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Ritchie Bros. Auctioneers Inc. (NYSE:RBA)

Q2 2010 Earnings Conference Call

August 6, 2010 11:00 AM ET

Executives

Peter Blake – CEO

Jeremy Black – VP, Business Development

Rob Mackay – President

Rob McLeod – CFO

Robert Armstrong – COO

Analysts

Nate Borchmann – William Blair & Co.

Scott Stember – Sidoti & Co.

Ben Cherniavsky – Raymond James

Jamie Sullivan – RBC Capital Markets

Lawrence De Maria – Sterne Agee

David Wells – Thompson Research Group

Scott Schneeberger – Oppenheimer

Matt McGary (ph) – Sentinel Investments

Operator

Good morning. My name is Andrea and I will be your conference operator today. At this time, I would like to welcome everyone to the Ritchie Brothers Auctioneers Q2 2010 Earnings Conference Call.

(Operator Instructions)

Thank you. I would now like to turn the call over to our host, Mr. Peter Blake, CEO for Ritchie Brothers. Please go ahead, sir.

Peter Blake

Thanks, Andrea. That’s quite a mouthful. Hey, thank you. Good morning, everyone. Thanks for joining us today on the call today, Ritchie Brothers Auctioneers Q2 2010 Investor Call.

I’m Peter Blake, CEO of Ritchie Brothers. I’m joined on the call today, here in Vancouver with Bob Armstrong, our Chief Operating Officer, Rob Mackay, our President, Rob McLeod, our CFO and Jeremy Black, our Vice President of Business Development and Corporate Secretary.

Before we get to the business of today’s call, I would like to make a Safe Harbor statement. The following discussion will include forward-looking statements as defined by SEC and Canadian rules and regulations. Comments that are not statements of fact, including projections of future earnings, revenue, gross auction proceeds or other financial items are considered forward-looking and involve risks and uncertainties.

These risks and uncertainties that may affect our performance significantly or could cause our actual, financial, and operating results to differ significantly from our forward-looking statements are detailed from time to time in our SEC, and Canadian Securities Filings, including our management’s discussion and analysis of financial conditions, and results of operation for the period ended June 30, 2010 and subsequent quarters, which available on the SEC, SEDAR, and company websites.

Examples of these risks and these uncertainties include the supply of and demand for equipment, equipment values, the mix of equipment we sell and the impact of recent economic circumstances on our customers and their buying and selling patterns. Actual results may differ materially from those contemplated in the forward-looking statements. We do not undertake any obligation to update the information contained in this call, which speaks only as of today’s date.

I’d also like to note that during the call today, we will talk about gross auction proceeds, which represents the total proceeds from all items sold at our actions. Our definition of gross auction proceeds may differ from those used by other participants in our industry. Gross auction proceeds are an important measure we use in comparing and our assessing our operating performance. It is not a measure of financial performance liquidity or revenue and is not presented in our statement of operations.

The most directly comparable measure in our financial statements is auction revenues, which represent the revenues we earn in the course of conducting at our auctions.

Today, we plan to give you a quick recap of some of the topics from our previous conference call in July and some of the highlights of Q2 before opening the line to questions.

As you may recall, we talked in July about our GAAP being difficult to predict at the best of times and how the current economic environment has further compounded those challenges. As a result of ongoing challenges in our major markets, primarily in the United States, in July, we reduced our 2010 gross auction proceeds guidance to the ranges of 3.3 billion to 3.5 billion for the year and adjusted net earnings guidance to the range of 25% to 30% below 2009 adjusted net earnings. This guidance still stands.

I would like to reemphasize today that we believe this revised guidance is very much a result of factors arising from temporary timing issues and is not an indication that our business model or our ability to execute on our strategy are in question. Our long-term fundamentals are very much and our competitive mote remains very wide.

To recap, we believe our current situation is a result of temporary market conditions and while it is predominantly centered in the United States, we have also seen a moderate slowdown in transaction volumes in Northern Europe.

Equipment owners and creditors’ actions that we have experienced in previous down cycles are not yet materialized. Low interest rates, lack of confidence in the firmness of the equipment pricing environment, a lack of urgency on the part of creditors to react and liquidate assets as they have in past down cycles and equipment market participants waiting on the promised impact of government stimulus have contributed to this effect.

In addition, we have seen equipment owners express a high degree of uncertainty over the yet unannounced pricing for EPA (ph) for compliant equipment, which could cause used equipment values to increase in line with expected increases in new equipment pricing. The consequence of these factors is that many equipment owners remain reluctant to trade or liquidate their inventory currently. So, even though equipment maybe sitting idle or at best drastically underutilized, they’re choosing instead to hold on to their equipment until some of these uncertainties are resolved.

This is particularly acute in the U.S. market, where the dynamics remain challenging. I should add that we are not witnessing or experiencing used equipment being sold in any meaningful volumes through alternate channels or methodology. It is simply idle and not transacting.

Our adjusted net earnings for the first half of 2010 came into $38.2 million compared to 58.1 million for the first half of 2009. This translates into $0.36 per diluted share, which is consistent with our expectations for the period. The primary driver of the decrease in net earnings from 2009 was the shortfall in our gross auction proceeds, which were 1.7 billion for the first half of this year compared to 1.9 billion last year.

Our auction revenue rate for the first half of 2010 remain above trend at 10.81% and higher than last year’s rate of 10.70%. The phenomenon that we have discussed preciously about our auction revenue rate remains high in the phase of challenging GAAP environment and continued in Q2 as both our at-risk and our straight commission business performed well.

We were successful controlling our G&A in the face of decelerating GAAP, particularly considering the 6% increase in our headcount compared to last year. The biggest component of the increase in G&A was the effect of foreign currency translation.

We’d that quick recap; I’d like to ask the other guys on the call here for their thoughts about what’s been going on. So, Jeremy, maybe you can start by telling us what’s been on the mind of investors that you have spoken with lately.

Jeremy Black

Thanks, Pete. We’ve had lots of questions and seeing some commentary recently about our market share in light of the current challenges we are facing. This is an important matter to address today. Although there is no hard market share data to which we can point, based on an analysis of various information sources, it is our belief that we had been increasing our market share over the last 18 months for a number of key reasons.

First, there has been a meaningful decrease in used equipment values over the last two years, both at our auctions and through other channels. In addition, our experience points to lower transaction volumes over the same period as equipment owners have chosen to sit on idle equipment. Thirdly, OEM new equipment production and sales in the latter part of 2008 and much of 2009 contracted severely in some cases by as much as 60%, which means dramatically less equipment has gone into the market during this period of price and volume decreases.

On top of this, recent equipment data associates, UCC filing data has pointed to significantly lower volumes of equipment financing transactions during the same time, which further lend support to a contraction of the market. The end results of these various data points is that during this time of what seems like a significant market contraction, we have maintained flat gross auction proceeds, which suggest that we have been gaining share during this period of market contraction. We believe that’s an important factor to evaluate when judging our performance in 2009 and 2010 and our prospects for 2011 and beyond.

Rob Mackay would you like to add any comments about the market?

Rob Mackay

Thanks, Jeremy. There have not been any meaningful changes in the market since our last update, except that we are seeing more of what we talked about at our last call in terms of competition for late model lower equipment from participants who have not been very active over the last two years.

There have been increasing signs of OEM strength to slowly increase production and we expect that this will have a positive impact in the overall used equipment market. But in the meantime, competition is fierce for near new equipment. Some of that competition is coming from dealers and in some cases; they are purchasing this late model equipment for their rental plates. In other cases, they are taking this equipment into inventory because of uncertain OEM production and delivery times along with the potential for price increases and New Tier 4 for compliant products. These factors are further adding to the competitive nature of these segments of the market.

While we remain optimistic, it’s still too soon to say we are closed to turning the quarter in the U.S. market. A lot has to happen to give equipment owners visibility into the future and necessary confidents to make the equipment buying and selling decisions, and unfortunately, we don’t know when this might occur and it is very difficult to predict with any accuracy. We remain confident that our slowdown in sales and the contraction in the used equipment market, our timing issues and that are returned to a more state is inevitable. However, we share your frustrations and it’s tough to predict the timing of the catalyst for this return to normal.

Back to you, Pete.

Peter Blake

Okay. Thanks, Rob. It’s important to understand the complexities of the current used equipment market to appreciate the challenging conditions, we and other market participants are facing. However, let me assure you that we are not sitting idly by hoping for a changed to com. We are taking prudent steps now to ensure we are focused on performance in the near-term and setting ourselves up for success over the long-term.

These steps include prudent and properly timed investments in our infrastructure particularly auction sites from systems and a renewed focus on leadership development and insuring we have the right employees in the proper positions to help drive the company in the future.

Let’s switch gears here. Rob McLeod can talk about dividend announcement this morning.

Rob McLeod

Thanks, Pete. If you saw our earnings release this morning, you will have seen that we increased our quarterly dividend by half a cent per share. We thought long and hard about what is the right approach to take with our dividend given our expectations for lower earnings in 2010. Our dividend has increased annually since we started paying a dividend in 2003 and we have always maintained that our dividend will grow at a rate that approximates our long-term earnings growth. It has never been tied to annual earnings growth or a target payout ratio.

We’ve maintained this policy each year and after considerable internal debate and further discussion with the Board, we have concluded that it was appropriate to increase our dividend for 2010. Some might argue that this is not a prudent use of capital given the uncertainty in the market and our limited visibility for our GAAP over the next six to 12 months. However, we continue to be strong in that the current challenging market conditions we are facing are a temporary phenomenon. Although, we don’t exactly when the equipment market will return to a more balanced state, we are confident about our long-term growth prospects.

We recognize these are difficult times for our business, but our cash flow continues to be strong and is increased amounting to both 2.5 million in additional dividend payments annually is manageable. But most importantly, it sends a very clear message about our confidence in the robustness of our model and the validity of our strategy.

Let me talk briefly about another long-term concept. We have talked a lot in the past about operating leverage and our expectation that we will start to see improvements in our G&A expenses as a percentage of gross option proceeds. It is evident that this has not happened as expected and the main culprit has been the lack of growth of our GAAP in 2009 and 2010 combined with recent infrastructure investments. Our G&A growth has been planned and is controlled and we feel that we are spending wisely.

However, until our GAAP growth returns to more normal levels and our investments and facilities mature, we do not expect to see a meaningful increase in our operating leverage. The potential is still there and we truly expect leverage in the future. We just need to have GAAP growing again before we start to see some of the benefits of our recent efficiency initiatives and we’re not sure when that will happen.

On that note, Bob, maybe you can give an update on some of our initiatives in this regarding quarter 2.

Robert Armstrong

Thanks, Rob. We have been very busy this year rolling out a number of initiatives designed to attend the level of service we are offering our customers and to create efficiencies in our systems and processors.

A great example of one of these initiatives is our Timed Auction System. We’ve talked lots about this past call, so I won’t go into detail today except to say that this system has been more successful than we anticipated. As a result, we have accelerated our rollout plan and now expect to have the system up and running at the majority of our auction sites by the end of this year. This will help us deliver more convenience for our buyers, more value to our sellers, while allowing to be much more efficient in the sale of lower value lots.

I would like to talk about one other initiative currently in progress. Every year, we update our strategic plan to make sure it is still relevant and to reset our strategic targets for the ensuing year. It has been a few years since we undertook a thorough review of our plan, and we initiated a new strategy development process last year that we are currently in the middle of right now.

We’ve had some stimulating sessions with all of our senior managers and Board and have more to come and the process will culminate in the presentation of management’s plan to the Board for their further input before we rollout the plan to our full company in the fall. Although we are not necessarily predicting any major paradigm shifts in our business, we are excited about some of the new initiatives that are already on the table for consideration. This is a very healthy process to go through particularly during this GAAP challenged times and we are approaching it with our usual vigor and desire to set our company up for success over the long-term.

Rob McLeod

It’s Rob McLeod, again. While we’re talking about strategy, I’d like to update you on our CapEx plans for the remainder of 2010 and beyond. As we mentioned on our previous call in July, we’ve gone through our regular detailed review of all of our capital projects in the pipeline to ensure the timing of projects is still appropriate given the changes in our expectations for the remainder of this year.

As a result of this review, a number of projects both option site development and IT development have been delayed. The net effect of these delays is that we now expect CapEx for 2010 to be in the range of $80 million and for the time being, we’re looking at a similar level in 2011.

We have some important projects in the hopper (ph) waiting for the right conditions to proceed and we will continue to monitor projects closely to ensure we are making those prudent investment decisions while still being opportunistic.

Pete, back to you.

Peter Blake

Thanks, Rob and thanks again to all of you for joining us in the call today. Before I bring the discussion to an end and give you some time for questions, I want to briefly recap the main takeaways from today.

Adjusted net earnings came in at approximately $0.36 per diluted share for the first half 2010 in line with our expectations for the period. The Board authorized an increase in our quarterly cash dividend by 5% as a signal of our confidence in our long-term growth prospects and strategy and most importantly, our business model is very much intact. We are experiencing used equipment market conditions primarily in the USA that we have never seen before. This will undoubtedly improve as the economy returns to a more balance state, which we believe will allow us to return to more normal rates of growth.

We are well-positioned for future high margin growth and we hope that you don’t lose site of the fact that this is a temporary phenomenon and all evidence to us suggest that our long-term growth strategy is very sound.

We can’t tell you precisely when the used equipment market will bounce back, how fast it will bounce back or whether it will return to its previously of price and/or activity, but it remains our view that the used equipment market will get back on track and we are not planning any substandard (ph) course corrections.

We remain focus on making prudent decisions in the face of challenging market conditions to set our company up for success over the long-term and we look forward to sharing more information with you on our next call on November.

Andrea, can you please open the call to questions?

Question-and-Answer Session

Operator

(Operator Instructions) Nate Borchmann with William Blair & Company. Your line is open.

Nate Borchmann – William Blair & Co.

Hi. Good morning, gentlemen.

Peter Blake

Hello, Nate.

Rob Mackay

Good morning.

Nate Borchmann – William Blair & Co.

I want to talk just a little bit more about kind of maybe the competitive environment for used equipment. You touched on this in terms of where you’re seeing some of the equipment going, but yet still gaining some share. And you also talked about in the last call about that we should expect or expect the auction revenue rates to diminish a little bit sequentially because of some of the competition. But I was just wondering what extra you might be doing in the marketplace right now to be attracting some of that equipment to your auctions?

Robert Armstrong

It’s Robert. Obviously, in today’s market when the customer has the equipment to sell or bags of equipment to sell, he’s seeking what they believe to be more normalized returns and a lot of people still hanging back on pricing that we saw in ‘07 and ‘08. And the reality that most people are having is that we’re not going to return to those levels of used pricing.

Each equipment owner goes to the market today with his equipment and is seeking out the best available return to him and hence, goes to as many alternatives as he can to get offers on his equipment. It’s our job with each and every one of these guys to sell them on our model, our marketing, our global reach and our ability to extract the best prices.

Buyers very much today are comfortable when they go to the auction and compete against other bidders at a live auction or a combination of, and are comfortable with the prices that they’re getting. So, we have to sell through to our customers the fact that we can reach those buyers, we can attract them and we have over the last two to three years in this recession, increased the number of bidders that are in the (inaudible) at our auction theaters.

So, it’s ultimately comes down to, in many cases, who’s willing to guarantee these customers the best return or the best net or the best whatever for the value of their equipment. And so that’s based upon everybody’s view of the market and as we spoke about earlier, there’s increased competition, particularly on the late of model stuff from the dealer network out there today, who is more apt to go after late-model equipment and put in into their inventory to resell or in many instances, putting it into their inventory to rent. They’re taking a new machine off-the-shelf.

So, it’s who’s willing to stand up to the plate and offer these guys the most money based upon what they see in the current economy.

Nate Borchmann – William Blair & Co.

And kind of along those lines, are you seeing somewhat of an increase may be in some of those potential sellers wanting guaranteed deals from Ritchie Bros.?

Robert Armstrong

They’re interested in seeing what your number is. Lots of customers who want to see all your options because what they look at is what are you willing to put on the table as a guarantee? And if you’re comfortable in doing that, then the question for many of the sellers is, do I take the guarantee and pay the premium insurance rate for the commission? Or do I take a lower straight commission rate and take the risk myself.

And they want to see what you’re willing to guarantee to see how comfortable you are and if there is on each individual customer whether he’s willing to take the straight commission offer or take the guarantee.

Peter Blake

And hey, Nate, it’s Pete here. One of the things allowed to – the other player in the transaction typically is the creditor or the finance company, if it happens to hold interest in it. And most often, those individuals or the companies are looking for some specific coverage of the debt exposure that they may have and some of the challenges that we’ve talked about in the past facing these guys are they finance it when the equipment pricing was ‘06, ‘07, – very, very high pricing came off and lack of willing to take a haircut on this thing and not believing that, that pricing decline was real or sustained. They sort of sat and the weeds and waited, and we were not willing to step up and guarantee them numbers that we didn’t believe were achievable.

So, we said no to many, many deals in the last several months that we believe we’re not achievable because they were based on rates that were or equipment pricing that was driven in a higher market. Those guys today we’re seeing and weighting really that catalyst and what are the catalyst were waiting for is those people, the companies that hold the paper to become more normalized in their view of what the returns will be and when they look at their own balance sheets and try to rationalize where they’re headed, try to understand what exposure they have in that meantime, hopefully, that debt has been paid down a little bit further, so that difference between the exposed debt and the fair value starting to creep a little bit closer together.

Now, we’re to see, hopefully, some tipping over of some of those people that – okay, now, they will accept net proceeds or they will accept straight commission contracts or will accept the lower guarantee than they might otherwise want, but that’s where the market and it’s not going to be moving a whole bunch higher (inaudible) along.

Nate Borchmann – William Blair & Co.

That’s very helpful, I appreciate that. And is it fair to say that or surmise then that there has been a little bit more interest at least in terms of the percentage or number of potential buyers regardless of what category they come from that are at least trying to get a fixed bid?

Peter Blake

Confiners. Confiners, you mean?

Nate Borchmann – William Blair & Co.

Yes.

Peter Blake

When you say a fixed bid, you’re talking about a guaranteed concept.

Nate Borchmann – William Blair & Co.

Correct, sorry.

Peter Blake

I don’t think we’ve seen a higher propensity. Like Rob says, everyone is interested in trying to find out what kind of our number is. They’re shopping around, trying to figure out where their best deal is. In some of that near new equipment, you tend to get higher competition because it’s less available and the dealers that are out there that are also competing with us effectively in some of this iron (ph) that might for sale from an end-user. It becomes more competitive and that’s one of the reasons why we talked about – we would expect our auction revenue rates to be a little bit compressed from the lofty 11 point range that we have in past quarters. But nonetheless, we still believe will perform above our top end of our range for the year.

Nate Borchmann – William Blair & Co.

Fair enough. I’ll turn it over and get back in the queue. Thanks.

Peter Blake

Thanks, Nate.

Robert Armstrong

Thanks, Nate.

Operator

Your next question comes from the line of Scott Stember with Sidoti & Company. Your line is open.

Scott Stember – Sidoti & Co.

Good morning.

Peter Blake

Good morning, Scott.

Scott Stember – Sidoti & Co.

Could you just refresh us again on the plans for adding to your sales force this year? And maybe just talk about some of the gauges that you used to judge whether these investments are paying off?

Robert Armstrong

Joe, Bob here. We’ve come from a recent summer meetings and talked at great lengths about our sales force and really have focused our guys in on looking carefully at their team and seeing who’s producing and who’s not. And the intent for the balance of the year is to upgrade and add to the team when we deem that we’re focused on what we call a franchise player.

Obviously, you’re always looking to hire the best people. But in some of our areas today, predominately in the U.S., where they’re struggling in some of our yards, we’re slowing our higher in TMs unless they’re really good franchise players and we’re pushing our managers out in the field to take a look at their team. And now is the time to make some trades and do some upgrading.

Rob Mackay

And Scott, Bob here. The second part of your question was how do we measure, how do we gauge success in our CapEx investments. I’ll split that into two. We have our technology investments and our property investments being the two major categories, and we definitely look at the success or lack in each of those areas. On the IT side, project by project, there’s different metrics we follow.

Two just bring to mind our website that we recently launched. One of the best measures there really is simply traffic, numbers of searches, numbers of unique visitors and we’re quite excited to the second quarter this year, our most recent statistics. I don’t have the numbers in my hand, but we saw meaningful increases in all our traffic measures. We’re quite pleased with that. But our guess is that one of the main drivers of that is a significant enhancement in language capabilities on the website. It’s simply accessible now to a whole new category of potential customers.

The other IT project that we’ve mentioned on the call was our Time Auctioned Lot System, and one of the key measures for us to success on that one is the increased efficiency of the auctions. And we have at every single auction, where the Time Auctioned Lot Systems being used, we have been able to reduce or staffing because we have either moved from a two day to a one-day sale, literally half the staff level required because you’ve got half the days or we’ve reduce the number of – we call them rings, where auctioneer teams are working simultaneously. So, we’ve been able to leave people at home or send them home earlier in every auction we’ve used and that was one of the key objectives, so that’s great.

On the capital side, which relate to properties that are a bit harder to judge on a short-term basis. We take a much longer term view to the success or failure, if you like, of those projects. So long in fact that it’s rare that we would ever even concluded it to failure. We have a – for a very long-term horizon on these investments because their 20, 25-year projects, so the return spent at least a period of that time. But we definitely watched quite closely the growth in GAAP in the regions, not just at the site. Within the region that’s anchored by the site following the introduction of the new facilities.

And in almost all cases, we’re quite pleased. There’s no question we’ve had some challenges this year with GAAP and some areas and so that’s perhaps masked the ability of the sites to generate activity.

But in 2009, for example, I believe more than 10 of our sites set records for our largest ever auctions. So, we’re continuing to see good growth at our site investments.

Scott Stember – Sidoti & Co.

All right. So, just back to the sales force, obviously, in absolute numbers slowing down the additions, but more just trying to improve the quality of what you have?

Rob Mackay

Temporarily, yes. At some of the sites, some of our other sites, we’re still looking for those sites to add to the forecast the number of TMs that they start at the beginning of the year with.

An example is, for instance, Australia. We’ve had a nice growth this year in Australia and we’re still looking to add to that team. The other areas or the areas that are challenged by GAAP to date that we’re really evaluating it and in instances where we may decide that a plan TM should be put on the shelf for a while. We’re looking at replacing that with TTMs and TTMs are our Territory Manager Trainees. These are young guys that we go out and find that postsecondary educated. We’ve put them into a training program that pretty much starts in the yard and they learn everything from the ground up through one to two-year course, and we grow them into sales.

So, we may pause on in certain areas on the hire of a TM, but were looking to put TTM’s lower down into the ranks that we can grow out in one to two years.

Scott Stember – Sidoti & Co.

All right. Last question, with regards to the $80 million CapEx run rate for the next year and a half, what’s the implied number of new facilities to be added?

Rob McLeod

Scott, Bob. Within the $80 million, you’ll see some maintenance CapEx, you’ll see some IT, some cars that sort of stuff and probably we’ll be working actively on three or four projects. In terms of actual grand openings next year, maybe only one or two. It really depends on the timing of different projects.

You’ll probably see us open a few regional auction units though, which is a least site. They don’t have a major CapEx component, but they add a dot to the map, if you like. So, I can’t give you a strong number, nothing like the record pace of grand openings you’ve seen over the last two years that will stand out in the annuals of Ritchie Brothers’ history for decades to come.

Scott Stember – Sidoti & Co.

Got you. That’s all I have. Thank you.

Operator

Your next question comes from the line of Ben Cherniavsky with Raymond James.

Ben Cherniavsky – Raymond James

Good morning, guys.

Peter Blake

Hey, Ben.

Rob McLeod

Good morning.

Ben Cherniavsky – Raymond James

If you listen to a lot what we’re hearing from the equipment manufacturers and some of the dealers are, that even in North America, there’s an improvement in demand from machinery. Maybe not so much on an end market conditions, but replacement demand cycles seems to be kicking in as you guys obviously know, it’s been a long time since contractors have upgraded, re-fleeted, invested in new machinery and now they’re getting to the point where they’re more of that. This is at least what we’re hearing from a number of other sources.

A, do you guys see the same thing? And b, if so, why would that not be translating into turnover of the used market, where guys are trading in used for new?

Robert Armstrong

Hey, Ben, Robert. We’re starting to see it, albeit it’s what I would refer to as somewhat thin still. Some of the larger companies out there that we deal with, the multinationals or national companies in North America in particular, they’re starting to have a little CapEx available to them.

And yes, you’re correct, they’re starting to move out some of the older stuff that they’ve retained for an extra year or two years.

But I guess as part of optimism that we’re looking at here in the second half of the year is we’ve seen some of that activity. Our guys have been quite busy over the summer, inspecting and looking at equipment, starting to get more calls and discussions with some of our ongoing customers that are making the right comments. So, I guess that’s what’s giving us somewhat of the optimistic view that we’re seeing in the last half of this year. So, we’re just unsure of the quantum of the break up.

Ben Cherniavsky – Raymond James

Okay.

Peter Blake

Ben, that’s sort of one – that’s one of the catalysts. It’s Pete here. So, that’s one of the catalyst in that OEM sort of production and sort of turn CapEx interest in some of the equipment end users and dealers and what not.

There are lots of other catalysts that we’re waiting for to happen. And one of those being that there are still people sitting, waiting on Tier 4. They’re people sitting and waiting and realizing slowly, I think, that some of the stimulus spending, particularly in the United States base stuff is not the panacea that they perhaps hope it would be. So, there’s still seeing 10, 15 different guys bidding on a particular road or contract rich project whatever it may be, and that’s historically a high number. And when that number starts to come down a little bit and you start to see more normalized bidding of contracts, then that will be another indication that things are returning more to normal.

The interest rate environments still low. Some of the creditors, you’re seeing a – a very, very early signs that some of the creditors are starting to return to more normalized behavior and looking at harder at their portfolios and making decisions.

But Rob’s right, we’ve seen a little bit of that. I think we’re hearing the same things that you guys are hearing, but we’re just a little more cautious in our outlook. I think that might support a higher – that latter half of 2010 for us, and we’re trying to give you guys a range of what realistically where we can expect to see 33 to 35, we think is a fair range.

Ben Cherniavsky – Raymond James

Fair enough. One follow-up, if I may. Another thing that I heard from one contractor in particular, it just stood out as I think an interesting observation and I wonder if you guys could comment on it. Was he was (inaudible) viewed right now, it’s easier to get financing from the OEMs than the banks, and as a result, there’s a migration of transactions to the dealers away from the auction. Do you think that’s affected your business at all?

Robert Armstrong

Rob here, Ben. I don’t think so, no.

Peter Blake

And in fact, we haven’t seen that propensity for financing to be available through dealers easier than through other sources there. There are other competitive lenders out there today that are very aggressive in looking at the right kind of deal.

Ben Cherniavsky – Raymond James

Yes.

Peter Blake

And if there’s enough equity in it, their pricing them fairly sharply. So, there’s not – perhaps the change is, I think, there was a point in time or some of the OEM financiers stepped away from sort of their normal transactions and now maybe they’re returning to more a normal state.

Rob McLeod

If that was the case then, I think we’d be seeing pressure on the (inaudible) auctions and yet we’re continuing to have record attendance. So, I guess since just from customer behavior itself, the financing that’s not the concern.

Ben Cherniavsky – Raymond James

Okay, good. That’s helpful. Thanks, guys.

Operator

Your next question comes from the line of Jamie Sullivan with RBC Capital Markets. Your line is open.

Jamie Sullivan – RBC Capital Markets

Hi. Good morning. Thanks for taking my question.

Rob McLeod

Good morning.

Peter Blake

Hi, Jamie.

Jamie Sullivan – RBC Capital Markets

Just curious, as you talk to your banking and creditor customers, it sounds like what you’re hearing is, they need to either accept kind of lower than historical returns that they’re used to getting through the cycle or we need to see a real pickup in prices that get to those returns, or the debt pay down as part of the deal before they would sell. Is that kind of the moving parts there?

Peter Blake

Yes, there seem – I guess we’re seeing a bit of convergence in values. Values have come up. They came up in the early in the year. We’ve seen them sort of flatten off a little except for the nearer new stuff, still pretty supportive pricing there. So, I think a lot of it is just simply a realization that’s just where the market is right now, from the lenders perspective. And the lenders also have seen performing loans hopefully so that the debt levels are have come off to where they were before.

So, that convergence of debt level versus value of portfolio has started to narrow and I think it’s allowing lenders to make more prudent decisions around their portfolios today than they were maybe six or 12 months ago.

Jamie Sullivan – RBC Capital Markets

Right, but I guess that – I guess my question is more that could be kind of a slow process if the debt continues to get paid down, unless we see another acceleration in pricing. Is that right?

Peter Blake

No idea, I think it’s the individual lender by lender and it’s to me, it’s one of the many, many catalysts that are out there in the market today.

Robert Armstrong

Well, to add to that. For sure, Jamie, people could be waiting for better pricing. But I don’t think that’s the only thing that might trigger a change. They might also just decide it’s time to take their medicine, where you can only wait so long.

I suspect there is portfolio managers and loans officers out there right now who are not getting their bonuses here, they know it.

From a very personal level, I suspect there’s no motivation for them to crystallize any losses and lock in the fact that they’re not getting a bonus. So, they’re holding on and hoping. At some point, that changes, reality has to kick in and a decision gets made to take a loss and move along. That’s the kind of they we’re starting to get little whisk of right now. We’re seeing some banks making those tough decisions. It’s what normally would happen during a downturn and for some reason we’re seeing – I’m not going to call it irrational, but its unusual behavior on the part of the banks.

In part, they’re waiting for a day that may never come. But in part, they’re just – they’re looking at losses that are so large that they are scared. Eventually, they have to deal with it.

Peter Blake

And part of it also maybe their ability to absorb that loss and depending what their balance sheet looks like and whether they’ve been wisely building up reserves in anticipation of that as well, so it maybe their ability to make that decision to take that haircut.

Jamie Sullivan – RBC Capital Markets

Okay, that’s helpful. And then as you look out to the OEM production schedules, when would you think those would roll through to the dealer fleets to relieve some of that competitive pressure you’re getting from the dealers that are buying used equipment for a number of reasons?

Rob McLeod

Ask OEMs.

Robert Armstrong

You’ve got to ask the OEMs. Obviously, things we hear in industry, lots of OEMs are increasing production and I think many of them have got some challenges with their supply chains for the products that they’re building. And we only hear what we can from our customers that are out there buying and there’s some fairly lengthy delivery times now in some products out there in the markets.

And even up here in Western Canada in the timber industry, some of the manufacturers producing some of the timber stuff, they’re five, six, seven months out now on delivery of certain items. So, really it’s a question of how fast they can gear up their production and how fast their supply chain can feed them.

Jamie Sullivan – RBC Capital Markets

Okay. And then just one last question, just looking with the auction calendar and just trying to make some sense on a number of moving parts given that GAAP challenges this year. You have some increased efficiency coming in from the Timed Auction Lots and it looks like you’re having a number of extra auctions in the back half of the year at a number of sites, including some more mature sites like Orlando and Dubai.

So, just kind of wondering what the thinking is there? And how we should think about that? There might be some extra costs associated with marketing and whatnot?

Robert Armstrong

Well, we have options, Jamie, when there’s equipment available for sale and this year, you saw an additional auction in Orlando. And we’ve always tried to get our Orlando site to move from three to four sales a year.

The challenge in the past was, if you put the fall auction too late, people will linger in wait until the February auctions, so you can’t go too late in the year. So, you’ve got to put one in between the May and the October auction. And this summer, there was enough opportunity down there in the Southeast region that it was quite apparent that we could hold another auction, so that’s what we do. We scheduled one, slotted it in and had managed to collect a fairly decent sale together there.

Jamie Sullivan – RBC Capital Markets

Yes.

Robert Armstrong

Other opportunities that exist there come along day by day and we have customers that they’re still trying to maximize and if need be that they don’t want to haul their equipment down the highway, 300 miles to Ritchie Brothers closer site and they want to have an auction sale in their yard, we’ll satisfy their needs.

Obviously, when we have these smaller outside sales, we’ve got to focus it on managing our direct expenses for them. But we’re there to service our customers and when they want to have to the sale somewhere that’s other than in our yard, we’re there to look after them.

Jamie Sullivan – RBC Capital Markets

Okay. That’s all I have. Thanks a lot.

Peter Blake

Thanks, Jay.

Operator

Your next question comes from the line of Lawrence De Maria from Sterne Agee.

Lawrence De Maria – Sterne Agee

Thank you very much. Just curious guys, what gives you the confidence that equipment is not going through alternative channels? I know obviously market is not cooperating by looks like some of the other channels are growing at this point. So, if you could just address that and then I’ve got a follow-up, please?

Peter Blake

Yes, sure. It’s Pete here. Our guys are very tuned into competitive channels and what’s going on. You might look at the online as one opportunity. There’s the dealer channel as the other. We monitor numbers fairly closely. We watched IP and their effort to try and do an IPO and we haven’t heard much of that since March, so I don’t know what’s really going on there.

I think if you look hard at their numbers as we can and do, we see what they’re doing and I think you should look at their Q2 to get a sense of where – I think that will help you probably realize what is going on in the marketplace. If you think it’s slowing that way, then you might check a second go around.

Lawrence De Maria – Sterne Agee

Yes. No, I understand that, obviously, they had extraordinary growth in the first quarter of about 40%, I think. The numbers I’ve been tracking there are probably for growth – I don’t know mid to high single-digits, so I sense that they’re growing and I guess you’re arguing that they’re not taking market share away from you guys at this point, right?

Peter Blake

Yes, I think what we’re seeing – we’re competitive as heck on everything, so we’ll get that out there and start swinging with the best of them. Our number one job is to add customer valued and customers measure those lots of different ways. Some is full-service, some is process. Ultimately, it’s measured by net return.

And when we look at competitively, when we look at what we sell versus what another auction company may sell, whether it be an online guide or catalogs and services or whomever it may be and we get lots and lots and lots of examples that we’ve tried out in a customers to say listen, “Here’s a light item that we sold for X and they sold for Y, and it’s very similar and our numbers are better. For us, it’s a process of selling the value proposition that we put in front of these customers and helping them understand how much more they get for what they pay us.

Lawrence De Maria – Sterne Agee

Right.

Peter Blake

And in fact, I think if you look at the cost of what our fees are, in fact, they’re lower than some of these other guys that are out there quoting and reporting that they’re taking share away. I think we’d be obtuse to think we haven’t lost some element of business through other channels like the advent of the online or the advent of some other auction players. But for us, it’s interesting because auctions become more the standard way of transacting equipment. The more people who get in the industry – for us, to me I think it’s a huge blessing that that now we have an opportunity to really show people what value we add because if you’re the only guy out these doing it or the dominant guy out there with a whole bunch of other competition, people get a little bit complacent and it’s always nice to have a choice.

But now we can line up, look at our value proposition, show people what we do, show them the evidence of what we’re delivering them, and make them few even better than they already feel about what they’re doing. And also get people of center that might not even consider auctions. Now there’s two or three or four guys knocking on their door and all of a sudden auctions becomes more legitimized, more the standard of trading and I think that’s going to continue on into the future.

Jeremy Black

Yes, Larry. It’s Jeremy here. I might just add that it’s important to realize that the market is still very large. It may have contracted during a time when our GAAP has remains flat, but the market is still very large and you have to pick up on what Pete’s talking about. These other competitors’ help, as Pete said, legitimize the auction channel and allow the auction channel in general to take a bigger share of the market. So, there’s lots of room to play in the sandbox and we’re still there.

Lawrence De Maria – Sterne Agee

Right. And then on the pricing front, have you guys been more aggressive on pricing lately, lowering prices? In other words, to get more volume? And then obviously, like you got it Peter, I think you just mentioned, IronPlanet and others maybe are charging more than you guys are, but you don’t have the – your consignor’s don’t have the added cost of shipping per se, obviously, to your auction sites. So, how does that flow through and can you talk about the competitive pricing?

Robert Armstrong

Hey, Rob, here. Bob. We were aggressive. It’s a case-by-case deal. The late-model low-hour stuff that we always speak about, the prices for that type of stuff has been on the increase. So, obviously, we got to be more aggressive on it. There are lots of assets classes out there, late-model stuff that we haven’t sold for a while, so the big million dollar question is how high is the price? What is the market? And since it’s been quite a time since we sold some products and some product lines, it’s a bit of a guesstimate. But we are aggressive on any deal that were out there today that we believe is the right deal to be aggressive on, and some are more aggressive than others.

Lawrence De Maria – Sterne Agee

And that’s changed in the last month, two months, to become even more aggressive?

Robert Armstrong

I would say that it’s been like that from the beginning of the year. There are deals we work on earlier in the year that we got extremely aggressive on because they were the domino deal that we wanted to have. That built an option sale or was the catalyst to building a sale. So, we’re very aggressive on the stuff that we believe we have to be aggressive on.

Lawrence De Maria – Sterne Agee

Right. No, fair enough.

Robert Armstrong

Yes.

Lawrence De Maria – Sterne Agee

And then just finally, if I could ask, how Q3, obviously, you guys are not myopic folks and you’re viewing things as a long-term. The business is lumpy. Just curious how Q3 is tracking, I guess your comments a little while ago were that you’re optimistic on the second half, just curious how things are going so far because obviously we don’t get as much auction data as we used to get?

Peter Blake

Larry, its Peter here. I think I should chime in to it. It’s very early for us in Q3. We’re only into the first month being July, the lion share of many of the auctions that we are going to be holding are in September, latter part of August, so it’s pretty early. But we’ve given you guidance for the year. We’re comfortable that those numbers are within the range of our achievable and expectations and I think it will be folly for us to discuss just a few auctions in the July, where we see things heading because it’s a very, very small data point.

Lawrence De Maria – Sterne Agee

Okay. Thanks very much. Thanks, Peter.

Operator

Your next question comes from the line of David Wells with Thompson Research Group. Your line is open.

Peter Blake

Good morning.

Rob Mackay

David.

David Wells – Thompson Research Group

First off, just looking at the mood of the auction revenue rate from the first quarter to the second quarter, a 47-basis point decline or so, how would you think about that on a seasonally adjusted basis as we go into the back half of the year? Would you expect that to continue to moderate at a similar rate and I guess kind of tied to one of the earlier questions. But just trying to get a sense of it, if there were some unique factors that drove that here and if you like if we’re more sustainable in the nearer term at current levels?

Rob McLeod

Hay, David. It’s Rob McLeod. In the auction revenue rate in quarter two was still well above our expected range and as expected, that’s mainly due to the performance of the at risk business, as well as some strengthening in the straight commission business that we’re seeing as well.

I guess following on the Rob’s comments about being aggressive and being as aggressive as we need to be, we don’t have any illusions that, that at risk performance will continue at those rates over the medium and long-term. And as we say, we will be as aggressive as necessary to get the deals that we believe are the right ones.

Robert Armstrong

Yes. It’s Rob here. Maybe I can add to that. As we went into Q2, there’s lots of deals out there that have been lingering around for three to six months, and we have had contact with the owner and after numerous visits and a couple of tries of putting deals together, there are opportunities came along that we got a little bit more aggressive. There was an opportunity to get a deal and some of that stuff came through our egg (ph) world and the strength of the used equipment pricing the egg (ph) world had lag behind the constructions, so we felt little bit of that as we did a few egg (ph) deals in the second quarter, and there was a couple of other at risk deals that we chose to take on because we’re thought they were the right deals to get.

And a couple of them didn’t turn out as well as we anticipated, so we saw in Q2 a little bit of a downward turn in our at risk auction revenue rate. But, how we see that panning out in the balance of the year, will determine on what deals are out there and where we believe we need to be to get them.

Peter Blake

All that said, David, we’re still in the view that will be at or above our long-term guided range. We usually guide to upwards of –

Robert Armstrong

10.25.

Peter Blake

10.25 and we said that we’ll be performing above that range.

David Wells – Thompson Research Group

That’s helpful. And then kind of jumping back to this expectation that at some point, there’s idle equipment on the sideline that’s going to come to market, I guess if we look back at the downturn, how much of a contractors given the fleet was older equipment that they were – I mean were they more likely to liquidate that earlier and then the fleet that they did keep simply hasn’t been utilize a lot, so it still has a number of useful hours.

I guess I’m trying understand what the magnitude of that possible basket of idle fee that could be up there or is a lot smaller than it actually could be because of some of those dynamics from just simply aging out what you do have?

Peter Blake

That’s a great question. I don’t think there’s enough data out there for us to be able to answer the question. But just anecdotally, we didn’t see a whole pile of moving of any iron. The contractors sitting on stuff and waiting because these guys fleet according to what they believe their project appetite can hold and when projects are on hold or stimulus is around the corner, they don’t want to really get rid of anything. The odd piece is here or there, but a lot of guys didn’t even go through the proposal of trimming their fleet. They just sat with everything and it’s still parked and stuff in the yards that you wouldn’t believe. You drive around and see the stuff and it’s all there and you talked to the guys and they say, “We’re waiting.”

Again, there’s no real hard data point to go to. But I would suggest that as more of that happen then certainly, guys see trimming off their older fleet and keeping the new stuff, we hardly saw any of that. Rob?

Robert Armstrong

Yes. I guess every customer that we deal with is different. And early on in the declined we had customers that had a substantial fleet of equipment that chose to take the latest model equipment that they had and to dispose of it in order to do that and meet the debt payments, they would take four, five items that had debt and they’d take four or five items that had no debt then collectively put them together and sell them in the auction and (inaudible) what was required on the debt, and they would sit there with older equipment in their yards with literally no debt on it and be ready to bid on jobs at a lower cost point because the cost of the fleet was lower.

We had other customers that went through the boom cycle and had a whole beautiful yard full of nice equipment and it’s all financed. And they had little money in the bank and a decent relationship with a financial institution and they’ve chosen to just keep it parked, and they’re feeding the debt on it as required by the finance company. So, we’ve got lots of those customers out there today that are still sitting and waiting and some of them are reaching the frustration point because when they go to bid on these jobs, where they used to be two or three bidders. They’re now walking into the fender lettings and there’s 10 or 12 guys sitting in there. It’s very, very competitive so –

David Wells – Thompson Research Group

That’s helpful. And then last question, I’ll jump back in the queue. With the franchise players are adding on the sales force side, are you having to do some things more creative on a compensation basis to incant (ph) them to leave their prior shop and come over to Ritchie Brothers? If so, what kind of impact could that have on your margins here going forward?

Robert Armstrong

Nothing out of the ordinary. I would there’s a few tweaks here and there that we may look at, but a number of these guys we’re looking to hire, that are coming to us – in their current jobs, they’re working for companies that aren’t doing that well either. So, depending on their compensation plan at these other companies, which many of them is more commission-based than ours is, they’re not doing that well over there. So, they’re looking for opportunities that are out there and we’re not doing anything substantial out of the norm.

David Wells – Thompson Research Group

Okay, that’s very helpful. Thank you for your time.

Robert Armstrong

Yes.

Peter Blake

Thanks.

Operator

Your next question comes from the line of Scott Schneeberger with Oppenheimer. Your line is open.

Scott Schneeberger – Oppenheimer

Thanks, good morning. I was wondering if you guys could speak a little bit to Timed Auctions, you mentioned a very broad rollout by year end. Could you speak a little bit to quantifying the efficiencies you’re going to get there, and specifically the quantification I know added day in the field for sales folks? But how do you think about what benefit, that will be to the bottom line?

Robert Armstrong

Scott, Bob here. Three main benefits to the timed (ph) project. The one you’re (inaudible), I’ll go their last. The other two are customer related. Buyers are convenience greatly because they can now access these lots. All online as well as in person, the bidding period is open longer. The results has been that we’re getting far more bidder activity on the lots, which is great. The sellers are doing well because now they’re able to expose these lots to a larger range of bidders and on average; we’re seeing better pricing so that’s a good thing.

And then to your point, the third one is the Ritchie Brothers advantage and it shows up in both cost savings and we believe revenue – this time I’ll call it revenue potential because I can’t put a dollar on it, but we believe it should be significant.

On the cost side, I’m putting less people at my auction site. We’re able to stop with lower number, fewer auctioneers, bid catchers, clerks, good customer service in general. I’m able to get away with a lower staffing level either by reducing the staff auction total or by sending the staff home earlier. So, I have a direct benefit there to direct expenses, which is the line item we see it on. Not a material change, but over the longer term, you’ll see it will help us with the downward trending and direct expenses.

And then what I believe is likely the largest win of all, it’s what you (inaudible) yourself, leaving the territory managers, our frontline sales guys in the field rather than having them come to the auction, allows them to have another revenue producing day, and each day they’re out there, they’re meeting with customers. That’s one of the most critical assets we have as a company as the number of hours that our territory managers’ time, anything that guys is doing that doesn’t involve sitting cross the desk from a customer is time that could be better spent.

So, if he is working at auction or if he’s on an airplane or he’s at a training course or on anything like, and he’s not with a customer, we better be really sure that’s valuable time. And I can cut a couple of days out of his months of working at auctions and then leave him in his territory, that’s a huge win. I can’t put a number on it because I don’t know whether he’s actually going to sign a contract that day. But territory manager productivity is one of the key metrics for our company and this tool will assist us to increase that.

Scott Schneeberger – Oppenheimer

Okay, thanks for that. I’m sorry. One other factor, the rental companies, they’ve been de-emphasizing use of the auction channel and I’m just curious are you seeing that in practice? Are your relationship managers witnessing the same? And what are they hearing directly from those in the rental companies involved with auctions? And this is not only on the selling side, but also just what you’re seeing from them on the buying side as well? Thanks.

Robert Armstrong

I don’t know that they’re – it’s Robert. I don’t know that they’re de-emphasizing it. The rental companies, the big guys have always had a multitude of channels to dispose of equipment. First and foremost, if they can sell it themselves, it’s their choice. But down from their, they have alternatives.

As we’ve seen during the first part of the year, many of the rental companies’ disposals have declined. Their CapEx has declined so they’re keeping their assets longer and renting them longer. And so the business that we’ve done with many of them has been down this year.

We’ve got a couple of them in our businesses have been up. So, as we go through towards the end of the year, I suspect they’re going to have a requirement to move some other assets off their books and hopefully, through our sales force and our relationships with these guys, that we’re going to be the catalyst if they used to be.

Peter Blake

It’s Pete here, Scott. One thing I’ll point out as well and we point out to the rental companies with great love and affection is that typically, when we get equipment from them, it’s already an attempted to be sold by themselves through their own retail channel websites or whatever it is. And sometimes it’s 90 days, 120 days and if they have 10 live items, where they’re able to sell five or six or seven on their own, then they give us the other three. There’s a reason they’re giving us the other three, usually the condition of those units are as likely not as shiny new as in operable as the others. So and then they line up the average price that we got for our three or four versus the average they got for their six and they say, “Look how good we are versus how good the auctions are. Our clear preference is to sell it ourselves.”

So, it’s a little bit of apples and oranges and we’re always mindful to gently point out to our customers that that in the fact is really what we’re seeing in what’s happening. So that’s also a – it’s a selling point for us to get across to these guys. We do – on occasion we do get direct items right off their fleet right to the yard, and we’re able to perform – if we get it in time, we can do our proper marketing and if refurbish is necessary, we can take care of that for them as well, if they choose. And then we end up getting pricing that, I believe, is very attractive.

They have so much fleet and they end up doing analysis by averaging because that’s really the only human way that you can with the thousands of items that they’re selling. So, we’re mindful that that’s a challenge for them, but also mindful that we have to point out to them, we believe there may well be a none-level playing field that they try not to compare what we do versus what they do in the retail side. Just a takeaway for you.

Peter Blake

Hey, Andrea. We probably have time for one more question and then we should wrap it up.

Operator

At this time, your last question comes from the line of Matt McGary (ph) with Sentinel Investments.

Matt McGary – Sentinel Investments

Good morning, guys or good afternoon almost. Could you just remind me of what your thoughts are and if we step back a little bit, just on free cash flow? You guys have been spending aggressively the last few years, except for this year I guess, but when you step back and look at your business maybe in the next five to 10 years, is it reasonable to assume we should see some significant ramp in free cash flow? And Just sort of talk about how CapEx spending works in your business? Is there leverage to be gained as you go bigger on the top line?

Rob McLeod

Hey, Matt. It’s Rob McLeod. Yes, you are correct, the model does have free cash flow ramping up probably in 2011, 2012, beginning in that. And the CapEx, as Rob had said, our levels of CapEx in 2008, 2009 when we look back, will be a record years of CapEx. So, we’re not expecting to have CapEx in the $150 million range which, obviously, has a direct impact on the generation of free cash flow.

So, yes, the expectation is for free cash flow to be ramping up certainly over the next five years for sure.

Matt McGary – Sentinel Investments

And then do you think about – I mean is there a reasonable way to think about – I’m sure maintenance CapEx is sometimes a hard number to get to, but can you think about it in terms of percentage of revenue? I’m not asking you to pinpoint the target, but just kind of how you think about things in the longer-term where do you want to see your sort of capital efficiency?

Rob McLeod

I think that really the main drivers for our capital expenditures will be auction sites, and so the amount for IT projects or for maintenance CapEx is going to be a small portion of it. So, how much we spend on new auction sites is really going to be – it seems to be getting faster. If we continue, which we will with the expectation of about two new auction sites a year, you’re not going to have $150 million of CapEx going forward. So, two new auction sites a year with some replacements, so it’s a relatively modest CapEx compared to our recent $150 million level.

Matt McGary – Sentinel Investments

Can you give me a ballpark number what it cost to open a new site? Let’s say I understand and obviously, they vary quite a bit.

Robert Armstrong

Matt, its Bob. The average cost right now is averaging sort of in the $15 to 25 million range per site and a very wide range because of a number of different factors. My guess is, that we’ll be spending well under $100 million for the next few years, and that should translate into meaningful free cash flow within a very short period of time.

Matt McGary – Sentinel Investments

Great. Thanks, Bob.

Peter Blake

Okay, thanks. Thanks, Matt and thanks to everyone for joining us on the call. We look forward to chatting to you again for our Q3. And in the meantime, Las Vegas is on and we’re about to get back to work here. So, thanks.

Operator

And this concludes today’s teleconference. You may now disconnect, and have a great weekend.

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Source: Ritchie Bros. Auctioneers Inc. Q2 2010 Earnings Call Transcript
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