News Details

Ritchie Bros. reports fourth quarter and 2019 annual results

February 27, 2020

VANCOUVER, Feb. 27, 2020 /CNW/ - Ritchie Bros. Auctioneers Incorporated (NYSE & TSX: RBA, the "Company", "Ritchie Bros.", "we", "us", or "our") reports results for the fourth quarter and full year ended December 31, 2019. 

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

Fourth quarter highlights
Net income attributable to stockholders for Q4 2019 increased 45% to $51.6 million, diluted earnings per share ("EPS") attributable to stockholders increased 47% to $0.47 from $0.32 per share, while diluted adjusted EPS attributable to stockholders (non-GAAP measure) increased 38% to $0.44 from $0.32 per share compared to the same period in 2018.

Consolidated results:

  • Total revenue in Q4 2019 decreased 7% to $332.2 million as compared to Q4 2018
    o Service revenue in Q4 2019 increased 10% to $218.5 million as compared to Q4 2018
    o Inventory sales revenue in Q4 2019 decreased 28% to $113.7 million as compared to Q4 2018
  • Total selling, general and administrative expenses ("SG&A") was $95.8 million compared to $95.6 million in Q4 2018
  • Operating income in Q4 2019 increased 27% to $71.5 million as compared to Q4 2018

Auctions & Marketplaces ("A&M") segment results:

  • GTV1 in Q4 2019 increased 3.5% to $1.4 billion compared to Q4 2018
  • A&M total revenue in Q4 2019 decreased 7% to $298.0 million as compared to Q4 2018
    o Service revenue in Q4 2019 increased 13% to $184.2 million as compared to Q4 2018
    o Inventory sales revenue in Q4 2019 decreased 28% to $113.7 million as compared to Q4 2018

Other Company development:

  • The Company announced on December 16, 2019 that Ann Fandozzi will be joining the Company as its new Chief Executive Officer ("CEO"), and member of the Board of Directors, effective January 6, 2020.

Full year highlights
Net income attributable to stockholders for 2019 increased 23% to $149.0 million compared to $121.5 million in 2018. Diluted earnings per share ("EPS") attributable to stockholders increased 23% to $1.36 from $1.11 per share, while diluted adjusted EPS attributable to stockholders (non-GAAP measure) increased 23% to $1.33 from $1.08 per share in 2018.

Consolidated results:

  • Total revenue increased 13% to $1.3 billion as compared to 2018
    o Service revenue increased 7% to $804.0 million as compared to 2018
    o Inventory sales revenue increased 22% to $514.6 million as compared to 2018
  • Total SG&A was $382.4 million in 2019 compared to $382.7 million in 2018
  • Operating income increased 21% to $223.2 million as compared to 2018
  • Cash provided by operating activities was $332.8 million for the year ended December 31, 2019
  • Declared quarterly dividends aggregating to $0.76 per common share in 2019

Auctions & Marketplaces segment results:

  • GTV increased 3.6% to $5.1 billion compared to 2018
  • A&M total revenue increased 14% to $1.2 billion as compared to 2018
    o Service revenue increased 8% to $678.8 million as compared to 2018
    o Inventory sales revenue increased 22% to $514.6 million as compared to 2018

____________________________

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, if applicable, the reconciliation to the most comparable GAAP financial measures.

 

"We are pleased with our strong fourth quarter delivering 47% reported earnings per share growth and 38% adjusted earnings per share growth. Our online marketplaces and US region both led the way with online delivering 16.4% GTV growth and the US posting double digit GTV growth."

"Through the dedication of our entire team we grew our full year GTV by 4%, with Total Revenue topping $1.3 billion and 23% growth in earnings per share. We generated strong operating cash flow for the year and are pleased with the overall strength of our balance sheet," said Ann Fandozzi, CEO of Ritchie Bros.

Fandozzi concluded, "I have been impressed and energized by the strength and the quality of our team. 2020 is poised to be another exciting year for Ritchie Bros. as we look to continue progressing our multichannel strategy and leveraging technology to drive more value for our customers."

Financial Overview
(Unaudited)



Three months ended December 31,

Year ended December 31,



% Change


% Change

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

2019

2018


2019 over 2018

2019

2018


2019 over 2018

Service revenue:













Commissions

$

114,107

$

106,621


7%

$

431,781

$

420,160


3%

Fees


104,362


91,158


14%


372,243


329,355


13%

Total service revenue


218,469


197,779


10%


804,024


749,515


7%

Inventory sales revenue


113,725


158,193


(28%)


514,617


420,511


22%

Total revenue


332,194


355,972


(7%)


1,318,641


1,170,026


13%

Service revenue as a % of total revenue


65.8%


55.6%


1020 bps


61.0%


64.1%


-310 bps

Inventory sales revenue as a % of total revenue


34.2%


44.4%


-1020 bps


39.0%


35.9%


310 bps

Costs of services


42,258


46,315


(9%)


164,977


159,058


4%

Cost of inventory sold


108,136


142,505


(24%)


480,839


374,339


28%

Selling, general and administrative expenses


95,800


95,624


0%


382,389


382,676


(0%)

Operating expenses


260,710


299,645


(13%)


1,095,439


984,837


11%

Cost of inventory sold as a % of operating expenses


41.5%


47.6%


-610 bps


43.9%


38.0%


590 bps

Operating income


71,484


56,327


27%


223,202


185,189


21%

Operating income margin


21.5%


15.8%


570 bps


16.9%


15.8%


110 bps

Net income attributable to stockholders


51,573


35,486


45%


149,039


121,479


23%

Adjusted net income attributable to stockholders*


48,183


35,486


36%


145,649


117,669


24%

Diluted earnings per share attributable to stockholders

$

0.47

$

0.32


47%

$

1.36

$

1.11


23%

Diluted adjusted EPS attributable to stockholders*

$

0.44

$

0.32


38%

$

1.33

$

1.08


23%

Effective tax rate


19.9%


25.2%


-530 bps


21.8%


20.3%


150 bps

Total GTV


1,383,908


1,337,614


3.5%


5,140,587


4,964,165


3.6%

Service revenue as a % of total GTV- Rate


15.8%


14.8%


100 bps


15.6%


15.1%


50 bps

Inventory sales revenue as a % of total GTV- Mix


8.2%


11.8%


-360 bps


10.0%


8.5%


150 bps

 

Segment Overview














(in U.S $000's)

Three months ended December 31, 2019

Year ended December 31, 2019


A&M

Other

Consolidated

A&M

Other

Consolidated

Service revenue

$

184,243

$

34,226

$

218,469

$

678,823

$

125,201

$

804,024

Inventory sales revenue


113,725


-


113,725


514,617


-


514,617

Total revenue


297,968


34,226


332,194


1,193,440


125,201


1,318,641

Ancillary and logistical service expenses


-


15,736


15,736


-


59,252


59,252

Other costs of services


25,022


1,500


26,522


99,821


5,904


105,725

Cost of inventory sold


108,136


-


108,136


480,839


-


480,839

SG&A expenses


89,230


6,570


95,800


358,016


24,373


382,389

Segment profit

$

75,580

$

10,420

$

86,000

$

254,764

$

35,672

$

290,436

Total GTV


1,383,908


N/A


N/A


5,140,587


N/A


N/A

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


13.3%


N/A


N/A


13.2%


N/A


N/A
















(in U.S $000's)

Three months ended December 31, 2018

Year ended December 31, 2018


A&M

Other

Consolidated

A&M

Other

Consolidated

Service revenue

$

162,931

$

34,848

$

197,779

$

626,007

$

123,508

$

749,515

Inventory sales revenue


158,193


-


158,193


420,511


-


420,511

Total revenue


321,124


34,848


355,972


1,046,518


123,508


1,170,026

Ancillary and logistical service expenses


-


20,334


20,334


-


66,576


66,576

Other costs of services


24,542


1,439


25,981


87,430


5,052


92,482

Cost of inventory sold


142,505


-


142,505


374,339


-


374,339

SG&A expenses


91,046


4,578


95,624


363,549


19,127


382,676

Segment profit

$

63,031

$

8,497

$

71,528

$

221,200

$

32,753

$

253,953

Total GTV


1,327,614


N/A


N/A


4,964,165


N/A


N/A

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


12.3%


N/A


N/A


12.6%


N/A


N/A

 

Consolidated Quarterly Performance Overview

GTV increased 3.5% to $1.4 billion. The increase in GTV was driven by a 16% increase in online marketplaces and 1% growth in live on site industrial auctions. Online marketplaces growth was driven by strong performance from our Marketplace-E platform, our strategic accounts team, and GovPlanet. Our live industrial GTV improvement was led by our US region posting double-digit growth which was partially offset with softer performance in our International and Canadian regions.

Total revenue decreased 7% to $332.2 million with a decrease in Inventory sales revenue of 28%, partially offset by an increase in Service revenue of 10%.

Service revenue growth of 10% was driven by a 14% increase in fee revenue and a 7% improvement in commissions revenue. The increase in fees revenue was driven by the harmonization of buyer fees, and higher total GTV. The increase in commissions revenue was in line with overall GTV volume growth related to commissions contracts.

Inventory sales revenue decreased 28% primarily due to the non-repeat of significant inventory contracts in International and Canada.  Inventory sales revenue as a percent of total GTV decreased to 8.2% in Q4 2019 from 11.8% in Q4 2018. 

Costs of services decreased 9% to $42.3 million primarily driven by lower revenue in the RB Logistics business.

Cost of inventory decreased 24% to $108.1 million, in line with the overall decrease in inventory sales volume and reflecting comparative softer rate performance in Canada and International compared to Q4 2018.

Selling, general and administrative ("SG&A") expenses increased slightly to $95.8 million due to additional headcount to support our growth initiatives and additional investments in the fourth quarter to support marketing efforts focused on generating buyer demand, offset by a $4.1 million share-based payment expense recovery related to the departure of our former CEO.

Net income attributable to stockholders  increased 45% to $51.6 million. The increase was primarily due to higher operating income combined with lower interest expense. Included in operating income is a foreign exchange gain of $4.1 million in Q4 2019 compared to $0.2 million in Q4 2018.  Adjusted net income attributable to stockholders (non-GAAP measure) increased 36%, to $48.2 million in Q4 2019 compared to $35.5 million in Q4 2018.

Primarily for the same reasons noted above, diluted EPS attributable to stockholders increased 47% to $0.47 per share compared to $0.32 per share in Q4 2018. Diluted adjusted EPS attributable to stockholders (non-GAAP measure) increased 38% to $0.44 per share in Q4 2019 compared to $0.32 per share in Q4 2018.

Dividend Information
Quarterly dividend
The Company declared on January 24, 2020, a quarterly cash dividend of $0.20 per common share payable on March 6, 2020 to shareholders of record on February 14, 2020.

Management Announcement
The Company announced today the planned retirement of Todd Wohler, Chief Human Resources Officer ("CHRO"). Mr. Wohler will retire as CHRO, effective March 31, 2020 after five years with the Company. Mr. Wohler had intended to retire earlier but agreed to stay on during the CEO transition. The Company is grateful to him for his significant contributions as CHRO.

Related to the above, the Company is pleased to announce the appointment of Carmen Thiede as Chief Human Resources Officer, effective April 13, 2020. Ms. Thiede brings significant experience to the Company gained during her impressive career in human resources leadership across diverse industries including automotive, financial and technological services at RBC, Ameriprise Financial Services, Regis Corporation and ABRA Auto Body & Glass. Ms. Thiede has a Master's Degree in Human Resources and Industrial Relations from the University of Minnesota - Carlson School of Management.

Q4 2019 Earnings Conference Call
Ritchie Bros. is hosting a conference call to discuss its financial results for the quarter ended December 31, 2019, at 8:00 am Pacific time / 11:00 am Eastern time / 4:00 pm GMT on February 28, 2020.  The replay of the webcast will be available through March 28, 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 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, 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 Consolidated Financial Information

GTV and Consolidated Income Statements – Fourth Quarter
(Expressed in thousands of United States dollars, except share and per share amounts)
(Unaudited)












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

Three months ended December 31,

Year ended December 31,






% Change





% Change


 

2019

 

2018

2019 over
2018

 

2019

 

2018

2019 over
2018

GTV

$

1,383,908

$

1,337,614

3%

$

5,140,587

$

4,964,165

4%

Revenues:











Service revenues

$

218,469

$

197,779

10%

$

804,024

$

749,515

7%

Inventory sales revenue


113,725


158,193

(28%)


514,617


420,511

22%

Total revenues


332,194


355,972

(7%)


1,318,641


1,170,026

13%

Operating expenses:











Costs of services


42,258


46,315

(9%)


164,977


159,058

4%

Cost of inventory sold


108,136


142,505

(24%)


480,839


374,339

28%

Selling, general and administration expenses


95,800


95,624

0%


382,389


382,676

(0%)

Acquisition-related costs


25


54

(54%)


777


5,093

(85%)

Depreciation and amortization expenses


18,582


17,163

8%


70,501


66,614

6%

Gain on disposition of property, plant and equipment


(36)


(1,773)

(98%)


(1,107)


(2,731)

(59%)

Foreign exchange loss (gain)


(4,055)


(243)

1569%


(2,937)


(212)

1285%

Total operating expenses


260,710


299,645

(13%)


1,095,439


984,837

11%

Operating income


71,484


56,327

27%


223,202


185,189

21%

Interest expense


(10,254)


(11,807)

(13%)


(41,277)


(44,527)

(7%)

Other, net


3,158


2,855

11%


8,838


11,850

(25%)

Income before income taxes


64,388


47,375

36%


190,763


152,512

25%

Income tax expense


12,823


11,915

8%


41,623


31,006

34%

Net income

$

51,565

$

35,460

45%

$

149,140

$

121,506

23%

Net income (loss) attributable to:











Stockholders

$

51,573

$

35,486

45%

$

149,039

$

121,479

23%

Non-controlling interests


(8)


(26)

(69%)


101


27

274%


$

51,565

$

35,460

45%

$

149,140

$

121,506

23%

Earnings per share attributable to stockholders:











Basic

$

0.47

$

0.33

42%

$

1.37

$

1.12

22%

Diluted

$

0.47

$

0.32

47%

$

1.36

$

1.11

23%

Weighted average number of share outstanding:











Basic


108,609,481


108,649,637

(0%)


108,519,739


108,063,349

0%

Diluted


110,194,557


109,983,224

0%


109,759,123


109,388,236

0%

 

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



As at December 31,


2019



2018







Assets






Cash and cash equivalents

$

359,671


$

237,744

Restricted cash


60,585



67,823

Trade and other receivables


137,402



129,257

Inventory


64,956



113,294

Other current assets


50,160



49,055

Income taxes receivable


6,810



6,365

Total current assets


679,584



603,538







Property, plant and equipment


484,482



486,599

Other non-current assets


145,679



29,395

Intangible assets


233,380



245,622

Goodwill


672,310



671,594

Deferred tax assets


13,995



15,648

Total assets

$

2,229,430


$

2,052,396







Liabilities and Equity






Auction proceeds payable

$

276,188


$

203,503

Trade and other payables


194,279



201,255

Income taxes payable


7,809



2,312

Short-term debt


4,705



19,896

Current portion of long-term debt


18,277



13,126

Total current liabilities


501,258



440,092







Long-term debt


627,204



698,172

Other non-current liabilities


151,238



41,980

Deferred tax liabilities


42,743



35,519

Total liabilities


1,322,443



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:






109,337,781 (December 31, 2018: 108,682,030)


194,771



181,780

Additional paid-in capital


52,110



56,885

Retained earnings


714,051



648,255

Accumulated other comprehensive loss


(59,099)



(56,277)

Stockholders' equity


901,833



830,643

Non-controlling interest


5,154



5,067

Total stockholders' equity


906,987



835,710

Total liabilities and equity

$

2,229,430


$

2,052,396

 

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


Year ended December 31,

2019

2018

2017

Cash provided by (used in):







Operating activities:







Net income

$

149,140

$

121,506

$

75,306

Adjustments for items not affecting cash:







Depreciation and amortization expenses


70,501


66,614


52,694

Impairment loss


-


-


8,911

Stock option compensation expense


4,697


8,252


13,700

Equity-classified share units expense


8,047


11,256


3,529

Deferred income tax expense (recovery)


8,826


6,239


(17,268)

Unrealized foreign exchange (gain) loss


(3,058)


951


254

Gain on disposition of property, plant and equipment


(1,107)


(2,731)


(1,656)

Amortization of debt issuance costs


4,086


4,995


3,056

Gain on disposition of equity investment


-


(4,935)


-

Amoritzation of right-of-use assets


12,280


-


-

Other, net


2,779


(2,317)


(1,237)

Net changes in operating assets and liabilities


76,602


(65,550)


10,279

Net cash provided by operating activities


332,793


144,280


147,568

Investing activities:







Acquisition of IronPlanet, net of cash acquired


-


-


(675,851)

Property, plant and equipment additions


(13,589)


(16,860)


(10,812)

Intangible asset additions


(27,415)


(26,152)


(28,584)

Proceeds on disposition of property, plant and equipment


5,929


10,586


4,985

Proceeds on disposal of equity investment


-


6,147


-

Other, net


(982)


(4,674)


(692)

Net cash used in investing activities


(36,057)


(30,953)


(710,954)

Financing activities:







Share repurchase


(42,012)


-


-

Dividends paid to stockholders


(82,535)


(75,678)


(72,785)

Dividends paid to NCI


-


-


(41)

Issuances of share capital


41,094


28,524


9,936

Payment of withholding taxes on issuance of shares


(5,260)


(3,901)


-

Proceeds from short-term debt


13,169


19,715


6,971

Repayment of short-term debt


(28,684)


(6,628)


(24,479)

Proceeds from long-term debt


-


-


325,000

Repayment of long-term debt


(76,282)


(91,013)


(108,985)

Debt issue costs


-


-


(12,624)

Repayment of finance lease obligations


(6,708)


(3,950)


(2,322)

Other, net


-


(1,176)


(1,408)

Net cash provided by (used in) financing activities


(187,218)


(134,107)


119,263

Effect of changes in foreign currency rates on







cash, cash equivalents, and restricted cash


5,171


(4,769)


17,150

Increase (decrease)


114,689


(25,549)


(426,973)

Beginning of period


305,567


331,116


758,089

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

$

420,256

$

305,567

$

331,116

 

Selected Data
(Unaudited)

Live industrial auction data



Three months ended December 31

Year ended December 31,







% Change






% Change


2019

2018


2019 over
2018

2019

2018


2019 over
2018

Number of auctions


54


53


2%


194


183


6%

Bidder registrations


223,800


171,500


30%


732,550


555,000


32%

Consignors


15,850


14,900


6%


58,850


53,950


9%

Buyers


44,350


38,500


15%


153,400


135,250


13%

Lots


117,650


103,500


14%


422,800


377,000


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 December 31

Year ended December 31,







% Change






% Change


2019

2018


2019 over
2018

2019

2018


2019 over
2018

Net income attributable to stockholders

$

51,573

$

35,486


45%

$

149,039

$

121,479


23%

Pre-tax adjusting items:













Share-based payment expense recovery


(4,078)


-


-100%


(4,078)


-


-100%

Deferred income tax effect of adjusting items:













Share-based payment expense recovery


688


-


100%


688


-


100%

Adjusted net income attributable to stockholders*

$

48,183

$

35,486


36%

$

145,649

$

117,669


24%

Weighted average number of dilutive shares outstanding


110,194,557


109,983,224


0%


109,759,123


109,388,236


0%

Diluted earnings per share attributable to stockholders

$

0.47

$

0.32


47%

$

1.36

$

1.11


23%

Diluted adjusted EPS attributable to stockholders*

$

0.44

$

0.32


38%

$

1.33

$

1.08


23%


(1)

Please refer to page 11 for a summary of adjusting items for the three month and year ended Decembre 31, 2019, and 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 securities, by the  weighted average number of dilutive shares outstanding.

 

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)

Year ended December 31,







% Change


2019

2018


2019 over 2018

Short-term debt

$

4.7

$

19.9


-76%

Long-term debt


645.5


711.3


-9%

Debt


650.2


731.2


-11%

Less: cash and cash equivalents


(359.7)


(237.7)


51%

Adjusted net debt*


290.5


493.5


-41%

Net income

$

149.1

$

121.5


23%

Add: depreciation and amortization expenses


70.5


66.6


6%

Add: interest expense


41.3


44.5


-7%

Less: interest income


(3.8)


(2.9)


31%

Add: income tax expense


41.6


31.0


34%

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*

$

294.6

$

257.3


14%

Debt/net income


4.4x


6x


(16%)

Adjusted net debt*/adjusted EBITDA*


1x


1.9x


(36%)








(1)

Please refer to page 11 for a summary of adjusting items for the year ended December 31, 2019, and 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*.

 

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)

Year ended December 31, 2019







% Change


2019

2018


2019 over 2018

Cash provided by operating activities

$

332.8

$

144.3


131%

Property, plant and equipment additions


13.6


16.9


-20%

Intangible asset additions


27.4


26.1


5%

Proceeds on disposition of property plant and equipment


(5.9)


(10.6)


-44%

Net capital spending

$

35.1

$

32.4


8%

OFCF*

$

297.7

$

111.9


166%








(1)

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

 

Adjusting items for the year ended December 31, 2019:

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.

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.

Adjusting items for the year ended December 31, 2018:

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.

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.

Cision View original content:http://www.prnewswire.com/news-releases/ritchie-bros-reports-fourth-quarter-and-2019-annual-results-301012842.html

SOURCE Ritchie Bros. Auctioneers