Ritchie Bros. Auctioneers Incorporated announced net earnings for the nine months ended Sept. 30, 2010, of $52.4 million, or $0.49 per diluted share, and adjusted net earnings of $51.6 million, or $0.49 per diluted share. This compares to financial statement net earnings for the first nine months of 2009 of $71.6 million, or $0.68 per diluted share, and adjusted net earnings of $71.0 million, or $0.67 per diluted share. Adjusted net earnings is a non-GAAP financial measure and is defined below.
In the first nine months of 2010, the company conducted 157 industrial auctions in 15 countries throughout North America, Europe, the Middle East, Central America, Asia and Australia.
The company also announced the declaration of a quarterly cash dividend of $0.105 per common share payable on Dec. 10, 2010, to shareholders of record on Nov. 19, 2010.
Gross Auction Proceeds and Auction Revenues
For the nine months ended Sept. 30, 2010, gross auction proceeds were $2.5 billion and auction revenues were $269.1 million compared to $2.6 billion and $280.1 million, respectively, in the first nine months of 2009. Gross auction proceeds is a non-GAAP financial measure and is described below. The company’s auction revenue rate (auction revenues as a percentage of gross auction proceeds) was 10.85 percent for the first nine months of 2010, compared to 10.77 percent for the first nine months of 2009, mainly due to the continuing strong performance of the company’s at risk business.
The company achieved gross auction proceeds of $750.9 million and auction revenues of $82.2 million for the third quarter of 2010, both representing 8 percent increases over the third quarter of 2009. The company’s auction revenue rate was 10.95 percent for both the third quarter of 2010 and 2009.
Net Earnings for the Quarter
Net earnings and adjusted net earnings for the three months ended Sept. 30, 2010, were $13.5 million, or $0.13 per diluted share, compared to net earnings and adjusted net earnings for the three months ended Sept. 30, 2009, of $12.9 million, or $0.12 per diluted share.
Bidders, Buyers and Sellers
The company had approximately 247,000 bidder registrations at its industrial auctions in the first nine months of 2010, of which more than 71,000 were successful buyers, roughly identical to the record numbers achieved in the same period in 2009.
In the first nine months of 2010, Ritchie Bros. sold more than 213,000 lots on behalf of approximately 31,000 consignors compared to close to 209,000 lots for more than 27,000 consignors in the first nine months of 2009.
Average Ritchie Bros. Auction
Although the company’s auctions varied in size over the 12 months ended Sept. 30, 2010, the average Ritchie Bros. industrial auction attracted more than 1,500 bidder registrations that competed for over 1,300 lots consigned by 189 consignors. For the 12 months ended Sept. 30, 2009, the average industrial auction attracted over 1,600 bidder registrations that competed for over 1,400 lots consigned by 185 consignors. The average gross auction proceeds per industrial auction for the 12 months ended Sept. 30, 2010, was $14.9 million (12 months ended Sept. 30, 2009 – $16.9 million).
Online Bidding Statistics
Ritchie Bros. sold more than $620 million worth of equipment, trucks and other assets to online bidders during the first nine months of 2010, compared to over $600 million in the first nine months of 2009. The company currently has approved users of its online bidding system from over 150 countries.
Online bidders represented approximately 40 percent of the total registered bidders at Ritchie Bros. industrial auctions for the nine months ended Sept. 30, 2010, and they were the buyer or runner up bidder on 39 percent of the lots offered online at these auctions (first nine months of 2009 – 35 percent). Ritchie Bros. is the largest seller in the world of used equipment and trucks to online buyers.
Summary Comments on Quarterly Results
Peter Blake, the company’s CEO commented: “While our year to date performance lags behind our 2009 performance, our third quarter auction revenues represented the highest third quarter results in our history and reflected solid gross auction proceeds growth and a strong auction revenue rate. Although we are very pleased with our performance in the third quarter of this year, we are still seeing considerable uncertainty in our major marketplaces and we believe the used equipment market has not yet returned to a balanced state. As a result, we continue to believe that we will face challenging market conditions for the remainder of 2010, particularly in the U.S.”
Ritchie Bros. recently completed an update of its strategic plan and has identified a number of initiatives that the company intends to introduce starting in 2011. These initiatives are designed to propel the company’s business forward by delivering enriched services to help its customers easily and confidently exchange equipment. The Company believes the initiatives will accelerate its market share growth and help Ritchie Bros. achieve strong earnings growth in the years ahead.
One of the most significant initiatives that the company intends to launch in 2011 is a bundle of value-added buyer services that it expects will help Ritchie Bros. customers feel more confident and make their experience at its auctions as compelling and easy as possible. The bundle of services is being developed in response to customer feedback and will include a customer finance program and enhanced equipment information. The introduction of these and other new services and features will further ongoing efforts to extend the appeal of the company’s auctions and enhance the company’s ability to attract new and existing customers to its auctions.
Ritchie Bros. also intends to revise and simplify its fee structure effective July 1, 2011. The company will eliminate certain fees and expand the scope of its administrative fee charged to buyers to address the cost of providing the new and significantly enhanced buyer services to be offered at the company’s auctions, as well as other high value buyer-focused initiatives launched in recent years.
The company anticipates an increase in both revenues and expenses in 2011 and future years as a result of these initiatives, with an expected positive net benefit to earnings.
“We have invested heavily over the last number of years to provide the highest possible level of service for our customers, and we believe the changes we will make starting in 2011 will further broaden the appeal and enhance the convenience and ease of our auctions. The changes to our fee structure that will take effect in 2011 will allow us to continue to deliver a high level of service to our customers, maintain our track record of innovation and grow our business,” Blake said.
The company defines adjusted net earnings as financial statement net earnings excluding the after-tax effects of excess property sales and significant foreign exchange gains or losses resulting from financing activities that are not expected to recur, and has provided a reconciliation below. Adjusted net earnings is a non-GAAP financial measure that does not have a standardized meaning, and is therefore unlikely to be comparable to similar measures presented by other companies.
The Company believes that comparing adjusted net earnings as defined above for different financial periods provides more useful information about the growth or decline of its net earnings for the relevant financial period and identifies the impact of items which the company does not consider to be part of its normal operating results.
Gross auction proceeds represent the total proceeds from all items sold at Ritchie Bros. auctions. The company’s definition of gross auction proceeds may differ from those used by other participants in its industry. Gross auction proceeds is an important measure the company uses in comparing and assessing its operating performance. It is not a measure of the company’s financial performance, liquidity or revenue and is not presented in its consolidated financial statements.
The company believes that auction revenues, which is the most directly comparable measure in its statements of operations, and certain other line items, are best understood by considering their relationship to gross auction proceeds. Auction revenues represent the revenues earned by Ritchie Bros. in the course of conducting its auctions, and consist primarily of commissions earned on consigned equipment and net profit on the sale of equipment purchased by the company and sold in the same manner as consigned equipment.
For more information, visit www.rbauction.com.
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