RB Global Inc (RBA) 2005 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Ritchie Bros. Auctioneers 2005 Q1 earnings conference call. [OPERATOR INSTRUCTIONS] As a reminder, this call is being recorded Tuesday, May 3, 2005.

I would now like to turn the conference over to Peter Blake, Chief Executive Officer of Ritchie Bros. Please go ahead, sir.

Thank you have, and welcome to the Ritchie Bros. Auctioneers investors' conference call for the first quarter 2005. I am Peter Blake, the Chief Executive Officer of Ritchie Bros. Joining me here today on the call are Bob Armstrong, our VP of Finance and CFO, and Jeremy Black, our Senior Manager of Finance.

Today, we will be discussing our results for the three months ended March 31, 2005. Our presentation will take about 20 minutes, and we'll be opening the call for questions.

Before we get started, I would like to make the Safe Harbor statement. The following discussion will include forward-looking statements as defined by the SEC rules and regulations. Comments that are not statements of fact are considered forward-looking statements. Forward-looking statements include comments about our projected future results and performance, growth initiatives, property development plans, and other matter. Our actual results may differ materially from those projected in this discussion. Additional information concerning factors that could cause such a difference are included our periodic filings, including our MD&A for the quarter ended March 31, 2005, which are available on our website at rbauction.com, and on the SEC and SEDAR websites.

In this call, we will talk about gross auction sales. As a reminder, gross auction sales represents the total proceeds from all items sold in our auctions. It is not a measure of revenue and is not stated in our statement of operations. Auction revenue is the revenue earned by Ritchie Bros.

I'll make a few remarks about our overall performance for the quarter and some current initiatives that we're working on,

before I turn the call over to Bob and Jeremy to give you the financial overview. Then I'll wrap up the call and open it to questions at the end.

We turned in another impressive performance in the first quarter of 2005. We have used the word "record" quite a few times over the last year or so, and I'm pleased that we can see it again to describe the first quarter of 2005.

Gross auction sales of over $456 million made this the largest, first quarter sales performance our history. The momentum that we experienced in 2004 has, so far, shown no signs of slowing. It's still early days for Q2, but things appear be to on-track for another good quarter, and I'm optimistic about the remainder of 2005.

I'm very happy with the gross auction sales growth we saw in Q1, and I'm even more pleased that we experience net earnings growth of 57%, compared to the further of 2004, excluding a gain on sales surplus land. This is a good example of the leverage inherent in our business model. Over the long-term, we continue to expect earnings to grow at a faster rate than our gross auction sales, and although our performance is best reviewed on an annual rather than quarterly basis, Q1 was a good example of our potential.

In addition to growing our gross auction sales in Q1, we also embarked on several new initiatives that we expect will drive future sales growth. One that I would like to highlight and mention today is our recently launched TM Excellence Training Program for our new front-line sales people or territory managers. We are continuing to invest in our training programs, and the TM Excellence Program is a good example. Through this program, new TM's receive one-on-one mentoring , in-house classroom sessions, web-based training, and on-the-job experience over several months. The goal is to minimize the time it takes for them to reach full productivity. We intend to continue to develop and enhance this and other training programs to give our people the tools they need to be fully productive.

Before I pass the call to Bob, I would like to give you an update on another item we have here -- Mission 2007 Strategic Initiative. As you may recall, the objective of this project, which we call "M07", is to put in place more efficient, consistent, and scalable processes that will enable us to meet our growth objectives well into the future. We have taken several experienced people out of the field to work on this initiative, and our plan is to evolve our processes and systems to keep pace with our planned growth. This should allow us to increase our gross auction sales by 10% each year on average without an equivalent increase in cost.

Since we spoke to you last, we have made significant progress. We have documented all of our existing systems and processes from top to bottom, and are well along the path of designing new systems and processes where they are warranted. Some of the MO7 initiatives that are already being deployed -- some of them are being deployed already -- as an example our new performance reporting process for regional managers. Although it is still early -- early days for that -- already the quality of the information that we are providing to our regional managers is helping them to manage their regions in a more first efficient and effective manner. Stay tuned for further updates.

I'll turn the call over to Bob Armstrong, now, our CFO.

Thanks, Pete, and good morning everyone.

The numbers that form the basis of the discuss that follows are included in our press release that we issued this morning, and in our quarterly MD&A and interim income statements, which we also filed this morning and are available on the SEC and SEDAR websites. All dollar amounts referred to on this call and in our press release and security's filings are stated in U.S. dollars. As Peter mentioned, our gross auction sales for the first quarter of 2005 hit 456 million, which is an increase of 20% compared to our gross auction sales in the first quarter of 2004. Continued strong growth in our U.S. and Canadian operations contributed to the majority of the increase.

We set several no benchmarks in the first quarter of 2005, including the largest sale in Ritchie Bros.' history at our permanent auction site in Orlando, Florida, in February, with gross auction sales of $79 million. Several larger than expected auctions at permanent auction sites combined with a higher than usual number of large offsite auctions, contributed to a gross auction sales total that ended up being well ahead of the expectations we shared with you on our last conference call.

Our Canadian and European results in Q1 were aided somewhat compared to the first quarter of last year by the strength in Canadian dollar in Euro against the U.S. dollar. However, the currency effect was less pronounced than in the prior year, as the increases in the Canadian dollar and Euro against the U.S. dollar were not as significant as in 2004.

Auction revenues were 48.6 million for the first quarter of '05, an increase of 29% compared to '04. Our auction revenue rate for the quarter was 10.65%, which is higher than the rate of 9.95 we achieved in Q1 last year. It is also above the expected range that we communicated to you during our last conference call.

The main driver behind this very strong rate was performance of our underwritten business. The underwritten business represented 23% of our Q1 sales, which is roughly consistent with recent periods, and we enjoyed excellent results on that business.

Jeremy will speak more about our expectations for Q2 and the rest of 2005, but I would like to say that we do not think that the auction revenue rate that we achieved in Q1 is sustainable for the remainder of the year. As many of you have heard us say before, we will have quarters where we do better than we expect, and quarters where our auction revenue rate falls short of expectations, which is why we encourage you look at the annual rate. History has shown us that our auction revenue rate fluctuates, and I expect we will see quarterly fluctuations again in 2005.

Direct expenses are the costs are that we incur to hold an auction. Examples of these include wages for temporary staff, advertising, and travel expenses for staff to attend and work at the auctions. Direct expenses were 1.20% of gross auction sales in the first quarter of '05, which is the same as the direct expense rate that we experienced in '04 -- at least the first quarter of the '04. Our direct expense range for a particular period is influenced by a number of factors, including the size of auction held, whether auctions are held on one day or several days, and whether auctions are held at permanent auction sites, regional auction units, or at offsite locations.

Larger sale, and sales held at permanent auction sales results in a lower ratio of direct expenses to gross auction sales. Our rate in Q1 of this year was lower than we expected in part because the average size of our industrial auctions held in the period was 15.7 million, which is well above the average of 12 million for all of '04, and 15.1 million in Q1 of 2004.

We finished the first quarter of 2005 with general and administrative expenses of 22.6 million, which is an increase of 16% over the comparable amount in Q1 of 2004, but 9% lower than Q4 of 2004. There are several reasons for their increase in G&A , including the effect of a continued weakening of the U.S. dollar.

The other major contributor to increased G&A was the continued growth in our business. For example, our average employee count increased 6% compared to the first quarter of 2004, from 606 employees at March 31, '04, to 643 in 2005 at March 31st '05. This led to higher wages and benefits as well as other costs associated with bringing new employees on board.

Our labor costs, including salaries, benefits, stock compensation expenses, and employees performance bonuses, represented approximately 60% of our total G&A expenses in the first quarter of 2005, which is roughly consistent with our experience in 2004. One other factor that I want to mention that contributed to the increase in our G&A in 2005, is the ConEx trade show that we attended in Las Vegas in March. We always send a large contingent to this trade show that takes place every three years, and the costs associated with this year's attendance are reflected in our G&A in Q1 of this year, whereas there was no one equivalent amount in Q1 of 2004. This is a large and important event in the global construction industry, and Ritchie Bros. was there in full force making contact with equipment owners from around the world. Our costs for attending this show were there in the range of $500 million.

Overall, we are satisfied with the level of our G&A expenses in Q1. In our last conference call, I talked in greater detail about the broader factors that have contributed to G&A growth in recent years. At a high level, the growth is attributable to be the significant infrastructure expansion of recent years and the costs that we have added to our system in order to provide up increasing levels of the customer service. The benefits of these additional expenditures include our ability to hold larger auctions, the increased capacity that we now enjoy, and our ability to achieve higher commission rates.

Also included in our income for Q1 of '05, is a $5.5 million gain recorded on the sale of land in Ft. Worth, Texas. This was land that we were not using in our business. The after-tax gain was approximately 3.3 million.

Our effective income tax rate for the quarter ended March 31, '05, was 38.1%, which is above our full-year expectation of 36%. The higher than expected tax rate is attributable to the gain we recorded on the sale of excess property in Ft. Worth, and the fact that we earned most of our Q1 income in high tax rate jurisdictions. Excluding the tax related to the gain on sales land, our income tax rate for the first quarter of '05 would have been 37.5%.

Net earnings for the quarter were 13.7 million, and diluted net earnings per share were $0.40 per share. If you exclude the impact of the $3.3 million after-tax gain on the sale of land, net earnings for the first quarter of 2005 would have been 10.4 million, or $0.30 per diluted share, which is approximately 57% ahead of net earnings in Q1 of last year.

Before I pass the call to Jeremy to discuss our expectations for Q2 and the remainder of 2005, I want to talk a bit about our recent capital expenditure projects.

Our total CapEx for the first quarter of '05 was 4.3 million, including maintenance CapEx. The costs incur in the first quarter of 2005 related primarily to regular upgrades our of computer and network infrastructure, and to the completion of work on our new permanent auction site in Sacramento, California, which had it's first sale in March of this year. In April, after the quarter end, we acquired approximately 125 acres of land in Houston, Texas, and we intend to build a new permanent auction site on this land to replace our existing site in Houston. The 8.5 million cost of this land will be included in our Q2 CapEx number.

Going forward, we are still expecting CapEx, including a maintenance CapEx, to remain in the the range of 20 million for 2005, although we may exceed this range if we able to accelerate our auction site expansion plan. Peter will talk more than about our plans in this regard in a few minutes.

Our Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on June 17, to shareholders of record on May 27. The total amount we expect to pay out for this dividend is approximately 3.8 million.

One last thing I would like to mention is the press release that we issued about 10 days ago announcing our gross auction sales for the quarter. We received a few calls questioning our rational for issuing this press release, because it was not our usual practice. So I thought I would shed some light on it, so that everyone understands. On the date of that press release, our total gross auction sales number for the quarter inadvertently became known to a larger than usual number of RBA employees. As a result of this much wider than normal distribution, we thought it best to announce the number publicly to avoid any chance of the information getting out in on uncontrolled manner. I apologized if the release caught any of you offguard, but we wanted to take the high road and error on the side of caution.

And now, I will turn in the call over to Jeremy Black our Senior Vice President of Finance.

Thanks, Bob, and good morning.

I'd like to take a few minutes to give you our guidance for Q2 this year and update our guidance for the remainder of 2005. On our last call,, we indicated that we were expecting gross auction sales for Q1 to come in around 400 million, and 2005 full year gross auction sales in the range of is 1.95 billion. Although our actually performance for the quarter was in excess of 456 million, we have canvassed our field managers, as we do at the beginning of every quarter, and we have concluded that gross auction sales of 1.95 billion for the full year is still an appropriate target.

Looking specifically at the second quarter, we estimate that Q2's gross auction sales will come in around $625 million, which would make it the single largest quarter in the Company's history. We will be able to offer more guidance on Q3 and Q4 expectations in future calls.

In our conference call in February, we indicated that we wouldn't be surprised if our auction revenue rate came in at the top end of our expected range of 9.5 to 10%. In Q1, we achieved an actual rate of 10.65%, which was well ahead head of our expectations. We have analyzed our actual performance in Q1 and have determined that is nothing to indicate that an increase in our guidance is warranted at this time. We have had periods of volatility in the past, and these make us very aware that our future average auction revenue rates could be higher or lower than our expected range.

Over the long term, we continue to believe that our auction revenue rate will be in the range of 9.5% to 10%, and most likely at the top end of this range for 2005. Although our direct expense rate came in at 1.20%, which is below our guidance of 1.30%, we still believe that we will finish 2005 with a direct expense rate in the range of 1.3% of gross auction sales. We had a number of large auctions in Q1 this year, which resulted in a lower than expected rate, but as we've said in the past, you need to look at the entire year to get an accurate picture.

We ended the first quarter of the 2005 right on the mark for G&A expenses, coming in close to our guidance. Our full year expectation was G&A of approximately 89 million in 2005. Now that we are partway into the year, we would like to increase the guidance slightly to be in the range of 90 million. The increase has to do mainly with higher than anticipated performance bonus accruals as a result of our stronger than expected earnings performance.

We continue to believe that our general and administrative will be incurred relatively even throughout the remaining quarters of 2005. We have not changed our expectation about depreciation expense in 2005, which should any about 14 million for the year, and interest expense, which we expect to be approximately 3 million for the full year. Other income is expected to be around $1 million for the full year in 2005.

You will notice in our statement of operations that we have split up the $5.5 million gain that was recorded on the sale of the excess land in Texas. We have done this because we do not believe that the gain should be reflected as part of our normal recurring operations. And most of the analysts following our stock have backed this number out of their models, and we believe this to be the appropriate treatment.

Our tax rate continues to be very sensitive to the jurisdictions in which our income is earned. As we have said before, the U.S. is a high rate tax jurisdiction, and we continue to earn the majority of our income in this market. In the first quarter of the 2005, our tax rate also reflected the impact of the Ft. Worth gains, which helped push our tax rate to 38%, which is slightly above our expected overall effective income tax rate of approximately 36%. We still believe that 36% is a good number to use for the remainder of 2005.

On our last conference call, we indicated that our expected net earnings growth for 2005 would be in the range of 12%. However, we also indicated that the growth rate could be higher if our auction revenue rate ended up being above our expectations. Based on our results to date in 2005, and backing out the after-tax effect of the gain on the sale of land, we now believe that our earnings growth in 2005 compared to 2004 will be closer to 15%, which is our expected long-term average earnings growth rate.

Before I conclude, I would like to clarify a couple of typos on two recent press releases. In yesterday's press release announcing the results of our for more dike sale, we mentioned nine sales coming in over $20 million in the year-to-date. The actual number should have been twelve sales to date in 2005.

In today's earnings release, in the income statement section, there is a subtotal for earnings from operations that is incorrect for 2005. Earnings from operations should actually be $17,139,000. All other numbers, including the net earnings number in the press release, are correct.

And now I'll pass the call pack to Peter.

Thanks, Jeremy.

I would like to given you a brief update on our property development initiatives. We have started moving dirt for construction of our new, permanent auction site in Nashville, and we recently acquired a great parcel of land in Houston, Texas, that we are planning to make our home in that city. We have a number of other irons in the fire as we continue our quest for new auction sites in the United States and Europe.

We have had lots of discussion internally about increasing the pace of our property expansion plans. You may recall that our expectation is to add one to two auction sites per year going forward. This is still our goal, but we are planning to dedicate some more resources to our property development activities and look for ways to increase the pace. We are still focused on finding good quality properties that meet our needs, so we may not be successful in increasing that pace, however, if we are, we could see our CapEx exceed the $20 million range this year, and could be as high as 30 million if everything comes together.

During the quarter ended March 31, 2005, we signed a lease for an auction property in Livorno, Italy. We haven't had any regular sales in this part of Italy for few year now, and this new regional auction unit will give us more permanence and allow us to grow our business in Italy. This joins out sites in the Netherlands and Spain, giving us an increasing footprint in Europe.

Before I wrap up the call, I would like to given you a brief personnel update. Roger Rummel retired from his position as Senior Vice President effective on March 31, 2005, after almost 25 years with the Company. We will all miss Roger's presence. His dedication to the customer and doing what is right made him an important part of our company over the last quarter century.

Roger's departure led to two new appointments to our committee -- Nick Nicholson has become a Senior Vice President and continues to be in charge of the South Central region of the U.S. and South American divisions, and [Dion Dijon] has become a Senior Vice-President and remains Managing Director in charge of our European operations. I congratulate both these individuals on their promotions, and look forward to their continuing contributions to the success of Ritchie Bros. in the future.

Before I open the call to questions, I'll quickly recap the main points we've covered in the call. Firstly, we ended the first quarter of 2005 with gross auction sales of $456 million, which is growth of 20% compared to the first quarter of 2004. We are forecasting gross auction sales of approximately $1.95 billion for the full year of 2005. Secondly, net earnings for Q1 were $13.7 million, or $0.40 per diluted weighted-averaged share. If you back out the 3.3 million gain on the sale of excess land, which we do not consider a recurring event, our earnings would have been $10.4 million, or $0.30 per diluted share. This represents an increase of 57% compared to the first quarter of 2004.

Our expectation for 2005 is net earnings growth in the range of 15%. If our auction revenue rate remains above our expected average rate for the year, earnings could grow by an even faster rate, but we are not comfortable guiding to that level. Finally, we are looking for ways to increase the pace of our auction site development activities, which could result in our CapEx for the year exceeding the $20 million mark. We will update you about this in our next call in August.

Now, we'd be pleased to answer any questions that you have. Myra, could you please begin the question period.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of James Gentile with Sidoti & Company. Please go ahead.

Good morning. You mentioned the first quarter revenue strength was also driven by a larger than expected or usual number of offsite auctions. I was wondering if you can kind of give us more details as to certain areas of the world where some of these offsite auctions have occurred, and where you see those in terms of converting them into a regional auction unit?

This is Peter here. We saw a lot of strength in the U.S. market.

We had several offsite sales in the U.S. that were not initially planned, although hoped for -- I guess -- at the start of the year. They are in regions that we have already targeted for future permanent sites, so it's a nice continued lift for us in terms of the presence of our activity and our services in the marketplaces that we want to target.

I would -- if I had to weight it to one area in particular, I would say it was primarily the U.S.

Okay. Thanks.

Thank you. The next question comes from the line of Ben Cherniavsky from Raymond James. Please proceed with your question.

Good morning, guys. Can you just comment on -- actually I was looking for a number of what your sales rep number is right now.

Sales rep number -- March 31, 2005 -- 208.

Okay. And what are the targets that you guys have put forward to the Board for the management bonuses this year, just so we know whether or not they're going to kick in?

Yeah, the bonus formula, if you like, is based on earnings guidance that the Board sets -- like an earnings hurdle target that the Board sets for us, and if we hit that particular target, then the bonus is set at the base level.

To the extent that earnings -- pretax earnings -- comes in below the target established by the comp committee, then the bonus is grounds down to to the extent that the results come in ahead of the target, then the executive bonus pool is moved up, and we've never disclosed the specific target amounts, but I can tell you that the numbers that we are currently talking about as our full-year expectations, are now slightly ahead of the base target amount, and that's why you've seen a slight increase in the accruals -- when Jeremy talked about G&A being up a little bit, it's because we had to increase our accrual expectations for the year.

Why would you guys be working with numbers that are different from -- or is it safe to assume that when you make your first stab at an annual forecast, publicly, that reflects the same forecast you're using internally by your board for your targets?

Yeah, that's about right.

Sometimes the board says that they're looking for a different level from us than what we're talking about to the public. They might say that if you are making good bonuses this year, you're going to be doing a bit differently than you're currently talking, sort of setting the bar a bit higher, but you're absolutely right that it's tied directly to the guidance for the investment community. We're not running two sets of books.

Yeah, I wouldn't understand why you would have a different formula for your bonuses than that which you disclose to us.

Correct.

But you're not going to disclose what that target is?

No, it's tied very, very closely to the guidance we give to the investment community, and I think that's probably sufficient information.

And the -- I noticed on your calander, you've got an auction set for Johannesburg this quarter, is that right?

Yeah.

You've done them down there before, haven't you?

Had one there about a year and a half ago in Gerbin, and this one set for July, so I guess it's actually in Q3 in the Johannesburg area.

So it's still a new developing market, but by the looks of holding a second auction, it's promising.

Definitely a new and developing market.

We are very hopeful that we can get ourselves into a regular rotation of auctions, but I don't know that we would expect it to be as big as Australia, for example, it would be nice if it could be, but right now it's in the early, early phase.

Is it a market your developing?

Yeah, if you look at the way we've developed some of the other markets, particularly Italy. Italy's a good example.

We had our first sale in Italy several year ago there, and it took us about a year or so to have another one, and we slowly started building a presence in the marketplace to a point now where this quarter we signed a lease for property on a longer term basis, and now we are going to have a nice recurring presence there in the marketplace with a view that ultimately -- as the market develops, you will likely get into a permanent site at some point.

So that's the same methodology that we've deployed for 40 year in growing the business, and it's nothing different for South Africa.

Okay. Great, thank.

Thank you. The next question comes from the line of Bert Powell from BMO Nesbitt Burns. Please proceed with your question.

I just want to go back quickly to the number of auctions that were held in the quarter. Bob, it looks like 29 this year versus 25 last year?

Industrial auctions, that's right.

Right. So a 16% uptick. What -- when you set guidance expectations back in the beginning of the quarter, what was the number that -- of auctions that you felt you would do?

The truth is, Sir, we didn't have a guaranteed number or a hard number. It wasn't 29, probably. It might have been in that range, but, as Pete mentioned, some of the offsite sales, for example, are ones that we didn't necessarily have in our schedule, and then there were others that we were anticipating that we didn't have, that maybe move to the second quarter or didn't come together at all. So it would have been in that same 25 to 30 range I think.

So how many offsite auctions were held this quarter? Out of the 29, how many would be offsite?

Bear with me for a two seconds -- one, two, three, four, five, six. My initial count, subject to clarification, is six.

Six, and how many were unexpected that came in -- that you added?

I think, you know, if you guys are trying to dial in on why the sales went up more than we had guided, it's not simply the offsite auctions that occurred. That was one factor for sure that contributed to it, but almost every location that we had, the guys that were targeting a number exceeded their target -- some in a big way and some in just a small way.

Very rarely did we have an auction site that targeted for a particular gross auction sale number and came in below that. So everyone has been enjoying a good, solid momentum in terms of their -- the growth of their business, but we saw more particular growth out of the U.S. and Canada than other parts of the world.

You've asked about number of auctions, I should tell you that in the quarter, the range for industrial auctions -- there was one auction that was less than $1 million, and there was one that was $79 million. So the number of auctions can be -- it can definitely be a little misleading.

No, and I know the number of consigners in the last couple of quarters is up significantly as well over the last couple of quarters, same as the average auction size -- I'm just trying to get some sense as to what happened versus expectations.

One thing I would add as color -- just following on Peters comments -- I think we're seeing with almost all of our auctions now is that the growth in the auctions, as they get closer to auction date, has become quite noticeable.

These things seem to get momentum of their own, so we might head into an auction maybe a month before the date with a certain level of expectations because of the deals we're working on, with the kind of equipment we expect to get, and maybe we're picking a target number of around 10 million.

Lately, it has not been surprising if that comes in at 12 million, because during the last couple of weeks of the auction -- getting ready for the auction -- local equipment owners get excited about the scale of the operation that's coming together, and they jump on. That's not a new phenomenon, but we're certainly enjoying it right now.

I think we used the word momentum, and we're seeing in so many of our regions, it's flattering as more and more people are that our unreserved auctions are the best way to access the global marketplace, but it's sure coming together nicely.

And that's one of the benefits you get by having that permanent presence in a permanent auction site, and generally higher profile highway, international airport type locations that we try to target for future growth.

So you're not having sort of a -- you know, a sales person's focus, they're just coming in and saying can I sign a piece of paper?

Well, I wish it was that easy, Bert, but that's not entirely true.

Our guys are all out working and trying to create new relationships with guys, but a lot of times it's like, "hey, I remember that guy drop Boyd see me, or I saw an ad in the paper, and I've got a flyer, and boy oh boy look at that auction. I know I have two or three pieces that it could convert to cash here pretty easily effectively if I give these guys a call, or I'll just drive over and see them."

So, we get a lot of that combination of -- it's rare that the guy just walks up and says, "hey, I have a million-dollar spread, can you sell it for me in? And, hey, what was your name again?"

It's very relationship-based. That won't change -- we don't believe -- going forward, but at the same time, there is terrific momentum that we experience when an auction site builds to then point of having a significant presence in the marketplace.

So have you guys what your expectations are for gross auction sales per rep on an average basis?

It looks like we're heading through what's been, you know, the best in the Company's history, in terms of productivity here.

Just as you asked your question, I flipped through my data on sales force productivity, because I was going to give you an update as a follow on to Pete's comments.

I wouldn't say that we've changed our expectations, because our expectations truly are set region by region and man by man, depending on the territory they have, but the we've been achieving -- two quarters in a row now -- looking at the 12 month average, it's been over 9 million per person on average system-wide. Two, three years ago, we were down around 7 million, and we've often said we wanted to keep it above 8.

Well, two quarters in a row now we've been above 9, and that's an example of maybe these additional volumes that our guys are finding. They're maturing -- doing a a great job. Their sites have momentum. Everything working together as a team shows up in the sales force productivity number or the average auction size number, and both of those are growing quite nicely.

Okay. Last question -- what's on the roster for the number of auctions this quarter? What's the initial plan?

You may not believe me. I don't know. I truly don't have a count. We don't do it that way.

I have ideas of total sales by region that the guys have given me, and that's why we come up with them 625 million number that Jeremy gave you, but they always don't tell us precisely whether it's going to be two sales at their regular site plus an offsite. We leave it to them to figure out best how to pull the numbers together.

Okay. Thanks a lot.

The next question comes from the line of Yvonne Varano from Jefferies. Please proceed with your question.

I know we started to talk the offsites -- the six offsites -- and the question was asked about how many were expected at the beginning of the quarter, but I don't think you actually answered that.

That's because we didn't really have a number, Yvonne.

There were two held right at the beginning of the quarter, so we knew about those. The other four were sort of the held throughout the quarter, including one on the last day of the quarter. Some of those were expected, some not.

It's entirely possible that volume they might have been hoping for, they may have been assuming they would do it all at their site, but then decided part way through the quarter work because it make more sense for the consigner to have it offsite. There really isn't -- you guys give us credit for being way more organized than we actually are.

No, I'm sure you're very organized.

Can you just make a comment on where you're seeing used prices on equipment today versus maybe a year ago, and how much that might have been impacting the gross auction sales, as well?

Sure, Yvonne. It's Pete here.

For sure, stronger -- I can't give you a percentage-wise, because again it's very sensitive, but there's still a shortage of good quality, used equipment out there.

The manufacturers -- the OEMs, in general -- are doing a better job, although there are still lead times on some of the bigger irons that are out for long period of time. A lot of guys are complaining about trying to getting rubber for some of their larger trucks and what not.

So I would say that -- that the conditions in the market are probably unchanged, maybe, you know, fairly tight in term those supply of equipment, so again from our perspective for us to grow our sales the way we have in such a tight equipment market is even more warming the cockled of my heart, as they say, to see our guys be able to penetrate the market as they have with such relatively fewer units out there that for sale and trading hands, because everyone is quite busy out. I would say the market is still continuing strong.

The general question -- on the minds of people that are in the market -- is how long does this go on, and it's probably the same question you guys ask yourself in terms of looking at stock market. We look at that pretty much every day and see what's happening in the marketplace. We're only as smart as the last sale that we've had, and we watch things very closely.

We had a sale on Saturday in Medford, Oregon, that was very strong, and continued our belief in where the market is heading in terms of it robustness going forward.

Is there any indication from your customers out there that they see an end to this, or there's any sign of, you know, their business slowing down?

I would say no, on a -- just a general comment. We haven't heard anybody running around with any worry, although the Fed is talking about going to 3 points this morning, and that might have some tightening effect on some of the guys. Some of the guys, truthfully, are out there that have been working for 10, 15, 20 years, and they're ready to retire, and they've been making lots of money lately, but with equipment market the way it is today, they're looking at just cashing in right now, so lots of discussions going on with guys like that.

But, in general, you know, in the financial markets, the repossessions and things like that for financial companies are down. So people are being able to meet their cash flow requirements. I think margins are still getting squeezed out there by some loss of players.

It's easy -- relatively easy -- to get into the equipment -- or the business of using equipment to make money, because of all of the different programs that rental companies and OEMs have out there for sending people to start moving irons, so the margins tend to squeezed in a market like that, especially with the market being tight the way it is, and busy the way it is, lots of people are making, you know, making a decent living out there right now.

Okay. And then just on the percentage of sales in the U.S., is that number one you'd throw out for 1Q?

Hang on a second. I think Jeremy is rifling through his pages.

While he's doing that, I want to go back to Ben's question. I think there's a way I could have answer that in a clear manner regarding the bonus situation.

So, Ben, if you're still there -- the bonus formula is tied directly on our guidance to the investment community, but there are a couple of adjustments. A good example is in the first quarter is the gain on sale of the land in Texas is backed -- we don't get any benefit for that. So that's maybe where you were heading with your question.

And, Yvonne, to answer your question -- the number we've put out is that approximately 69% of our auction revenues were earned in the U.S., 12% was in Canada, and 19% was from the rest of the world outside of the U.S. and Canada.

Terrific. Thanks so much.

Thank you. The next question comes from the line of Bruce Simpson from William Blair. Please proceed with your question.

Good morning, everybody.

Thank you, Bruce.

Could you comment a little bit about how the agricultural auction season is running here in April compared to prior year?

Sure.

This is Pete here, Bruce, and the ag guy -- we just had a meeting with our main ag guy who is here in town , part of the TM Excellence series, he is one of the mentors tieing in with our newer fellowships -- we had a meeting yesterday. We're on track for a good increase over the prior year.

I can't give you an exact percentage, but I would say I that our penetration into that marketplace is going extremely well. We are still focused on Canada right now with a view that we would like to get into the States, and that's our design by the end of the year, which we've talked about before as well, but we want to carry on looking at ways to expand that business, Alberta, Saskatchewan, have been both very successful.

The -- you guys in the U.S. appreciate this, but the Canadian-beach situation and the BFE issue that's been going on, had some farmers worried. There was also record or relatively lower crop prices that are on right now that are giving guys a bit of grief too. So, there was some concern at the start of the season that there would be some grief through a lower resell value of equipment or land on the way through -- in Alberta, Saskachewan -- but we have not experienced that at all.

It's been very strong. Good equipment is selling well. There's -- there's less of a shortage of ag equipment, I would say, than there is in the construction side, yet we're still seeing very solid pricing and very reflective of where our expectations are going into a risk deal. So it's has been very solid, and the guys have grown over last year for sure, and, again, looking to move to the U.S. here as quickly as we can get our act together there.

So then, it sounds like the number of sales has stepped up pretty significantly, and is the average sizes of those getting larger as well?

I don't have stats on that, Bruce. I could get them for you if you need them, but anecdotally, I would say that the average size of an auction has grown. I can't give you a feeling for the number of auctions, I would say they're probably close if not a little bit more, but I think the growth is probably is more in the average size of the auctions.

Okay. And then would the average sales be dominated by spring activity, or is it because of the crops involved? Would it be more of a fall thing?

It's funny, that's a good point. The typical selling season in the United States is typically fall for equipment, and in Canada, it's typically spring, and that really ties closely to the cash flow for the farmers. For whatever reasons, the Canadians don't get their crop money out till spring because of the structure of the way the internal workings work -- primarily the wheat board and things like that. So, it's very typical that the buying season and the selling season for equipment is the spring in Canada and the fall in the U.S.

And might you get into the U.S. by this fall, or is it too early?

It might be too early. I'd love to say yes, but I can't sit hereby today comfortably feeling that that would be the right answer.

Okay. Different topic. You give us a little more depth on the auction revenue rate -- how much of that outperformance above your long-term guidance comes down to Orlando -- it being so large in terms of its impact on the quarter, and how much of it is just kind of consistently better performance across many underwritten auctions?

That's a very easy answer. It's almost entirely attributable to the performance of the underwritten business. Our straight commission business didn't surprise us during the quarter -- rarely does.

Orlando was not much of an impact on us. The business in Orlando performed much like business performed in the rest of our auctions. It's so clear when I look at my graphs and charts that the underwritten business during the first quarter was a very strong performer -- one of the best performances we've seen from that category in a long time, and it jumped it up.

I guess what I am getting at, Bob, is within the underwritten business, is there one auction in particular that's enough of an impact to spike that up, or are you seeing consistently better and higher percentages from underwritten business profitability across the board.

For sure it was not a single auction -- it wasn't even one or two auctions. It was more consistent, but as I have to remind you, there's no way it was completely consistent.

We had some real money losers in there as well. Didn't have any auctions that were dogs, but within a given auction, there will absolutely be one or two contracts that performed incredibly well, and quite possibly one or two to that did not, but on average, the underwritten business almost for all of our auctions was very strong. So it was a multi-auction, and almost all auctions contributing.

Okay. Different topic -- give us a little bit of elaboration on the thinking behind accelerating the build out of permanent sites.

Sure, Bruce. Peter here.

The thinking behind that is that is that we've seen great success in virtually every instance where we've gone into a permanent auction site and made it happen. So the thought is that if we can find the right piece of property, let's devote more resources and energy to making sure that we're getting our properties up and running. It's not getting any easier, and in fact, it's getting much more difficult to get these sites in place, and if we sit back wait and do maybe none one year and one the next year, and none the following year, it just gets harder and harder to get the sites put into play with the zoning and the local ordinance issues that you have to go through.

So, we're focused on remaining opportunistic in trying to find these locations and make sure that they're the right place, but it makes sense to us that we if we have resources to be able to get them in place, and we have the people to be able to run them , which we do, both, then let's see if we can somehow seize the opportunity if it presents itself to make it happen.

So, you know, I think right now, with the resources we devote to the property development group, are fine to keep on a pace of one to two per years, but we would like to see maybe one or two guys into that group to see if they can uncover locations -- we know the area that we want to be in, but haven't been able to find the right location, and because there are so many things on for our property group, the guys might not get there for one, two, three months at a time, and then they'll spend one, two, or three days scouting for locations. So we think if we had a more directed effort at locating these properties that we may be able to accelerate that program, so that's the reason behind that.

Okay, but all of that is still consistent within the long-term top- and bottom-line growth rates? In other words, if you're successful at accelerating this, you don't think that it potentially accelerates the growth rate? More sort of like you need to put resources just to continue to feed the existing growth rate?

I think if you maintain the -- you know, we're doing some analysis internally here, but, if we just sat here and did nothing and simply clipped coupons for the rest of our days, we would have lots of cash flow, but we wouldn't grow the business at the same pace that we want to and we can.

I think that we're trying to maintain a measured pace in terms of our growth targets. We're not going to run off here and build 10 new permanent auction sites in two years, that's not in the program, but I think what we're doing is talking about maybe accelerating one additional site in a year, or maybe -- or maybe two or three over a period of two and a half years kind of thing.

We're not talking about a material movement -- just want to indicate to you guys that we're trying to stay focused on the things that are important to us, that help us grow our business, and this is currently one of them.

We've often said that we'd have to pass the system to do more business than we are doing today -- probably 40, 50% more if we clip coupons, as Pete said, which means that in the three or four years we would be up against a capacity ceiling, and because it takes a long time to get these darn sites up and running, we're looking to put the sights in place before we hit the capacity palp, and that's really what the plan is now. It's not really focusing on accelerating our 10% top-line growth target.

That would be nice, but the sites is simply one of many factors that contribute to that. We've of talked about the importance of adding people to our team of people -- sales and support people -- so that's also important. We have to be working on multiple strategic initiatives, and the property one is just an important piece, and because it's a time consume and challenging one, we're trying to get a head start on it.

Okay. Last question for me has to do with M07, and when you update your SG&A guidance to 90 million-ish, does that reflect any cost savings pulling out of that, or is MO7 really more of a 2006 impact in providing leverage?

The current G&A numbers do not impact -- do not include any assumed impact from MO7. I don't think we'll see tangible benefits that we would reflect in our guidance until '06-07. I would agree with you. However, you won't see cost decreases as a result of MO7. What we are working toward is a slowing of cost increases, and we're not clipping coupons, we're really growing this company. Our goal is to have our revenues grow faster than our expenses. MO7 is one of the strategies that will assist us to continue growing our expenses at a slower pace, but still growing our expenses.

Okay thanks. Guys.

Thank you.

Your next questions comes from the line of Gary Prestopino with Barrington Research. Please proceed with your question.

Good morning.

Gary.

Can you give us some idea at all if what kind of lift you're seeing on the prices you're realizing at auction from your internet sales?

Sure. The internet participation continues to grow, although at a fairly measured pace right now. Internet participants are representing about 20% of the registered bidders that auction. In recent periods and run rate, you know, right now, they're representing the buyer or the runner up on between 15 and 20% of all of the lots that we're selling in our auctions. So that means that the lift felt on 15 to 20% of the lots at the auctions.

I can't put a number on it for you. We've never tried to do that, but it's easy to say that it's at least either one or two increments on those auctions - on those lots -- that the internet is the buyer or the runner up of. We've never tried to put a percentage on it.

Just because I'm new to to story, Bob -- this underwritten to gross auction sales was up about 870 basis points. Now, it look looks it was a little bit depressed year-over-year year versus last year, but can you kind of explain the dynamics of what drives that? I mean, obviously, it drives it because you're getting more guarantee and more purchase contracts. It would seem to me, though, that in an environment of tight supply and strong demand, a consigner would not want to enter these contracts. They would want to take their chances at getting a higher price realized at auction. So, could you help me out with that a little bit with that?

Sure, I'll see if I can't reword your question, Gary. I think you're wondering about the auction revenue rate and why it was up higher than last quarter, because another question might have been the percentage of our business that we are underwrite, whether that was up.

You know, that's up, the other auction revenue rate is up too, and I'm just trying to get an understanding of what drives that percentage underwritten up, especially in an environment of the tight supply and strong demand.

Fair enough.

Well, the underwritten percentage was 23% in the quarter, and it's been been to 20 to 25% for the last graph year. It's been in a pretty tight band for several year, it goes up and down on a quarterly basis, but sort of the 20, 25% range. And, what drives it in a given period, boy, there are a lot of factors, but I think I would say it's driven by the individual motivations of individual customers, and what their level of risk tolerance is.

The cheapest way to work with Ritchie Bros. is to get us on a straight commission basis, and that's what 75% of our customers choose to do, but in some cases, a particular seller, consigner's risk preference means he's willing to may us an insurance premium to have more assurance, and when we are dealing with somebody like that, we absolutely keen to roll out difference contract options for them, and work with them to create a deal that makes more sense for them, and that's when you see more underwritten business. I don't think we've ever seen the underwritten percentage cycle in a relation to economic cycles. Pete, would you add any color to that?

I don't know that there's anything I can add to that, Bob.

You're not seeing the economic cycle -- I mean, is it -- could it be a mix shift in that you have more banks, maybe leasing companies trying to sell equipment versus owner/operators? Does that play into it at all?

I would say no because banks are -- some of them want guarantees and some don't, and owner/operators -- some of them want guarantees and some don't. Maybe one thing that is relative would be the degree of competition in a region. If we're in a particular region and there's a lot of competition, sometimes that enables to sellers to get Ritchie Bros. and the other competitors to sort of the fight against each other for a contract, and that can sometimes turn into an underwritten deal.

I mean Bob is right.

I understand your question, Gary, I mean, intuitively, you would think that people would choose the least-cost option to them, because they would be more comfortable with the resale value. Yet Bob is saying on that there are individual needs and desires for everyone -- some people retiring, they don't feel like -- you know, they've worked their whole life, and they don't want to take then risk of having something sell for less than what they would like to see in the bank, so we're quite prepared and happy to step up and do that. And that really sets us apart from a lot of the competition that we see in different parts of the world -- there are no other groups that can step up and do what we do in this auction space.

Thank you.

Thank you. The next question comes from the line of Sarah Hughes from Sprott Securities. Please proceed with your question.

Hi just just a few quick questions. You talked about earlier in the conference call how you're seeing more people come to the auction and wanting to sell equipment closer to the auction date. Is that helping your underwriting or the auction rate? I would assume you wouldn't have to offer them as attractive a commission rate for the people that come to the auction early.

Boy, you think we're that nasty, huh?

Those people probably don't come in and get underwritten deals, I think that's probably safe to say. Those tend to be a bit longer in the negotiations, so you're right, most of that would be straight commission business, and I think it's a fair comment and quite an astute observation.

If somebody comes in two day before a sale with a loader backhoe, they don't have as much negotiating power as they do if they came in with a fleet of rock trucks three weeks before the sale, so you're right. If somebody comes in closer to the sale, we've already got $10 million signed up. Yeah, they're probably a lot closer to the standard fee.

And, Peter, I did notice in terms of the number of consigners that you signed up in the quarter versus Q1 last year that you had a good jump there. Are you seeing any different market dynamics to help in terms of getting the consigners because I would have thought you would have had some trouble given the tight market conditions?

Yeah, I mentioned that earlier, too, Sara, that intuitively because of the tight market conditions, you would think that our guys it would be having more trouble. The reality of it is that we're just continuing to enjoy that momentum and penetrating the market.

It becomes more of an event in a marketplace where you have a large auction that people modify the buying and selling habits that they have in the local market where they start seeing regular, you know, 10, 15, 20, or more million dollar auction sales in an area that become this way that they choose to buy and sell their equipment.

So our guys are doing a tremendous job in the field at continuing to create their relationships, and continuing to raise the profile and of the presence of the unreserved auction method and the Ritchie Bros.- method of selling that equipment. So many people out there still do not use our service that it's like kids in a candy store trying to sell these guys what we do, and the more -- the more consigners that come, of course, that, to us, is evidence that more and more people are being converted to the process, saying, "yeah, this is the most effective, efficient method of converting my equipment into cash, and this effective, efficient method of for me to go out and take a day away from my job site so I can go and get the equipment I need grow my business. So it's that same synergy that's been working along all the way, we are really enjoying it. The had a lift in consigners over Q1 from the prior period is continued evidence to us that we're on the right course here.

And are you seeing some previous customer who weren't really interested in the auction, say, for example, some of the dealers, they believe they could do it on their own so why use an auction? Are you seeing some of those people being converted too coming to your auction?

Yes, we are.

Okay. And then just last question, I guess for Bob, in terms of the guidance to get to the 1.95 billion, I think, or you're assuming some deceleration in the growth of the gross auction sales in the second half of the year, is that just being conservative, given the lifted visibility, or is there something else there?

We just look at the numbers we get from the guys in the field. I see what you're seeing when you're think acceleration, but you're right in that it looks like the bulk of the growth that our guys in the field are projecting is the first -- in the first two quarters.

We're not playing any games. It's just the way it comes in. They're working on some big packages that they see coming together in the second quarter. That's why we're guiding to, you know, a scary big number, and they're not projecting those kinds of numbers in the third and fourth this year. Next year, it could be the opposite.

Okay. Thank you. Thank you. The next question comes from the line of James Gentile with Sidoti and Company. Please go ahead.

Just one more than question. I don't want to belabor anything, but at the end of the year, in your conference call, you mentioned other areas of expansion like Columbus, Ohio, you mentioned the construction of Nashville, and the progress of New England site identification, could you just kind of comment on that?

Columbus -- we have a piece of land under contract that we've been working for with the local council for getting proper zoning and rezoning -- so that's under way as we speak. Nashville is -- they started to move rock in the first quarter here, so they're actually -- in fact, I was down there last week, drove by the sight, and I couldn't even recognize it. It was a tremendous difference from when we bought the property to where it's at right now. So they're going great guns, and it's got great highway exposure.

The New England area -- we were close on a couple of properties that didn't come together because of some zoning issues, so that's an area that we talk about trying to increase our CapEx if we can, to find a location. New England is an area where we can sit somebody down and spend a month driving around there and try to find the right location, but we don't have the time right now, and the resources to devote to that. It's been frustrating to try to find the right piece of property, and we've been close on a couple of occasions, but no luck yet.

I'll take a ride up to [inaudible].

Pardon me?

Nothing. It's a city in rural Massachusetts. But no worries are. Thanks. That's all I need to know.

Okay.

Thank you. And the next question is another follow-up question from Ben Cherniavsky from Raymond James. Please go ahead.

Can you guys comment at all -- I know you don't want to say anything about the financial component of the deal with CitiCapital, but can you comment at all as to whether you did some business with them the first quarter, and whether or not that's already contributing to your gross auction sales?

Sure, Ben, I can tell you that last year for this first quarter, we did very little, if any, business with CitiCapital, and this year in the first quarter, we did a lot of business with CitiCapital. A lot, not to the point where they would be a material consigner in terms of one or economic dependence upon one guy. It was a nice large consignment spread out over much of the U.S. and Canada, in dribs and drabs here and there, and it's just the regular flow of their business that they're managing through. I think we're probably in the top ten of our competitors n the first quarter. I haven't done the math, but I would guess. Maybe top 20.

Okay. And I'm not expecting to get anywhere with this, but I'll ask you anyway. What do you guys -- how do you guys feel about the trade off between strength in used pricing in a strong market when demand exceeds supply, and the strength in volume and weaker -- and the related offset in weaker prices when this market turns and supply exceeds demand?

Do you get a sense that one is better? I know you guys like to is it a doesn't matter, but historically, which environment has worked better for you?

We're not avoiding that question. That's one of my favorite ones to talk about. The thing that drives Ritchie Bros. transactions -- but you're absolutely right that in different market conditions and different times, prices and volumes go up and down -- we're chasing the volumes, and one of the nicest things about our market is that the prices aren't too volatile, so rarely has the change in prices been dramatic enough to override the impact of a change in volume.

And I think the best example is just anecdotally, from past downturns, past periods of market weakness, past cycles, when equipment prices are on a decline if you like, or a bit soft, you're usually looking at a time of increased supply, which is what you were referring to, so we're chasing business like crazy, there's lots of equipment available for us, we're bringing more into the auction, and the logical assumption might be that would be offset by lower prices, but that doesn't tend to be the case.

The increased supply, historically, at Ritchie Bros. auction, has been met by increased demand, and the reason that I have no problem with that even though at first it's not intuitive, is because the demand is coming from all the traditional buyers of used equipment, but a new category of buyer -- the folks who are traditional buyers of new equipment during downturns become buyers in the aftermarket. They still need equipment.

Don't forget the economy is colossal, regardless if it's expansion times or contraction times, the economy is colossal, and there's people building roads and bridges and dams and digging up trees and things, they need equipment. Where they normally would have gone to the Cat or [Kamatsu] dealer to buy new, they now don't have the same degree of confidence to justify that level of expenditure, so they turn to the aftermarket. And they join the traditional buyers of used that are market, and are now fighting against each other, a larger buyer crowd, and that helps to support the pricing. So, our experience has been in downturns, sure prices go down a bit, but they don't go down dramatically.

It tends to be a sort of self-correcting feature of our market, and it drives us back to our paper comments that , we weren't as cyclical as others. We have our supply. Prices are down little bit, but not dramatically. They continued to be a vessel correcting feature in our market, and let drives us back tower favorite excellent that we're just after transactions. The pricing almost takes care of itself.

But I've heard you guys say the past, you like to describe your business that it does well in good times and better in bad times -- do you still believe that?

I believe it, Ben.

This is Peter here, and I believe it.

Bob's trying to coach this comment, but in my heart of hearts, I've seen it happen several times. We do well in the good times, and we provide a really valuable service in the good times, and we call the bad times, and coined it, but there really isn't that bad a time out there. In times of increased supply and a downward economy when interest rates tick up, yeah, we tend to do better.

I would add to that -- we seem to be able to do well at any point in the cycle, primarily because we are so small, relative though market opportunity. At some point, our business models become mature, I'll probably be in an old age home in a rocking chair by then, we have a lot of market growth to go. When our market share from the current say 2% to some mature number, I don't know -- 10, 15, 20% -- at that point, economic cycles probably become relevant, but for us right now, we seem to be able to grow in good or in bad times.

Having said that, the one macro factor that probably would make a difference would be some spike in interest rates, but that doesn't seem to be on the horizon right now.

Would make a positive difference?

I would think so.

I don't want to belabor this, but I remember a five years ago when you guys were saying -- Russ, at the time, was saying -- business is -- demand for equipment is so strong we can't get anyone to sell, and your numbers, at the time -- I'm sure you guys remember -- were disappointing relatively to the targets you set at least. What's different this time?

You know, Ben, it's Pete here. Lots of things, I guess, are different this time.

I think they're -- you know within my take on that -- that was back in '98, '99, 2000. The internet was just coming onstream, and we're competing for -- we're a channel, we're a distribution channel -- and we're competing with other distribution charges to get the equipment through and realized into the market place. So this brand new channel got invented called the internet, and a lot of people were starting to push things saying, "well, I'm going to advertise my thing on the internet," and we had fifty odd competitors online, everyone with equipment listed for sale saying we're going to take over your space.

So, to me, I saw it as a temporary attempt by some guys to try to use a different channel to see if there was something that was more efficient out there for them. And, of course, with those channels now different, and those fifty competitors now gone, and people seeing the impact that we've had and the way we've integrated the internet into our system of allowing the live bid to occur, allowing the real live auction to take place at the same time internet bid and internet participation, people are seeing more and more that this is the real meal deal here, and this is the trap -- the mouse trap -- they've been looking for.

So we're enjoying an awful lot of momentum. The integrity and reputation of the Company has never more important than it is today in terms of what's been happening to the marketplace in general. It's sad, in a way, in some respects to the commentary that you've got all of these guys that have been doing all of these nasty things for many, many years, and we've just been sort of maintaining the same level of integrity that we were founded on and we continue to be, and it's nice because we're earning dividends because of that. At the same time, you shouldn't be rewarded just for doing the right thing. And that, to me, is just a little bit disappointing as a general societal comment -- but reading about Mr. Greenburg this morning on Wall Street Journal this morning, yeah, that kind of stuff -- that's what's different now than before that I think our repetition and our integrity are helping us stand out there further.

The distribution charges have changed somewhat so that there's a solidification of what we've been driving in the marketplace more so than in the past. There's also quite a bit of transparency in the marketplace, Ben, we didn't have that a five years ago. .

Pete talked about the internet being new back then, now it's everywhere. People have lots of access to information. There's no advantage, but there's less advantage for people to be using some of the traditional channels, and we're finding more people are coming to our channel because of the evolution and trends within the marketplace.

Okay. Thank you.

Operator, we time for one more question.

There is actually no further questions at this time.

That's what I meant was we don't have any more questions. Thanks everyone appreciate your attendance, and we'll look forward to talking to you the next quarter. We're going to go out and make some money. Okay?

Thank you, Ladies and Gentlemen. That concludes the conference call for today.