Ritchie Bros. reports third quarter 2017 results
VANCOUVER, Nov. 9, 2017 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reports results for the three and nine months ended September 30, 2017.
The Company also announced today a new reportable segment and a resulting change to its segmented information. The changes are due to a shift in how the Company manages and evaluates its business operations after its merger with IronPlanet (the "Merger"), which closed on May 31, 2017. The Company now distinguishes between revenues generated from transactional asset disposition services and those from other non-transactional services. The following table illustrates the placement of key channels and services:
Auctions and Marketplaces
segment Other services
------------------------- --------------
Live on site auctions Online listing service
Includes: Ritchie Bros. live
unreserved on site auctions,
Cat(R) Auctions, Kruse Energy,
Xcira Includes: Mascus
------------------------------ ----------------
Online auctions and marketplaces Support businesses
Includes: IronPlanet, Includes: Ritchie Bros. Financial
EquipmentOne, Marketplacee, Services, Asset Appraisal Services,
GovPlanet, TruckPlanet, Ritchie Equipment Refurbishment, Ritchie
Bros. Private Treaty Bros. Logistical Services
-------------------------------- -----------------------------------
Third Quarter 2017 Highlights:
(All figures are presented in U.S. dollars)
During the quarter, the Company generated $141.0 million of revenues, an increase of 9% versus the same quarter last year with $10.3 million of net income attributable to stockholders versus a net loss of $5.1 million in the third quarter of 2016. Diluted EPS attributable to stockholders was $0.09 including $3.6 million of acquisition-related costs and $10.6 million of interest expense compared to diluted loss per share attributable to stockholders of $0.05 in the third quarter of 2016.
-- Consolidated Revenues up 9% to $141.0 million versus third quarter 2016
-- Consolidated Revenue Rate[1] was 13.84%, a 94-basis point increase from
the third quarter of 2016
-- Auctions and Marketplaces segment revenues up 8% with segment Revenue
Rate(1) up 66 basis points ("bps") to 12.78% versus third quarter 2016
-- Revenue from other services of $10.8 million; an increase of 39%
compared to the third quarter of 2016
-- $97.2 million of net cash provided by operating activities through the
first nine months of 2017
-- Declared quarterly dividend of $0.17 per common share
-- Gross Transaction Value ("GTV")(1) of $1,019.3 million, a 2% increase
compared to the third quarter of 2016
"Our third quarter revenues declined on a like-for-like basis versus prior year, which is primarily related to the significant equipment supply shortage especially in the U.S., as dealers and end users continue to experience high equipment utilization rates. We faced a tough comparable quarter due to the massive Columbus auction last year as well as growing pains of sales force integration and execution, as our legacy RB and IP teams learn to sell each others' offerings. On a positive note, the combination of RB and IP continued to deliver sequential revenue rate improvement. We achieved strong double-digit growth in our International business, particularly Europe, and in RBFS, Mascus and ancillary services. We remain optimistic about the long-term value creation prospects of the combination with IronPlanet and are laser-focused on regaining growth momentum" said Ravi Saligram, Chief Executive Officer of Ritchie Bros.
______________________________
1 GTV represents the total proceeds from all items sold at the Company's
auctions and online marketplaces and, effective August 1, 2017, no longer
includes EquipmentOne buyer's premiums. The Company has also retrospectively
restated GTV to exclude GTV from the Company's Asset Appraisal Services,
which are not included in the Company's Auctions and Marketplaces segment.
GTV attributable to Asset Appraisal Services was $8.0 million during the
third quarter of 2017 and $3.1 million during the second quarter of 2017.
GTV is not a measure of financial performance, liquidity, or revenue, and is
not presented in the Company's consolidated financial statements. Auctions
and Marketplaces segment Revenue Rate is calculated as segment revenues
divided by GTV. Consolidated Revenue Rate is calculated as total,
consolidated revenues divided by GTV.
Saligram continued, "our multi-channel live on site and online portfolio and technology platform afford us a unique ability to optimize our use of capital and to scale our business efficiently. As we evolve our integration efforts, we are launching a comprehensive initiative to transform our auction operations to align and enable our multi-channel go-to-market sales approach and achieve structural cost efficiencies. A first step in this process is to optimize our live auction network by rationalizing sites with marginal returns and focusing resources on our high volume sites, while increasing the usage of our weekly featured online auction throughout the year; specifically we plan to cease operations at five live auction sites in North America by year end. Our sales coverage will remain unchanged and our sales teams will continue to serve customers in these regions through both our closest live auction site and our online solutions."
Financial Overview
(Unaudited)
(in U.S. $ millions, except EPS) Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
Better/(Worse) Better/(Worse)
2017 2016 2017 over 2017 2016 2017 over
2016 2016
--- --- ----
Revenues $141.0 $128.9 9% $431.7 $419.6 3%
Selling, general and administrative expenses $85.3 $68.3 (25%) $230.3 $209.4 (10%)
Acquisition-related costs $3.6 $5.4 34% $35.2 $7.2 (388%)
Impairment loss $ - $28.2 100% $8.9 $28.2 68%
Operating income $16.9 $2.3 641% $67.4 $95.1 (29%)
Adjusted operating income (non-GAAP)
measure)(2) $16.9 $30.5 (45%) $91.6 $123.3 (26%)
Operating income margin 12.0% 1.8% 1020 bps 15.6% 22.7% -710 bps
Adjusted operating income margin
(non-GAAP measure)(3) 12.0% 23.7% -1170 bps 21.2% 29.4% -820 bps
Net income (loss) attributable to
stockholders $10.3 $(5.1) 300% $38.3 $64.0 (40%)
Adjusted net income attributable to
stockholders (non-GAAP measure)4 $10.3 $21.3 (52%) $59.4 $90.4 (34%)
Diluted earnings (loss) per share
attributable to stockholders $0.09 $(0.05) 280% $0.35 $0.60 (42%)
Diluted adjusted EPS attributable to
stockholders (non-GAAP measure)5 $0.09 $0.20 (55%) $0.55 $0.84 (35%)
-------------------------------- ----- ----- ---- ----- ----- ----
GTV $1,019.3 $998.9 2% $3,173.1 $3,294.5 (4%)
Auctions and Marketplaces segment:
Revenues 130.2 121.1 8% 400.6 395.2 1%
Revenue Rate 12.78% 12.12% 66 bps 12.62% 12.00% 62 bps
============ ===== ===== ====== ===== ===== ======
Adjusted (non-GAAP) figures for the three and nine months ended September 30, 2017 in the table above include the impact of $3.6 million ($0.03
per diluted share) and $19.9 million ($0.18 per diluted share) of pre-tax acquisition-related costs, respectively. Segmented information, which
includes segment revenues and profits, can be found in the tables on pages 11 through 13 of this News Release.
2 Adjusted operating income is a non-
GAAP measure. The Company uses
income statement and balance sheet
performance scorecards to align the
Company's operations with its
strategic priorities. The Company
concentrates on a limited number of
metrics to ensure focus and to
facilitate quarterly performance
discussions. The income statement
scorecard includes the performance
metric, adjusted operating income.
The Company believes that comparing
adjusted operating income for
different financial periods
provides useful information about
the growth or decline of operating
income for the relevant financial
period. The Company calculates
adjusted operating income by
eliminating from operating income
the pre-tax effects of significant
non-recurring items that the
Company does not consider to be
part of its normal operating
results, such as acquisition-
related costs, management
reorganization costs, severance,
retention, gains/losses on sale of
certain property, plant and
equipment, impairment losses, and
certain other items, which the
Company refers to as 'adjusting
items'. Adjusted operating income
is reconciled to the most directly
comparable GAAP measures in the
Company's consolidated financial
statements under "Non-GAAP
Measures" below.
3 The Company's income statement
scorecard includes the performance
metric, adjusted operating income
margin, which is a non-GAAP
measure. The Company believes that
comparing adjusted operating income
margin for different financial
periods provides useful information
about the growth or decline of its
operating income for the relevant
financial period. The Company
calculates adjusted operating
income margin by dividing adjusted
operating income (non-GAAP
measure) by revenues. Adjusted
operating income margin is
reconciled to the most directly
comparable GAAP measures in the
Company's consolidated financial
statements under "Non-GAAP
Measures" below.
4 Adjusted net income attributable to
stockholders is a non-GAAP
financial measure. The Company
believes that comparing adjusted
net income attributable to
stockholders for different
financial periods provides useful
information about the growth or
decline of the Company's net income
attributable to stockholders for
the relevant financial period, and
eliminates the financial impact of
adjusting items the Company does
not consider to be part of its
normal operating results. Adjusted
net income attributable to
stockholders represents net income
attributable to stockholders
excluding the effects of adjusting
items and is reconciled to the most
directly comparable GAAP measures
in the Company's consolidated
financial statements under "Non-
GAAP Measures" below.
5 Diluted adjusted EPS attributable to
stockholders is a non-GAAP
financial measure. The Company
believes that comparing diluted
adjusted EPS attributable to
stockholders for different
financial periods provides useful
information about the growth or
decline of the Company's diluted
EPS attributable to stockholders
for the relevant financial period,
and eliminates the financial impact
of adjusting items the Company does
not consider to be part of its
normal operating results. Diluted
adjusted EPS attributable to
stockholders is calculated by
dividing adjusted net income
attributable to stockholders (non-
GAAP measure), net of the effect of
dilutive securities, by the
weighted average number of dilutive
shares outstanding. Diluted
adjusted EPS attributable to
stockholders is reconciled to the
most directly comparable GAAP
measures in the Company's
consolidated financial statements
under "Non-GAAP Measures" below.
Results of operations - third quarter and year-to-date update
For the three and nine months ended September 30, 2017
Gross Transaction Value ("GTV") increased $20.5 million, or 2%, compared to the third quarter of 2016. The increase is primarily due to the Merger and the resulting increase in online marketplace GTV, as well as a positive impact of foreign exchange rates over the comparative period. Increases in GTV from the Merger were offset by overall lower equipment supply in the market and higher equipment utilization rates in key industry sectors leading to a decrease in the number of auction lots, as well as some lower sales productivity as the Company completes the integration of its sales teams post-Merger. On a year-to-date basis, GTV decreased $121.4 million, or 4% versus the same period last year.
During the third quarter of 2017, the Company continued to actively pursue the use of underwritten commission contracts from a strategic perspective and when the opportunity arose, only entering into such contracts when the risk/reward profile of the terms were agreeable. The volume of underwritten commission contracts decreased to 18% of GTV in the third quarter of 2017 from 27% in the third quarter of 2016, primarily due to the pressure on used equipment market supply volume. The tight supply of used equipment resulted in less opportunity for the Company to pursue underwritten commission contracts.
Revenues increased $12.2 million, or 9%, compared to the third quarter of 2016. This increase is primarily due to the performance of live onsite auction activities in Europe and Australia, as well as the Merger and increases in revenues from other value-added services, including Ritchie Bros. Financial Services ("RBFS"). Consolidated Revenue Rate increased 94 basis points to 13.84% versus the same period last year due to the Merger and the growth in non-GTV related services. On a year-to-date basis, revenues increased $12.1 million, or 3%, versus the third quarter of 2016 with Consolidated Revenue Rate increasing by 87 basis points to 13.61% versus the same period last year.
Costs of services increased $4.8 million to $19.6 million from $14.8 million in the third quarter of 2016. This increase is primarily due to costs associated with the Company's inspection and appraisal activities, which increased as a result of the Merger, as well as an increase in the number of agricultural auctions over the comparative period. On a year-to-date basis, costs of services increased $4.2 million, or 8% compared to the same period last year.
Selling, general and administrative ("SG&A") expenses increased $17.0 million, or 25%, compared to the third quarter of 2016. This increase is primarily due to the Merger, including increased headcount, travel costs, and search engine fees associated with the online marketplace channel, as well as merit increases and higher bank fees attributable to the new credit facility. On a year-to-date basis, SG&A expenses increased $20.9 million or 10% versus the same period last year.
Acquisition-related costs consist of operating expenses directly incurred as part of a business combination, due diligence, and integration planning - including those related to the IronPlanet Merger - and continuing employment costs that are recognized separately from the Company's business combinations. Third quarter 2017 and 2016 acquisition-related costs were $3.6 million and $5.4 million, respectively, and consisted primarily of costs associated with the Merger. Year-to-date acquisition-related costs were $35.2 million versus $7.2 million during the first nine months of 2016.
Operating income increased $14.6 million, or 641%, to $16.9 million compared to $2.3 million in the third quarter of 2016. This improvement was primarily due to a $28.2 million impairment loss recognized in the third quarter of 2016 together with higher third quarter 2017 revenues, and partially offset by higher third quarter 2017 SG&A expenses, costs of services, and depreciation and amortization ("D&A") expenses. On a year-to-date basis, operating income decreased $27.7 million, or 29%, to $67.4 million compared to the first nine months of 2016.
Net income attributable to stockholders increased $15.4 million, or 300%, compared to the third quarter of 2016. This improvement is primarily due to the increase in operating income and lower income tax expense, partially offset by higher interest expense. The lower income tax expense was primarily due to the lower estimated annual effective tax rate for the full 2017 year, which was caused by a greater proportion of earnings taxed in jurisdictions with lower tax rates, as well as the impact of revised estimates of the tax deductibility of stock option compensation expenses and acquisition-related costs. Also, the comparative period reflected the impact of a non-deductible goodwill impairment loss recorded in the third quarter of 2016. The increases in interest expense were due to the increased indebtedness to fund the Merger. On a year-to-date basis, net income attributable to stockholders decreased $25.7 million, or 40% compared to first nine months of 2016.
Primarily for the same reasons noted above, diluted EPS attributable to stockholders was $0.09 compared to diluted loss per share attributable to stockholders of $0.05 in the third quarter of 2016. On a year-to-date basis, diluted EPS attributable to stockholders decreased 42% to $0.35 from $0.60 in the first nine months of 2016.
Results by segment
Auctions and Marketplaces segment
Gross Transaction Value. GTV increased $20.5 million, or 2%, in the third quarter of 2017 compared to the third quarter of 2016. The increase is primarily due to the Merger and the resulting increase in online marketplace GTV, as well as a positive impact of foreign exchange rates over the comparative period. On a year-to-date basis, GTV decreased $121.4 million, or 4%, compared to the nine months ended September 30, 2016. The decrease in GTV on a year-to-date basis is primarily due to the decrease in GTV generated by the live on site auction channel compared to the first nine months of 2016, partially offset by the Merger and a positive impact of foreign exchange rates over the comparative period. The live on site auction channel GTV decrease is primarily due to a decrease in the number of industrial and agricultural auction lots and changes in the auction calendar in the nine months ended September 30, 2017 compared to the same period in 2016.
Revenue. Segment revenue increased 8% to $130.2 million compared to $121.1 million in the third quarter of 2016 primarily for the same reasons noted above in the consolidated revenue commentary. Segment Revenue Rate improved 66 basis points to 12.78% in the third quarter of 2017, primarily due to the Merger, which resulted in higher buyer transaction and listing fees from the online marketplace channel.
On a year-to-date basis, segment revenue increased 1% to $400.6 million compared to $395.2 million in the nine months ended September 30, 2016. Segment Revenue Rate increased 62 basis points to 12.62% in the first nine months of 2017, primarily due to the Merger and improved performance on underwritten transactions. The impact of the improved Revenue Rate on segment revenues was partially offset by the impact of lower GTV.
SG&A expenses. Segment SG&A expenses increased $16.6 million, or 25%, compared to the third quarter of 2016 primarily for the same reasons noted above in the consolidated SG&A expense commentary. On a year-to-date basis, segment SG&A expenses increased $19.6 million, or 10%, compared to the first nine months of 2016.
Other services
Revenue from other services grew $3.0 million, or 39%, compared to the third quarter of 2016. This increase is primarily due to the Merger, which added $1.4 million of Asset Appraisal Services ("AAS") revenue in the third quarter of 2017, as well as increases in revenue from RBFS and Mascus. On a year-to-date basis, revenue from other services grew $6.8 million, or 28%, compared to the first nine months of 2016. RBFS segment revenues increased $2.6 million and the Merger added $1.9 million of AAS revenue in the first nine months of 2017.
RBFS operating segment. RBFS segment revenues were $3.4 million, a 20% increase compared to the $2.9 million in the third quarter of 2016. Funded volume, which represents the amount of lending brokered by RBFS, increased 15% from $56.3 million in the third quarter of 2016 to $65.0 million. RBFS segment profit increased 9% over the same comparative period to $1.7 million from $1.5 million.
On a year-to-date basis, RBFS segment revenues were $11.5 million, a 29% increase compared to the $8.9 million in the first nine months of 2016. Funded volume increased 13% from $191.6 million in the first nine months of 2016 to $216.2 million. RBFS segment operating profit increased 31% over the same comparative period to $6.4 million from $4.9 million.
Site Closures
The Company announced today a series of actions to streamline its auction site portfolio and intensify efforts to operationalize and enable its growing multi-channel program. The actions include closure of the following five North American auction sites by the end of 2017: Grande Prairie in Canada and Raleigh-Durham, St. Louis, Manchester, and Albuquerque in the United States.
Dividend Information
Quarterly dividend
The Company declares a quarterly cash dividend of $0.17 per common share payable on December 20, 2017 to shareholders of record on November 29, 2017.
Q3 2017 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended September 30, 2017, at 8:00 am Pacific time / 11:00 am Eastern time / 4:00 pm GMT on November 10, 2017. A replay will be available shortly after the call.
Conference call and webcast details are available at the following link:
https://investor.ritchiebros.com
About Ritchie Bros.
Established in 1958, Ritchie Bros. (NYSE and TSX: RBA) is a global asset management and disposition company, offering customers end-to-end solutions for buying and selling used heavy equipment, trucks and other assets. Operating in a multitude of sectors, including construction, transportation, agriculture, energy, oil and gas, mining, and forestry, the Company's selling channels include: Ritchie Bros. Auctioneers, the world's largest industrial auctioneer offering live on site auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing its exclusive IronClad Assurance® equipment condition certification program; EquipmentOne, an online auction marketplace; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The Company also offers sector-specific solutions including GovPlanet, TruckPlanet, and Kruse Energy Auctioneers, plus equipment financing and leasing through Ritchie Bros. Financial Services. For more information about the unprecedented choice provided by Ritchie Bros., visit RitchieBros.com.
Forward-looking Statements
This news release contains forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities legislation (collectively, "forward-looking statements"), including, in particular, statements regarding future financial and operational results, including integration efforts with IronPlanet gaining momentum and accelerating growth, ceasing live on site auction activities at five auction sites in North America, the use or continued development of technology assets, the effects on the Company's performance of changing foreign exchange rates, and payment of dividends. Forward-looking statements are statements that are not historical facts and are generally, although not always, identified by words such as "expect", "plan", "anticipate", "project", "target", "potential", "schedule", "forecast", "budget", "estimate", "intend" or "believe" and similar expressions or their negative connotations, or statements that events or conditions "will", "would", "may", "could", "should" or "might" occur. All such forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking statements necessarily involve assumptions, risks and uncertainties, certain of which are beyond the Company's control, including the numerous factors that influence the supply of and demand for used equipment; economic and other conditions in local, regional and global sectors; the Company's ability to successfully integrate IronPlanet, and to receive the anticipated benefits of the Merger; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, which are available on the SEC, SEDAR, and the Company websites. The foregoing list is not exhaustive of the factors that may affect the Company's forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, and actual results may differ materially from those expressed in, or implied by, these forward-looking statements. Forward-looking statements are made as of the date of this news release and the Company does not undertake any obligation to update the information contained herein unless required by applicable securities legislation. For the reasons set forth above, you should not place undue reliance on forward-looking statements.
GTV and Selected Condensed Consolidated Financial Information
GTV and condensed consolidated income statements - third quarter
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)
Three months ended September 30, 2017 2016
-------------------------------- ---- ----
GTV $1,019,322 $998,859
--- ---------- --------
Revenues $141,047 $128,876
Costs of services, excluding depreciation and amortization 19,583 14,750
---------------------------------------------------------- ------ ------
121,464 114,126
Selling, general and administrative expenses 85,335 68,293
Acquisition-related costs 3,587 5,398
Depreciation and amortization expenses 14,837 10,196
Gain on disposition of property, plant and equipment (42) (570)
Impairment loss - 28,243
Foreign exchange loss 816 281
--------------------- --- ---
Operating income $16,931 $2,285
---------------- ------- ------
Other income (expense):
Interest income 517 369
interest expense (10,558) (934)
Equity income (loss) (109) 213
Other, net 184 247
---------- --- ---
(9,966) (105)
------ ----
Income before income taxes $6,965 $2,180
Income tax expense (3,358) 7,180
------------------ ------ -----
Net income (loss) $10,323 $(5,000)
================ ======= =======
Net income (loss) attributable to:
Stockholders 10,261 (5,137)
Non-controlling interests 62 137
------------------------- --- ---
$10,323 $(5,000)
------- -------
Earnings (loss) per share attributable
to stockholders:
Basic $0.10 $(0.05)
Diluted $0.09 $(0.05)
------- ----- ------
Weighted average number of share outstanding:
Basic 107,120,618 106,622,376
Diluted 108,178,303 107,525,051
======= =========== ===========
GTV and condensed consolidated income statements - year-to-date
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)
Nine months ended September 30, 2017 2016
------------------------------- ---- ----
GTV $3,173,050 $3,294,463
--- ---------- ----------
Revenues $431,732 $419,626
Costs of services, excluding depreciation
and amortization 53,987 49,821
----------------------------------------- ------ ------
377,745 369,805
Selling, general and administrative
expenses 230,287 209,395
Acquisition-related costs 35,162 7,198
Depreciation and amortization expenses 37,047 30,560
Gain on disposition of property, plant
and equipment (1,071) (1,017)
Impairment loss 8,911 28,243
Foreign exchange loss (gain) (7) 332
--------------------------- --- ---
Operating income $67,416 $95,094
---------------- ------- -------
Other income (expense):
Interest income 2,459 1,354
interest expense (27,311) (3,357)
Equity income (loss) (158) 1,209
Other, net 4,045 1,214
---------- ----- -----
(20,965) 420
------- ---
Income before income taxes $46,451 $95,514
Income tax expense 7,982 29,929
------------------ ----- ------
Net income $38,469 $65,585
========== ======= =======
Net income attributable to:
Stockholders 38,273 63,979
Non-controlling interests 196 1,606
------------------------- --- -----
$38,469 $65,585
------- -------
EPS attributable to stockholders:
Basic $0.36 $0.60
Diluted $0.35 $0.60
------- ----- -----
Weighted average number of share
outstanding:
Basic 106,993,358 106,595,088
Diluted 108,069,624 107,221,390
======= =========== ===========
Condensed consolidated balance sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)
September 30, December 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $224,474 $207,867
Restricted cash 89,846 50,222
Trade and other receivables 212,330 52,979
Inventory 46,333 28,491
Advances against auction contracts 9,983 5,621
Prepaid expenses and deposits 16,422 19,005
Assets held for sale 654 632
Income taxes receivable 21,413 13,181
----------------------- ------ ------
621,455 377,998
Property, plant and equipment 530,495 515,030
Equity-accounted investments 7,287 7,326
Restricted cash - 500,000
Deferred debt issue costs 4,054 6,182
Other non-current assets 7,198 4,027
Intangible assets 261,122 72,304
Goodwill 669,646 97,537
Deferred tax assets 28,607 19,129
------------------- ------ ------
$2,129,864 $1,599,533
========== ==========
Liabilities and Equity
Current liabilities:
Auction proceeds payable $360,517 $98,873
Trade and other payables 132,045 124,694
Income taxes payable 1,277 5,355
Short-term debt 8,567 23,912
Current portion of long-term debt 16,985 -
--------------------------------- ------ ---
519,391 252,834
Long-term debt 800,900 595,706
Share unit liabilities 2,444 4,243
Other non-current liabilities 18,118 14,583
Deferred tax liabilities 62,068 36,387
------------------------ ------ ------
1,402,921 903,753
--------- -------
Contingencies
Contingently redeemable performance
share units 7,230 3,950
Stockholders' equity:
Share capital:
Common stock; no
par value,
unlimited shares
authorized, issued and outstanding
shares:
107,180,726 (December 31, 2016:
106,822,001) 135,919 125,474
Additional paid-in
capital 38,907 27,638
Retained earnings 584,263 601,071
Accumulated other
comprehensive loss (44,354) (67,126)
------------------ ------- -------
Stockholders' equity 714,735 687,057
Non-controlling interest 4,978 4,773
------------------------ ----- -----
719,713 691,830
------- -------
$2,129,864 $1,599,533
========== ==========
Condensed consolidated statements of cash flows
(Expressed in thousands of United States dollars)
(Unaudited)
Nine months ended September 30, 2017 2016
------------------------------- ---- ----
Cash provided by (used in):
Operating activities:
Net income $38,469 $65,585
Adjustments for
items not
affecting cash:
Depreciation and amortization
expenses 37,047 30,560
Inventory write down 778 2,284
Impairment loss 8,911 28,243
Stock option compensation expense 10,996 4,025
Equity-classified PSU expense 1,871 1,222
Deferred income tax recovery (9,583) (5,838)
Equity loss (income) less dividends
received 158 (1,209)
Unrealized foreign exchange (gain)
loss (1,011) 586
Change in fair value of contingent
consideration (2,194) -
Gain on disposition of property,
plant and equipment (1,071) (1,017)
Debt issue cost amortization 2,058 -
Other, net 239 -
Net changes in
operating assets
and liabilities 10,547 36,980
----------------- ------ ------
Net cash provided by operating
activities 97,215 161,421
------------------------------ ------ -------
Investing activities:
Acquisition of
IronPlanet, net
of cash acquired (675,851) -
Acquisition of
Mascus - (28,123)
Acquisition of
Petrowsky - (6,250)
Acquisition of
contingently
redeemable NCI - (41,092)
Acquisition of
NCI - (226)
Property, plant
and equipment
additions (8,086) (12,600)
Intangible asset
additions (20,482) (12,041)
Proceeds on
disposition of
property, plant
and equipment 3,487 3,259
Other, net (667) (243)
---------- ---- ----
Net cash used in investing activities (701,599) (97,316)
------------------------------------- -------- -------
Financing activities:
Issuances of
share capital 7,934 20,702
Share repurchase - (36,726)
Dividends paid to
stockholders (54,558) (52,303)
Dividends paid to
NCI (41) (3,436)
Proceeds from
short-term debt 6,850 52,584
Repayment of
short-term debt (22,793) (28,641)
Proceeds from
long-term debt 325,000 46,572
Repayment of
long-term debt (104,729) (46,568)
Debt issue costs (12,624) (844)
Repayment of
finance lease
obligations (1,565) (1,282)
Other, net (129) 332
---------- ---- ---
Net cash provided by (used in)
financing activities 143,345 (49,610)
------------------------------ ------- -------
Effect of changes in foreign currency
rates on
cash, cash
equivalents, and
restricted cash 17,270 6,656
----------------- ------ -----
Cash, cash equivalents, and
restricted cash:
Increase
(decrease) (443,769) 21,151
Beginning of
period 758,089 293,246
------------- ------- -------
Cash, cash equivalents, and
restricted cash, end of period $314,320 314,397
=============================== ======== =======
Segmented information
(Expressed in thousands of United States dollars)
(Unaudited)
Three months ended September 30, 2017 Nine months ended September 30, 2017
------------------------------------- ------------------------------------
Auctions and Other Consolidated Auctions and Other Consolidated
Marketplaces Marketplaces
------------ ------------
Revenues $130,242 $10,805 $141,047 $400,565 $31,167 $431,732
Costs of services,
excluding D&A (18,383) (1,200) (19,583) (51,948) (2,039) (53,987)
Selling, general and
administrative
("SG&A") expenses (81,964) (3,371) (85,335) (220,555) (9,732) (230,287)
Impairment loss - - - (8,911) - (8,911)
--------------- --- --- --- ------ --- ------
Segment profit $29,895 $6,234 $36,129 $119,151 $19,396 $138,547
Acquisition-related
costs (3,587) (35,162)
D&A expenses (14,837) (37,047)
Gain on disposition of
Property, plant
and equipment ("PPE") 42 1,071
Foreign exchange gain
(loss) (816) 7
--------------------- ---- ---
Operating income $16,931 $67,416
Other expense (9,966) (20,965)
Income tax recovery (expense) 3,358 (7,982)
----------------------------- ----- ------
Net income $10,323 $38,469
========== ======= =======
Three months ended March 31, 2017 Three months ended June 30, 2017
--------------------------------- --------------------------------
Auctions and Other Consolidated Auctions and Other Consolidated
Marketplaces Marketplaces
------------ ------------
Revenues $115,677 $8,822 $124,499 $154,646 $11,540 $166,186
Costs of services,
excluding D&A (12,587) (226) (12,813) (20,978) (613) (21,591)
SG&A expenses (67,392) (3,183) (70,575) (71,199) (3,178) (74,377)
Impairment loss - - - (8,911) - (8,911)
--------------- --- --- --- ------ --- ------
Segment profit $35,698 $5,413 $41,111 $53,558 $7,749 $61,307
Acquisition-related
costs (8,627) (22,948)
D&A expenses (10,338) (11,872)
Gain on disposition
of PPE 721 308
Foreign exchange
gain 730 93
---------------- --- ---
Operating income $23,597 $26,888
Other expense (5,849) (5,150)
Income tax expense (7,315) (4,025)
------------------ ------ ------
Net income $10,433 $17,713
========== ======= =======
Three months ended September 31, 2016 Three months ended December 31, 2016
------------------------------------- ------------------------------------
Auctions and Other Consolidated Auctions and Other Consolidated
Marketplaces Marketplaces
------------ ------------
Revenues $121,111 $7,765 $128,876 $136,598 $10,171 $146,769
Costs of services,
excluding D&A (14,493) (257) (14,750) (16,035) (206) (16,241)
SG&A expenses (65,346) (2,947) (68,293) (72,212) (1,922) (74,134)
Impairment loss (28,243) - (28,243) - - -
--------------- ------- --- ------- --- --- ---
Segment profit $13,029 $4,561 $17,590 $48,351 $8,043 $56,394
Acquisition-related
costs (5,398) (4,631)
D&A expenses (10,196) (10,301)
Gain on disposition
of PPE 570 265
Foreign exchange
loss (281) (1,099)
---------------- ---- ------
Operating income $2,285 $40,628
Other expense (105) (5,648)
Income tax expense (7,180) (7,053)
------------------ ------ ------
Net income (loss) $(5,000) $27,927
================ ======= =======
Three months ended March 31, 2016 Three months ended June 30, 2016
--------------------------------- --------------------------------
Auctions and Other Consolidated Auctions and Other Consolidated
Marketplaces Marketplaces
------------ ------------
Revenues $125,659 $6,286 $131,945 $148,458 $10,347 $158,805
Costs of services,
excluding D&A (15,313) - (15,313) (19,407) (351) (19,758)
SG&A expenses (65,706) (1,404) (67,110) (69,915) (4,077) (73,992)
------------- ------- ------ ------- ------- ------ -------
Segment profit $44,640 $4,882 $49,522 $59,136 $5,919 $65,055
Acquisition-related
costs (1,197) (603)
D&A expenses (10,080) (10,284)
Gain on disposition
of PPE 246 201
Foreign exchange
gain (loss) 683 (734)
---------------- --- ----
Operating income $39,174 $53,635
Other income 352 173
Income tax expense (9,532) (13,217)
------------------ ------ -------
Net income $29,994 $40,591
========== ======= =======
Nine months ended September 30, 2016 Year ended December 31, 2016
------------------------------------ ----------------------------
Auctions and Other Consolidated Auctions and Other Consolidated
Marketplaces Marketplaces
------------ ------------
Revenues $395,228 $24,398 $419,626 $531,826 $34,569 $566,395
Costs of services,
excluding D&A (49,213) (608) (49,821) (65,248) (814) (66,062)
SG&A expenses (200,967) (8,428) (209,395) (273,179) (10,350) (283,529)
Impairment loss (28,243) - (28,243) (28,243) - (28,243)
--------------- ------- --- ------- ------- --- -------
Segment profit $116,805 $15,362 $132,167 $165,156 $23,405 $188,561
Acquisition-related
costs (7,198) (11,829)
D&A expenses (30,560) (40,861)
Gain on disposition
of PPE 1,017 1,282
Foreign exchange
loss (332) (1,431)
---------------- ---- ------
Operating income $95,094 $135,722
Other income (expense) 420 (5,228)
Income tax expense (29,929) (36,982)
------------------ ------- -------
Net income $65,585 $93,512
========== ======= =======
Selected Data
(Unaudited)
Selected balance sheet data
(in U.S. $000's) September 30, December 31,
2017 2016
---- ----
Current assets $621,455 $377,998
Current liabilities 519,391 252,834
------------------- ------- -------
Working capital $102,064 $125,164
--------------- -------- --------
Total assets $2,129,864 $1,599,533
Long-term debt 817,885 595,706
Stockholders' equity 714,735 687,057
==================== ======= =======
Selected operating data
As at and for the nine months ended
September 30, 2017 2016
----------------------------------- ---- ----
Auctions and Marketplaces segment
Revenue Rate 12.62% 12.00%
--------------------------------- ----- -----
Number of consignments at industrial
auctions 41,950 39,250
Number of bidder registrations at
industrial auctions 404,000 395,500
Number of buyers at industrial
auctions 100,650 101,000
Number of lots at industrial auctions 276,000 294,000
------------------------------------- ------- -------
Number of permanent auction sites 39 39
Number of regional auction sites 6 6
-------------------------------- --- ---
Total auction sites 45 45
------------------- --- ---
Number of industrial auctions 169 162
----------------------------- --- ---
Number of revenue producers 434 354
Number of territory managers 372 304
============================ === ===
Average industrial auction data
Nine months ended
September 30, 2017 2016
----------------- ---- ----
GTV $ 17.1 million $ 18.4 million
--- --- ------------ --- ------------
Bidder registrations 2,390 2,442
Consignors 248 243
Lots 1,637 1,802
==== ===== =====
Non-GAAP Measures
This news release makes reference to various non-GAAP measures. These measures do not have a standardized meaning and are, therefore, unlikely to be comparable to similar measures presented by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles.
The following tables present adjusted operating income (non-GAAP measure) and adjusted operating income margin (non-GAAP measure) results for the three and nine months, respectively, ended September 30, 2017 and 2016, as well as reconcile those metrics to operating income, revenues, and operating income margin, which are the most directly comparable GAAP measures in, or calculated from, the consolidated income statements:
(in U.S.
$000's) Three months ended September 30,
--------------------------------
Change
------
2017 2016 2017 over
2016
----
Operating
income $16,931 $2,285 641%
Pre-tax
adjusting
item:
Impairment loss - 28,243 (100%)
--------------- --- ------ -----
Adjusted
operating
income
(non-GAAP measure) 16,931 30,528 (45%)
----------------- ------ ------ ----
Revenues $141,047 $128,876 9%
-------- -------- -------- ---
Operating
income margin 12.0% 1.8% 1020 bps
Adjusted
operating
income margin
(non-GAAP measure) 12.0% 23.7% -1170 bps
================= ==== ==== =========
(in U.S. $000's) Nine months ended September 30,
-------------------------------
Change
------
2017 2016 2017 over
2016
----
Operating income $67,416 $95,094 (29%)
Pre-tax adjusting items:
Accelerated vesting of assumed
options 4,752 - 100%
Acquisition and finance
structure advisory 9,063 - 100%
Severance and retention 1,447 - 100%
Impairment loss 8,911 28,243 (68%)
--------------- ----- ------ ----
Adjusted operating income
(non-GAAP measure) 91,589 123,337 (26%)
----------------- ------ ------- ----
Revenues $431,732 $419,626 3%
-------- -------- -------- ---
Operating income margin 15.6% 22.7% -710 bps
Adjusted operating income
margin
(non-GAAP measure) 21.2% 29.4% -820 bps
================= ==== ==== ========
The first nine months 2017 adjusting items were $4.8 million ($4.8 million after tax, or $0.04 per diluted share) of stock option compensation expense related to the accelerated vesting of certain IronPlanet stock options assumed as part of the Merger, $9.1 million ($6.6 million after tax, or $0.06 per diluted share) of acquisition and finance structure advisory costs, $1.4 million ($0.9 million after tax, or $0.01 per diluted share) of severance and retention costs in a corporate reorganization that followed the Merger, and an $8.9 million ($6.6 million after tax, or $0.06 per diluted share) impairment loss recognized on various technology assets.
The third quarter and first nine months 2016 adjusting item was a $28.2 million ($26.4 million after tax, or $0.25 per diluted share) impairment loss on the Company's EquipmentOne reporting unit goodwill and customer relationships.
The following tables present adjusted net income attributable to stockholders (non-GAAP measure) and diluted adjusted EPS attributable to stockholders (non-GAAP measure) results for the three and nine months ended September 30, 2017 and 2016, as well as reconciles those metrics to net income (loss) attributable to stockholders, the effect of dilutive securities, the weighted average number of dilutive shares outstanding, and diluted earnings (loss) per share attributable to stockholders, which are the most directly comparable GAAP measures in the consolidated income statements:
(in U.S. $000's, except
share and Three months ended September 30,
--------------------------------
per share data) Change
------
2017 2016 2017 over
2016
----
Net income (loss)
attributable to
stockholders $10,261 $(5,137) 300%
Pre-tax adjusting items:
Impairment loss - 28,243 (100%)
Deferred income tax effect
of adjusting
items:
Impairment loss - (1,798) (100%)
--------------- --- ------ -----
Adjusted net income
attributable to
stockholders (non-GAAP measure) $10,261 $21,308 (52%)
------------------------------ ------- ------- ----
Effect of dilutive
securities $ - $ - -
------------------ --- --- --- --- ---
Weighted average number of
dilutive shares outstanding 108,178,303 107,525,051 1%
--------------------------- ----------- ----------- ---
Diluted earnings (loss) per
share
attributable to stockholders $0.09 $(0.05) 280%
Diluted adjusted EPS
attributable to
stockholders (non-GAAP measure) $0.09 $0.20 (55%)
============================== ===== ===== ====
(in U.S. $000's, except
share and Nine months ended September 30,
-------------------------------
per share data) Change
------
2017 2016 2017 over
2016
----
Net income attributable to
stockholders $38,273 $63,979 (40%)
Pre-tax adjusting items:
Accelerated vesting of assumed
options 4,752 - 100%
Acquisition and finance structure
advisory 9,063 - 100%
Severance and retention 1,447 - 100%
Impairment loss 8,911 28,243 (68%)
Current income tax effect of
adjusting
items:
Acquisition and finance structure
advisory (2,447) - 100%
Severance and retention (564) - 100%
Deferred income tax effect
of adjusting
items:
Impairment loss (2,361) (1,798) 31%
Current income tax adjusting
item:
Change in uncertain tax provision 2,290 - 100%
--------------------------------- ----- --- ---
Adjusted net income
attributable to
stockholders (non-GAAP measure) $59,364 $90,424 (34%)
------------------------------ ------- ------- ----
Effect of dilutive
securities $(50) $ - 100%
------------------ ---- --- --- ---
Weighted average number of
dilutive shares outstanding 108,069,624 107,221,390 1%
--------------------------- ----------- ----------- ---
Diluted EPS attributable to
stockholders $0.35 $0.60 (42%)
Diluted adjusted EPS
attributable to
stockholders (non-GAAP measure) $0.55 $0.84 (35%)
============================== ===== ===== ====
The first nine months 2017 adjusting items were $4.8 million ($4.8 million before tax, or $0.04 per diluted share) of stock option compensation expense related to the accelerated vesting of certain IronPlanet stock options assumed as part of the Merger, $6.6 million ($9.1 million before tax, or $0.06 per diluted share) of acquisition and finance structure advisory costs, $0.9 million ($1.4 million before tax, or $0.01 per diluted share) of severance and retention costs in a corporate reorganization that followed the Merger, and a $6.6 million ($8.9 million before tax, or $0.06 per diluted share) impairment loss recognized on various technology assets during the second quarter of 2017. In addition, there was a $2.3 million (or $0.02 per diluted share) charge related to the change in uncertain tax provisions incurred in the first quarter of 2017.
The third quarter and first nine months 2016 adjusting item was a $26.4 million ($28.2 million before tax, or $0.25 per diluted share) impairment loss on the Company's EquipmentOne reporting unit goodwill and customer relationships.
SOURCE Ritchie Bros. Auctioneers
