UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission file number: 001-13425

Ritchie Bros. Auctioneers Incorporated

(Exact Name of Registrant as Specified in its Charter)

Canada	98-0626225
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9500 Glenlyon Parkway
Burnaby, British Columbia, Canada	V5J 0C6
(Address of Principal Executive Offices)	(Zip Code)

(778) 331-5500

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares	RBA	New York Stock Exchange
Common Share Purchase Rights	N/A	New York Stock Exchange

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 108,685,255 common shares, without par value, outstanding as of August 5, 2020.

RITCHIE BROS. AUCTIONEERS INCORPORATED

FORM 10-Q

For the quarter ended June 30, 2020

INDEX

PART I – FINANCIAL INFORMATION
ITEM 1:	Consolidated Financial Statements	1
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	49
ITEM 4:	Controls and Procedures	49
PART II – OTHER INFORMATION
ITEM 1:	Legal Proceedings	50
ITEM 1A:	Risk Factors	50
ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds	51
ITEM 3:	Defaults Upon Senior Securities	51
ITEM 4:	Mine Safety Disclosures	51
ITEM 5:	Other Information	51
ITEM 6:	Exhibits	52
SIGNATURES		53

PART I – FINANCIAL INFORMATION

ITEM 1:           CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Income Statements

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

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue:
Service revenue	$	234,139	$	234,606	$	417,262	$	406,978
Inventory sales revenue		154,911		158,616		245,043		289,673
Total revenue		389,050		393,222		662,305		696,651
Operating expenses:
Costs of services		39,448		50,268		78,803		86,337
Cost of inventory sold		143,134		149,818		224,719		270,293
Selling, general and administrative expenses		100,632		97,714		199,017		192,898
Acquisition-related costs		—		38		—		707
Depreciation and amortization expenses		17,857		17,112		37,150		34,227
Gain on disposition of property, plant and equipment		(1,213)		(101)		(1,260)		(250)
Foreign exchange loss		392		403		994		881
Total operating expenses		300,250		315,252		539,423		585,093
Operating income		88,800		77,970		122,882		111,558
Interest expense		(8,882)		(10,117)		(18,064)		(20,933)
Other income, net		857		1,679		4,434		3,718
Income before income taxes		80,775		69,532		109,252		94,343
Income tax expense		27,656		15,401		33,304		22,040
Net income	$	53,119	$	54,131	$	75,948	$	72,303
Net income attributable to:
Stockholders	$	53,043	$	54,036	$	75,851	$	72,200
Non-controlling interests		76		95		97		103
Net income	$	53,119	$	54,131	$	75,948	$	72,303
Earnings per share attributable to stockholders:
Basic	$	0.49	$	0.50	$	0.70	$	0.66
Diluted	$	0.49	$	0.49	$	0.69	$	0.66
Weighted average number of shares outstanding:
Basic		108,387,490		108,707,708		108,818,903		108,725,871
Diluted		109,323,343		109,942,768		109,903,808		109,982,763

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros. 1

Condensed Consolidated Statements of Comprehensive Income

(Expressed in thousands of United States dollars)

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income	$	53,119	$	54,131	$	75,948	$	72,303
Other comprehensive income (loss), net of income tax:
Foreign currency translation adjustment		10,764		2,457		(5,105)		823
Total comprehensive income	$	63,883	$	56,588	$	70,843	$	73,126
Total comprehensive income attributable to:
Stockholders	$	63,795	$	56,486	$	70,743	$	73,028
Non-controlling interests		88		102		100		98
	$	63,883	$	56,588	$	70,843	$	73,126

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros. 2

Condensed Consolidated Balance Sheets

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

(Unaudited)

	June 30,		December 31,
	2020		2019
Assets
Cash and cash equivalents	$	389,720	$	359,671
Restricted cash		148,293		60,585
Trade and other receivables		334,488		142,627
Less: allowance for credit losses		(4,559)		(5,225)
Inventory		63,089		64,956
Other current assets		27,486		50,160
Income taxes receivable		3,937		6,810
Total current assets		962,454		679,584
Property, plant and equipment		475,936		484,482
Other non-current assets		131,326		145,679
Intangible assets		223,130		233,380
Goodwill		671,368		672,310
Deferred tax assets		14,299		13,995
Total assets	$	2,478,513	$	2,229,430
Liabilities and Equity
Auction proceeds payable	$	499,415	$	276,188
Trade and other payables		213,036		194,279
Income taxes payable		16,023		7,809
Short-term debt		21,980		4,705
Current portion of long-term debt		17,588		18,277
Total current liabilities		768,042		501,258
Long-term debt		614,375		627,204
Other non-current liabilities		142,518		151,238
Deferred tax liabilities		49,270		42,743
Total liabilities		1,574,205		1,322,443
Commitments and Contingencies (Note 19 and Note 20 respectively)
Stockholders' equity:
Share capital:
Common stock; no par value, unlimited shares authorized, issued and outstanding shares: 108,630,537 (December 31, 2019: 109,337,781)		169,255		194,771
Additional paid-in capital		47,958		52,110
Retained earnings		746,048		714,051
Accumulated other comprehensive loss		(64,207)		(59,099)
Stockholders' equity		899,054		901,833
Non-controlling interest		5,254		5,154
Total stockholders' equity		904,308		906,987
Total liabilities and equity	$	2,478,513	$	2,229,430

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros. 3

Condensed Consolidated Statements of Changes in Equity

(Expressed in thousands of United States dollars, except where noted)

(Unaudited)

	Attributable to stockholders													Contingently
				Additional				Accumulated		Non-				redeemable
	Common stock			paid-In				other		controlling				performance
	Number of			capital		Retained		comprehensive		interest		Total		share units
Three months ended June 30, 2020	shares	Amount		("APIC")		earnings		loss		("NCI")		equity		("PSUs")
Balance, March 31, 2020	108,198,739	$	153,801	$	46,147	$	714,816	$	(74,959)	$	5,166	$	844,971		—
Net income	—		—		—		53,043		—		76		53,119		—
Other comprehensive loss	—		—		—		—		10,752		12		10,764		—
	—		—		—		53,043		10,752		88		63,883		—
Stock option exercises	431,831		15,457		(3,086)		—		—		—		12,371		—
Issuance of common stock related to vesting of share units	(33)		(3)		(7)		—		—		—		(10)		—
Stock option compensation expense	—		—		1,543		—		—		—		1,543		—
Equity-classified share units expense	—		—		3,231		—		—		—		3,231		—
Equity-classified share units dividend equivalents	—		—		130		(130)		—		—		—		—
Cash dividends paid	—		—		—		(21,681)		—		—		(21,681)		—
Balance, June 30, 2020	108,630,537	$	169,255	$	47,958	$	746,048	$	(64,207)	$	5,254	$	904,308		—
Three months ended June 30, 2019
Balance, March 31, 2019	108,958,906	$	189,297	$	50,054	$	646,614	$	(57,899)	$	5,063	$	833,129		984
Net income	—		—		—		54,036		—		95		54,131		—
Other comprehensive income (loss)	—		—		—		—		2,450		7		2,457		—
	—		—		—		54,036		2,450		102		56,588		—
Stock option exercises	98,433		3,190		(694)		—		—		—		2,496		—
Issuance of common stock related to vesting of share units	3,009		110		—		—		—		—		110		—
Stock option compensation expense	—		—		1,660		—		—		—		1,660		—
Equity-classified share units expense	—		—		3,488		—		—		—		3,488		47
Equity-classified share units dividend equivalents	—		—		125		(143)		—		—		(18)		18
Cash dividends paid	—		—		—		(19,592)		—		—		(19,592)		—
Shares repurchased	(1,223,674)		(42,012)		—		—		—		—		(42,012)		—
Balance, June 30, 2019	107,836,674	$	150,585	$	54,633	$	680,915	$	(55,449)	$	5,165	$	835,849		1,049

Ritchie Bros. 4

Condensed Consolidated Statements of Changes in Equity

(Expressed in thousands of United States dollars, except where noted)

(Unaudited)

	Attributable to stockholders													Contingently
				Additional				Accumulated		Non-				redeemable
	Common stock			paid-In				other		controlling				performance
	Number of			capital		Retained		comprehensive		interest		Total		share units
Six months ended June 30, 2020	shares	Amount		("APIC")		earnings		loss		("NCI")		equity		("PSUs")
Balance, December 31, 2019	109,337,781	$	194,771	$	52,110	$	714,051	$	(59,099)	$	5,154	$	906,987	$	—
Net income	—		—		—		75,851		—		97		75,948		—
Other comprehensive loss	—		—		—		—		(5,108)		3		(5,105)		—
	—		—		—		75,851		(5,108)		100		70,843		—
Stock option exercises	679,277		24,141		(4,716)		—		—		—		19,425		—
Issuance of common stock related to vesting of share units	138,791		3,513		(7,451)		—		—		—		(3,938)		—
Stock option compensation expense	—		—		2,730		—		—		—		2,730		—
Equity-classified share units expense	—		—		5,017		—		—		—		5,017		—
Equity-classified share units dividend equivalents	—		—		268		(268)		—		—		—		—
Cash dividends paid	—		—		—		(43,586)		—		—		(43,586)		—
Shares repurchased	(1,525,312)		(53,170)		—		—		—		—		(53,170)		—
Balance, June 30, 2020	108,630,537	$	169,255	$	47,958	$	746,048	$	(64,207)	$	5,254	$	904,308	$	—
Six months ended June 30, 2019
Balance, December 31, 2018	108,682,030	$	181,780	$	56,885	$	648,255	$	(56,277)	$	5,067	$	835,710	$	923
Net income	—		—		—		72,200		—		103		72,303		—
Other comprehensive loss	—		—		—		—		828		(5)		823		—
	—		—		—		72,200		828		98		73,126		—
Stock option exercises	181,359		5,668		(1,544)		—		—		—		4,124		—
Issuance of common stock related to vesting of share units	196,959		5,149		(10,064)		—		—		—		(4,915)		—
Stock option compensation expense	—		—		3,199		—		—		—		3,199		—
Equity-classified share units expense	—		—		5,810		—		—		—		5,810		93
Equity-classified share units dividend equivalents	—		—		347		(380)		—		—		(33)		33
Cash dividends paid	—		—		—		(39,160)		—		—		(39,160)		—
Shares repurchased	(1,223,674)		(42,012)		—		—		—		—		(42,012)		—
Balance, June 30, 2019	107,836,674	$	150,585	$	54,633	$	680,915	$	(55,449)	$	5,165	$	835,849	$	1,049

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros. 5

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited)

Six months ended June 30,	2020		2019
Cash provided by (used in):
Operating activities:
Net income	$	75,948	$	72,303
Adjustments for items not affecting cash:
Depreciation and amortization expenses		37,150		34,227
Stock option compensation expense		2,730		3,199
Equity-classified share unit expense		5,017		5,903
Deferred income tax expense		6,657		1,056
Unrealized foreign exchange (gain) loss		1,129		(51)
Gain on disposition of property, plant and equipment		(1,260)		(250)
Amortization of debt issuance costs		1,577		1,765
Amortization of right-of-use assets		6,318		5,845
Gain on contingent consideration from equity investment		(1,700)		—
Other, net		1,934		322
Net changes in operating assets and liabilities		62,824		36,036
Net cash provided by operating activities		198,324		160,355
Investing activities:
Property, plant and equipment additions		(6,140)		(4,618)
Intangible asset additions		(13,244)		(12,175)
Proceeds on disposition of property, plant and equipment		16,106		583
Distribution from equity investment		4,212		—
Proceeds on contingent consideration from equity investment		1,700		—
Other, net		(2,782)		(1,000)
Net cash used in investing activities		(148)		(17,210)
Financing activities:
Share repurchase		(53,170)		(42,012)
Dividends paid to stockholders		(43,586)		(39,160)
Issuances of share capital		19,425		4,124
Payment of withholding taxes on issuance of shares		(3,321)		(4,915)
Proceeds from short-term debt		35,799		12,879
Repayment of short-term debt		(19,941)		(24,985)
Repayment of long-term debt