Ritchie Bros. Auctioneers Incorporated announced net earnings for the nine months ended Sept. 30, 2011 of $49.9 million, or $0.47 per diluted share, and adjusted net earnings of $46.9 million, or $0.44 per diluted share.
This compares with net earnings of $52.1 million and adjusted net earnings of $51.4 million, or $0.48 per diluted share for the nine months ended Sept. 30, 2010, representing a 9 percent decrease in adjusted net earnings. Adjusted net earnings is a non-GAAP financial measure and is defined below. The company’s auction revenues for the first nine months of 2011 grew 5 percent to $282.7 million compared with $269.1 million for the same period in 2010. The company conducted 157 unreserved industrial auctions in 13 countries throughout North America, Europe, the Middle East, Central America and Australia during the first nine months of 2011. All dollar amounts are presented in U.S. dollars.
Quarterly Dividend
The company also announced the declaration of its quarterly cash dividend of $0.1125 per common share payable on Dec. 9, 2011 to shareholders of record on Nov. 18, 2011.
Gross Auction Proceeds, Auction Revenues
For the nine months ended Sept. 30, 2011, gross auction proceeds were $2.7 billion, 8 percent higher than the first nine months of 2010. Gross auction proceeds is a non-GAAP financial measure and is defined below. The company’s auction revenue rate (auction revenues as a percentage of gross auction proceeds) was 10.57 percent during the first nine months of 2011 compared with 10.85 percent in the first nine months of 2010. The company’s at risk business, consisting of guarantee and purchase contracts, represented 35 percent of gross auction proceeds in the first nine months of 2011 (first nine months of 2010 - 22 percent).
The company achieved gross auction proceeds of $673 million for the third quarter of 2011, representing a 10 percent decrease compared with the third quarter of 2010. Auction revenues were $79.7 million for the three months ended Sept. 30, 2011, compared with $82.2 million for the third quarter of 2010, a decrease of 3 percent. The company’s auction revenue rate was 11.84 percent for the third quarter of 2011 and 10.95 percent for the third quarter of 2010. The company’s revised fee structure, which came into effect on July 1, 2011, contributed $9 million to auction revenues during the quarter.
Net Earnings for the Quarter
Net earnings and adjusted net earnings for the quarter ended Sept. 30, 2011 were $6.5 million, or $0.06 per diluted share, which is a 51 percent decrease compared with net earnings and adjusted net earnings of $13.4 million, or $0.13 per diluted share, for the three months ended Sept. 30, 2010.
Online Bidding Statistics
Ritchie Bros. sold more than $770 million of equipment, trucks and other assets to online bidders during the first nine months of 2011, representing a 24 percent increase compared with the same period in 2010 (first nine months of 2010 - $620 million). Internet bidders comprised approximately 50 percent of the total bidder registrations at Ritchie Bros. industrial auctions in the first nine months of 2011. Since launching its real-time online bidding service in 2002, the company has now sold more than $4.9 billion worth of trucks.
Web Site Statistics
There was a 23 percent increase in the number of visitors to rbauction.com for the nine months ended Sept. 30, 2011, compared with the same period in 2010. More than 3 million visitors made 8 million visits to the Web site during the nine months ended Sept. 30, 2011 compared with 2.4 million visitors and 7.2 million visits, respectively, in the same period in 2010.
New Services, Fee Structure
On July 1, 2011, as previously announced, the company launched a range of value-added services for its customers in the United States and Canada, with many of these services also available at other auctions around the world. These value-added services include the Detailed Equipment Information program, Insurance Services and Powertrain Service Warranty. In addition, Ritchie Bros. Financial Services (RBFS) began providing financing options for customers who purchase equipment at Ritchie Bros. auctions. The Company expects to complete the roll out of these services to its remaining auction locations around the world in the future. The Company’s value-added services are designed to extend the appeal of its auctions, thereby enhancing the Company’s ability to retain existing customers and attract new customers. In addition, Ritchie Bros.’ revised administrative fee structure took effect on July 1, 2011.
Summary Comments
"We are pleased with the successful launch of our new services and early reviews from our customers are very encouraging," said Peter Blake, the company’s chief executive officer. "Our third quarter earnings came in well below last year’s earnings, however our outlook for our full year results remains unchanged and we believe we are on track to achieve our targets for the year. During the third quarter, market conditions became more challenging due to economic uncertainty and the sudden erosion of confidence, particularly in the US market. This exacerbated the already tight supply of equipment, which reflects reduced manufacturer production over the last couple of years, inhibiting the velocity of transactions in the used equipment market. It is also important to remember that our auctions are not fixed in a quarter and this was evident in this quarter as a number of auctions that occurred in quarter three 2010 will take place in quarter four 2011. In the third quarter, 30 percent of our gross auction proceeds was at risk, which is more in line with historical levels compared to the second quarter, though we still intend to use it as an effective tool to compete for the limited supply of late model equipment."
Blake continued: "These market conditions had an effect on our business in the third quarter; however, the pricing environment for late model equipment remains firm and our fourth quarter auctions are building strongly ahead of the equivalent period in 2010. Our gross auction proceeds for October 2011 were approximately $280 million compared to $180 million achieved during the same month in 2010."
Definitions of Non-GAAP Measures
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 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 Consolidated Income Statements, 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, please visit www.rbauction.com.
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