Ritchie Bros. reports third quarter 2019 results
VANCOUVER, Nov. 7, 2019 /PRNewswire/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company" or "Ritchie Bros.") reported the following results for the three months ended September 30, 2019:
(All figures are presented in U.S. dollars)
Net income attributable to stockholders for Q3 2019 increased 9% to $25.3 million, diluted earnings per share ("EPS") attributable to stockholders increased 10% to $0.23 from $0.21 per share, while diluted adjusted EPS attributed to stockholders (non-GAAP measure) increased 28% to $0.23 from $0.18 per share compared to the same period in 2018.
Consolidated results:
- Total revenue in Q3 2019 increased 18% to $289.8 million as compared to Q3 2018
- Service revenue in Q3 2019 increased 11% to $178.6 million as compared to Q3 2018
- Inventory sales revenue in Q3 2019 increased 32% to $111.2 million as compared to Q3 2018
- Total selling, general and administrative expenses ("SG&A") in Q3 2019 increased 6% to $93.7 million as compared to Q3 2018
- Operating income in Q3 2019 increased 29% to $40.2 million as compared to Q3 2018
- Cash provided by operating activities was $309.1 million for the first nine months of 2019
Auctions & Marketplaces segment results:
- GTV1 in Q3 2019 increased 4% to $1.1 billion and increased 5% when excluding the impact of foreign exchange as compared to Q3 2018
- A&M total revenue in Q3 2019 increased 20% to $261.3 million as compared to Q3 2018
- Service revenue in Q3 2019 increased 12% to $150.1 million as compared to Q3 2018
- Inventory sales revenue in Q3 2019 increased 32% to $111.2 million as compared to Q3 2018
Other Services segment results:
- Other Services total revenue in Q3 2019 increased 6% to $28.5 million as compared to Q3 2018
- Ritchie Bros. Financial Services ("RBFS") revenue in Q3 2019 increased 29% to $6.2 million as compared to Q3 2018
Other Company development:
- On August 8, 2019, the Board of Ritchie Bros. announced that Sharon Driscoll, Chief Financial Officer, and Karl Werner, President, International, have been named interim Co-Chief Executive Officers of the Company, in addition to their current roles effective October 1, 2019.
"Our positive earnings growth in the quarter was driven by solid GTV performance in our US region and global online GTV growth of 37%, highlighting the continued momentum and strength of our multichannel business model. Furthermore, we are pleased with our strong balance sheet and significant growth in our operating cash flow through the third quarter," said Sharon Driscoll interim Co-Chief Executive Officer and Chief Financial Officer.
Karl Werner, interim Co-Chief Executive Officer and President of International, said, "We are encouraged by improvement in the overall equipment supply, with our sales teams doing a good job of securing volume to help offset some pockets of price deflation in the quarter. We remain focused on continued execution of our strategy and delivering exceptional service for our customers."
_______________________________ |
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 |
The Company presents both GAAP and non-GAAP measures to provide investors with additional information. Providing these non-GAAP measures along with |
Financial Overview
(Unaudited)
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
% Change |
% Change |
|||||||||||||||
(in U.S. $000's, except EPS) |
2019 |
2018 |
2019 over |
2019 |
2018 |
2019 over |
||||||||||
Service revenue: |
||||||||||||||||
Commissions |
$ |
90,928 |
$ |
87,548 |
4% |
$ |
317,674 |
$ |
313,539 |
1% |
||||||
Fees |
87,649 |
73,826 |
19% |
267,881 |
238,197 |
12% |
||||||||||
Total service revenue |
178,577 |
161,374 |
11% |
585,555 |
551,736 |
6% |
||||||||||
Inventory sales revenue |
111,219 |
83,972 |
32% |
400,892 |
262,318 |
53% |
||||||||||
Total revenue |
289,796 |
245,346 |
18% |
986,447 |
814,054 |
21% |
||||||||||
Service revenue as a % of total revenue |
61.6% |
65.8% |
(420) bps |
59.4% |
67.8% |
(840) bps |
||||||||||
Inventory sales revenue as a % of total revenue |
38.4% |
34.2% |
420 bps |
40.6% |
32.2% |
840 bps |
||||||||||
Costs of services |
36,382 |
33,053 |
10% |
122,719 |
112,743 |
9% |
||||||||||
Cost of inventory sold |
102,410 |
74,341 |
38% |
372,703 |
231,834 |
61% |
||||||||||
Selling, general and administrative expenses |
93,691 |
88,323 |
6% |
286,589 |
287,052 |
(0%) |
||||||||||
Operating expenses |
249,636 |
214,152 |
17% |
834,729 |
685,192 |
22% |
||||||||||
Cost of inventory sold as a % of operating expenses |
41.0% |
34.7% |
630 bps |
44.6% |
33.8% |
1080 bps |
||||||||||
Operating income |
40,160 |
31,194 |
29% |
151,718 |
128,862 |
18% |
||||||||||
Operating income margin |
13.9% |
12.7% |
120 bps |
15.4% |
15.8% |
(40) bps |
||||||||||
Net income attributable to stockholders |
25,266 |
23,138 |
9% |
97,466 |
85,993 |
13% |
||||||||||
Adjusted net income attributable to stockholders |
||||||||||||||||
(non-GAAP measure) |
25,266 |
19,328 |
31% |
97,466 |
82,183 |
19% |
||||||||||
Diluted earnings per share attributable to stockholders |
$ |
0.23 |
$ |
0.21 |
10% |
$ |
0.89 |
$ |
0.79 |
13% |
||||||
Diluted adjusted EPS attributable to stockholders |
||||||||||||||||
(non-GAAP measure) |
$ |
0.23 |
$ |
0.18 |
28% |
$ |
0.89 |
$ |
0.75 |
19% |
||||||
Effective tax rate |
21.1% |
17.2% |
390 bps |
22.8% |
18.2% |
460 bps |
||||||||||
Total GTV |
1,084,241 |
1,039,427 |
4% |
3,756,679 |
3,626,551 |
4% |
||||||||||
Service revenue as a % of total GTV- Rate |
16.5% |
15.5% |
100 bps |
15.6% |
15.2% |
40 bps |
||||||||||
Inventory sales revenue as a % of total GTV- Mix |
10.3% |
8.1% |
220 bps |
10.7% |
7.2% |
350 bps |
||||||||||
Segment Overview
(in U.S $000's) |
Three months ended September 30, 2019 |
Nine months ended September 30, 2019 |
||||||||||
A&M |
Other |
Consolidated |
A&M |
Other |
Consolidated |
|||||||
Service revenue |
$ |
150,093 |
$ |
28,484 |
$ |
178,577 |
$ |
494,580 |
$ |
90,975 |
$ |
585,555 |
Inventory sales revenue |
111,219 |
- |
111,219 |
400,892 |
- |
400,892 |
||||||
Total revenue |
261,312 |
28,484 |
289,796 |
895,472 |
90,975 |
986,447 |
||||||
Ancillary and logistical service expenses |
- |
13,285 |
13,285 |
- |
43,516 |
43,516 |
||||||
Other costs of services |
21,431 |
1,666 |
23,097 |
74,799 |
4,404 |
79,203 |
||||||
Cost of inventory sold |
102,410 |
- |
102,410 |
372,703 |
- |
372,703 |
||||||
SG&A expenses |
88,138 |
5,553 |
93,691 |
268,786 |
17,803 |
286,589 |
||||||
Segment profit |
$ |
49,333 |
$ |
7,980 |
$ |
57,313 |
$ |
179,184 |
$ |
25,252 |
$ |
204,436 |
Total GTV |
1,084,241 |
N/A |
N/A |
3,756,679 |
N/A |
N/A |
||||||
A&M service revenue as a % of total GTV- Rate |
13.8% |
N/A |
N/A |
13.2% |
N/A |
N/A |
||||||
(in U.S $000's) |
Three months ended September 30, 2018 |
Nine months ended September 30, 2018 |
||||||||||
A&M |
Other |
Consolidated |
A&M |
Other |
Consolidated |
|||||||
Service revenue |
$ |
134,604 |
$ |
26,770 |
$ |
161,374 |
$ |
463,076 |
$ |
88,660 |
$ |
551,736 |
Inventory sales revenue |
83,972 |
- |
83,972 |
262,318 |
- |
262,318 |
||||||
Total revenue |
218,576 |
26,770 |
245,346 |
725,394 |
88,660 |
814,054 |
||||||
Ancillary and logistical service expenses |
- |
11,682 |
11,682 |
- |
46,242 |
46,242 |
||||||
Other costs of services |
20,059 |
1,312 |
21,371 |
62,888 |
3,613 |
66,501 |
||||||
Cost of inventory sold |
74,341 |
- |
74,341 |
231,834 |
- |
231,834 |
||||||
SG&A expenses |
83,542 |
4,781 |
88,323 |
272,503 |
14,549 |
287,052 |
||||||
Segment profit |
$ |
40,634 |
$ |
8,995 |
$ |
49,629 |
$ |
158,169 |
$ |
24,256 |
$ |
182,425 |
Total GTV |
1,039,427 |
N/A |
N/A |
3,626,551 |
N/A |
N/A |
||||||
A&M service revenue as a % of total GTV- Rate |
12.9% |
N/A |
N/A |
12.8% |
N/A |
N/A |
||||||
Consolidated Performance Overview
GTV increased 4% to $1.1 billion and increased 5% when excluding the impact of foreign exchange. The increase was led by strong growth in online marketplaces of 37%, partially offset by live on site auction volume declining 3%. Despite a strong positive live GTV performance from the US region, overall live was down due to the calendar shift of the larger Moerdijk, Netherlands auction to Q2 2019, lower demand within the energy and the Canadian agriculture sectors, and softer performance at the Dubai, UAE auction from lower demand in the region.
Total revenue increased 18% to $289.8 million with Service revenue growth of 11% and Inventory sales revenue growth of 32%.
Service revenue growth of 11% was driven by commissions revenue increasing 4% and fee revenue increasing 19%. The increase in commissions revenue was in line with higher Service GTV of 2%, and due to strong performance in our US region, where the Company experienced volume growth through both live auctions and weekly featured online businesses, combined with strong growth in the Company's global guarantee rates. The increase in fee revenue was driven primarily by the buyer fees harmonization, fee growth from higher GTV and RBFS fee revenue growth.
Inventory sales revenue increased 32% primarily due to higher inventory volumes at the US live auctions and GovPlanet business.
Costs of services increased 10% to $36.4 million. The increase was primarily in line with growth in services revenue, including incremental GovPlanet operating costs.
Cost of inventory increased 38% to $102.4 million, in line with the overall increase in inventory sales volume.
Selling, general and administrative ("SG&A") expenses increased 6% to $93.7 million primarily due to higher year-over-year incentive compensation expenses on improved performance and to a lesser extent, on-going incremental GovPlanet costs, partially offset by the positive impact of foreign exchange fluctuations.
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 and Canadian dollar exchange rates relative to the U.S. dollar.
Net income attributable to stockholders increased 9% to $25.3 million. The increase was primarily due to higher operating income, partially offset by a non-recurring gain on sale of equity accounted investment recorded in Q3 2018 and higher taxes due to an increase in the effective tax rate. Adjusted net income attributed to stockholders (non-GAAP measure) increased 31%, to $25.3 million in Q3 2019 compared to $19.3 million in Q3 2018.
Primarily for the same reasons noted above, diluted EPS attributable to stockholders increased 10% to $0.23 per share compared to $0.21 per share in Q3 2018. Diluted adjusted EPS attributed to stockholders (non-GAAP measure) increased 28% to $0.23 in Q3 2019 compared to $0.18 in Q3 2018.
Dividend Information
Quarterly dividend
The Company declared on November 6, 2019, a quarterly cash dividend of $0.20 per common share payable on December 18, 2019 to shareholders of record on November 27, 2019.
Q3 2019 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended September 30, 2019, at 8am Pacific time / 11 am Eastern time / 4pm GMT on November 8, 2019. The replay of the webcast will be available through December 8, 2019.
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 Q4 performance, 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 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, 2018 and the Company's Form 10-Q for the quarter ended September 30, 2019, 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 – Third Quarter |
||||||||||||
(Expressed in thousands of United States dollars, except share and per share amounts) |
||||||||||||
(Unaudited) |
||||||||||||
Three months ended September 30, 2019 |
Nine months ended September 30, 2019 |
|||||||||||
% Change |
% Change |
|||||||||||
2019 |
2018 |
2019 over |
2019 |
2018 |
2019 over |
|||||||
GTV |
$ |
1,084,241 |
$ |
1,039,427 |
4% |
$ |
3,756,679 |
$ |
3,626,551 |
4% |
||
Revenue: |
||||||||||||
Service revenue |
$ |
178,577 |
$ |
161,374 |
11% |
$ |
585,555 |
$ |
551,736 |
6% |
||
Revenue from inventory sales |
111,219 |
83,972 |
32% |
400,892 |
262,318 |
53% |
||||||
Total revenue |
289,796 |
245,346 |
18% |
986,447 |
814,054 |
21% |
||||||
Operating expenses: |
||||||||||||
Costs of services |
36,382 |
33,053 |
10% |
122,719 |
112,743 |
9% |
||||||
Cost of inventory sold |
102,410 |
74,341 |
38% |
372,703 |
231,834 |
61% |
||||||
Selling, general and administration expenses |
93,691 |
88,323 |
6% |
286,589 |
287,052 |
0% |
||||||
Acquisition-related costs |
45 |
2,007 |
(98)% |
752 |
5,039 |
(85)% |
||||||
Depreciation and amortization expenses |
17,692 |
16,723 |
6% |
51,919 |
49,451 |
5% |
||||||
Gain on disposition of property, plant and equipment |
(821) |
(342) |
140% |
(1,071) |
(958) |
12% |
||||||
Foreign exchange loss |
237 |
47 |
404% |
1,118 |
31 |
3506% |
||||||
Total operating expenses |
249,636 |
214,152 |
17% |
834,729 |
685,192 |
22% |
||||||
Operating income |
40,160 |
31,194 |
29% |
151,718 |
128,862 |
18% |
||||||
Interest expense |
(10,090) |
(10,473) |
(4)% |
(31,023) |
(32,720) |
(5)% |
||||||
Other, net |
1,962 |
7,182 |
(73)% |
5,680 |
8,995 |
(37)% |
||||||
Income before income taxes |
32,032 |
27,903 |
15% |
126,375 |
105,137 |
20% |
||||||
Income tax expense |
6,760 |
4,791 |
41% |
28,800 |
19,091 |
51% |
||||||
Net income |
$ |
25,272 |
$ |
23,112 |
9% |
$ |
97,575 |
$ |
86,046 |
13% |
||
Net income (loss) attributable to: |
||||||||||||
Stockholders |
$ |
25,266 |
$ |
23,138 |
9% |
$ |
97,466 |
$ |
85,993 |
13% |
||
Non-controlling interests |
6 |
(26) |
(123)% |
109 |
53 |
106% |
||||||
$ |
25,272 |
$ |
23,112 |
9% |
$ |
97,575 |
$ |
86,046 |
13% |
|||
Earnings per share attributable |
||||||||||||
to stockholders: |
||||||||||||
Basic |
$ |
0.23 |
$ |
0.21 |
10% |
$ |
0.90 |
$ |
0.80 |
13% |
||
Diluted |
$ |
0.23 |
$ |
0.21 |
10% |
$ |
0.89 |
$ |
0.79 |
13% |
||
Weighted average number of share outstanding: |
||||||||||||
Basic |
108,003,390 |
108,365,427 |
0% |
108,453,525 |
107,811,391 |
1% |
||||||
Diluted |
109,381,173 |
109,887,194 |
0% |
109,634,195 |
109,133,378 |
0% |
||||||
Condensed Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share data)
(Unaudited)
September 30, |
December 31, |
|||
2019 |
2018 |
|||
Assets |
||||
Cash and cash equivalents |
$ |
309,555 |
$ |
237,744 |
Restricted cash |
141,832 |
67,823 |
||
Trade and other receivables |
249,925 |
129,257 |
||
Inventory |
53,092 |
113,294 |
||
Other current assets |
44,364 |
49,055 |
||
Income taxes receivable |
10,488 |
6,365 |
||
Total current assets |
809,256 |
603,538 |
||
Property, plant and equipment |
476,776 |
486,599 |
||
Other non-current assets |
148,375 |
29,395 |
||
Intangible assets |
234,249 |
245,622 |
||
Goodwill |
671,378 |
671,594 |
||
Deferred tax assets |
17,797 |
15,648 |
||
Total assets |
$ |
2,357,831 |
$ |
2,052,396 |
Liabilities and Equity |
||||
Auction proceeds payable |
$ |
453,278 |
$ |
203,503 |
Trade and other payables |
166,796 |
201,255 |
||
Income taxes payable |
16,053 |
2,312 |
||
Short-term debt |
5,805 |
19,896 |
||
Current portion of long-term debt |
18,027 |
13,126 |
||
Total current liabilities |
659,959 |
440,092 |
||
Long-term debt |
671,301 |
698,172 |
||
Other non-current liabilities |
150,400 |
41,980 |
||
Deferred tax liabilities |
32,859 |
35,519 |
||
Total liabilities |
1,514,519 |
1,215,763 |
||
Commitments |
||||
Contingencies |
||||
Contingently redeemable performance share units |
- |
923 |
||
Stockholders' equity: |
||||
Share capital: |
||||
Common stock; no par value, unlimited shares |
||||
authorized, issued and outstanding shares: |
||||
108,210,335 (December 31, 2018: 108,682,030) |
159,773 |
181,780 |
||
Additional paid-in capital |
59,289 |
56,885 |
||
Retained earnings |
684,231 |
648,255 |
||
Accumulated other comprehensive loss |
(65,129) |
(56,277) |
||
Stockholders' equity |
838,164 |
830,643 |
||
Non-controlling interest |
5,148 |
5,067 |
||
Total stockholders' equity |
843,312 |
835,710 |
||
Total liabilities and equity |
$ |
2,357,831 |
$ |
2,052,396 |
Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Unaudited)
Nine months ended September 30, |
2019 |
2018 |
||
Cash provided by (used in): |
||||
Operating activities: |
||||
Net income |
$ |
97,575 |
$ |
86,046 |
Adjustments for items not affecting cash: |
||||
Depreciation and amortization expenses |
51,919 |
49,451 |
||
Stock option compensation expense |
4,852 |
6,711 |
||
Equity-classified PSU expense |
8,754 |
8,978 |
||
Deferred income tax recovery |
(4,760) |
(3,774) |
||
Unrealized foreign exchange (gain) loss |
(129) |
501 |
||
Gain on disposition of property, plant and equipment |
(1,071) |
(958) |
||
Amortization of debt issuance costs |
2,701 |
3,032 |
||
Gain on disposition of equity investment |
- |
(4,935) |
||
Other, net |
9,892 |
(3,678) |
||
Net changes in operating assets and liabilities |
139,372 |
(44,227) |
||
Net cash provided by operating activities |
309,105 |
97,147 |
||
Investing activities: |
||||
Property, plant and equipment additions |
(6,915) |
(13,394) |
||
Intangible asset additions |
(18,377) |
(19,410) |
||
Proceeds on disposition of property, plant and equipment |
5,610 |
2,524 |
||
Proceeds on disposal of equity investment |
- |
6,147 |
||
Other, net |
(1,000) |
(4,674) |
||
Net cash used in investing activities |
(20,682) |
(28,807) |
||
Financing activities: |
||||
Share repurchase |
(42,012) |
- |
||
Dividends paid to stockholders |
(60,791) |
(56,116) |
||
Issuances of share capital |
12,440 |
27,072 |
||
Payment of withholding taxes on issuance of shares |
(5,260) |
(3,901) |
||
Proceeds from short-term debt |
10,519 |
6,949 |
||
Repayment of short-term debt |
(24,979) |
(3,372) |
||
Repayment of long-term debt |
(29,022) |
(58,825) |
||
Repayment of finance lease obligations |
(4,848) |
(2,827) |
||
Other, net |
- |
(1,176) |
||
Net cash used in financing activities |
(143,953) |
(92,196) |
||
Effect of changes in foreign currency rates on |
||||
cash, cash equivalents, and restricted cash |
1,350 |
(3,215) |
||
Increase (decrease) |
145,820 |
(27,071) |
||
Beginning of period |
305,567 |
331,116 |
||
Cash, cash equivalents, and restricted cash, end of period |
$ |
451,387 |
$ |
304,045 |
Selected Data
(Unaudited)
Industrial live on site auction metrics |
||||||||||||
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
% Change |
% Change |
|||||||||||
2019 |
2018 |
2019 over |
2019 |
2018 |
2019 over |
|||||||
Number of auctions |
46 |
45 |
2% |
140 |
130 |
8% |
||||||
Bidder registrations |
165,500 |
123,000 |
35% |
508,750 |
383,500 |
33% |
||||||
Consignors |
14,000 |
13,600 |
3% |
43,000 |
39,050 |
10% |
||||||
Buyers |
34,800 |
31,400 |
11% |
109,050 |
96,750 |
13% |
||||||
Lots |
98,400 |
89,000 |
11% |
305,150 |
273,500 |
12% |
||||||
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) |
Three months ended September 30, |
Nine months ended September 30, |
|||||||||
% Change |
% Change |
||||||||||
2019 |
2018 |
2019 over |
2019 |
2018 |
2019 over 2018 |
||||||
Net income attributable to stockholders |
$ |
25,266 |
$ |
23,138 |
9% |
$ |
97,466 |
$ |
85,993 |
13% |
|
Pre-tax adjusting items: |
|||||||||||
Severance and retention |
- |
1,501 |
(100)% |
- |
1,501 |
(100)% |
|||||
Gain on sale of equity accounted for investment |
- |
(4,935) |
100% |
- |
(4,935) |
100% |
|||||
Current income tax effect of adjusting items: |
|||||||||||
Severance and retention |
- |
(376) |
100% |
- |
(376) |
100% |
|||||
Adjusted net income attributable to stockholders* |
$ |
25,266 |
$ |
19,328 |
31% |
$ |
97,466 |
$ |
82,183 |
19% |
|
Weighted average number of dilutive shares |
109,381,173 |
109,887,194 |
0% |
109,634,195 |
109,133,378 |
0% |
|||||
Diluted earnings per share attributable to stockholders |
$ |
0.23 |
$ |
0.21 |
10% |
$ |
0.89 |
$ |
0.79 |
13% |
|
Diluted adjusted EPS attributable to Stockholders* |
$ |
0.23 |
$ |
0.18 |
28% |
$ |
0.89 |
$ |
0.75 |
19% |
|
(1) |
Please refer to page 11 for a summary of adjusting items for the three month and nine month ended September 30, 2019 and September 30, 2018. |
||||||||||
(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 |
||||||||||
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) |
As at and for the 12 months ended September 30, |
|||||
% Change |
||||||
2019 |
2018 |
2019 over 2018 |
||||
Short-term debt |
$ |
5.8 |
$ |
10.5 |
(45)% |
|
Long-term debt |
689.3 |
751.8 |
(8)% |
|||
Debt |
695.1 |
762.3 |
(9)% |
|||
Less: cash and cash equivalents |
(309.6) |
(228.8) |
35% |
|||
Adjusted net debt* |
385.5 |
533.5 |
(28)% |
|||
Net income |
$ |
133.0 |
$ |
122.9 |
8% |
|
Add: depreciation and amortization expenses |
69.1 |
65.1 |
6% |
|||
Add: interest expense |
42.8 |
43.7 |
(2)% |
|||
Less: interest income |
(3.3) |
(2.7) |
22% |
|||
Add: income tax expense |
40.7 |
13.2 |
208% |
|||
Pre-tax adjusting items: |
||||||
Severance and retention |
- |
3.7 |
(100)% |
|||
Gain on sale of equity accounted for investment |
- |
(4.9) |
100% |
|||
Adjusted EBITDA* |
$ |
282.3 |
$ |
241.0 |
17% |
|
Debt/net income |
5.2x |
6.2x |
(16%) |
|||
Adjusted net debt*/adjusted EBITDA* |
1.4x |
2.2x |
(36%) |
|||
(1) |
Please refer to page 11 for a summary of adjusting items during the trailing 12-months ended September 30, 2019 and September 30, 2018. |
(2) |
Adjusted EBITDA* is calculated by adding back depreciation and amortization expenses, interest expense, and income tax expense, and subtracting interest |
(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) |
12 months ended September 30, |
|||||
% Change |
||||||
2019 |
2018 |
2019 over 2018 |
||||
Cash provided by operating activities |
$ |
356.2 |
$ |
146.2 |
144% |
|
Property, plant and equipment additions |
10.4 |
16.1 |
(35)% |
|||
Intangible asset additions |
25.1 |
27.5 |
(9)% |
|||
Proceeds on disposition of property plant and equipment |
(13.7) |
(4.0) |
243% |
|||
Net capital spending |
$ |
21.8 |
$ |
39.6 |
(45)% |
|
OFCF* |
$ |
334.4 |
$ |
106.6 |
214% |
|
(1) |
OFCF* is calculated by subtracting net capital spending from cash provided by operating activities. |
Adjusting items during the trailing 12-months ended September 30, 2019 were:
Recognized in the third quarter of 2019
- There were no adjustment items recognized in the third quarter of 2019.
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.
Adjusting items during the trailing 12-months ended September 30, 2018 were:
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.
Recognized in the second quarter of 2018
- There were no adjustment items recognized in the second quarter of 2018.
Recognized in the first quarter of 2018
- There were no adjustment items recognized in the first quarter of 2018.
Recognized in the fourth quarter of 2017
- $2.2 million ($1.6 million after tax, or $0.02 per diluted share) of severance and retention costs in a corporate reorganization that followed the IronPlanet acquisition;
- $10.1 million (or $0.10 per diluted share) benefit on remeasurement of deferred taxes due to the Tax Cuts and Jobs Act.
SOURCE Ritchie Bros. Auctioneers
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