Boart Longyear — FY2013 Earnings Presentation
43 slides from Boart Longyear's earnings presentation, Feb 24, 2014
Slide 1: 2013 Full-Year Results
2013 Full-Year Results February 2014
Slide 2: Important Notice and Disclaimer
Important Notice and Disclaimer • This presentation has been prepared by Boart Longyear Limited, ABN 49 123 052 728 (Boart Longyear or the Company). It contains general information about the Company’s activities as at the date of the presentation. It is information given in summary form and does not
Slide 3: Safety & Environment
Safety & Environment Our goal is adding value with zero harm – leading our industry by returning our employees home safely each day and performing our work with minimal impact to our neighbors or the environment. • Safety Performance Tragic loss of Andy Buttram: one of our own. Involved in a motor v
Slide 4: FY 2013 – Consolidated Results Summary
FY 2013 – Consolidated Results Summary (US $M) Revenue 2,012 Sector-wide contraction in mining spend which began in the back half of 2012 persisted through 2013 1,223 Stable demand for underground applications and products FY 2012 FY 2013 Drill rig utilisation2 down ~20 percentage points on a
Slide 5: 2013 was a year of decline and contraction across the industry
2013 was a year of decline and contraction across the industry… Mining Performance Key Commodity Trends SNL MEG* Gold ($/oz.) - Pipeline Activity Index- 1,750 2012 Avg 1,500 2013 Avg 1,250 1,000 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Copper ($/lb.) 4.00 3.75 2012 Avg 3.50 2013 Avg 3.25 3.00 Jan-1
Slide 6: …which tempered demand for our services and products…
…which tempered demand for our services and products… Drilling Services’ Historical Operating Rig Percentage1 70% In late 2013, operating rig utilisation 60% fell below the low point experienced in April 2009 50% A surplus of global rig capacity is 40% 2009 Low % Operating Rigs leading to a very
Slide 7: …and in response to the prevailing market conditions, Boart Longyear took action
… and in response to the prevailing market conditions, Boart Longyear took action Key Events & Themes Occurring in 2013 Barcelona Mining Conference Miners focused on cost reductions 110% & reduced capex Mining & Energy Project 200,000 Cancelation Gold Selloff Announcement that $147B of 100% Largest
Slide 8: …and reduced its overall cost structure
…and reduced its overall cost structure (US $M) Total expenditure reduction of $890 million 13 To be realised Realised in 2013 $(460) in 2014 $188 $2,081 $160 $(232) $(55) $(60) $1,274 $(30) $(28) $(25) $1,191 Realised over $800m of expenditure reductions in FY2013 FY 2012 Variable Cost Capex Dec 20
Slide 9: Key Performance Indicators
Key Performance Indicators 2013 Q1 Q2 Q3 Q4 Avg. Rig Count ~1,150 ~1,140 ~1,040 ~1,030 Avg. Operating Rig Utilisation ~40% ~45% ~40% ~30% (new) 1 Avg. Operating + Assigned ~60% ~50% ~45% ~40% Rig Utilisation Avg. Product Backlog ~$40M ~$30M ~$20M ~$20M Headcount ~8,300 ~7,300 ~6,020 ~5,700 Net Debt
Slide 10: Financial Overview
Financial Overview
Slide 11: FY 2013 Consolidated Overview
FY 2013 Consolidated Overview (US $M) Statutory Adjusted1 2012 2013 % Change 2012 2013 % Change Revenue 2,012 1,223 -39% Revenue 2,012 1,223 -39% Gross Margin 512 202 -61% Gross Margin 512 202 -61% Gross Margin as a % of Revenue 25% 17% Gross Margin as a % of Revenue 25% 17% EBIT / Op Profit (loss)
Slide 12: FY 2013 Half over Half Overview
FY 2013 Half over Half Overview (US $M) Statutory Adjusted1 % Change % Change 1H13 2H13 2013 Half over Half 1H13 2H13 2013 Half over Half Revenue 719 504 1,223 -30% Revenue 719 504 1,223 -30% Gross Margin 134 68 202 -49% Gross Margin 134 68 202 -49% Gross Margin as a % of Revenue 19% 13% 17% Gross M
Slide 13: Reconciliation: Statutory to Adjusted EBITDA
Reconciliation: Statutory to Adjusted EBITDA (US $M) EBITDA1 $107 $38 ($17) $45 $102 $110 $166 $(337) Dec 2013 Goodwill Equipment Inventory Severance Intangibles/Other Pension Dec 2013 Statutory EBITDA Impairment Impairment Impairment Impairments Gain Adjusted EBITDA Other considerations not include
Slide 14: FY 2013: Debt Bridge
FY 2013: Debt Bridge (US $M) Operations Working Capital Other $39 $94 $139 $42 $5 $602 $65 $585 $(131) $(102) $(48) $(74) $(46) 3 1 4 2 Gross Debt Adjusted Cash Depreciation & Taxes & Cash Taxes AR AP Inventory Capex Dividends Other Change Gross Debt Dec 20121 NPAT 2 Restructuring Amortization Inter
Slide 15: Debt maturity profile significantly extended through issuance of Secured Notes
Debt maturity profile significantly extended through issuance of Secured Notes Pre-September 2013 Refinancing Post-September 2013 Refinancing Debt Maturity (US$ million) Debt Maturity (US$ million) Revolver Facility1 $350 Existing New Senior Existing Senior Notes Secured Notes Senior Notes $300 $300
Slide 16: Debt Covenant Compliance for FY 2013
Debt Covenant Compliance for FY 2013 Debt Compliance (as of 31 Dec 2013) 4.0x 3.8x 35.0x 200 (Under Bank Facility) 31.2x AR + Inventory + Cash / Proforma Minimum Liquidity EBITDA/Interest3 30.0x Total Outstanding EBITDA/Interest $154M 3.0x 25.0x 150 2.5x 20.0x 2.0x 15.0x 100 1.55x 1.0x 10.0x 5.0x 50
Slide 17: Recent Amendment to the $140 million Revolving Credit Facility
Recent Amendment to the $140 million Revolving Credit Facility2 Modified covenant structure to provide financial flexibility 1 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Min Asset Coverage Eliminated Min Liquidity $30M Suspended $30M Min Interest Coverage 1.55X Suspended 1
Slide 18: Canadian Tax Dispute
Canadian Tax Dispute 2005 to 2006 Audit 2007 to 2009 Audit 100 Withdrawn by the CRA 90 Original In Dispute with the CRA 80 CRA Proposed 70 $ in CAD Millions Assessed CRA 60 Liability: Assessed 50 C$88 Amount Liability: 40 Withdrawn by C$75 CRA: C$79 Estimated Security 30 20 Required by CRA: 10 Final
Slide 19: Business Overview
Northern Canada Business Overview
Slide 20: Diversified End Market Exposure
Diversified End Market Exposure FY 2013 Total BLY Revenue – Products & Services FY 2013 Total BLY Revenue by Region – Products & Services Underground Drilling Coring, 15% Drilling 6% Equipment, Equipment, 6% Global LAM, 13% Underground Rotary/RC, Coring, 15% 21% Drilling USA, 22% Rotary/RC, Services
Slide 21: FY 2013 Operations: Drilling Services
FY 2013 Operations Drilling Services % Change Half over % Change Water Services Gaining Traction Drilling Services 2012 1H13 2H13 2013 Half YOY (US$M) Revenue 1,516 538 379 917 -30% -39% COGS 1,187 453 330 783 -27% -34% SG&A 137 50 35 85 -32% -38% EBITDA1 290 84 58 142 -31% -51% EBITDA as a % of Rev
Slide 22: FY 2013 Operations: Products
FY 2013 Operations Products % Change Half over % Change Examples of Products that Launched in 2013 Products 2012 1H13 2H13 2013 Half YOY (US$M) Revenue 495 181 125 306 -31% -38% COGS 312 131 106 237 -19% -24% SG&A 91 36 29 65 -19% -28% EBITDA1 107 22 (6) 16 NMF -85% EBITDA as a % of Revenue 22% 12%
Slide 23: Driving Cost and Efficiencies
Driving Cost and Efficiencies Synergies: Products & Drilling Services Aftermarket & Maintenance Synergies • Expanded aftermarket footprint using existing Drilling Services facilities • Resulted in key wins in Indonesia, West Africa and Western Canada • Improved resource utilisation – manpower, facil
Slide 24: Company Outlook
LM 90 Underground Rig Company Outlook
Slide 25: Current Commodity Landscape
Current Commodity Landscape Key Commodity Themes Gold: ~39% of DS Revenue • Broker consensus suggest that a significant price recovery in ($/oz.) 1,300 commodities may not occur in the near-future 1,250 1,200 • Miners continue to focus on free cash flow by reducing overall 1,150 2014 Consensus: spen
Slide 26: 2014 Business Outlook
2014 Business Outlook Forecasting & Guidance: The volatility and cyclicality of the industry make forecasting very challenging The Company will not provide Revenue and EBITDA guidance The Company will provide quarterly metrics & KPI’s Current Industry Conditions: Mineral exploration and mini
Slide 27: The low-end of analysts' consensus appears to be lagging current market conditions
The low-end of analysts’ consensus1 appears to be lagging current market conditions (US $M) 2014 Forecast Considerations FY 2013 Revenue Profile 1,223 Impact in 2014 relative to 2H13: 719 504 279 225 1H13 2H13 FY 2013 Q313 Q413 Pricing pressure & carry over impact from 2013 FY 2013 Statutory EBITD
Slide 28: Review of Strategic Options
Review of Strategic Options Engaged Goldman Sachs to assess a comprehensive spectrum of strategic options Objectives of the Strategic Option Review: Evaluate the feasibility and timing of all potential options available to the company Maximise value for all Boart Longyear stakeholders Preserve
Slide 29: Boart Longyear's 2014 Business Objectives
Boart Longyear’s 2014 Business Objectives Safety First Empower Focus on Increase Customers People Margin De-Lever Balance Sheet Reduce Generate Cost Cash Improve Create Liquidity Efficiencies FY 2013 Earnings Presentation 29
Slide 30: Questions?
QUESTIONS? FY 2013 Earnings Presentation 30
Slide 31: Appendix
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Slide 32: FY 2013 Consolidated Overview
FY 2013 Consolidated Overview (US $M) Revenue Bridge $2,012 $(98) $(659) $(32) $1,223 FY 2012 Price Volume/Mix FX FY 2013 Adjusted1 EBITDA Bridge $322 $(98) $(182) $100 $(3) $107 $(32) FY 2012 Price Volume/Mix Material/Labor SG&A/Other FX FY 2013 Inflation 1 See Footnote 1 in the Appendix FY 2013 Ea
Slide 33: FY 2013 Performance Bridges - Products
FY 2013 Performance Bridges - Products (US $M) Products Revenue Bridge • Revenue down 38%; minimal price impact $495 $(11) $(169) • $23M of non-cash obsolescence reserves $(10) $306 impacting margins - $10M in 1H; $13M in 2H • $15M of negative manufacturing variances impacting margins due to idling
Slide 34: FY 2013 Performance Bridges - Drilling Services
FY 2013 Performance Bridges - Drilling Services (US $M) Drilling Services Revenue Bridge • Revenue down 39%; driven by lower utilisation $1,516 $(60) $(517) $(22) $917 • Margins negatively impacted by • Timing of reducing variable costs • One time severance costs • Price FY 2012 Price Volume/Mix FX
Slide 35: Reconciliation: Statutory to Adjusted
Reconciliation: Statutory to Adjusted (US $M) Statutory Adjusted Statutory Adjusted $ in Millions 2012 Adjustments 2012 1 2013 Adjustments 2013 1 Revenue 2,012 - 2,012 1,223 - 1,223 EBIT 127 68 195 (468) 444 (24) EBITDA 254 68 322 (337) 444 107 NPAT 68 48 116 (620) 526 (94) 1 See Footnote 1 in the A
Slide 36: Inventory
Inventory (US $M) Inventory Balance $534 $(102) Peaked at ~$570M in October 2012 $(102) Continued focus on supply chain efficiencies $(31) $299 to further decrease total company inventory Non-cash obsolescence expense of $23M expected to be largely non-recurring in 2014 and relates to our “slo
Slide 37: End Market Exposure
End Market Exposure Year over year comparison BLY Revenue - Products & Services Drilling Services Revenue by Stage % of Revenue FY 2013 FY 2012 % of Revenue FY 2013 FY 2012 Production Drilling 5% 3% Greenfield 13% 28% Surface Coring 30% 39% Development (Near Mine/Brownfield) 56% 51% Underground Cori
Slide 38: Income Statement
Income Statement Year ended Year ended 2013 2012 US$'000 US$'000 Revenue 1,222,853 2,011,507 Cost of goods sold (1,020,718) (1,499,060) Gross margin 202,135 512,447 Other income 18,151 3,097 General and administrative expenses (157,728) (236,168) Sales and marketing expenses (44,405) (61,490) Restru
Slide 39: Balance Sheet
Balance Sheet 31 December 31 December 2013 2012 US$'000 US$'000 Current assets Cash and cash equivalents 59,053 89,628 Trade and other receivables 196,912 260,502 Inventories 298,947 533,690 Current tax receivable 18,253 39,331 Prepaid expenses and other assets 25,054 42,021 598,219 965,172 Assets c
Slide 40: Cash Flow Statement (1 of 2)
Cash Flow Statement (1 of 2) Year ended Year ended 2013 2012 US$'000 US$'000 Cash flows from operating activities (Loss) Profit for the year (619,943) 68,164 Adjustments provided by operating activities: Income tax expense recognised in profit 114,040 31,762 Finance costs recognised in profit 40,914
Slide 41: Cash Flow Statement (2 of 2)
Cash Flow Statement (2 of 2) Year ended Year ended 2013 2012 US$'000 US$'000 Cash flows from investing activities Purchase of property, plant and equipment (35,528) (247,653) Proceeds from sale of property, plant and equipment 14,522 3,266 Intangible costs paid (5,956) (35,141) Proceeds on disposal
Slide 42: Restructuring & Impairment Detail
Restructuring & Impairment Detail For the year ended 31 December 2013 2013 2012 2012 US$ Millions US$ Millions US$ Millions US$ Millions US$ Millions EBITDA (1)(3) (337.1) 254.3 NPAT(2)(3) (619.9) 68.2 Goodwill impairments 166.3 166.3 6.8 6.8 Property, plant and equipment impairments 109.9 109.9 6.0
Slide 43: Footnote Disclosures
Footnote Disclosures • Footnote 1: Adjusted EBITDA, Adjusted EBIT, and Adjusted NPAT are non-IFRS measures and are used internally by management to assess the performance of the business and, for 2013, have been derived from the Company’s financial statements by adding back US$444 million pre-tax (U