EX-99.1 2 tv526707_ex99-1.htm EXHIBIT 99.1

 

  Exhibit 99.1 – News Release

 

Ritchie Bros. reports second quarter 2019 results, raises dividend and announces interim Co-Chief Executive Officers

 

VANCOUVER, August 8, 2019– Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the “Company” or “Ritchie Bros.”) reported the following results for the three months ended June 30, 2019:

 

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

 

Net income attributable to stockholders for Q2 2019 increased 18% to $54.0 million, and diluted earnings per share (“EPS”) attributable to stockholders increased 17% to $0.49 per share, compared to the same period in 2018.

 

Consolidated results:

·Total revenue in Q2 2019 increased 27% to $393.2 million as compared to Q2 2018

oService revenue in Q2 2019 increased 9% to $234.6 million as compared to Q2 2018

oInventory sales revenue in Q2 2019 increased 68% to $158.6 million as compared to Q2 2018

·Total selling, general and administrative expenses (“SG&A”) in Q2 2019 decreased 4% to $97.7 million as compared to Q2 2018

·Operating income in Q2 2019 increased 20% to $78.0 million as compared to Q2 2018

·Cash provided by operating activities was up 49% to $160.4 million for the first half of 2019

 

Auctions & Marketplaces segment results:

·GTV1 in Q2 2019 increased 5% to $1.5 billion and increased 7% when excluding the impact of foreign exchange as compared to Q2 2018

·A&M total revenue in Q2 2019 increased 31% to $359.7 million as compared to Q2 2018

oService revenue in Q2 2019 increased 12% to $201.1 million as compared to Q2 2018

oInventory sales revenue in Q2 2019 increased 68% to $158.6 million as compared to Q2 2018

  

Other Services segment results:

·Other Services total revenue in Q2 2019 decreased 2% to $33.6 million as compared to Q2 2018

·Ritchie Bros. Financial Services (“RBFS”) revenue in Q2 2019 increased 19% to $8.1 million as compared to Q2 2018

 

“We delivered impressive second quarter results driven by our highest ever Q2 GTV performance of $1.5 billion and 7% growth on a constant currency basis.” said Ravi Saligram, Chief Executive Officer, Ritchie Bros. “Furthermore, our strong second quarter performance reinforced the power of our business model to achieve operating leverage and drive strong cash flow. We generated 27% total revenue growth together with disciplined cost management and achieved 20% operating income growth and record quarterly diluted earnings per share of $0.49. We are pleased that our operating free cash flow* grew 64% on a trailing twelve-month basis and we achieved an adjusted net debt* to adjusted EBITDA* ratio of 1.8 times.”

 

Saligram continued, “our US region led our live auction performance with 10% growth fueled by the massive $94 million Columbus, OH auction. Our global online channel had strong GTV growth from Marketplace-E up 47% in the quarter along with GovPlanet up over 200%. RBFS continues to deliver with strength posting 19% revenue growth and its 30th consecutive double-digit growth quarter.”

 

 

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 10-11 for explanations of why the Company uses these non-GAAP measures and, if applicable, the reconciliation to the most comparable GAAP financial measures.

 

  1

 

 

Other Company developments:

·In Q2 2019, our Board of Directors authorized a share repurchase program for the repurchase of up to $100 million of our common shares over the next 12 months, which was approved by the Toronto Stock Exchange “TSX”. During Q2 2019, we repurchased $42.0 million of common shares.
·Increased quarterly cash dividend by 11% to $0.20 per share

 

Announcement of Interim Chief Executive Officers and Promotions

The Board of Ritchie Bros. announces 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 1st concurrent with the date of Mr. Saligram’s departure. Ravi will work closely with Sharon, Karl and the executive team to assure a smooth transition. The Board continues its search for a successor to Mr. Saligram as Chief Executive Officer. That search, together with the announcement of Mr. Saligram’s intention to step down from his positions at the Company, were announced on June 24, 2019. Sharon and Karl will assume their new roles on October 1, 2019.

 

Ritchie Bros. also announced the following appointments and promotions:

·Jeff Jeter who was recently appointed President, Upstream and Emerging Businesses, North America will now also assume responsibility for digital operations. He will continue to play an important role in accelerating momentum behind key growth initiatives including oversight of North American strategic accounts, the Government business and the commercial roll-out of Ritchie Bros. Asset Solutions.
·Kari Taylor, currently Chief Sales Officer, U.S. Regions, will become President, US Regions, overseeing both sales and operations functions in the US.
·Kieran Holm, currently SVP, Operations Excellence & Efficiencies, will become President, Canada, responsible for all aspects of the region’s sales and operations.
·Matt Ackley, currently SVP Product Management & Digital Marketing will become Chief Marketing Officer responsible for the entire Marketing function including digital product management and the global development of Ritchie Bros. Asset Solutions.

 

Jeff, Kari, Kieran and Matt will continue reporting directly to the Chief Executive Officer.

Erik Olsson Appointed Vice Chair of Board of Directors

·The Company also announced that Erik Olsson, a Director of the Company since 2013, has been named Vice Chairman of the Board as part of the Board’s succession process. Ms. Briscoe will continue as Board Chair through May 2020 and intends to remain on the Board of Directors through 2021.

 

Saligram concluded, “It has been a privilege and an honor to lead the transformation of Ritchie Bros. I am highly confident about our future growth prospects given our outstanding management team, technology enabled platform driving significant network effects, and ability to penetrate all segments of the market with a full suite of multi-channel solutions and portfolio of growth initiatives. I firmly believe that Sharon and Karl in collaboration with the executive team will successfully guide Ritchie Bros. during this interim period in executing our strategic plan to drive growth and add shareholder value while continuing to keep the customer at the heart of everything we do. I would like to express my sincere thanks to all our employees for their support and I am optimistic that our best days are ahead of us.”

  

Ritchie Bros. 2

 

 

Financial Overview

(Unaudited)

 

   Three months ended June 30,   Six months ended June 30, 
           % Change           % Change 
(in U.S. $000's, except EPS)  2019   2018   2019 over
2018		   2019   2018   2019 over
2018		 
Service revenue:                              
Commissions  $134,466   $124,697    8%  $226,746   $225,991    -%
Fees   100,140    89,649    12%   180,232    164,371    10%
Total service revenue   234,606    214,346    9%   406,978    390,362    4%
Inventory sales revenue   158,616    94,184    68%   289,673    178,346    62%
Total revenue   393,222    308,530    27%   696,651    568,708    22%
Service revenue as a % of total revenue   59.7%   69.5%   (980) bps    58.4%   68.6%   (1020) bps 
Inventory sales revenue as a % of total revenue   40.3%   30.5%   980 bps    41.6%   31.4%   1020 bps 
Costs of services   50,268    43,033    17%   86,337    79,690    8%
Cost of inventory sold   149,818    81,702    83%   270,293    157,493    72%
Selling, general and administrative expenses   97,714    101,259    (4%)   192,898    198,729    (3%)
Operating expenses   315,252    243,735    29%   585,093    471,040    24%
Cost of inventory sold as a % of operating expenses   47.5%   33.5%   1400 bps    46.2%   33.4%   1280 bps 
Operating income   77,970    64,795    20%   111,558    97,668    14%
Operating income margin   19.8%   21.0%   (120) bps    16.0%   17.2%   (120) bps 
Net income attributable to stockholders   54,036    45,717    18%   72,200    62,855    15%
Diluted earnings per share attributable to stockholders  $0.49   $0.42    17%  $0.66   $0.58    14%
Diluted adjusted EPS attributable to stockholders (non-GAAP measure)  $0.49   $0.42    17%  $0.66   $0.58    14%
Effective tax rate   22.1%   16.5%   560 bps    23.4%   18.5%   490 bps 
Total GTV   1,497,757    1,426,412    5%   2,672,438    2,587,124    3%
Service revenue as a % of total GTV- Rate   15.7%   15.0%   70 bps    15.2%   15.1%   10 bps 
Inventory sales revenue as a % of total GTV- Mix   10.6%   6.6%   400 bps    10.8%   6.9%   390 bps 


 

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Segment Overview

 

  Three months ended June 30, 2019   Six months ended June 30, 2019 
(in U.S $000's)  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 

 

  Three months ended June 30, 2018   Six months ended June 30, 2018 
(in U.S $000's)  A&M   Other   Consolidated   A&M   Other   Consolidated 
Service revenue  $180,067   $34,279   $214,346   $328,472   $61,890   $390,362 
Inventory sales revenue   94,184    -    94,184    178,346    -    178,346 
Total revenue   274,251    34,279    308,530    506,818    61,890    568,708 
Ancillary and logistical service expenses   -    19,980    19,980    -    34,560    34,560 
Other costs of services   21,381    1,672    23,053    42,829    2,301    45,130 
Cost of inventory sold   81,702    -    81,702    157,493    -    157,493 
SG&A expenses   95,959    5,300    101,259    188,961    9,768    198,729 
Segment profit  $75,209   $7,327   $82,536   $117,535   $15,261   $132,796 
Total GTV   1,426,412    N/A    N/A    2,587,124    N/A    N/A 
A&M service revenue as a % of total GTV- Rate   12.6%   N/A    N/A    12.7%   N/A    N/A 

 

Consolidated Performance Overview

 

GTV increased 5% to $1.5 billion and increased 7% when excluding the impact of foreign exchange. GTV from live on site auctions increased 5% to $1.3 billion and GTV from online marketplaces increased 5% to $236.6 million. During the quarter, there was a large dispersal of pipeline equipment as part of the $94 million Columbus, Ohio auction held in June 2019.
 

Total revenue increased 27% to $393.2 million with Service revenue growth of 9% and Inventory sales revenue growth of 68%.

 

Service revenue growth of 9% was driven by an 8% improvement in commissions revenue and a 12% increase in fee revenue. The increase in commissions revenue was primarily due to the Columbus, Ohio auction in the U.S. where the Company saw higher guarantee commission rate performance and improved straight commission rate in the International region. The increase in fee revenue was driven primarily by full implementation of the buyer fees harmonization in June 2019, higher proportion of low value lots, and fees earned from RBFS.

 

Inventory sales revenue increased 68% led by the Columbus, Ohio auction, GovPlanet revenue growth from the non-rolling stock program, and a higher volume of inventory sales contracts in the International region.

 

Costs of services increased 17% to $50.3 million. The increase was primarily driven by a one-time fee paid to an unrelated third party in connection with a large dispersal of pipeline equipment at the Columbus, Ohio auction, on-going costs to support the growth of GovPlanet operations and overall cost growth in-line with the Company’s service revenue growth.

 

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Cost of inventory increased 83% to $149.8 million partially due to the overall increase in inventory sales volume as well as the trailing effect of selling through some lower performing inventory packages acquired in the previous quarter within our International region.

 

Selling, general and administrative (“SG&A”) expenses decreased 4% to $97.7 million primarily due to foreign exchange fluctuations, lower compensation expense in the US and a decrease in professional fees, partially offset by on-going incremental costs related to the GovPlanet non-rolling stock program, and to support the growth in RBFS.

 

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 exchange rates relative to the U.S. dollar.

 

Net income attributable to stockholders increased 18% to $54.0 million. The increase was primarily due to higher operating income coupled with lower net interest expenses, partially offset by higher taxes due to an increase in the effective tax rate.

 

Primarily for the same reasons noted above, diluted EPS attributable to stockholders increased 17% to $0.49 per share compared to $0.42 per share in Q2 2018.

 

Dividend Information

 

Quarterly dividend

 

The Company declared on August 7, 2019, a quarterly cash dividend of $0.20 per common share payable on September 18, 2019 to shareholders of record on August 28, 2019.

 

Q2 2019 Earnings Conference Call

 

Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended June 30, 2019, at 8am Pacific time / 11 am Eastern time / 4pm GMT on August 9, 2019. The replay of the webcast will be available through September 9, 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.

 

 

Ritchie Bros. 

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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 growth prospects, payment of dividends and the repurchase of our common shares. 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 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, which is 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.

  

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GTV and Selected Condensed Consolidated Financial Information

 

GTV and Condensed Consolidated Income Statements – Second Quarter

(Expressed in thousands of United States dollars, except share and per share amounts)

(Unaudited)

 

  Three months ended June 30,   Six months ended June 30, 
           % Change           % Change 
(in U.S. $000's, except EPS)  2019   2018   2018 over 2017   2019   2018   2018 over 2017 
GTV  $1,497,757   $1,426,412    5%  $2,672,438   $2,587,124    3%
Revenues:                              
Service revenues  $234,606   $214,346    9%  $406,978   $390,362    4%
Revenue from inventory sales   158,616    94,184    68%   289,673    178,346    62%
Total revenues   393,222    308,530    27%   696,651    568,708    22%
Operating expenses:                              
Costs of services   50,268    43,033    17%   86,337    79,690    8%
Cost of inventory sold   149,818    81,702    83%   270,293    157,493    72%
SG&A expenses   97,714    101,259    (4%)   192,898    198,729    (3%)
Acquisition-related costs   38    1,399    (97%)   707    3,032    (77%)
Depreciation and amortization expenses   17,112    16,537    3%   34,227    32,728    5%
Gain on disposition of property, plant and equipment   (101)   (271)   (63%)   (250)   (616)   (59%)
Foreign exchange loss (gain)   403    76    430%   881    (16)   5606%
Total operating expenses   315,252    243,735    29%   585,093    471,040    24%
Operating income   77,970    64,795    20%   111,558    97,668    14%
Interest expense   (10,117)   (10,937)   (7%)   (20,933)   (22,247)   (6%)
Other, net   1,679    900    87%   3,718    1,813    105%
Income before income taxes   69,532    54,758    27%   94,343    77,234    22%
Income tax expense    15,401    9,031    71%   22,040    14,300    54%
Net income  $54,131   $45,727    18%  $72,303   $62,934    15%
Net income attributable to:                              
Stockholders  $54,036   $45,717    18%  $72,200   $62,855    15%
Non-controlling interests   95    10    850%   103    79    30%
   $54,131   $45,727    18%  $72,303   $62,934    15%
Earnings per share attributable to stockholders:                              
Basic  $0.50   $0.42    19%  $0.66   $0.58    14%
Diluted  $0.49   $0.42    17%  $0.66   $0.58    14%
Weighted average number of share outstanding:                              
Basic   108,707,708    107,864,030    1%   108,725,871    107,610,679    1%
Diluted   109,942,768    109,019,708    1%   109,982,763    108,832,776    1%

  

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Condensed Consolidated Balance Sheets

(Expressed in thousands of United States dollars, except share data)

(Unaudited)

 

   June 30,   December 31, 
   2019   2018 
Assets          
           
Cash and cash equivalents  $210,429   $237,744 
Restricted cash   128,565    67,823 
Trade and other receivables   338,618    129,257 
Inventory   78,829    113,294 
Other current assets   64,149    49,055 
Income taxes receivable   6,671    6,365 
Total current assets   827,261    603,538 
           
Property, plant and equipment   473,036    486,599 
Other non-current assets   144,877    29,395 
Intangible assets   239,761    245,622 
Goodwill   672,505    671,594 
Deferred tax assets   17,668    15,648 
Total assets  $2,375,108   $2,052,396 
           
Liabilities and Equity          
           
Auction proceeds payable  $458,116   $203,503 
Trade and other payables   175,735    201,255 
Income taxes payable   5,384    2,312 
Short-term debt   8,010    19,896 
Current portion of long-term debt   18,235    13,126 
Total current liabilities   665,480    440,092 
           
Long-term debt   686,694    698,172 
Other non-current liabilities   147,454    41,980 
Deferred tax liabilities   38,582    35,519 
Total liabilities   1,538,210    1,215,763 
           
Commitments          
Contingencies          
Contingently redeemable performance share units   1,049    923 
Stockholders' equity:          
Share capital:          
Common stock; no par value, unlimited shares authorized, issued and outstanding shares: 107,836,674 (December 31, 2018: 108,682,030)   150,585    181,780 
Additional paid-in capital   54,633    56,885 
Retained earnings   680,915    648,255 
Accumulated other comprehensive loss   (55,449)   (56,277)
Stockholders' equity   830,684    830,643 
Non-controlling interest   5,165    5,067 
Total stockholders' equity   835,849    835,710 
Total liabilities and equity  $2,375,108   $2,052,396 

 

Ritchie Bros. 

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Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited)

 

Six months ended June 30,  2019   2018 
Cash provided by (used in):          
Operating activities:          
Net income  $72,303   $62,934 
Adjustments for items not affecting cash:          
Depreciation and amortization expenses   34,227    32,728 
Stock option compensation expense   3,199    4,483 
Equity-classified PSU expense   5,903    6,261 
Deferred income tax expense   1,056    922 
Unrealized foreign exchange (gain) loss   (51)   92 
Gain on disposition of property, plant and equipment   (250)   (616)
Amortization of debt issuance costs   1,765    2,073 
Other, net   6,167    (4,263)
Net changes in operating assets and liabilities   36,036    3,244 
Net cash provided by operating activities   160,355    107,858 
Investing activities:          
Property, plant and equipment additions   (4,618)   (5,802)
Intangible asset additions   (12,175)   (12,273)
Proceeds on disposition of property, plant and equipment   583    1,633 
Other, net   (1,000)   (4,674)
Net cash used in investing activities   (17,210)   (21,116)
Financing activities:          
Share repurchase   (42,012)   - 
Dividends paid to stockholders   (39,160)   (36,588)
Issuances of share capital   4,124    18,049 
Payment of withholding taxes on issuance of shares   (4,915)   (3,357)
Proceeds from short-term debt   12,879    308 
Repayment of short-term debt   (24,985)   (3,372)
Repayment of long-term debt   (14,514)   (56,555)
Repayment of finance lease obligations   (2,937)   (1,774)
Other, net   -    (1,176)
Net cash used in financing activities   (111,520)   (84,465)
Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash   1,802    (4,113)
Increase   33,427    (1,836)
Beginning of period   305,567    331,116 
Cash, cash equivalents, and restricted cash, end of period  $338,994   $329,280 

 

Selected Data

(Unaudited)

 

Industrial live on site auction metrics

 

   Three months ended June 30,   Six months ended June 30, 
           % Change           % Change 
   2019   2018   2019 over
2018		   2019   2018   2019 over
2018		 
Number of consignors at industrial auctions   17,450    14,700    19%   29,000    25,450    14%
Number of bidder registrations at industrial auctions   200,250    141,500    42%   343,250    260,500    32%
Number of buyers at industrial auctions   43,500    36,350    20%   74,250    65,350    14%
Number of lots at industrial auctions   120,500    103,500    16%   206,750    184,500    12%

 

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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.

 

The non-GAAP measure diluted adjusted EPS attributable to stockholders* eliminates the financial impact of adjusting items which are after-tax effects of significant non-recurring items that management 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’.

There were no adjusting items in Q2 2019 or in the comparative prior year period, and, accordingly, diluted adjusted EPS attributable to stockholders* was equal to diluted EPS attributable to stockholders, the most comparable GAAP measure in the consolidated income statements, for Q2 2019.
 

Adjusted EBITDA* 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 EBITDA* and adjusted net debt*/adjusted EBITDA* to debt, cash and cash equivalents, net income, and debt as a multiple of net income, which are the most directly comparable GAAP measures in, or calculated from, the consolidated financial statements.

 

  As at and for the 12 months ended June 30, 
           % Change 
(in U.S. $ millions)  2019   2018   2019 over 2018 
Short-term debt  $8.0   $4.1    95%
Long-term debt   704.9    750.4    (6%)
Debt   712.9    754.5    (6%)
Less: cash and cash equivalents   (210.4)   (210.6)   -%
Adjusted net debt*   502.5    543.9    (8%)
Net income  $130.9   $110.1    19%
Add: depreciation and amortization expenses   68.1    63.3    8%
Add: interest expense   43.2    43.8    (1%)
Less: interest income   (3.6)   (2.5)   43%
Add: income tax expense   38.7    5.0    674%
Pre-tax adjusting items:               
Severance and retention   1.5    2.2    (32%)
Gain on sale of equity accounted for investment   (4.9)   -    -%
Adjusted EBITDA*  $273.9   $221.9    23%
Debt/net income   5.4x   6.9x   (22%)
Adjusted net debt*/adjusted EBITDA*   1.8x   2.5x   (28%)

 

(1)Please refer to page 11 for a summary of adjusting items during the trailing 12-months ended June 30, 2019 and June 30, 2018.

(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*.

 

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Operating Free Cash Flow* (“OFCF”) Reconciliation

We believe OFCF*, when compared on a trailing 12-month basis to different financial periods provides an effective measure of the cash generated by our business and provides useful information regarding cash flows remaining for discretionary return to stockholders, mergers and acquisitions, or debt reduction. Our 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 and net capital spending, which are the most directly comparable GAAP measures in, or calculated from, our consolidated statements of cash flows:

 

(in U.S. $ millions)  12 months ended June 30, 
           % Change 
   2019   2018   2019 over 2018 
Cash provided by operating activities  $196.8   $139.4    41%
Property, plant and equipment additions   15.7    12.3    28%
Intangible asset additions   26.1    30.7    (15)%
Proceeds on disposition of property plant and equipment   (9.5)   (4.2)   126%
Net capital spending  $32.3   $38.8    (17%)
OFCF*  $164.5   $100.6    64%

 

(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, 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 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.

 

Adjusting items during the trailing 12-months ended June 30, 2018 were:

 

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 Acquisition;
·$10.1 million (or $0.10 per diluted share) benefit on remeasurement of deferred taxes due to the Tax Cuts and Jobs Act.

 

Recognized in the third quarter of 2017

·There were no adjustment items recognized in the third quarter of 2017.


 

For further information, please contact:

Zaheed Mawani | Vice President, Investor Relations

Phone: 1.778.331.5219 | Email: zmawani@rbauction.com

 

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