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 September 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: 109,400,129 common shares, without par value, outstanding as of November 4, 2020.

RITCHIE BROS. AUCTIONEERS INCORPORATED

FORM 10-Q

For the quarter ended September 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	27
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				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue:
Service revenue	$	222,679	$	178,577	$	639,941	$	585,555
Inventory sales revenue		108,863		111,219		353,906		400,892
Total revenue		331,542		289,796		993,847		986,447
Operating expenses:
Costs of services		39,223		36,382		118,026		122,719
Cost of inventory sold		96,253		102,410		320,972		372,703
Selling, general and administrative expenses		110,186		93,691		309,203		286,589
Acquisition-related costs		—		45		—		752
Depreciation and amortization expenses		18,436		17,692		55,586		51,919
Gain on disposition of property, plant and equipment		(276)		(821)		(1,536)		(1,071)
Foreign exchange loss		336		237		1,330		1,118
Total operating expenses		264,158		249,636		803,581		834,729
Operating income		67,384		40,160		190,266		151,718
Interest expense		(8,737)		(10,090)		(26,801)		(31,023)
Other income, net		2,280		1,962		6,714		5,680
Income before income taxes		60,927		32,032		170,179		126,375
Income tax expense		15,437		6,760		48,741		28,800
Net income	$	45,490	$	25,272	$	121,438	$	97,575
Net income attributable to:
Stockholders	$	45,387	$	25,266	$	121,239	$	97,466
Non-controlling interests		103		6		199		109
Net income	$	45,490	$	25,272	$	121,438	$	97,575
Earnings per share attributable to stockholders:
Basic	$	0.42	$	0.23	$	1.11	$	0.90
Diluted	$	0.41	$	0.23	$	1.10	$	0.89
Weighted average number of shares outstanding:
Basic		109,018,469		108,003,390		108,887,026		108,453,525
Diluted		110,369,718		109,381,173		110,060,712		109,634,195

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				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income	$	45,490	$	25,272	$	121,438	$	97,575
Other comprehensive income (loss), net of income tax:
Foreign currency translation adjustment		12,549		(9,703)		7,445		(8,880)
Total comprehensive income	$	58,039	$	15,569	$	128,883	$	88,695
Total comprehensive income attributable to:
Stockholders	$	57,910	$	15,586	$	128,654	$	88,614
Non-controlling interests		129		(17)		229		81
	$	58,039	$	15,569	$	128,883	$	88,695

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)

	September 30,		December 31,
	2020		2019
Assets
Cash and cash equivalents	$	470,285	$	359,671
Restricted cash		120,014		60,585
Trade and other receivables		333,110		142,627
Less: allowance for credit losses		(4,635)		(5,225)
Inventory		62,101		64,956
Other current assets		26,279		50,160
Income taxes receivable		5,619		6,810
Total current assets		1,012,773		679,584
Property, plant and equipment		481,047		484,482
Other non-current assets		134,973		145,679
Intangible assets		220,791		233,380
Goodwill		672,746		672,310
Deferred tax assets		15,659		13,995
Total assets	$	2,537,989	$	2,229,430
Liabilities and Equity
Auction proceeds payable	$	496,936	$	276,188
Trade and other payables		215,110		194,279
Income taxes payable		11,241		7,809
Short-term debt		20,285		4,705
Current portion of long-term debt		9,926		18,277
Total current liabilities		753,498		501,258
Long-term debt		622,635		627,204
Other non-current liabilities		144,677		151,238
Deferred tax liabilities		52,312		42,743
Total liabilities		1,573,122		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: 109,381,891 (December 31, 2019: 109,337,781)		195,727		194,771
Additional paid-in capital		48,253		52,110
Retained earnings		767,188		714,051
Accumulated other comprehensive loss		(51,684)		(59,099)
Stockholders' equity		959,484		901,833
Non-controlling interest		5,383		5,154
Total stockholders' equity		964,867		906,987
Total liabilities and equity	$	2,537,989	$	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 September 30, 2020	shares	Amount		("APIC")		earnings		loss		("NCI")		equity		("PSUs")
Balance, June 30, 2020	108,630,537	$	169,255	$	47,958	$	746,048	$	(64,207)	$	5,254	$	904,308		—
Net income	—		—		—		45,387		—		103		45,490		—
Other comprehensive income (loss)	—		—		—		—		12,523		26		12,549		—
	—		—		—		45,387		12,523		129		58,039		—
Stock option exercises	751,268		26,470		(5,701)		—		—		—		20,769		—
Issuance of common stock related to vesting of share units	86		2		(7)		—		—		—		(5)		—
Stock option compensation expense	—		—		1,671		—		—		—		1,671		—
Equity-classified share units expense	—		—		4,138		—		—		—		4,138		—
Equity-classified share units dividend equivalents	—		—		194		(194)		—		—		—		—
Cash dividends paid	—		—		—		(24,053)		—		—		(24,053)		—
Balance, September 30, 2020	109,381,891	$	195,727	$	48,253	$	767,188	$	(51,684)	$	5,383	$	964,867		—
Three months ended September 30, 2019
Balance, June 30, 2019	107,836,674	$	150,585	$	54,633	$	680,915	$	(55,449)	$	5,165	$	835,849		1,049
Net income	—		—		—		25,266		—		6		25,272		—
Other comprehensive income (loss)	—		—		—		—		(9,680)		(23)		(9,703)		—
	—		—		—		25,266		(9,680)		(17)		15,569		—
Stock option exercises	363,217		8,451		(135)		—		—		—		8,316		—
Issuance of common stock related to vesting of share units	10,444		737		—		1		—		—		738		(1,083)
Stock option compensation expense	—		—		1,653		—		—		—		1,653		—
Equity-classified share units expense	—		—		2,830		—		—		—		2,830		21
Equity-classified share units dividend equivalents	—		—		308		(320)		—		—		(12)		13
Cash dividends paid	—		—		—		(21,631)		—		—		(21,631)		—
Balance, September 30, 2019	108,210,335	$	159,773	$	59,289	$	684,231	$	(65,129)	$	5,148	$	843,312		—

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
Nine months ended September 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	—		—		—		121,239		—		199		121,438		—
Other comprehensive income (loss)	—		—		—		—		7,415		30		7,445		—
	—		—		—		121,239		7,415		229		128,883		—
Stock option exercises	1,430,545		50,611		(10,417)		—		—		—		40,194		—
Issuance of common stock related to vesting of share units	138,877		3,515		(7,459)		—		—		—		(3,944)		—
Stock option compensation expense	—		—		4,401		—		—		—		4,401		—
Equity-classified share units expense	—		—		9,155		—		—		—		9,155		—
Equity-classified share units dividend equivalents	—		—		463		(463)		—		—		—		—
Cash dividends paid	—		—		—		(67,639)		—		—		(67,639)		—
Shares repurchased	(1,525,312)		(53,170)		—		—		—		—		(53,170)		—
Balance, September 30, 2020	109,381,891	$	195,727	$	48,253	$	767,188	$	(51,684)	$	5,383	$	964,867	$	—
Nine months ended September 30, 2019
Balance, December 31, 2018	108,682,030	$	181,780	$	56,885	$	648,255	$	(56,277)	$	5,067	$	835,710	$	923
Net income	—		—		—		97,466		—		109		97,575		—
Other comprehensive loss	—		—		—		—		(8,852)		(28)		(8,880)		—
	—		—		—		97,466		(8,852)		81		88,695		—
Stock option exercises	544,576		14,119		(1,679)		—		—		—		12,440		—
Issuance of common stock related to vesting of share units	207,403		5,886		(10,064)		1		—		—		(4,177)		(1,083)
Stock option compensation expense	—		—		4,852		—		—		—		4,852		—
Equity-classified share units expense	—		—		8,640		—		—		—		8,640		114
Equity-classified share units dividend equivalents	—		—		655		(700)		—		—		(45)		46
Cash dividends paid	—		—		—		(60,791)		—		—		(60,791)		—
Shares repurchased	(1,223,674)		(42,012)		—		—		—		—		(42,012)		—
Balance, September 30, 2019	108,210,335	$	159,773	$	59,289	$	684,231	$	(65,129)	$	5,148	$	843,312	$	—

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)

Nine months ended September 30,	2020		2019
Cash provided by (used in):
Operating activities:
Net income	$	121,438	$	97,575
Adjustments for items not affecting cash:
Depreciation and amortization expenses		55,586		51,919
Stock option compensation expense		4,401		4,852
Equity-classified share unit expense		9,155		8,754
Deferred income tax expense (recovery)		8,250		(4,760)
Unrealized foreign exchange (gain) loss		2,049		(129)
Gain on disposition of property, plant and equipment		(1,536)		(1,071)
Amortization of debt issuance costs		2,375		2,701
Amortization of right-of-use assets		9,194		8,867
Gain on contingent consideration from equity investment		(1,700)		—
Other, net		2,427		1,025
Net changes in operating assets and liabilities		53,912		139,372
Net cash provided by operating activities		265,551		309,105
Investing activities:
Property, plant and equipment additions		(9,865)		(6,915)
Intangible asset additions		(19,886)		(18,377)
Proceeds on disposition of property, plant and equipment		16,277		5,610
Distribution from equity investment		4,212		—
Proceeds on contingent consideration from equity investment		1,700		—
Other, net		(2,630)		(1,000)
Net cash used in investing activities		(10,192)		(20,682)
Financing activities:
Share repurchase		(53,170)		(42,012)
Dividends paid to stockholders		(67,639)		(60,791)
Issuances of share capital		40,194		12,440
Payment of withholding taxes on issuance of shares		(3,870)		(5,260)
Proceeds from short-term debt