Mr. Ravi Saligram reports
RITCHIE BROS. REPORTS SECOND QUARTER 2015 RESULTS
Ritchie Bros. Auctioneers Inc. has released its results for the three months ended June 30, 2015.
During the quarter, the company generated $155.5-million of revenue, a 10-per-cent increase compared with revenue of $141.8-million in the second quarter last year, and net earnings (1) of $46.4-million, an increase of 20 per cent compared with net earnings of $38.6-million in the second quarter last year. Diluted earnings per share (1) (EPS) were 43 cents, a 21-per-cent increase compared with 36 cents in the same quarter last year. During the first half of 2015, for the six months ended June 30, 2015, the company generated $271.1-million in revenue, a 13-per-cent increase compared with $240.4-million during the first six months of 2014. Net earnings were $70.0-million during the first half of 2015, a 32-per-cent increase compared with $52.9-million in the first half of 2014. Diluted EPS for the first half of 2015 was 65 cents, a 33-per-cent increase compared with the same period last year (all figures are presented in U.S. dollars).
"The momentum we built during the first quarter continued into the second, with 10-per-cent revenue growth and 21-per-cent growth in diluted earnings per share compared with the second quarter last year. We also nearly doubled operating free cash flow compared with the same period a year ago," said Ravi Saligram, chief executive officer. "Our focus on enhancing the performance of our underwritten business is clearly delivering results and was demonstrated by the strong revenue rates we achieved at many of the auctions we held during the second quarter. Every business unit contributed positively to our results, including EquipmentOne and Ritchie Bros. Financial Services. In particular, our U.S. and Latin America business achieved a new second-quarter revenue record. It's an early indication that our teams are embracing the new strategy and are laser focused on execution. The strength of our performance has given us the confidence to provide our shareholders with a 14-per-cent increase in our quarterly cash dividend, which raises our dividend to 16 cents per share."
INCOME STATEMENT SCORECARD
(in millions of U.S. dollars, except EPS)
Three months ended June 30, Six months ended June 30,
2015 2014 2015 2014
GAP (1) $1,262.2 $1,229.2 $2,217.7 $2,084.6
Revenues $ 155.5 $ 141.8 $ 271.1 $ 240.4
Revenue rate (2) 12.32% 11.54% 12.22% 11.53%
Operating income (3) $ 62.4 $ 51.7 $ 92.1 $ 69.4
Operating income margin (3) 40.2% 36.5% 34.0% 28.9%
Diluted EPS (4) $ 0.43 $ 0.36 $ 0.65 $ 0.49
(1) Gross auction proceeds (GAP) is a non-generally accepted accounting principles
measure that represents the total proceeds from all items sold at the company's
auctions and the gross transaction value (GTV) sold through the company's on-line
marketplaces. GTV is a non-GAAP measure that represents total proceeds from all
items sold at the company's on-line marketplaces and is a component of the company's
GAP results. In addition to the total value of the items sold in on-line marketplace
transactions, GTV includes a buyers' premium component applicable only to the
company's on-line marketplace transactions. The company believes that the most
directly comparable measure to GAP and GTV is revenues as presented in its unaudited
condensed consolidated interim financial statements. GAP and GTV are not measures
of the company's financial performance, liquidity or revenue, and are not presented
in its consolidated income statements. The company believes that comparing GAP and
GTV for different financial periods provides useful information about the growth or
decline of the company's net earnings for the relevant financial period.
(2) Revenue rate is a non-GAAP measure that is reconciled to the company's unaudited
condensed consolidated interim financial statements by dividing revenues by GAP, and
is discussed further under non-GAAP measures. The company believes that comparing
revenue rate for different financial periods provides useful information about the
growth or decline of the company's net earnings for the relevant financial period.
(3) Operating income and operating income margin are non-GAAP measures. The company
believes that comparing operating income for different financial periods provides
useful information about the growth or decline of net earnings for the relevant
financial period, and eliminates the financial impact of items the company does not
consider to be part of normal operating results. The company believes that comparing
operating income margin for different financial periods is the best indicator of how
efficiently the company translates revenue into pretax profit. The company calculates
operating income as earnings from operations excluding the pretax effects of
significant non-recurring items such as severance, management reorganization and
certain other items, which the company refers to as adjusting items. The company
calculates operating income margin as operating income divided by revenues.
(4) Figures presented include only the results attributable to the company's 51-per-cent
interest in Ritchie Bros. Financial Services to conform with the presentation adopted
in the company's audited annual consolidated financial statements.
Income statement scorecard analysis for the three months ended June 30, 2015
Gross auction proceeds were $1.3-billion for the second quarter of 2015, a quarterly record and a 3-per-cent increase compared with the second quarter of 2014. EquipmentOne, the company's on-line equipment marketplace, contributed $31.7-million of gross transaction value (GTV) to GAP in the second quarter of 2015 compared with $29.6-million in the second quarter of 2014. GAP for the second quarter of 2015 would have been $98.7-million higher, or an additional 7.8 per cent increase, if foreign exchange rates had remained consistent with those in the same period last year. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the euro relative to the U.S. dollar.
Revenue grew 10 per cent during the second quarter of 2015 to $155.5-million, compared with $141.8-million in the second quarter of 2014, as a result of the record GAP and higher revenue rate achieved in the second quarter this year. Revenue would have been $12.7-million higher, or an additional 8.2 per cent increase, if foreign exchange rates had remained consistent with those in the same period last year.
The revenue rate was 12.32 per cent in the second quarter of 2015, compared with 11.54 per cent in the second quarter of 2014. The increase in the revenue rate is primarily due to the performance of the company's underwritten business, which comprises guarantee and inventory contracts, consistent with the company's strategic focus on this business. As a per cent of total GAP, the volume of underwritten business decreased slightly to 29 per cent during the second quarter of 2015 compared with 32 per cent for the same period in 2014.
Operating income grew 21 per cent during the second quarter of 2015 to $62.4-million, compared with $51.7-million in the second quarter of 2014. This increase is due to revenue growth significantly outpacing the growth of selling, general and administrative (SG&A) expenses. Operating income would have been $4.9-million higher, or an additional 7.9 per cent increase, if foreign exchange rates had remained consistent with those in the same period last year.
Operating income margin was 40.2 per cent for the second quarter of 2015, 370 basis points higher than 36.5 per cent for the same period last year, primarily due to revenues increasing at a rate higher than SG&A expenses.
Diluted EPS for the second quarter of 2015 was 43 cents per diluted share, a 21-per-cent increase compared with the second quarter of 2014. The increase was driven by GAP, revenue and revenue-rate growth during the quarter, compared with the same period last year, offset slightly by an increase in SG&A expenses and a higher tax rate during the second quarter of 2015 compared with the same period in 2014.
Income statement scorecard analysis for the six months ended June 30, 2015
GAP was $2.2-billion for the first half of 2015, a half-year record and a 6-per-cent increase compared with the first half of 2014. EquipmentOne, the company's on-line equipment marketplace, contributed $53.5-million of GTV to GAP in the first half of 2015 compared with $48.0-million in the first half of 2014. GAP for the first half of 2015 would have been $151.6-million higher, or an additional 6.8 per cent increase, if foreign exchange rates had remained consistent with those in the same period last year. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the euro relative to the U.S. dollar.
Revenue grew 13 per cent during the first half of 2015 to $271.1-million, compared with $240.4-million in the first half of 2014, as a result of the record GAP and higher revenue rate achieved in the first half this year. Revenue would have been $19.5-million higher, or an additional 7.2 per cent increase, if foreign exchange rates had remained consistent with those in the same period last year.
The revenue rate was 12.22 per cent in the first half of 2015, compared with 11.53 per cent in the first half of 2014. The increase in the revenue rate is primarily due to the performance of the company's underwritten business, which comprises guarantee and inventory contracts, consistent with the company's strategic focus on this business. The volume of underwritten business increased slightly to 30 per cent during the first half of 2015 compared with 29 per cent for the same period in 2014.
Operating income grew 33 per cent during the first half of 2015 to $92.1-million, compared with $69.4-million in the first half of 2014. This increase is due to revenue growth significantly outpacing the growth of SG&A expenses. Operating income would have been $5.6-million higher, or an additional 6.0 per cent increase, if foreign exchange rates had remained consistent with those in the same period last year.
Operating income margin was 34.0 per cent for the first half of 2015, 509 basis points higher than 28.9 per cent for the same period last year, primarily due to revenues increasing at a rate higher than SG&A expenses.
Diluted EPS for the first half of 2015 was 65 cents per diluted share, a 33-per-cent increase compared with the first half of 2014. The increase was driven by GAP, revenue and revenue-rate growth during the first half of 2015, compared with the same period last year, and other income items, offset slightly by an increase in SG&A expenses and a higher tax rate during the first half of 2015 compared with the same period in 2014.
Balance sheet scorecard analysis
As at and for the 12 months ended June 30, 2015
Operating free cash flow increased 91 per cent to $220.3-million during the 12 months ended June 30, 2015, compared with $115.3-million during the 12 months ended June 30, 2014. This increase is the result of more cash generated by operating activities and less capital spending during the 12 months ended June 30, 2015, compared with the same period ended in 2014.
Working capital intensity was minus 23.9 per cent for the 12 months ended June 30, 2015, an improvement of 806 basis points from minus 15.9 per cent for the 12 months ended June 30, 2014. This improvement in working capital intensity is the result of increased revenues and decreased quick operating working capital during the 12 months ended June 30, 2015, compared with the same period ended in 2014. The decrease in quick operating working capital is primarily the result of decreases in inventory, advances against auction contracts, and trade and other receivable balances. Working capital intensity will fluctuate most significantly as a result of the timing and size of auctions just prior to each period-end. The fact that the company's working capital intensity is negative highlights the minimal amount of working capital required to run the business.
Capex intensity was 3.2 per cent for the 12 months ended June 30, 2015, a decrease of 369 basis points from 6.9 per cent for the 12 months ended June 30, 2014. This 53-per-cent decrease is due primarily to a decrease in net capital spending of $16.5-million as a result of disciplined capital spending and strategic investments, and the timing of these expenditures. Additionally, revenue increased $34.4-million, or 7 per cent, during the 12 months ended June 30, 2015, compared with the same period ended in 2014.
Return on net assets (RONA) for the 12 months ended June 30, 2015, was 24.9 per cent, an increase of 738 basis points compared with 17.5 per cent for the 12 months ended June 30, 2014. This increase was the result of an increase in net operating profit after tax combined with a decrease in adjusted net assets. The decrease in adjusted net assets was driven by an increase in cash and cash equivalents, and current liabilities, as well as foreign exchange effects on non-U.S.-dollar-denominated assets. The increase in current liabilities is primarily due to the reclassification from non-current to current borrowings of a $60-million term loan in the second quarter of 2015. Management intends to refinance this borrowing when it falls due in May, 2016.
The reclassification of this borrowing had a positive effect on Rona. Excluding the effects of the reclassification, RONA for the 12 months ended June 30, 2015, would have been 22.5 per cent, an increase of 495 basis points compared with RONA for the same period ended June 30, 2014.
Debt/adjusted EBITDA decreased to 0.6 times for the 12 months ended June 30, 2015, compared with 0.9 times for the 12 months ended June 30, 2014. The company achieved a 12-per-cent increase in adjusted EBITDA with a lower level of borrowings as at June 30, 2015, compared with June 30, 2014.
Dividend information
Quarterly dividend
The company declares a 14-per-cent increase to its quarterly dividend, raising the quarterly cash dividend to 16 cents per common share payable on Sept. 25, 2015, to shareholders of record on Sept. 4, 2015.
Operational highlights
On-line statistics
During the second quarter of 2015, the company attracted record second-quarter on-line bidder registrations, and sold approximately $583.7-million of equipment, trucks and other assets to on-line auction bidders and EquipmentOne customers. This represents a 12-per-cent increase over the second quarter of 2014 and a second-quarter on-line sales record.
Auction activity
During the second quarter of 2015, Ritchie Bros. conducted 68 unreserved industrial auctions in 15 countries throughout North America, Central America, Europe, the Middle East, Australia, New Zealand and Asia. Highlights during the quarter include:
- At the June 24 to June 25, 2015, Houston, Tex., auction, the company sold over $45-million (U.S.) of assets.
- At the June 11 to June 12, 2015, Denver, Colo., auction, Ritchie Bros. sold over $40-million (U.S>) of assets -- the largest auction ever held by Ritchie Bros. at the Denver auction site.
- At the June 9 to June 11, 2015, Edmonton, Alta., auction, Ritchie Bros. sold over $96-million of assets.
- At the May 6 to May 7, 2015, Fort Worth, Tex., auction, the company sold over $50-million (U.S.) of assets.
- At the April 28 to May 1, 2015, Edmonton, Alta., auction, the company sold a record $215-million of assets -- making it the largest Canadian auction in Ritchie Bros. history.
- On April 23, 2015, Ritchie Bros. held its first auction in New Zealand, which was held on the site of the consignor.
- At the April 15 to April 16, 2015, Houston, Tex., auction, the company sold $57-million (U.S.) of assets.
There were no adjusting items in the first half of 2015 or the first half of 2014.
There are currently 75 unreserved auctions on the 2015 Ritchie Bros. auction calendar on the company's website, including auctions in North America, Europe, the Middle East, Australia and Asia.
EquipmentOne activity
During the second quarter of 2015, EquipmentOne sold more than $31.7-million of equipment and other assets on behalf of customers. Highlights during the quarter include:
- Website traffic for the EquipmentOne website increased 19 per cent in Q2 2015 compared with Q2 2014, based on average monthly users.
- In May, 2015, 25 trucks were sold on EquipmentOne on behalf of Swift Transportation. The trucks were listed and sold in a period of 10 days, and were purchased by four buyers.
Corporate developments
Management updates
On July 6, 2015, the company was pleased to welcome Sharon Driscoll as chief financial officer. Ms. Driscoll has over 17 years of senior-executive experience at companies such as Rexall Pharmacies Canada (Katz Group Canada), Sears Canada Inc. and Loblaw Companies Ltd. Most recently, Ms. Driscoll was executive vice-president and CFO at Katz Group Canada Ltd., where she was responsible for all financial operations, including capital allocation, financing strategies, treasury operations, regulatory compliance, risk management and financial talent development. On July 6, 2015, Rob McLeod was appointed chief business development officer. In this role, Mr. McLeod oversees all mergers and acquisitions, and corporate development initiatives, as well as strategies to grow Ritchie Bros.' penetration in the transportation and agricultural sectors. Prior to this role, Mr. McLeod was chief financial officer.
On May 20, 2015, the company was pleased to welcome Terry Dolan as president, United States and Latin America. Mr. Dolan has held numerous leadership roles, most recently at Generac, where he was executive vice-president, global commercial and industrial products.
Transition to U.S. GAAP reporting
As a non-U.S. company listed on the New York Stock Exchange, the U.S. Securities and Exchange Commission (SEC) requires Ritchie Bros. to perform a test on the last business day of the second quarter of each fiscal year to determine whether the company continues to meet the definition of a foreign private issuer (FPI). Historically, Ritchie Bros. met the definition of an FPI and, as such, prepared consolidated financial statements in accordance with international financial reporting standards, reported with the SEC on FPI forms, and complied with SEC rules and regulations applicable to FPIs. On June 30, 2015, Ritchie Bros. performed the test and determined that it no longer meets the definition of an FPI. As such, from Jan. 1, 2016, the company will be required to prepare consolidated financial statements in accordance with United States generally accepted accounting principles, report with the SEC on domestic forms, and comply with SEC rules and regulations applicable to domestic issuers. Consequently, Ritchie Bros.' 2015 annual consolidated financial statements will be prepared in accordance with U.S. GAAP. The transition from IFRS to U.S. GAAP will include retrospective application of U.S. GAAP to all reporting periods.
Q2 2015 earnings conference call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended June 30, 2015, at 8 a.m. PT/11 a.m. ET/4 p.m. GMT on Aug. 7, 2015. A replay will be available shortly after the call.
Conference call and webcast details are available on-line.
Non-GAAP measures
The company makes reference to various non-GAAP performance measures throughout this news release. These measures do not have a standardized meaning and are therefore unlikely to be comparable with similar measures presented by other companies. In particular, the company's definitions of GAP and GTV may differ from those used by other participants in its industry. GAP and GTV are important measures the company uses in comparing and assessing its operating performance. The company believes that revenues and certain other line items are best understood by considering their relationship to GAP and GTV. Revenues consist primarily of commission income earned by Ritchie Bros. in the course of conducting its auctions and on-line marketplace transactions, including commissions earned on consigned equipment, and net profits on the sale of equipment purchased by the company and sold in the same manner as consigned equipment. Revenue also includes fee income earned from equipment buyers at the company's auctions, equipment buyers and sellers on EquipmentOne, and valued-added services, including financing fees earned by Ritchie Bros. Financial Services.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS
(expressed in thousands of U.S. dollars, except share and per-share amounts)
Three months ended June 30,
2015 2014
Gross auction proceeds $ 1,262,168 $ 1,229,204
Revenues $ 155,477 $ 141,835
Direct expenses 17,027 17,616
138,450 124,219
Selling, general and administrative expenses
SG&A expenses excluding depreciation and amortization 65,176 61,513
Depreciation and amortization 10,825 10,979
76,001 72,492
Earnings from operations $ 62,449 $ 51,727
Other income (expense)
Foreign exchange loss (438) (212)
Gain on disposition of property, plant and equipment 298 258
Other 1,091 688
951 734
Finance income (costs)
Finance income 680 617
Finance costs (1,314) (1,345)
(634) (728)
Earnings before income taxes $ 62,766 $ 51,733
Income taxes 15,556 12,598
Net earnings $ 47,210 $ 39,135
Net earnings attributable to
Equityholders of the parent 46,447 38,607
Non-controlling interest 763 528
$ 47,210 $ 39,135
Net earnings per share attributable to equityholders of the parent
Basic EPS $ 0.44 $ 0.36
Diluted EPS $ 0.43 $ 0.36
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS
(expressed in thousands of U.S. dollars, except share and per-share amounts)
Six months ended June 30,
2015 2014
Gross auction proceeds $ 2,217,729 $ 2,084,581
Revenues $ 271,095 $ 240,423
Direct expenses 28,636 27,916
242,459 212,507
Selling, general and administrative expenses
SG&A expenses excluding depreciation and amortization 128,932 121,485
Depreciation and amortization 21,441 21,576
150,373 143,061
Earnings from operations $ 92,086 $ 69,446
Other income
Foreign exchange gain 2,769 1,079
Gain on disposition of property, plant and equipment 473 329
Other 2,530 1,495
5,772 2,903
Finance income (costs)
Finance income 1,527 1,125
Finance costs (2,583) (2,764)
(1,056) (1,639)
Earnings before income taxes $ 96,802 $ 70,710
Income taxes 25,671 17,057
Net earnings $ 71,131 $ 53,653
Net earnings attributable to
Equityholders of the parent 70,035 52,864
Non-controlling interest 1,096 789
$ 71,131 $ 53,653
Net earnings per share attributable to equityholders of the parent
Basic EPS $ 0.65 $ 0.49
Diluted EPS $ 0.65 $ 0.49
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.