Ritchie Bros. reports second quarter 2020 results

|Aug 6|magazine70 min read

VANCOUVER, BC, Aug. 6, 2020 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE: RBA) (TSX: RBA) the "Company", "Ritchie Bros.", "we", "us", or "our") reported the following results for the three months ended June 30, 2020:

(All figures are presented in U.S. dollars)

Net income attributable to stockholders decreased 2% to $53.0 million, compared to $54.0 million in Q2 2019. Diluted earnings per share ("EPS") attributable to stockholders was flat at $0.49 per share in Q2 2020 compared to and Q2 2019. Diluted adjusted EPS* which excludes a $6.2 million income tax expense in Q2 2020 related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements, increased 10% to $0.54 per share in Q2 2020 compared to $0.49 per share in Q2 2019.

"I am proud to see the resilience, creativity and resolve demonstrated by our employees and customers. It is their perseverance and professionalism that has driven our strong second quarter results as we pivoted to 100% online auctions.", said Ann Fandozzi, Chief Executive Officer of Ritchie Bros

Fandozzi continued, "We are encouraged by the strength of our business performance and the momentum we have exiting the second quarter. Our leading platform, global reach and the investments we've made in digital have served us well through these uncertain times. Market conditions continue to be strong and we remain focused on our priorities of maintaining the health and safety of our employees and customers, providing our customer with exceptional service, and preserving our strong financial position to the benefit of our shareholders." 

Consolidated results:

  • Total revenue in Q2 2020 decreased 1% to $389.1 million as compared to Q2 2019
    • Service revenue in Q2 2020 was $234.1 million, flat compared to Q2 2019
    • Inventory sales revenue in Q2 2020 decreased 2% to $154.9 million as compared to Q2 2019
  • Total selling, general and administrative expenses ("SG&A") in Q2 2020 increased 3% to $100.6 million as compared to Q2 2019
  • Operating income in Q2 2020 increased 14% to $88.8 million as compared to Q2 2019
  • Net income in Q2 2020 decreased 2% to $53.1 million as compared to Q2 2019
  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization* ("EBITDA") (non-GAAP measure) in Q2 2020 increased 12% to $107.1 million as compared to Q2 2019
  • Cash provided by operating activities was $198.3 million for the first half of 2020
  • Cash on hand at Q2 2020 was $538.0 million, of which $389.7 million was unrestricted

Auctions & Marketplaces segment results:

  • GTV1 in Q2 2020 was flat at $1.5 billion compared to Q2 2019
  • A&M total revenue in Q2 2020 decreased 1% to $354.6 million as compared to Q2 2019
    • Service revenue in Q2 2020 decreased 1% to $199.6 million as compared to Q2 2019
    • Inventory sales revenue in Q2 2020 decreased 2% to $154.9 million as compared to Q2 2019

Other Services segment results:

  • Other Services total revenue in Q2 2020 increased 3% to $34.5 million as compared to Q2 2019
  • RBFS revenue in Q2 2020 increased 5% to $8.5 million as compared to Q2 2019

Other Company developments:

  • On May 4, 2020, the Company announced the appointment of Jim Kessler as Chief Operating Officer, effective May 11, 2020
  • Increased quarterly cash dividend by 10% to $0.22 per share

_________________________

1 Gross Transaction Value ("GTV") represents total proceeds from all items sold at the Company's live on site auctions and online marketplaces. GTV is not a measure of financial performance, liquidity, or revenue, and is not presented in the Company's consolidated financial statements.

 


The Company presents both GAAP and non-GAAP measures to provide investors with additional information. Providing these non-GAAP measures along with GAAP measures allows for increased comparability of our ongoing performance from period to period. Non-GAAP financial measures referred to in this news release are labeled as "non-GAAP measure" or designated as such with an asterisk (*). Please see page 9-11 for explanations of why the Company uses these non-GAAP measures and the reconciliation to the most comparable GAAP financial measures.


Financial Overview
(Unaudited)




















(in U.S. $000's, except EPS and percentages)


Three months ended June 30, 


Six months ended June 30, 









% Change








% Change



2020


2019


2020 over 2019


2020


2019


2020 over 2019

Service revenue:



















Commissions


$

125,465


$

134,466


(7)

%


$

218,950


$

226,746


(3)

%

Fees



108,674



100,140


9

%



198,312



180,232


10

%

Total service revenue



234,139



234,606


(0)

%



417,262



406,978


3

%

Inventory sales revenue



154,911



158,616


(2)

%



245,043



289,673


(15)

%

Total revenue



389,050



393,222


(1)

%



662,305



696,651


(5)

%

Service revenue as a % of total revenue



60.2

%


59.7

%

50

bps



63.0

%


58.4

%

460

bps

Inventory sales revenue as a % of total revenue



39.8

%


40.3

%

(50)

bps



37.0

%


41.6

%

(460)

bps

Costs of services



39,448



50,268


(22)

%



78,803



86,337


(9)

%

Cost of inventory sold



143,134



149,818


(4)

%



224,719



270,293


(17)

%

Selling, general and administrative expenses



100,632



97,714


3

%



199,017



192,898


3

%

Operating expenses



300,250



315,252


(5)

%



539,423



585,093


(8)

%

Cost of inventory sold as a % of operating expenses



47.7

%


47.5

%

20

bps



41.7

%


46.2

%

(450)

bps

Operating income



88,800



77,970


14

%



122,882



111,558


10

%

Operating income margin



22.8

%


19.8

%

300

bps



18.6

%


16.0

%

260

bps

Net income attributable to stockholders



53,043



54,036


(2)

%



75,851



72,200


5

%

Diluted EPS to stockholders


$

0.49


$

0.49


%


$

0.69


$

0.66


5

%

Diluted adjusted EPS attributable to stockholders



0.54



0.49


10

%



0.75



0.66


14

%

Effective tax rate



34.2

%


22.1

%

1210

bps



30.5

%


23.4

%

710

bps

Total GTV



1,493,982



1,497,757


(0)

%



2,641,006



2,672,438


(1)

%

Service revenue as a % of total GTV- Rate



15.7

%


15.7

%

bps



15.8

%


15.2

%

60

bps

Inventory sales revenue as a % of total GTV- Mix



10.4

%


10.6

%

(20)

bps



9.3

%


10.8

%

(150)

bps

Segment Overview


















(in U.S $000's)


Three months ended June 30, 2020


Six months ended June 30, 2020



A&M


Other


Consolidated


A&M


Other


Consolidated

Service revenue


$

199,648


34,491


$

234,139


$

354,391


62,871


$

417,262

Inventory sales revenue



154,911




154,911



245,043




245,043

Total revenue



354,559


34,491



389,050



599,434


62,871



662,305

Ancillary and logistical service expenses




16,060



16,060




28,818



28,818

Other costs of services



22,190


1,198



23,388



47,285


2,700



49,985

Cost of inventory sold



143,134




143,134



224,719




224,719

SG&A expenses



94,559


6,073



100,632



186,144


12,873



199,017

Segment profit


$

94,676


11,160


$

105,836


$

141,286


18,480


$

159,766

Total GTV



1,493,982


N/A



N/A



2,641,006


N/A



N/A

A&M service revenue as a % of total GTV- Rate



13.4

%

N/A



N/A



13.4

%

N/A



N/A

 




















(in U.S $000's)


Three months ended June 30, 2019


Six months ended June 30, 2019



A&M


Other


Consolidated


A&M


Other


Consolidated

Service revenue


$

201,050


$

33,556


$

234,606


$

344,487


$

62,491


$

406,978

Inventory sales revenue



158,616





158,616



289,673





289,673

Total revenue



359,666



33,556



393,222



634,160



62,491



696,651

Ancillary and logistical service expenses





16,472



16,472





30,231



30,231

Other costs of services



32,551



1,245



33,796



53,368



2,738



56,106

Cost of inventory sold



149,818





149,818



270,293





270,293

SG&A expenses



91,466



6,248



97,714



180,648



12,250



192,898

Segment profit


$

85,831


$

9,591


$

95,422



129,851



17,272



147,123

Total GTV



1,497,757



N/A



N/A



2,672,438



N/A



N/A

A&M service revenue as a % of total GTV- Rate



13.4

%


N/A



N/A


$

12.9

%

$

N/A



N/A

Q2 2020 Consolidated Performance Overview

For Q2 2020, the Company was able to operate and serve our customers' equipment and immediate liquidity needs through our platform of auction technology solutions and online auction capabilities. In addition to running our IronPlanet weekly featured online auction, our online Marketplace-E solution and GovPlanet online auctions, we modified our live operations in March 2020 which transitioned all our traditional live on site industrial auctions to online bidding. In addition, as implemented in the first quarter, we are using our Time Auctioned Lots (TAL) solution for selected International and on-the-farm agriculture events.

GTV remained flat at $1.5 billion in Q2 2020 with significant variability by region where US and Canada had higher activity, but International was lower due to the severe impact of the COVID-19 pandemic in that region. Total GTV increased due to record online performance driven from strong execution by the US region and the US strategic accounts sales teams, year-over-year growth performance at our Fort Worth auction, and auction calendar shifts in response to COVID-19. These shifts included the addition of the Montreal, Canada and Los Angeles, US auctions from Q1 2020 to Q2 2020, which were partially offset by the postponement of the Polotitlan, Mexico, and Ocana, Spain auctions from Q2 2020 to Q3 2020. This increase was offset by the non-repeat of a large dispersal of pipeline equipment as part of the $94 million Columbus, Ohio auction held in June 2019, and lower International performance mainly due to the severe impact of the COVID-19 pandemic in this region. In addition, GTV related to government surplus contracts were lower due to government shutdowns in response to COVID-19.  

Total revenue decreased 1% to $389.0 million in Q2 2020.

Service revenue was flat year-over-year at $234.1 million with commissions revenue lower by 7% on flat Service GTV primarily due to softer commission rate performance from a higher proportion of GTV sourced from strategic accounts, and lower rates from our government operations. Total fees were up 9% on flat total GTV driven primarily by the mix of small values lots, the harmonization of buyer fees and higher fees from services within our US operations, which was partially offset by fees waived for Canadian on-the-farm auctions as part of our COVID-19 pandemic response. 

Inventory sales revenue decreased 2% primarily related to a non-recurring large dispersal of pipeline equipment as part of the $94 million Columbus, Ohio auction in June 2019, and selling through certain non-repeating large inventory deals from Europe and Asia in Q2 2019. We also earned lower inventory revenue through our government surplus contracts due to government shutdowns in response to COVID-19. This decrease was partially offset by strong year-over-year performance in the US and Canada regions.

Costs of services decreased 22% to $39.4 million. In response to the COVID-19 pandemic, we transitioned our live on site auctions to online bidding, utilized TAL solutions for selected International and on-the-farm agricultural events, and implemented travel restrictions. These operational changes resulted in significant temporary cost reductions in employee compensation and travel, advertising, and promotion expenses. In addition, we incurred lower net fees related to referral payments.

Cost of inventory decreased 4% to $143.1 million, primarily in line with lower activity in inventory sales revenue. Cost of inventory sold decreased at a higher rate than the decrease of inventory sales revenue, indicating an increase in the revenue margin. The margin also improved as a result of equipment sold at a lower price performance in the prior year within the International region, which was not repeated in Q2 2020. 

Selling, general and administrative ("SG&A") expenses increased 3% to $100.6 million primarily due to higher incentive expense, including a one-time incentive accrual to employees who have been instrumental during the COVID-19 pandemic to continue keeping our operations running and servicing our customers. These increases were partially offset by lower SG&A expenses related to lower travel, advertising, and promotion costs as we implemented travel restrictions.

Foreign exchange had an unfavourable impact on total revenue and a favourable impact on expenses. These impacts were primarily due to the fluctuations in the Euro, Canadian dollar, and Australian dollar exchange rates relative to the U.S. dollar.

Net income attributable to stockholders decreased 2% to $53.0 million, primarily related to the increase in the effective tax rate, partially offset by a higher operating income and lower interest expense.

Primarily for the same reasons noted above, diluted EPS attributable to stockholders was flat at $0.49 per share for Q2 2020 and Q2 2019. Diluted adjusted EPS attributable to stockholders* increased 10% to $0.54 per share in Q2 2020, after adjusting for a $6.2 million income tax expense in Q2 2020 related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements.

Dividend Information
Quarterly dividend
On August 5, 2020, the Company declared a quarterly cash dividend of $0.22 per common share payable on September 16, 2020 to shareholders of record on August 26, 2020.

Share repurchase program
On August 5, 2020,the Company's board of directors authorized a share repurchase program for the repurchase of up to $100 million worth of common shares of the Company (subject to TSX approval) over the next 12 months. The share repurchases will primarily be used to offset dilution from options. The Company intends to make an application to the TSX for approval of a Normal Course Issuer Bid in August 2020.

Q2 2020 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended June 30, 2020 at 8am Pacific time / 11 am Eastern time / 3pm GMT on August 7, 2020. The replay of the webcast will be available through September 7, 2020.

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 number 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 offers live auction events with online bidding; IronPlanet, an online marketplace with featured weekly auctions and providing the exclusive IronClad Assurance® equipment condition certification; Marketplace-E, a controlled marketplace offering multiple price and timing options; Mascus, a leading European online equipment listing service; and Ritchie Bros. Private Treaty, offering privately negotiated sales. The company's suite of multichannel sales solutions also includes RB Asset Solutions, a complete end-to-end asset management and disposition system. Ritchie Bros. 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 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 future auctions and estimated GTV thereof, growth prospects 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 duration and impact of the COVID-19 pandemic on the Company's operations, the operations of customers, and general economic conditions; 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 IronPlanet acquisition; and the risks and uncertainties set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the Company's Form 10-Q for the quarter ended June 30, 2020, which are available on the SEC, SEDAR, and 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 – Second Quarter
(Expressed in thousands of United States dollars, except share, per share amounts and percentages)
(Unaudited)




















(in U.S. $000's, except EPS)


Three months ended June 30, 


Six months ended June 30, 









% Change








% Change




2020



2019


2020 over 2019



2020



2019


2020 over 2019

GTV


$

1,493,982


$

1,497,757


(0)

%


$

2,641,006


$

2,672,438


(1)

%

Revenues:



















Service revenues


$

234,139


$

234,606


(0)

%


$

417,262


$

406,978


3

%

Inventory sales revenue



154,911



158,616


(2)

%



245,043



289,673


(15)

%

Total revenues



389,050



393,222


(1)

%



662,305



696,651


(5)

%

Operating expenses:



















Costs of services



39,448



50,268


(22)

%



78,803



86,337


(9)

%

Cost of inventory sold



143,134



149,818


(4)

%



224,719



270,293


(17)

%

Selling, general and administration expenses



100,632



97,714


3

%



199,017



192,898


3

%

Acquisition-related costs





38


(100)

%





707


(100)

%

Depreciation and amortization expenses



17,857



17,112


4

%



37,150



34,227


9

%

Gain on disposition of property, plant and equipment



(1,213)



(101)


1,101

%



(1,260)



(250)


404

%

Foreign exchange loss



392



403


(3)

%



994



881


13

%

Total operating expenses



300,250



315,252


(5)

%



539,423



585,093


(8)

%

Operating income



88,800



77,970


14

%



122,882



111,558


10

%

Interest expense



(8,882)



(10,117)


(12)

%



(18,064)



(20,933)


(14)

%

Other income, net



857



1,679


(49)

%



4,434



3,718


19

%

Income before income taxes



80,775



69,532


16

%



109,252



94,343


16

%

Income tax expense



27,656



15,401


80

%



33,304



22,040


51

%

Net income


$

53,119


$

54,131


(2)

%


$

75,948


$

72,303


5

%

Net income attributable to:



















Stockholders


$

53,043


$

54,036


(2)

%



75,851


$

72,200


5

%

Non-controlling interests



76



95


(20)

%



97



103


(6)

%



$

53,119


$

54,131


(2)

%



75,948


$

72,303


5

%

Earnings per share attributable to stockholders:



















Basic


$

0.49


$

0.50


(2)

%



0.70


$

0.66


6

%

Diluted


$

0.49


$

0.49


(1)

%



0.69


$

0.66


5

%

Weighted average number of share outstanding:



















Basic



108,387,490



108,707,708


(0)

%



108,818,903



108,725,871


0

%

Diluted



109,323,343



109,942,768


(1)

%



109,903,808



109,982,763


(0)

%

 

Condensed Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)










June 30, 2020


December 31, 2019








Assets







Cash and cash equivalents


$

389,720


$

359,671

Restricted cash



148,293



60,585

Trade and other receivables



334,488



142,627

Less: allowance for credit losses



(4,559)



(5,225)

Inventory



63,089



64,956

Other current assets



27,486



50,160

Income taxes receivable



3,937



6,810

Total current assets



962,454



679,584








Property, plant and equipment



475,936



484,482

Other non-current assets



131,326



145,679

Intangible assets



223,130



233,380

Goodwill



671,368



672,310

Deferred tax assets



14,299



13,995

Total assets


$

2,478,513


$

2,229,430








Liabilities and Equity







Auction proceeds payable


$

499,415


$

276,188

Trade and other payables



213,036



194,279

Income taxes payable



16,023



7,809

Short-term debt



21,980



4,705

Current portion of long-term debt



17,588



18,277

Total current liabilities



768,042



501,258








Long-term debt



614,375



627,204

Other non-current liabilities



142,518



151,238

Deferred tax liabilities



49,270



42,743

Total liabilities



1,574,205



1,322,443








Commitments and Contingencies







Stockholders' equity:







Share capital:







Common stock; no par value, unlimited shares







authorized, issued and outstanding shares:







108,630,537 (December 31, 2019: 109,337,781)



169,255



194,771

Additional paid-in capital



47,958



52,110

Retained earnings



746,048



714,051

Accumulated other comprehensive loss



(64,207)



(59,099)

Stockholders' equity



899,054



901,833

Non-controlling interest



5,254



5,154

Total stockholders' equity



904,308



906,987

Total liabilities and equity


$

2,478,513


$

2,229,430

 

Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Unaudited)








Six months ended June 30,


2020


2019

Cash provided by (used in):







Operating activities:







Net income


$

75,948


$

72,303

Adjustments for items not affecting cash:







Depreciation and amortization expenses



37,150



34,227

Stock option compensation expense



2,730



3,199

Equity-classified share unit expense



5,017



5,903

Deferred income tax expense



6,657



1,056

Unrealized foreign exchange (gain) loss



1,129



(51)

Gain on disposition of property, plant and equipment



(1,260)



(250)

Amortization of debt issuance costs



1,577



1,765

Amortization of right-of-use assets



6,318



5,845

Gain on contingent consideration from equity investment



(1,700)



Other, net



1,934



322

Net changes in operating assets and liabilities



62,824



36,036

Net cash provided by operating activities



198,324



160,355

Investing activities:







Property, plant and equipment additions



(6,140)



(4,618)

Intangible asset additions



(13,244)



(12,175)

Proceeds on disposition of property, plant and equipment



16,106



583

Distribution from equity investment



4,212



Proceeds on contingent consideration from equity investment



1,700



Other, net



(2,782)



(1,000)

Net cash used in investing activities



(148)



(17,210)

Financing activities:







Share repurchase



(53,170)



(42,012)

Dividends paid to stockholders



(43,586)



(39,160)

Issuances of share capital



19,425



4,124

Payment of withholding taxes on issuance of shares



(3,321)



(4,915)

Proceeds from short-term debt



35,799



12,879

Repayment of short-term debt



(19,941)



(24,985)

Repayment of long-term debt



(8,633)



(14,514)

Repayment of finance lease obligations



(4,384)



(2,937)

Net cash used in financing activities



(77,811)



(111,520)

Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash



(2,608)



1,802

Increase



117,757



33,427

Beginning of period



420,256



305,567

Cash, cash equivalents, and restricted cash, end of period


$

538,013


$

338,994

 

Selected Data
(Unaudited)

Industrial live on site auction metrics


















Three months ended June 30, 


Six months ended June 30, 







% Change






% Change



2020


2019


2020 over 2019


2020


2019


2020 over 2019

Number of auctions


51


59


(14)

%


81


94


(14)

%

Bidder registrations


284,550


200,250


42

%


445,550


343,250


30

%

Consignors


14,400


17,450


(17)

%


25,350


29,000


(13)

%

Buyers


44,350


43,500


2

%


74,250


74,250


%

Lots


114,700


120,500


(5)

%


197,050


206,750


(5)

%

Non-GAAP Measures

This news release references to non-GAAP measures. Non-GAAP 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.

Adjusted Net Income Attributable to Stockholders* and Diluted Adjusted EPS Attributable to Stockholders* Reconciliation
The Company believes that adjusted net income attributable to stockholders* provides useful information about the growth or decline of the 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 the normal operating results. Diluted Adjusted EPS attributable to stockholders* eliminates the financial impact of adjusting items which are after-tax effects of significant non-recurring items that the Company does not consider to be part of the normal operating results, such as acquisition-related costs, management reorganization costs, and certain other items, which the Company refers to as 'adjusting items'.

The following table reconciles adjusted net income attributable to stockholders* and diluted adjusted EPS attributable to stockholders* to net income attributable to stockholders and diluted EPS attributable to stockholders, which are the most directly comparable GAAP measures in the consolidated income statements.




















(in U.S. $000's, except share and per share data, and percentages)


Three months ended June 30, 


Six months ended June 30, 









% Change








% Change



2020


2019


2020 over 2019


2020


2019


2020 over 2019

Net income attributable to stockholders


$

53,043


$

54,036


(2)

%


$

75,851


$

72,200


5

%

Current income tax adjusting item:



















Change in uncertain tax provision



766




100

%



766




100

%

Deferred tax adjusting item:



















Change in uncertain tax provision



5,462




100

%



5,462




100

%

Adjusted net income attributable to stockholders*


$

59,271


$

54,036


10

%


$

82,079


$

72,200


14

%

Weighted average number of dilutive shares outstanding



109,323,343



109,942,768


(1)

%



109,903,808



109,982,763


(0)

%

Diluted earnings per share attributable to stockholders


$

0.49


$

0.49


%


$

0.69


$

0.66


5

%

Diluted adjusted EPS attributable to Stockholders*


$

0.54


$

0.49


10

%


$

0.75


$

0.66


14

%

(1)

Please refer to page 11 for a summary of adjusting items for the three month and six months ended June 30, 2020 and June 30, 2019.

(2)

Adjusted net income attributable to stockholders* represents net income attributable to stockholders excluding the effects of adjusting items.

(3)

Diluted adjusted EPS attributable to stockholders* is calculated by dividing adjusted net income attributable to stockholders*, net of the effect of dilutive securities, by the  weighted average number of dilutive shares outstanding.

Adjusted EBITDA*

The Company believes that adjusted EBITDA* provides useful information about the growth or decline of our net income when compared between different financial periods.

The following table reconciles adjusted EBITDA* to net income, which is the most directly comparable GAAP measures in, or calculated from, our consolidated income statements:






















Three months ended June 30, 



Six months ended June 30, 










% Change








% Change

(in U.S. $000's, except percentages)


2020


2019


2020 over 2019


2020


2019


2020 over 2019

Net income


$

53,119


$

54,131


(2)

%


$

75,948


$

72,303


5

%

Add: depreciation and amortization expenses



17,857



17,112


4

%



37,150



34,227


9

%

Add: interest expense



8,882



10,117


(12)

%



18,064



20,933


(14)

%

Less: interest income



(393)



(1,063)


(63)

%



(1,063)



(1,918)


(45)

%

Add: income tax expense



27,656



15,401


80

%



33,304



22,040


51

%

Adjusted EBITDA*


$

107,121


$

95,698


12

%


$

163,403


$

147,585


11

%

(1)

Please refer to page 11 for a summary of adjusting items during the three and six months ended June 30, 2020 and June 30, 2019.

(2)

Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest income from net income excluding the pre-tax effects of adjusting items.

Adjusted Net Debt* and Adjusted Net Debt/Adjusted EBITDA* Reconciliation
The Company believes that comparing adjusted net debt/adjusted EBITDA* on a trailing 12-month basis for different financial periods provides useful information about the performance of the Company's operations as an indicator of the amount of time it would take the Company to settle both the short and long-term debt. The Company does not consider this to be a measure of liquidity, which is the ability to settle only short-term obligations, but rather a measure of how well the Company funds liquidity.

The following table reconciles adjusted net debt* to debt, adjusted EBITDA* to net income, and adjusted net debt*/adjusted EBITDA* to debt/ net income, respectively, which are the most directly comparable GAAP measures in, or calculated from, our consolidated financial statements.











(in U.S. $millions, except percentages)


As at and for the 12 months ended June 30, 









% Change




2020



2019


2020 over 2019

Short-term debt


$

22.0


$

8.0


175

%

Long-term debt



632.0



704.9


(10)

%

Debt



654.0



712.9


(8)

%

 Less: Cash and cash equivalents



(389.7)



(210.4)


85

%

Adjusted net debt*



264.3



502.5


(47)

%

Net income


$

152.7


$

130.9


17

%

Add: depreciation and amortization expenses



73.4



68.1


8

%

Add: interest expense



38.4



43.2


(11)

%

Less: interest income



(3.1)



(3.6)


(14)

%

Add: income tax expense



52.9



38.7


37

%

Pre-tax adjusting items:










Share-based payment expense recovery



(4.1)




(100)

%

Severance and retention





1.5


(100)

%

Gain on sale of equity accounted for investment





(4.9)


(100)

%

Adjusted EBITDA*


$

310.2


$

273.9


13

%

Debt/net income



4.3

x


5.4

x

(20)

%

Adjusted net debt*/adjusted EBITDA*



0.9

x


1.8

x

(50)

%

(1)

Please refer to page 11 for a summary of adjusting items for the trailing 12-months ended June 30, 2020 and June 30, 2019.

(2)

Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest income from net income excluding the pre-tax effects of adjusting items.

(3)

Adjusted net debt* is calculated by subtracting cash and cash equivalents from short and long-term debt.

(4)

Adjusted net debt*/adjusted EBITDA* is calculated by dividing adjusted net debt* by adjusted EBITDA*.

Operating Free Cash Flow* ("OFCF") Reconciliation

The Company believes OFCF*, when compared on a trailing 12-month basis to different financial periods provides an effective measure of the cash generated by the business and provides useful information regarding cash flows remaining for discretionary return to stockholders, mergers and acquisitions, or debt reduction. The balance sheet scorecard includes OFCF* as a performance metric. OFCF* is also an element of the performance criteria for certain annual short-term and long-term incentive awards.

The following table reconciles OFCF* to cash provided by operating activities, which is the most directly comparable GAAP measure in, or calculated from, the consolidated statements of cash flows:











(in U.S. $millions, except percentages)


12 months ended June 30, 









% Change




2020



2019


2020 over 2019

Cash provided by operating activities


$

370.8


$

196.8


88

%

Property, plant and equipment additions



15.1



15.7


(4)

%

Intangible asset additions



28.5



26.1


9

%

Proceeds on disposition of property plant and equipment



(21.5)



(9.5)


126

%

Net capital spending


$

22.1


$

32.3


(32)

%

OFCF*


$

348.7


$

164.5


112

%

(1)   OFCF* is calculated by subtracting net capital spending from cash provided by operating activities.

Adjusting items during the trailing 12-months ended June 30, 2020 were:

Recognized in the second quarter of 2020

  • $6.2 million ($0.06 per diluted share) in current and deferred income tax expense related to an unfavourable adjustment to reflect final regulations published regarding hybrid financing arrangements

Recognized in the first quarter of 2020

  • There were no adjustment items recognized in the first quarter of 2020.

Recognized in the fourth quarter of 2019

  • $4.1 million ($3.4 million after tax, or $0.03 per diluted share) in share-based payment expense recovery related to the departure of our former CEO.

Recognized in the third quarter of 2019

  • There were no adjustment items recognized in the third quarter of 2019.

Adjusting items during the trailing 12-months ended June 30, 2019 were:

Recognized in the second quarter of 2019

  • There were no adjustment items recognized in the second quarter of 2019.

Recognized in the first quarter of 2019

  • There were no adjustment items recognized in the first quarter of 2019.

Recognized in the fourth quarter of 2018

  • There were no adjustment items recognized in the fourth quarter of 2018.

Recognized in the third quarter of 2018

  • $1.5 million ($1.1 million after tax, or $0.01 per diluted share) of severance and retention costs in a corporate reorganization that followed the IronPlanet acquisition;
  • $4.9 million ($4.9 million after tax, or $0.04 per diluted share) due to gain on sale of an equity accounted for investment.

Cision View original content:http://www.prnewswire.com/news-releases/ritchie-bros-reports-second-quarter-2020-results-301107987.html

SOURCE Ritchie Bros. Auctioneers