dormant
Dem. Rep. of Congo Drilling Services
New Zealand
Drilling Services
Australia
Australia
Canada
Argentina
Australia
Australia
Burkina Faso
Netherlands
Canada
Chile
Colombia
USA
USA
Mexico
Mexico
China
Holding Company
Holding Company
Holding Company
Drilling Services
Holding Company
Drilling Services
Drilling Services
Drilling Products
Drilling Products and Services
Drilling Products and Services
Dormant
Drilling Products and Services
Holding Company
Drilling Services
Dormant
Drilling Products and Services
Drilling Services
Drilling Services
Holding Company
Holding Company
Drilling Products and Services
Drilling Services
Holding Company
Holding Company
Holding Company
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
-
100
100
100
-
100
100
100
_______________________________________________________________________________________
95
95
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
28. COMPANY SUBSIDIARIES (CONTINUED)
BOART LONGYEAR LIMITED
Country of
incorporation
Business
31 Dec
2019
31 Dec
2018
Subsidiaries
Boart Longyear Liberia Corporation
Boart Longyear Limitada
Boart Longyear Limited
Boart Longyear Limited1
Boart Longyear LLC 2
Boart Longyear Management Pty Ltd
Boart Longyear Manufacturing Canada Ltd.
Boart Longyear Manufacturing and Distribution Inc.
Boart Longyear Netherlands BV
Boart Longyear Poland Spolka z.o.o.
Boart Longyear Products KZ LLP 2
Boart Longyear RUS2
Boart Longyear S.A.C.
Boart Longyear Saudi Arabia LLC2
Boart Longyear Sole Co., Limited
Boart Longyear Suisse Sàrl
Boart Longyear Ventures Inc.
Boart Longyear Vermogensverwaltung GmbH
Boart Longyear Zambia Limited2
Cooperatief Longyear Holdings UA
Dongray Industrial Limited2
Drillcorp Pty Ltd1
Geoserv Pesquisas Geologicas S.A.
Globaltech Corporation Pty Ltd 4
Inavel S.A.
Longyear Canada, ULC
Longyear Global Holdings, Inc.4
Longyear Holdings New Zealand, Ltd1
Longyear Holdings, Inc.1
Longyear South Africa (Pty) Ltd
Longyear TM, Inc.
North West Drilling Pty Limited1
P.T. Boart Longyear
Patagonia Drill Mining Services S.A.
Resources Services Holdco, Inc.1
Votraint No. 1609 Pty Ltd
(1) This entity was merged or dissolved in 2019
(2) This entity is currently in liquidation status
(3) This entity was formed in 2019
(4) Boart Longyear became a majority shareholder in 2018
Liberia
Brazil
Ireland
Thailand
Drilling Services
Drilling Products
Drilling Products
Drilling Services
Russia Federation
Drilling Products
Australia
Canada
USA
Holding Company
Drilling Products
Drilling Products
Netherlands
Holding Company
Poland
Drilling Products and Services
Kazakhstan
Drilling Products
Russia Federation
Drilling Services
Peru
Drilling Products and Services
Saudi Arabia
Dormant
Laos
Switzerland
Canada
Germany
Zambia
Drilling Services
Holding Company
Holding Company
Holding Company
Drilling Products
Netherlands
Holding Company
United Kingdom
Australia
Brazil
Australia
Uruguay
Canada
USA
Dormant
Dormant
Drilling Services
Holding Company
Drilling Services
Drilling Products
Holding Company
New Zealand
Dormant
USA
Holding Company
South Africa
Drilling Products and Services
USA
Australia
Indonesia
Argentina
USA
Australia
Holding Company
Dormant
Drilling Services
Drilling Services
Holding Company
Drilling Services
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
52
100
100
100
-
-
100
100
-
100
100
-
100
_______________________________________________________________________________________
96
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
52
100
100
100
100
100
100
100
100
100
100
100
100
96
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
29. RELATED PARTY TRANSACTIONS
Transactions with key management personnel
(i)
Key management personnel compensation
BOART LONGYEAR LIMITED
Details of key management personnel compensation are disclosed in Note 8.
(ii)
Other transactions with key management personnel of the Company
None.
(iii)
During the year the Company incurred the following interest expenses associated with the relevant parties
and corresponding debt facilities:
Centerbridge
Term Loan A
Term Loan B
Backstop ABL
Senior Secured Notes
Backstop ABL
Senior Secured Notes
Unsecured Notes
Ascribe
Balances at
31 Dec 2019
US$'000
Interest expense for the
financial year ended
31 Dec 2019
US$'000
143,691
173,219
15,032
21,618
5,270
59,751
41,910
11,094
13,374
1,631
2,162
571
5,975
623
_______________________________________________________________________________________
97
97
BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
30. CASH AND CASH EQUIVALENTS
BOART LONGYEAR LIMITED
Included in the cash balance at 31 December 2019 is $0.2 million of restricted cash and at 31 December 2018 $1.6 million
of restricted cash. The Company cannot access these cash balances until certain conditions are met. These conditions
pertain to the Company’s ABL facility as well as restrictions to secure facility leases.
31. NON-CASH TRANSACTIONS
During the current year, the Company entered into the following non-cash financing activities, which are not reflected in
the consolidated statement of cash flows:
•
$33.3 million of non-cash interest expense
32. 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.
These standards and interpretations are set forth throughout the notes to the financial statements. The adoption of each
standard individually did not have a significant impact on the Company’s financial results or consolidated statement of
financial position.
Standards and Interpretations issued and effective
Standard / Interpretation
Effective for annual reporting
periods beginning on or after
Applied in the financial year ended
AASB 16 'Leases'
1 January 2019
31 December 2019
Interpretation 23 'Uncertainty over
Income Tax Treatments'
AASB 16 – Leases
1 January 2019
31 December 2019
Details of the Company’s adoption of AASB 16 Leases is set out in Note 25.
Interpretation 23 Uncertainty over Income Tax Treatments
Interpretation 23 sets out how to determine the accounting tax position when there is uncertainty over income tax
treatments. The Interpretation requires an entity to:
•
•
determine whether uncertain tax positions are assessed separately or as a group; and
assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be
used, by an entity in its income tax filings:
o
o
If yes, the entity should determine its accounting tax position consistently with the tax treatment used or
planned to be used in its income tax filings.
If no, the entity should reflect the effect of uncertainty in determining its accounting tax position.
The Interpretation is effective for annual periods beginning on or after 1 January 2019. Entities can apply the
Interpretation with either full retrospective application or modified retrospective application without restatement of
comparatives retrospectively or prospectively. The Company used the modified retrospective approach for adopting IFRIC
23. Details of the Company’s adoption are set out in Note 10.
_______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2019
For the financial year ended 31 December 2019
33. ACQUISITION OF OPERATIONS
BOART LONGYEAR LIMITED
On 1 July 2018 the Boart Longyear acquired an additional 11.9% of the issued share capital of Globaltech Corporation Pty
Ltd (“Globaltech”), increasing its shareholding to 51.7% and obtaining control of Globaltech. The direct parent entity of
Globaltech is Votraint No. 1609 Pty Ltd (“Votraint”). The goodwill arising on the acquisition of Globaltech is related to the
designing, development and manufacturing of electronic instrumentation for drilling operations for the mining industry.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table
below.
Financial assets
Property, plant and equipment
Research & development assets
Current Tax Payable
Deferred Tax Liability
Financial liabilities
Total identifiable assets
Goodwill
Total Assets
Boart Longyear 51.7% share
Satisfied by:
Converting loans and accrued interest to ordinary shares of
GlobalTech
Total consideration transferred
Fair Value
US$’000
1,813
277
7,436
(922)
(2,358)
(785)
5,461
3,940
9,401
4,860
4,860
4,860
The fair value of the financial assets includes trade receivables with a fair value of $1.0 million.
The goodwill of $3.9 million arising from the acquisition consists of the excess of the total consideration transferred and
Votraint’s share (51.7%) of the fair value of Globaltech’s net assets at acquisition date.
The non-controlling interest (48.3%) recognised at the acquisition date was measured by reference to the non-controlling
share of the fair value of the net assets of Globaltech at acquisition date and amounted to $2.4 million.
34. SUBSEQUENT EVENTS
None.
_______________________________________________________________________________________
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BOART LONGYEAR 2019 ANNUAL REPORT
SUPPLEMENTARY INFORMATION
Additional Information as at 18 March 2020
ADDITIONAL INFORMATION as at 18 March 2020
1. Substantial shareholders
The substantial shareholders as disclosed to the Company in substantial holders’ notices are:
Holder
Centerbridge Partners group of Companies
(as set out in Form 604: Notice of change of interests of substantial
holder lodged 12 June 2019)
Ascribe group of Companies
(as set out in Form 604: Notice of change of interests of substantial
holder lodged 27 September 2017)
Number of Ordinary Shares in
which relevant interest held
*14,156,931,140
**5,497,572,395
Subsequent to completion of the 300:1 Share consolidation on 11 November 2019, the number of shares held by
each substantial shareholder is as follows:
Centerbridge Partners group of Companies*
Ascribe group of Companies**
2. Number of securities on issue and security holders
(a) Quoted Securities
i) Ordinary share capital
47,189,771
18,325,242
There are 87,753,905 quoted fully paid ordinary shares on issue under the ASX code “BLY”, held by
3,799 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.
ii) Warrants
There are 2,012,403 quoted warrants expiring 13 September 2024 held by 5,792 individual warrant
holders, that are publically traded on the ASX under the code “BLYO”. The quoted warrants do not carry
rights to vote
(b) Unquoted Securities
i) Options
There are 90,150 unquoted share options on issue held by 14 individual option holders that are not
publically traded on the ASX under the code “BLYAA”. The unquoted share options do not carry rights to
vote.
ii) Warrants
There are 427,816 unquoted warrants held by 9 individual warrant holders that are not publically traded
on the ASX under the code “BLYAC”. The unquoted warrants do not carry rights to vote.
3. Distribution of holders of equity securities
Range
Holders - Fully Paid
Ordinary Shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
TOTAL
2859
666
130
119
25
3,799
Boart Longyear Annual Report 2020
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BOART LONGYEAR 2019 ANNUAL REPORT
SUPPLEMENTARY INFORMATION
Additional Information as at 18 March 2020
4. Unmarketable parcel of shares
The number of security investors holding less than a marketable parcel of 944 securities ($0.53 on 18/03/2020) is
2,766 and they hold 701,797 securities.
5. On-market buy back
There is no current on-market buy-back of Boart Longyear shares
6. 20 Largest holders of quoted equity securities
a) Fully paid ordinary shares
No. Holder
1 CCP II DUTCH ACQUISITION - E2, B.V.
2 ASCRIBE II INVESTMENTS LLC
3 CCP CREDIT SC II DUTCH ACQUISITION - E, B.V.
4 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
5
J P MORGAN NOMINEES AUSTRALIA LIMITED
6 CS THIRD NOMINEES PTY LIMITED
7 MERRILL LYNCH (AUSTRALIA) NOMINEES LIMITED
8 CITICORP NOMINEES PTY LIMITED
9 MR JZHONG-WEI MIAO
10 MS LINLIN LI
11 KEONG LIM PTY LIMITED
12 MR JEFFREY OLSEN
13 MRS GUIXING JIAN
14 MR CHRISTOPHER STUART KING
15 RIADIS HOLDINGS PTY LTD
16 MR JAMES DOUGLAS KERN
17 RUSSELL INVESTMENTS
18 MR JIMMY YIP
19 ANDAMAX INVESTMENTS PTY LTD
20 MR ALLAN KEITH CLARKE
TOTAL
Fully Paid
Ordinary
Shares
29,544,846
18,301,318
13,467,607
6,820,869
6,155,146
1,264,037
838,584
767,125
450,000
383,334
286,747
270,135
268,688
250,023
245,000
202,602
202,444
189,239
175,000
170,000
80,252,744
Percent held of
Issued Capital
33.67
20.86
15.35
7.77
7.01
1.44
0.96
0.87
0.51
0.44
0.33
0.31
0.31
0.28
0.28
0.23
0.23
0.22
0.20
0.19
91.45
Boart Longyear Annual Report 2020
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BOART LONGYEAR 2019 ANNUAL REPORT
SUPPLEMENTARY INFORMATION
Additional Information as at 18 March 2020
6. 20 Largest holders of quoted equity securities (cont.)
b) Warrants
No. Holder
1
J P MORGAN NOMINEES AUSTRALIA LIMITED
2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3 CITICORP NOMINEES PTY LIMITED
4 SNOWSIDE PTY LTD
5 VFG ASSET MANAGEMENT PTY LTD
6 PACIFIC CUSTODIANS PTY LTD
7 OUTCOME POSITIVE PTY LTD
8 BNP PARIBAS NOMINEES PTY LTD
9 MRS SURANJITA MULVEY
10 MAURICI NOMINEES PTY LTD
11 MR KATSUO RAIMOTO
12 PACIFIC CUSTODIANS PTY LIMITED
13 DR SIL LIN TAN
14 MR BAREND JACOBUS STOLTZ
15 PACIFIC CUSTODIANS PTY LIMITED
16 GAZUMP RESOURCES PTY LTD
17 BUDDY TRADER PTY LTD
18 RIADIS HOLDINGS PTY LTD
19 DR PAUL FRANCIS MORTON
20 BNP PARIBAS NOMS PTY LTD
Quoted
Warrants
225,116
110,026
101,512
87,478
86,341
70,400
40,000
37,028
36,774
36,046
32,035
25,163
22,654
21,039
20,334
19,395
19,167
18,334
17,752
17,000
Percent held of
Quoted Warrants
11.19
5.47
5.04
4.35
4.29
3.50
1.99
1.84
1.83
1.79
1.59
1.25
1.13
1.05
1.01
0.96
0.95
0.91
0.88
0.84
TOTAL
1,043,594
51.86%
7. Holders of 20% or greater of unquoted equity securities:
a) Options
No. Holder
1 MR RICHARD O’BRIEN
TOTAL
b) Warrants
No. Holder
1 WATFORD RE LTD
2 CITICORP NOMINEES PTY LIMITED
TOTAL
Unquoted
Options
45,737
45,737
Unquoted
Warrants
188,750
140,240
328,990
Percent held of
Unquoted
Options
50.73%
50.73%
Percent held of
Unquoted
Warrants
44.12
32.78
76.90
Boart Longyear Annual Report 2020
131
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BOART LONGYEAR 2019 ANNUAL REPORT
103
BOART LONGYEAR 2019 ANNUAL REPORT 104
BOART LONGYEAR 2019 ANNUAL REPORT Listing
Boart Longyear Limited is listed on the
Australian Securities Exchange under the
symbol ‘BLY’
Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney, New South Wales 2000
Tel: +61 1800 781 633
Website
www.boartlongyear.com
CORPORATE INFORMATION
Headquarters
Global Headquarters
2455 South 3600 West
West Valley City, UT 84119
United States of America
Tel: +1 801 972 6430
Fax: +1 801 977 3374
Registered Office
26 Butler Boulevard
Burbridge Business Park
Adelaide Airport, SA 5950
Tel: +61 8 8375 8375
Fax: +61 8 8375 8497
Auditors
Deloitte Touche Tohmatsu
Company Secretaries
Robert Closner
Phil Mackey
Shareholder Enquiries
Boart Longyear Investor Relations
2455 South 3600 West
West Valley City, UT 84119
United States of America
Australia: +61 8 8375 8300
Others: +1 801 952 8343
Email: ir@boartlongyear.com