RB Global Inc (RBA) 2003 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Ritchie Brothers Auctioneers 2003 quarter two earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. As a reminder, this conference is being recorded, Wednesday August 6 of 2003. I would now like to call the conference over to Randy Wall. President and Chief Operating Officer. Please go ahead, sir.

Thank you, Tammy. Good morning, everyone. And welcome to the Ritchie Brothers Auctioneers investor conference call. Today we will be talking about the results for the three and six month period ended June 30, 2003. I'm Randy Wall, President and Chief Operating Officer of Ritchie Brothers. I'm joined by Peter Blake, our Senior Vice President and Chief Financial Officer; by Bob Armstrong, our Vice President of Finance; and by Dave Ritchie, our Chairman and CEO.

Our presentation will take about 20 minutes, and then we'll accept your questions. At this time, I would like to make a safe harbor statement. The following discussion will include forward-looking statements within the meaning set out by SEC rules and regulations. Comments that are not statements of fact are considered forward-looking statements.

These statements include comments about projected future results and performance, among others. Our actual results may differ materially from those projected in this discussion. Additional information concerning factors that could cause such a difference is included in our periodic filings with the SEC. I would also like to remind listeners that during this call we will talk about gross auction sales, which represent the total proceeds of all items sold at company auctions during the period.

Gross auction sales is not a measure of revenue and is not presented in the company's GAAP financial statements. Auction revenue is the top line of our GAAP statement of operations, and it represents the revenue earned by Ritchie Brothers. The main components are commission income and the net profit or loss on the sale of equipment owned by Ritchie Brothers. I'm pleased to report that Ritchie Brothers has achieved another record breaking performance during the second quarter of 2003. Which follows on the heels of the first quarter's records. With six months complete, 2003 is shaping up to be another outstanding year for the company.

For the six months ended June 30, we realized gross auction sales of $804.5 million, auction revenues of $84 million, and net earnings of $ 21.9 million, which are all new records. During the three months ended June 30, 2003, we recorded the highest quarterly gross auction sales and auction revenues in the company's 40-year history. We're very pleased with this accomplishment. I'm also happy to report that our board of directors has declared a quarterly cash dividend of 15 cents per common share. Peter will talk more about the details of the dividend.

But let me say that it was a carefully thought out decision, because we did not want to impair our ability to grow our business. However, the confidence that we'll be able to generate enough free-cash flow and fund our growth strategies going forward, and still return cash to our shareholders. We believe that our results for the three and six months ended June 30, 2003 demonstrates the benefits of our investments over the last few years in people, facilities and infrastructure.

Although we're proud of what we've accomplished to date, we remain focused on several areas, including our productivity and efficiency, delivering first-rate customer service, and growing our margins by taking advantage of our operating leverage. From our perspective, there is little change in the global economic situation during the second quarter of 2003. Although there was was more clarity in the Middle East during the quarter, that situation continued to cause economic uncertainty, as well as opportunities. In addition, although there may be some signs of improvement in the United States economy, the construction sector still appears to be in a state of economic weakness.

Interest rates have remained low and the U.S. dollar has fallen considerably. Despite this general environment of economic weakness, Ritchie Brothers produced record results, which we believe demonstrates the strength of the business model and our strategy of operating in many different markets and regions. We continue to believe that our reputation for honesty and fairness and our commitment to the unreserved auction process, together with our worldwide presence, have allowed us to repeatedly achieve new performance records. In the first half of 2003, over 91,000 bidders registered to bid at our auctions. This represents a 17% increase over the number of registered bidders in the first half of 2002.

These bidders were competing for almost 83,000 lots consigned by nearly 11,800 consigners, which were increases of 9% and 12%,respectively, in our experience in the first half of '02. In the last few years, we've been experiencing considerable momentum in our business, which is evidenced by our ability to continue to attract increasing numbers of bidders and consigners to our auctions. We hope that our focus on customer service will fuel this momentum.

We feel that we offer a first-rate, high value auction experience that will continue to be attractive to existing and potential businesses that are bidders and consigners. And our experience has shown that as we attract more bidders and continue to grow our customer base, we're able to attract more consigners and more equipment, which in turn attracts more bidders and so on. We plan to stay focused on our customer service objectives and we expect this will help us deliver strong results in the second half of 2003 and on into the future. This momentum feeds well into our strategy of exploring our operating leverage to grow our business, because a high number of bidders and consigners are what allow us to truly benefit from our extensive network of modern auction sites. We're able to hold larger auctions, and in some markets, more actions, generating more revenue without an equivalent increase in costs.

Our global presence also allows us to to take advantage of opportunities to hold auctions in new regions and enter new market segments as new markets emerge, also without a significant increase in costs. We expect these factors to translate into further growth of our business and profitability for the remainder of this year and in the years ahead. In our last conference call in May, we talked about expecting more growth in Europe and how our Canada operations had achieved strong results in the first three months of 2003.

I can now report that our operations in Europe have continued to perform well in the second quarter this year. We're expecting this pattern to continue for the remainder of 2003, with Europe posting healthy gross auction sales and revenue growth. Our Canadian business is now benefiting from the results of our APA agricultural division, which was formed in August of 2002 when we acquired the assets of all piece auctions in Northern Alberta.

The second quarter of this year was the first quarter to feel the impact of the APA agricultural division. During the quarter, this division conducted 23 agricultural auctions and contributed strong earnings to the company's consolidated results. Bob will talk a bit more about the results. But I'll say we are pleased with what has been accomplished in this division, and we're looking forward to growing that side of the business.

Before I hand the call over to Peter, I want to reinforce to our shareholders and other listeners that we intend to remain focused on our objectives and not let what we believe are impressive results cloud our drive to remain the preimminent industrial auctioneer in the world. We are committed delivering a compelling value proposition to our stock holders and to our customers, and we will accomplish this by continuing our improving growth strategy of steady controlled growth and paying attention to the details, providing excellent customer service, and recognizing that we have only a small share of the enormous and highly fragmented used equipment market. To achieve our goals -- to achieve our goals of an average 10% top line growth and 15% bottom line growth, we must remain mindful of the key principles I've discussed today. So far, it is working and we intend to do what we can to keep moving forward. Let me now turn the call over to Peter Blake, our CFO.

Thanks, Randy. Good morning, everyone. I hope you've all seen the press release we've issued this morning. The numbers that form the basis for the discussion that follows are contained in that press release.

Let me remind everyone that all dollar amounts referred to in this call and in our press release are stated in U.S. dollars. Before I get into the detail of our performance, I want to mention a factor that impacted our results in the first half of 2003 more than in the past three years. Ritchie Brothers conducts operations on a global basis and in a number of different currencies, but our reporting currency is the United States dollar. Approximately 30% of our revenues and approximately 40% of our operating costs are denominated in currencies other than United States dollar.

As a result, material fluctuation in foreign exchange rates can impact the presentation of our financial positions and results of operations. The main currency other than the United States dollar in which our revenues and operating costs are denominated are the Canada dollar, the Australian dollar and the Euro. In the past, fluctuations in the value of these currencies have not had a material impact on the presentation of our results of operations.

So we have never referred to currency swings when discussing our financial information; however, in more recent periods, there has been a significant increase in the value of these currencies versus the United States dollar. It is difficult to identify the precise impact of these currency fluctuations because changes in currency impact aspects of our business beyond simply the mathematical translation of our financial results. The influence equipment flows between different countries.

The purchasing power of buyers. The motivation of consignors, the value of equipment and more. As a result, it is impossible for us to precisely identify the effective currency fluctuations on our business and financial results, however, we believe that the overall impact on our financial results has been roughly neutral. During our last conference call, we indicated that we were expecting gross auction sales for the second quarter of 2003 to be in the range of $460 million. Gross auction sales for the quarter came in at $463 million.

So far this year, we have generated total gross auction sales of $804.5 million, which is about 14% hirer than in the first six months of last year. The increase over the prior year is mainly the result of higher gross auction sales volumes in Canada and Europe, combined with the effect of the currency fluctuations discussed previously.

One change from last year that explains part of the growth from 2002 is our APA agricultural division, which was formed in August of 2002. Due to the seasonal nature of the farm auction business, the majority of this division's volume is generated the second quarter. The financial results of this division, as well as some incremental industrial business, we're now doing [INAUDIBLE], contributed to the 2003 increase over the Q2 totals. Auction revenues for the second quarter of 2003 were $47.7 million.

And for the six months ended June 30, 2003, auction revenues totalled $84 million ,which is a 23% increase over the equivalent period in 2002. The growth in auction revenues can be attributed to several factors, including increased gross auction sales and a higher auction revenue rate. Our auction revenue rate for the second quarter was 10.29% this year compared to 9.39% in 2002. For year to date in 2003, our auction revenue rate was 10.45% compared to 9.64% last year.

Our underwritten business, which is made up of guarantee contracts and the net profit or loss from the sale of inventoried packages, performed better in 2003 than compared in the 2002 period. And this contributed to the stronger revenue rate in 2003. Bob will speak our great expectations for the rest of 2003 later. Direct expenses, which are comprised of the cost incurred specifically to hold an auction, were 1.46% of gross auction sales for the second quarter of 2003. And 1.42% for the year to date. This compares to a direct expense rate of 1.47% in Q2 of 2002. And 1.41% for the six months ended June 30, 2002. Our expectation discussed in our last conference call was for a rate of 1.45%.

The direct expense rate is influenced by the size of auctions held in a particular period. And by whether auctions are held at permanent auction sites, regional auction units or an off-site location. Larger sales and sales held in permanent auction site generally result in a lower ratio of direct expenses to gross auction sales. General and administrative expenses were $17.3 million for the second quarter of 2003. And $33.9 million for the six months ended June 30, 2003.

These figures represent increases of 10% and 7% respectively over the same period of G&A in 2002. Depreciation was $2.9 million in the second quarter of 2003. And $5.5 million for the first six months of the year. Depreciation increased in 2003, primarily as a result of depreciation of new auction facilities constructed over the past few years and increasing charges related to capitalized software development costs. During the second quarter of 2003, we incurred interest expense of $1.4 million. And for the year-to-date interest expense totaled $2.3 million.

These amounts are in line with our estimates for the quarter and slightly ahead for our year-to-date. Interest expense in the first quarter was offset by the recovery of approximately $600,000 of accrued interest in connection with an outstanding tax issue that was resolved in the first quarter. Interest expense increased in 2003, partly as a result of lower capitalized interest compared to prior years. Other income was $164,000 for the quarter. And $447,000 for the six months ended June 30, 2003. Both figures are significant decreases from the prior year.

The 2002 balance included a gain on the sale of redundant property in Q2 of 2002 of about $1 million, or about $800,000 after taxes. Our income tax rate for the quarter ended June 30, 2003 was $32.8%. And for the year to date was 30%, which is marginally above our full year guidance. Our tax rate fluctuates based on where we earn income. Some tax jurisdictions in which we operate and earn income have higher income tax rates and some have lower.

So far in 2003, we have had higher earnings than expected in some of those higher rate tax jurisdictions. Net earnings for the second quarter of 2003 were $13.1 million. Or 77 cents per diluted weighted average share. For the six months ended June 30, 2003, we had net earnings of $21.9 million, or $1.29 per diluted weighted average share, which is about 36% ahead of last year. The main factors to consider when comparing our 2003 and 2002 results are the higher gross auction sales and the improved auction revenue rate.

David is going to talk more about our recent property development activities. But I would like to make a few comments about our capital expenditure in the second quarter of 2003, and update you on our cap ex plans and expectations for free cash flow for the remainder of 2003. Cap ex for the second quarter of 2000, including maintenance cap ex, was $3.3 million. The expenditures during the second quarter of '03 relate to various items, including investments in automobiles, software development and other items, as well as costs related to the completion of our new permanent auction site in Prince George, British Columbia. We still expect that we will incur gross cap ex for the full year in the range of $10 to $15 million. And maintenance cap ex in the range of $5 million, for total expenditures in the range of $15 to $20 million for the full year.

In the first quarter, we acquired land in Sacramento, California, which we intend to develop into a permanent auction site. We're still looking at several other opportunities in the United States. We are reiterating our guidance for free cash flow after estimated cap ex and scheduled debt repayments for the full year of 2003 to be in the range of $15 to $20 million. Based on this and our expectations for growth and precash flow in 2004 and future years, our board of directors has declared a 15 cent per share quarterly dividend.

This will result in a dividend payment of about $2.5 million in October of this year. We're still commitmented to reinvesting in the business. And we feel that the dividend yield we have started with will allow us to achieve our growth targets and take advantage of opportunities to grow the business as opportunities arise. We expect that this dividend is the beginning of a regular quarterly dividend program, and we anticipate that our next quarterly dividend will likely be paid in December of this year. Now I'll turn the call over to Bob Armstrong, our Vice President of Finance.

Good morning. I'm going to update our guidance for the remainder of 2003. In our last conference call, we indicated we were expecting gross auction sales in the range of $1.56 million for 2003. Based on our performance in the first six months of 2003, we would like to reiterate this guidance for the full year, which represents a growth rate of approximately 13% over 2002's gross auction sales. We believe that with our results today, and based on recent forecasts provided by our regional managers, that we should be able to realize this level of growth in 2003. Third quarter gross auction sales should be in the range of $290 million or about 19% of the annual total.

At this time, it is probably reasonable to assume that the fourth quarter will represent approximately 30% of our annual sales volume. We will offer more specific guidance on these numbers in our next conference call. We've now completed seven quarters with auction revenue rates above our expected average rate. As we do on a regular basis, we have analyzed the components of our auction revenue rate, and have determined that we are now achieving a sustainably higher auction revenue rate. We now expect our average auction revenue rate to be in the range of 9.5%, which is 20 basis points above our previous expected rate of 9.3%.

The underlying reasons for the higher expected average auction revenue rate related to increased values of our services and our ability to recover the costs delivering those services. There are several key factors that we believe contribute to this increased value. First, the maturity and experience of our sales force. Between the beginning of 1998 and 2001, we increased our sales force by almost 70%. It typically takes between two and three years for these individuals to develop the skills and experience necessary to deliver the desired level of productivity and customer service.

The majority of the employees added in the last five years are now reaching that level. Second, the expansion of our network of auction sites. Since the beginning of 1998, we've increased our auction sites from 21 to 29 sites around the world. We've invested approximately $180 million in facilities and infrastructure over this period, building new sites and upgrading old sites. These modern auction facilities offer more amenities for bidders and allow us to hold larger auctions.

The size of the network is more also more appealing to consigners. There are more auction sites to choose from. Which means lower transportation costs and improved convenience. Third, larger bidder audiences. Improved auction facilities and customer services, combined with more and larger auctions, have attracted an increasing number of bidders in recent years. The introduction of the RB Auction Bid Live Internet bidding service has contributed further to this trend. Larger bidding audiences are more attractive to consignors.

And finally, the benefits of our internet initiatives. Over the last years we have invested in new and improved Internet tools for use by our customers. The result of these investments has been a higher level of customer service. We believe that these underlying factors have increased the value of our offering.

This higher value service, combined with our initiatives to recover some of the costs of enhanced customer service, has allowed us to achieve a higher overall auction rate that we now believe will be sustainable. We still expect quarterly fluctuations. But I expect the average rate to be in the range of 9.5% going forward. We continue to expect direct expenses, being the cost specifically related to particular auctions, to be in the range of 1.45% of gross auction sales for the remainder of 2003.

We are increasing our guidance for general and admin expenses for the full year 2003. In our last call, we indicated that G&A would likely be in the range of $66 million for the year. Based on the results to date in '03, I would like to increase this guidance to be in the range of $68 million for the full year of 2003. We are increasing our guidance in part due to increased bonus accruals, reflecting the strong earning growth that has been achieved. Full year depreciation expense in 2003 should be in the range of $11 million, consistent with our previous guidance. As I stated in our last call, depreciation will be charged roughly equally throughout the quarters in '03, but increasing slightly through the year as a result of depreciation on new buildings and equipment coming on-line.

Depreciation will also be higher than in prior years as a result of continued growth in capitalized software. Interest expense for the full year 2003 should be in the range of $5 million. Interest will increase over 2002 levels, as we expect to be capitalizing less interest of property under development in 2003. We discussed previously an income tax rate for 2003 in the range of 27 to 28%. But depending on the tax jurisdictions on which our earnings will be earned for the remainder of the year, our tax rate may end up being higher than this, as we saw in the second quarter.

This rate is becoming difficult to predict. But the full year rate may end up being in the range of 29 or even 30%. Before I hand the call over to Dave, I want to give you an update on our RB Auction Bid Live Internet bidding service. We've continued to see growth in the use of the service in 2003, and by all accounts it has been an unqualified success.

In January of this year, we introduced a modest fee, applicable only to [INAUDIBLE] using the service. This fee does not appear to have any impact on users of the service. Both buyers and consignors of equipment appreciate the advantages of RB Auction Bid Live, and this tool is becoming a significant competitive advantage for Ritchie Brothers. Internet bidders are bidding on up to 40% of the items being offered on-line. And are already buyer or runner up of approximately 15% of velocity offered over the Internet.

This means that Internet bidders are having a positive impact on the prices of a significant portion of the items we sell. Our sales over the Internet for the first six months of 2003 were over $77 million. Which brings our cumulative sales over the Internet to date to over $150 million. And now I'll pass the call over to Dave Ritchie.

Good morning. I'd like to speak briefly about our property development activities and give you an update on the used equipment market. We are committed to a steady expansion program that will see us add one or two sites a year over the next several years. I've already told you about our new regional units in Spain and Melbourne, Australia, as well as as the opening of our new facility in Prince George.

Things in Sacramento, California are continuing to progress and we're working on getting the necessary permitting in place so that we can begin construction. I'm eager to get going. I truly believe this is a very big opportunity in this market. We hope to complete the site in mid 2004. As I mentioned before, we are still looking for other new properties in the United States, as well as internationally.

I have my eye on one or two regionals in particular that I think we could do very well in. And I hope to add another property in the United States later this year. Or maybe even early 2004.

Although the pace of our expansion is not going at what it was in the last five years, we are going to continue to look for opportunities to increase our presence in the market. We already operate in -- to get into the new regions where we don't operate. This rate of expansion should be more than sufficient for us to achieve our growth target. I won't say much about the prices for used trucks and equipment, other than to say the prices have remained firm across most categories of equipment.

We sell more used trucks and equipment than anybody else in the world, so we have a very good feel for the prices and trends; and as has happened before, the used market in holding up well, even while demand for new equipment is under pressure. And the world is facing all kinds of economical and political uncertainty. From our perspective, supply and demand appear to be well balanced for the most part. And prices have been steady in most categories of the equipment.

There will always be pockets of weakness in a used equipment market. But we stand by our belief that the value of well-maintained, late-model used equipment will remain strong in the years ahead, and so far results of our auctions have supported this view. I'll now turn the call back over to Randy.

Thanks, Dave.

As I noted earlier, there are lots of opportunities for Ritchie Brothers in the industrial asset markets. The challenge for Ritchie Brothers is to take advantage of these opportunities and to expand in related markets where we can create value for our customers. Our plan to is to grow the business by developing more and deeper relationships with equipment owners, by introducing more people and more industries to our unreserved auctions, by continuing to expand internationally, and by continually improving the service we provide so that the value proposition we offer to both consigners and buyers remains compelling. Ours is very much a relationship business.

We understand that our service does not sell itself and that our team of sales representatives and administrative personnel need to provide the very best customer service in order to support our growth objectives. We're fortunate to have a strong and dedicated team and I'm confident about our future.

Before we open the call to questions, I would like to recap the main points we covered on this call.. Firstly, we ended the first six months of 2003 with gross auction sales of $804.5 million. And net earnings of $1.29 per diluted share, a 14% increase in gross auction shares and a 23% improvement in earnings over our results for the first six months of '02. We're expecting further growth in gross auction sales for the remainder of 2003. And have reaffirmed our target to the $1.56 billion for the year.

Secondly, thanks to the infrastructure investments of prior years, we have significant operating leverage, which is driving improvements in our margins, earnings and cash flows. Over the next several years, we'll continue to work toward average top line growth in the range of 10%, which should translate into average earnings growth in the range of 15%. Thirdly, we have increased our expected average auction revenue rate from 9.3 to 9.5%, which recognizes the enhanced value we're delivering to our customers. Finally, the used equipment market is facing changes and uncertainties that are creating market opportunities for Ritchie Brothers. The market opportunity in front of us right now is huge, and we have the operating capacity and operating levers to go after it. Now we would be pleased to answer any questions that you have, and Tammy, if you would please open the call to questions.

Thank you. Ladies and gentlemen, if you would like to register a question, please press the one followed by a four on the telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, press the one. If you are using a speaker phone, please lift your hand set before entering your request. One moment, please, for the first question. Your first question will come from the line of Ben Cherniavsky from Raymond James. Please proceed with your question.

Good morning, guys.

Good morning.

Well, I was going to ask you when you were going to implant your dividend, when you were going to get double digit gross auction sales growth. And fortunately, I don't have to bug you about those things. And congratulations on an outstanding quarter. It looks like everything went very, very well for you and you've got some momentum here. But I do have some questions, maybe that you can elaborate on. One is just, Peter, you mentioned the currency impact in the quarter as being neutral. But I just wonder if you can go over that again. Because it also sounded like you said there were more materials than ever currency issues in the quarter. But that meant it was -- the U.S. dollar was neutral. Maybe I just didn't hear that correctly. What was the impact of the U.S. dollar? Even though I recognize it is difficulty to precisely quantify?

Sure. Maybe Ben -- we have lots of discussion about this, because it was -- for the three-month period, the currency movement was more dramatic than we've seen in a long, long time, with the U.S. dollar weakening. Maybe the best way to illustrate it is by example. And typically, when the U.S. dollar, and the periods when the U.S. dollar was strengthening, we saw some reaction in the marketplace because of operating in so many jurisdictions. We would see a lot of U.S. buyers in markets other than the United States.

Example, Canada. Probably the easiest example to use a Canada, because it is so close to each other. You see a lot of buyers in the auction. They would typically be driving the price of equipment higher because they are competing with the local markets. And in the last three months, we saw a reverse of that, where fewer U.S. buyers were attending Canadian auctions; compounded with that would be much of the product that is sold is Canada is produced in the United States.

So the conversion of the new price of equipment in Canada would be less. And we saw some actual deflation in the Canadian market in new equipment pricing. Is this which has a direct impact on the price of used. It is easy to do the math.

But when you layer in all of the other factors and have got consignors and equipment in the United State that would typically bring it into Canada, thinking they might get more or vice versa, it has an impact on the buyer habits, consignor habits and an impact on the resale pricing, because of the pricing of new.

So overall when you look at all of that and you layer it over the costs, as well if you look at some of the currency fluctuation related to operating costs and you do the math all the way through, from a translation point of view, and when you are looking at all the other factors, when we say neutral, we think that the business is well positioned because of its geographic exposure in most of non U.S. markets that when the U.S. dollar goes up or down, the net effect on the bottom line is approximately neutral.

You have some line item changes up or down. But they are hard to predict as well, or hard to quantify, because you would be belying the truth if you simply did the math and said here's the impact of this and that. It is a lot deeper and it's a lot more complicated than you might think from the outside looking in.

Probably our reason for raising it is twofold. Swings are more material this time. And people are more aware of it. I get more questions. The second would be, to get the effects of the centrally neutral, we thought that was an important point for people to understand about our business model.

Okay, then if you can just keep shipping this equipment to where we think the market is going to do the best. We're that flexible, we can still ride with these things and move it around the world to take advantage of the markets. So where would some of the best, strongest markets be right now, Dave?

With the European currency being so strong, it picked up 12, 13%. If the customer is going to ship it to the United States, we need to bring it to Europe. That's how it always has worked.

That's generally on your bigger packages, right? It must be more difficult to send guys who come with one or two pieces of equipment, send it over to Europe?

You can put anything in a container and ship it anywhere in the world.

Can you also just -- housekeeping here -- how many auctions did you hold in the quarter?

We held -- excluding the ag auctions, 23 in the quarter. Excluding that, we held 41.

So you held 41 auctions?

41, I guess from now on we'll be talking about industrial auctions and farm auctions, just because we now have the AP agricultural division. So their numbers as compared to previous discussions would be the Industrial auctions of 41. And then the APA agricultural division had 23.

Oh, they had 23?

Correct.

Some of them are really small, Ben.

And can you in any way quantify what contribution all piece had even on your gross auction sales for the quarter?

Unfortunately the answer is no. It is a complete blend with our operations in northern Alberta. The agricultural business that we were previously doing as part of Ritchie Brothers is blended in. We're now calling all piece -- excuse me -- APA agricultural.

And the industrial side that all piece was doing before the acquisition, to the extent that is carrying on in whatever form it's carrying on, I just hope it's part of Ritchie Brothers, so much like the previous discussion on other acquisitions, it just blended right in. We're not making an effort internally to do much to break it up.

Not to hog the line. Just one last thing. Can you comment on the ag market there in Alberta with the issues with mad cow disease? How is that impacting what you guys see there your ag business -- in your growing ag business?

It really hasn't had the impact yet, Ben. But it will have a very dramatic impact.

In which way? From your perspective, will it be good or will it be challenging?

It will be challenging, but it will also be a big source of inventory for us.

You have to recall, Ben, the beef markets, the summer is not normally a time where beef is moving quite often. It is out to pasture. The fall is where they are looking at a crunch right now. So the hurt is yet to come for many of these guys. And of course, they've been worrying for the whole period.

It's already impacted the trucking in the whole industry. And that is very negative.

So would you expect to auction more farms as a result of this? A few more farms. And most of the cattle producers. And the people haven't -- everybody who is involved in that industry is under a great deal of pain.

It is just going to create increased pressure. Is which can lead to selling activity.

Okay, well again, good quarter. And I'm also glad to see that gross market sales margin looks like it's sustainably higher. There was an apparent trend there. It is great to see that confirmed. Congratulations.

Thanks.

Thank you.

Our next question comes from the line of Murray Gainer with Scotia Capital. Please proceed with your question.

Thank you. Bob, can you just talk about some of the reasoning that went in behind raising your rate -- or you estimated rate -- to 9.5 as opposed to some other number?

Sure. Probably a couple of things to mention. One how we figured it out. For the last several years, we've been looking at that rate, it's obviously a very important part of our business, and we looked at the performance of our straight commission business, we looked at the performance of the underwritten business.

And we concluded in recent management meetings that we now had a sustainably higher rate in particular -- or not in particular, but in both of those categories. The straight commission business we think has been generating a marginally higher rate than it had previously. And the under written business, higher on average but also -- and this is probably the most significant -- slightly more stable.

We still expect quite a bit of volatility in the rate. And that's why we're continuing to be quite cautious. I made a point in my statements in the call to say we expect continued volatility. That has not changed. But we're seeing perhaps a little less volatility in the under written portion. There are a number of reasons behind all of that, I sort of walked through them quick in the call, let me sit on them again.

These are reasons that support both the higher straight commission rate and the higher average underwritten rate. First would be sales force productivity and sales force quality, these guys are doing a better job as you expect with any sales force as it matures. Next would be the impact of our investments and infrastructure, in particular the auction sites.

This network and facilities we have around the world now sitting at 29 is a huge competitive advantage in value added service. It is valuable to our customers and therefore they are willing to pay for it. And we're now able to recover some of the costs of that.

This is Randy. I just want to underline part of what Bob said in terms of the volatility. We're going to continue to aggressively chase business and that's going to mean that on average 20 to 30% is going to be under written on a year-by-year basis.

That will be subject to volatility, and we're doing quite well with it. We are going to endeavor to do so, but we're not going to run shy of business just because we want to try to keep that rate over 10%. So it will be lumpy. But there is lots of good factors built into it that led us to the confidence to increase it slightly.

Just to round it out, Murray, a couple other points I think worth mentioning, one is, all the initiatives we have underway have led to larger bidding audiences and just a simple fact, when you have more bidders it translates to more prices. That's one of the reasons people chose Ritchie Brothers for years. It is part of our compelling value proposition. Because of the stage of maturity now, our customers are willing to pay for for that.

We definitely produce the best net return for guys. The commission is factored into that discussion. And the higher gross price justifies the higher commission rate. This is not to say that we're trying to run rates up, I agree with what Randy is saying. It is quite the opposite, in fact. It is simply a reflection that we're able to recover slighty more of the cost. Finally with our Internet activity going on, that's been a very good bonus in terms of providing value to our bidders and also value to our sellers.

Okay. So you sort of increased your rates as a result in part of the expansion network of auction sites. But as an increased proportion of business goes to permanent auction sites, wouldn't you expect to see a decline of the direct expense rate as well?

I think we have seen that, Maurice, over the last, say, three or four years. When we went public, my recall is that the direct expense was about 1.8% of gross auction sales, and now it is down to roughly 1.45%. If we see a continuing movement of more and more of our business to our current auction sites and also to larger sales, then you may see that rate come down a bit further. It is already pretty tight.

At the same time that we've been getting more efficiencies, we're also blaring on more and more customer service. More and more expenses being incurred at our site to maintain our competitive position and make sure we're offering the best possible customer service.

I'll also add that as we expand geographically, we invariably are doing that through smaller off-site auctions in either temporary facilities or in new released regional auction bidder, and these are smaller auctions that are a relatively higher cost to produce.

It is part of the strategy of growing a business at this frontier. As you do that, that is keeping the direct expenses at a more even level, you know, of 1.45%. So it is a pretty good number. And while your super yard of 21 facilities that we have do get bigger and have economies of scale, we're also building at the frontier at a little bit higher cost.

Okay, thank you.

Our next question comes from the line of you Yvonne Verono with CIBC World Markets. Please proceed with your question.

Thank you. Randy, in Europe, you talked about your abundant growth there, are there any metrics you can give us to quantify that?

Well, the European market has been pretty vibrant for us because we've been growing into new countries and having more regular markets. In terms of specific segmentation of those financial results, no, that's something that we've resisted doing in prior times. I don't know if you want to add to that, Bob, but we can certainly tell you that we're holding three to four auction a year in Spain. We're holding two to three auctions in England.

We're planning another sale in Greece later this year, which would make it two this year. So the amount of non [INAUDIBLE] auctions is significantly increased from what it was last year and the year before. That's probably the most significant metric. Plus one other thing is, we've noticed quite an increase in the Internet activity from the European customers. They tend to be quite a bit more conservative than the American marketplace, which would tend to be the most highly Internet active. So there's been a pretty good increase there in the numbers of people, as well as from the Middle East, who are participating in the Internet. We're very pleased about that.

Without giving any revenues, are there any percentages we might be able to put on some numbers?

Bob?

We've never broken out Europe as a separate group, Yvonne, and I think I had better refrain from doing that now. In our financial statements and annual report, we have also reported the United States, Canada and rest of world. Those are our three reporting segments.

Okay. I know you talked a little bit about the market, Dave. Is there anything you could give us more color on in terms of new equipment and new equipment pricing?

This is Dave Ritchie speaking. I really believe we're going to be faced with a little bit of deflation. I can't believe you can sit in Detroit and build a vehicle at the cost of $55 an hour, and China coming on stream at $1 an hour. It is just obvious to me it is going to be made in China. And it is obvious to me the price is going to come down. And I believe that deflation will be the thing that will enter the scene here. And I think it has already happened.

Any specific equipment, either ag or construction or trucks, that you might have seen more so than others?

I'll tell you, just about in everything that we touch, everything that you own, if you look on the label at the back of it, it says "made in China". And it doesn't matter whether you're wearing a fishing hat or a pair of new trousers. It is incredible, what I see. When you see 1.300,000 containers sitting in North America and nothing going back the other way, that's got to tell you the whole story.

And I really believe that we as North Americans have to get our butts together here and start working. Because we're not going to live on services. And we've got to get back into making things. We've got to get back to a global pricing and not a favorite nation pricing, like -- most of these large manufacturers have about seven layers of prices around the world. And when they sell a vehicle in China for about two thirds of what it sells for in North America, they already have the cheapest labor in the world. Give them the cheapest truck in the world.

And pretty soon you've got a mind that's operating pretty efficiently over there. And a mind in North American operating to the point it is not operating anymore, because we can't compete. Until we get global pricing for everything, all the components, the rubber that goes into a machine, the steel that goes into a machine, it is all bought on global pricing. But as soon as they manufacture it, they revalue it all and reprice it.

And I think that is totally wrong. Because this is a global world. We're all fighting for every piece of the market globally. And we've got to get our act together and start to look at this pricing. Because we can't be at a disadvantage here in North America.

Over the near term, you're talking about deflation, do you think that is going to be in the 5% range or greater than that?

Very hard to say. You know, in most of my life, I've never lived through a period of deflation. It has always had some kind of an increase over a ten-year period in every ten-year phase that I've looked at. But I really believe that things are going to be start being made better and cheaper.

If you would look at new pricing over the past six months or so, would you think it's come down or remained flat?

I think there are some statements being made that they have been able to increase the prices of vehicles and increase the prices of equipment. But honestly, I see a real decline in value. And I just -- I think we've got a serious problem in front of us. And people, if they haven't recognized it -- I look at this as a period between 1945 and 1950 in Britain. Britain ruled the world in those years, from '45 to '50. But it was in a noticeable state of decline and the empire collapsed.

Well, people didn't know that it was collapsing. But it did happen. And I believe what we've got here now is a situation where we as North Americans and Europeans -- Europe has the same problem we have. That we haven't realized where this market is trending. And the three countries that I believe is China, India and Brazil. And those countries will come on to be the new world leaders. And if we don't recognize that, I think [INAUDIBLE].

Okay. And just the last thing, we talked with the APA auctions being at 23 in the quarter. Can you give a comparable number of the year ago, Bob?

That was before we owned them. A comfortable number, I don't have it at my fingertips. But even if I did, I would hesitate to give it to you, Yvonne, because that would be apples and oranges. I think the current APA numbers include business that has come because of their being part of the Ritchie Brothers program and Ritchie Brothers customers. It really wouldn't be an apples to apples comparison. But my sense is that the activity levels are not dramatically different than in prior years. Maybe a little bit higher piece of it.

Yeah, it is. If you really want the answer, Yvonne, we'll talk to our folks up north. My sense of it is it is probably a little bit greater than in prior years, but not dramatically greater.

One thing we do know for sure is that it is pretty much gone on with the expectations and predictions [INAUDIBLE].

Oh, for sure. That's right, that's a good point. I think your comment in the prepared comments of Randy's comments, Yvonne, was this is an interesting market for us. We're going to delve into it a little deeper than we have in the past. and I think we were operating it for the first year just to see what we have on our hands. And we have a hope that we can grow that business beyond where it is today.

I guess I was just under the impression that all piece is doing 6 or 7 auctions a year. And I think $2 million to $15 million range. And this number seemed to be a lot higher than that. And I was trying to reconcile the thinking.

I think I know what you might be thinking about. All piece, as an operation, they had two things going. They had a permanent office site in [INAUDIBLE] Alberta, where they conducted -- I think the number was six. I think that's right, six or so auctions a year. mostly industrial focused, some agricultural, and then they had a large number of small farm auctions.

I know this is the number you [INAUDIBLE], running 20, 30, whatever the number would be. Of all different sizes. Anywhere from less than $100,000 to over a million. Quite a range. As we happen in our program right now, the industrial business that is going through the Grand Prairie Yard, plus any business signed in that region by territory managers working in that area and going to other yards in our system, that is all of our industrial sales, that's all blended in.

That is part of Ritchie Brothers Industrial. We've created something we call the APA agricultural division And all the farm sales plus the agricultural only-sales that are taking place in Grand Prairie, they're all classified as, just internally, we call it the APA agricultural division. It is really for marketing purposes.

That's the group that had 23 sales. Just so you understand it Yvonne, if you were here, the farm sales we refer to here are usually all done in a day. They literally own the farm. So we have a mobile unit that goes out in the morning to the farm location. The farmer, and in conjunction with assistance from the APA guys, have gone through and prepared the equipment to line it up and get it ready for sale.

It is a different level of service and a type of service that we offer compared to our permanent auction sites that you've attended before. This is a much more any more nimble, low-cost. You're in. You have the auction that day. You collect all the money that day. And you leave that day. And on the trailers, carry on to the next location for the next sale.

Typically, March, April, May are the busy times for these guys when they're rolling along. More so in April than any other month. You're literally doing one or two sales a day in various locations. So they have teams that go on call. So it is a bit of a roving unit, like a mass unit if you want to call it that.

They have much more -- I guess lower auctions, typically, than you would be used to in the Ritchie Brothers world. They range anywhere from less to $100,000 to upwards of multimillion dollars. But typically, several hundred thousand dollars would be an average size sale for those guys.

Okay. And the industrial auctions are included in the 41 we talked about for the quarter?

Yes, they are.

Okay. Great. Thanks so much.

Our next question comes from the line of James Genteil with Sedonian Companies. Please proceed with your question.

Good morning, gentlemen. How are you?

Very well.

I guess listening to Mr. Ritchie's comments, I wanted to ask if in fact you guys are implementing any source strategies in China to take advantage of the movement of equipment there.

We've been looking at China since 1980. And when it is right, we'll be there. I've spent so much time and energy with sending people in there, as much as six months at a time, trying to figure it out. China is not quite ready for us yet. It is illegal to import used equipment into China.

And we -- although there are lots of pieces of equipment going into China, we do not participate in that. Until things become right, then we'll be there. But there's lots of business going on. But when it is ready, we'll be ready to go.

But what exactly needs to happen, then, for that to transpire over time?

Well, first of all, you've got to have proper banking, credit facilities that we can move the money in and out correctly. And it is illegal to take -- there are thousands of machines going into China. They can take a used machine and put it in parts and ship it in. It just skirts the real rule. And we don't do that.

Fair enough.

And one day when they start to open up these markets, we'll be there.

Excellent. Looking at your two regional sites that you've opened, one in Valencia and one in Melbourne, how are those progressing? I think you had a Melbourne auction this quarter. Did you have any in Valencia? And where do you expect those markets to go, and when could they convert into a permanent auction site?

Jim, this is Randy. Spain and Melbourne, yes, we did have sales there. They are both running Melbourne, two or three a year. Spain maybe four, perhaps five a year. But let's say four. You know, they are in a progression towards a regional auction unit as they grow and become economical to invest the incremental dollars. And I would say Spain could perhaps get there before the Melbourne site.

I'm not -- it probably would be misleading to specify one or two or three or however many years. It is not that far off, I would think. Not really long term. But they are both progressing right according to expectations. And they are auctions that I've referred to as being on the frontier. And they tend to be smaller. Could be $2 million to $7 million in terms of size. And what the advantages of these operations is that they put us in the middle of new populations.

And we can create new customer base and also spawn new buyers that go to our traditional and long-term sites. And it is just word of mouth. And that's another very big benefit we focus on the quantity and volume generated by the local auction sales. But we don't talk about the spinoff as much. And that's equally important.

And I guess one last question regarding your Sacramento land purchase and eventual development. Mr. Ritchie referred to that completed in mid 2004. Now, can it be said that it is a Dallas-size market? California itself is a market almost equivalent to Canada. Right.

And we have had a long experience in California. We've never really had a big operation this the middle of California. And I expect it to be a very positive addition to our fleet.

Okay. Okay, guys, thanks a lot.

Our next question comes from the line of Sara Hughes from Sprott Securities.

Hi, I had a few questions. In terms of the number of salespeople you have now, is it still at 190?

189, I believe.

You beat me.

189. And I guess kind of, what's your plans? I know you talk a lot about the productivity of your salesperson being kind of in the $8 million mark. Are they becoming more productive now as they mature, or are you going to look to increase that going into 2004?

Let me answer that one. For sure, we're looking to not only expand in terms of the number of sales force in a controlled manner, but also look to maintaining the productivity and improving it. As we said last year at the end of the year, we had made gains in productivity from the year before. We're in the course of making more gains this year. What we're focusing on is quality.

It is important and imperative that we reach and retain quality people rather than just bodies. When the time is right -- we're always, always looking. We have openings that we could hire people in today. And as we find the right people with the right qualifications, they will be added on board. So our focus is quality. And with a view to increasing both the number of salespeople, as well as maintaining a healthy productivity level.

And would you say the productivity level of your existing sales force is above the $8 million level now?

At the end of last year, it was in the low 7 --

Yeah, 7.3 about.

We're on target, long term target is $8 million. And we're going to be between $7.2 and $8 million this year.

And just one last question, just on your Internet business, and Randy, you commented briefly on the kind of international presence there increasing. What other trends are you seeing in the Internet business in terms of explaining the growth. Are you seeing more new customers or is it just more existing customers using it more, and different regional preferences increasing?

Before Bob jumps in and finishes off, which I'm going to only talk partially on, it's been a tremendous increase. We talk a lot about the Internet and how much of an impact it does have. And I'll let Bob speak to that. But I also want to speak to the other part of our business that still remains, but doesn't get stressed on quite as much. In the 15% of the lots that are attracting bids or being second on the Internet, the second highest bidder or actually transacting will own 15% of the lot.

That means 85% is selling to the live customer whose traveled to the site, there on auction day. And now you have this layering of a very healthy and vibrant remote position. But the overlarge majority is still people present on site, used equipment, kick the tires, give it a test drive. It is all highly, highly important.

And it should not be stressed and focused, that the Internet, ra ra ra, it is great, fantastic tool, huge selling advantage that we have over others. But it is still a tremendous and integral part. That's the reason we're building the facilities and sites all over the world. That is very important. Bob, stats or any other information you want to impart?

Sure, I'll just -- Sarah's question on existing or new customers, it is a good question to ask, and the answer is pretty interesting, I think. Most of the people using the system are existing Ritchie Brothers customers, and that's critical, because we have a lot of safe guards on the system to ensure we don't have any fraud or other problems. We just don't let people use it, unless they are well known to us or put down a significant cash deposit. What that means is, you're typically a well-known Ritchie customer before you use it.

But what we are seeing is that our existing customers are using it to participate in more auctions. So if the Fort Worth auction has 400 internet bidders, that is not into lieu of the 400 of the people who would have appeared live. It tends to be on top of the already large crowd Randy is talking about. We're having people participating in more auctions.

It is an existing customer, but for the auction they participate in, they are a new customer. They would not have been there in most cases. We've seen that the number of Internet bidders is very similar to the total growth in average bidders that we've enjoyed over the last year. We're up about 200 or so people on average, as far as auction registration goes. And that is coincidentally the number we have on average registering on the Internet.

Okay. Great. Thanks, guys.

Ladies and gentlemen, as a reminder, to register for a question, press the one, four. Our next question comings from the line of Ben Cherniavsky from Raymond James. Please proceed with your follow-up.

A couple quick follow-ups here. Any guidance you want to give for '04 in terms of gross auction sales?

The only thing we're seeing, Ben, for '04, our corporate strategy is to shoot for an average of 10% top line growth and average of -- wot Tom line growth. We're obviously looking to be ahead of that this year. It is possible to be below it next year for averages. It is too soon for us to put a real number on that.

And you did say you had broken out APA agricultural division. You must know what that is generating in auction revenue.

We've definitely broken it out internally. For management purposes.

But if you take that [INAUDIBLE] their generating auction revenue, it would be helpful to know what they contributed to the second quarter. In other words, break up your acquired gross auction sales from your total gross auction sales.

You could give a number, Ben, but it would be meaningless, partly because -- and let's take an example. An APA guy goes out and makes a call and talks to some guy. He either decides to sell it on a farm or bring it to either a farm or industrial auction. We're selling more agricultural equipment embedded in an industrial sale.

To try to isolate the performance of APA by simply looking at what was sold on the farm would be misleading. So there is not much point in giving you a number. It could be anything, and it wouldn't tell you anything.

What about auction, farm auctions? What about your farm auction revenue? I mean, that's got to be stuff you wouldn't have got pre-all piece. And you must know what kind of auction revenue you generated from the on-site farm auction.

[INAUDIBLE] for management purposes. But it would also be somewhat misleading, because the performance of that division is not simply isolated into on-the-farm sales. It encompasses a whole lot more than that.

Let me give one example here, Ben. The single largest agricultural auction we held so far this year, was a lead with a direct result of a previous Ritchie Brothers employee, not an all piece employee. It generated an on-the-farm event that was manned by the APA staff.

But the lead itself and the relationship was one from a Ritchie Brothers previous employee. And that individual's desire as a selling farmer was to deal with Ritchie Brothers and not APA. There are ebbs and flows that go both way. It was the single largest auction that that division did last year. It was a Ritchie Brothers-triggered event.

Okay. Great. Thanks.

Our next question comes from the line of Sebastian Vanburken, with Vanburken and Associates. Please proceed with your question.

Yes, thank you very much. Number one, I would like to just congratulate you on an outstanding year-to-date, and particularly the integration of the dividend policy. That leads me to my first question. Maybe Bob, can you let us know a little bit more what the dividend policy is? I know you're starting with a low level of 15 cents quarterly.

Do you expect the dividend to basically follow the growth and the earnings long term? Or what is the policy behind the payout?

I guess it is fun to try to speak for the board, but I'll try to summarize what they've decided. At this stage, all they've done is declare the first dividend and I guess state an intent it would be the beginning of a program of quarterly dividends. There's been no discussion yet regarding planned increases or otherwise. So I would say at this stage, it is probably too soon to stay.

Okay. The second question, Bob, is with respect to this year's earnings. They are so outstanding, I'm really impressed with where you are to date. $1.29 for the first six months fully diluted, excluding a gain on the sale of the property, fantastic numbers. I guess if we were to double that number for the balance of the year, we'd get numbers something like $258 a share.

Do you think the second half -- given the comments you've made, you're still very positive on Europe. You're still positive on what may happen in the ag business. It seems to me that the next two quarters are going to be still extremely strong. Could you give us some guidance there? I know it is well above the long-term 15%. And obviously next year is going to be hard to duplicate that. But it just seems to me that your earnings per share are going to be pretty good.

I hope you're right. It would be a mistake to do the times two program. The expectation for gross auction sales in the second half is below what we did in the first half. That's the way it is working out this year, based on our current forecast from the guys in the field. You may end up being right. The number you're throwing out would be a fair bit higher than our expectations, based on what we're hearing from the field right now.

Right. And let me make comment, Sebastian, on that just a little bit. Q3 is always our slowest quarter, because of the summer and the seasonality, and as we get swinging back in the auction. So Q1 and Q2 always is a little bit more in aggregate than the last two. But Q4 should be a very healthy quarter again. That is following the normal flows and patterns of the business.

Anyways, it is really outstanding, guys. I just thought I would come on the line and ask a couple of questions.

Thanks very much.

Okay. Thank you.

Once again, ladies and gentlemen, to register for a question, press the one, four. Our next question comes from the line of Ross Turnbull with Oldham Brown. Please proceed with your question.

Good morning.

Good morning.

First of all, thanks for the dividend, 3 cents better than my expectation.

We tried!

I just wanted to follow up with some of the questions Ben had about all piece. Specifically with the agricultural division, based on what you've learned to date, is that a business where you guys think you can really grow? Doing many of these very small auctions on the farms?

Peter here. Our plan is to devote more resources to growing that business right now. They operate primarily in a Northern Alberta market and not much other territory. So the answer is yes. Yes, we think we can grow it. We don't expect it to be doubling the Ritchie Brother's industrial volume that we do.

We think it is another avenue we can grow comfortably with more resources applied to on the farm. And as it generates more sort of synergy with the industrial side of life as well -- you find farmers attend the sales and you'll find construction guys using farm equipment on construction jobs. There is lots of industry crossover with particular types of equipment. So it is just a natural evolution for us to continue the grow the business.

It is kind of like the Ritchie Brothers of old, where it was the small sales that start to increase and penetrate the marketplaces that you're in. It is the same kind of thing. But we're just attacking it from a different angle. So yes, the intention is we will grow it. The intention is we add resources to it as we carry forward here. But don't expect it to add $2 a share to the bottom line.

Well, for example, would this be a business that you might enter into in the United States?

Certainly, sure.

Okay. And do you feel like you can control these auctions in the same way you can with the larger auctions?

Define control.

Put your Ritchie Brothers stamp on it to make sure it is always a fair auction and those types of things?

Sure. That goes by reputation. We advertise it as a different division of the company. But we have the Ritchie Brothers name there prominently displayed. And I think you know -- the market is an extremely efficient place. We learned that because we live and work in it day-to-day.

So provided that you maintain that reputation for integrity and honesty in business, that gets spread pretty darn quickly, as does the people that don't adhere to those principles. So I think we're safe in just marching forward with the same type of program we have on the forward. We'll look forward to extending that operation. But probably under a different heading than just the Ritchie Brothers name.

In prior quarters you've had some sales of new equipment lots. Was there anything like that in the second quarter?

Lots. Just the continuing process, Ross, in the past, there's been lots of unused equipment that we've sold this time.

Okay. And I just wanted to follow up with what Dave was talking about with the layered pricing. Certainly what your company is doing is working against what Caterpillar is trying to achieve. Because of course, you're establishing global prices for used equipment. How do you think they are going to respond to what your business is doing over the longer term?

I think it is just a wake-up call. I think we're living in a global market. And as soon as more people start to understand global pricing, I think it is going to be the right step. We've got to come down. The other countries have got to come up. And it is going to be an equal playing field here in many years.

Okay. Well, thanks very much.

Thank you.

Tammy, I this I we have time for one more question.

Gentlemen, there are no further questions at this time. I want to offer the cal back to you. Please continue with your presentation or closing remarks.

Thank you, Tammy. This is Randy. We've had a great quarter. We've had a great first half of 2003. We're going to endeavor to continue that as we move forward, with a focus of the management group on shareholder value and sticking to our corporate objectives that we've outline so far. We thank you for your interest and we'll carry on with business.

Thanks very much.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.