RITCHIE BROS. AUCTIONEERS INCORPORATED
Annual Report
2012
Contents
Letter to Shareholders
Financial Information
Management’s Discussion and Analysis
Audited Consolidated Financial Statements
Supplemental Quarterly Data
Selected Financial and Operating Data
Shareholder Information
3
8
92
93
94
Forward-looking statements
The discussion in this Annual Report includes forward-looking statements, which involve risks and
uncertainties as to possible future outcomes. Readers should refer to the discussion concerning
forward-looking statements and risk factors included in our Management’s Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31, 2012, which is
included in the Financial Information section of this Annual Report.
To Our Fellow Shareholders:
When we sat down in 2010 to craft a new mission statement built on our core values, the global
business environment was in turmoil and economic uncertainty was the order of the day. Fast forward
to the present and things have not changed much. The eye of the storm may have passed but the
uncertainty remains. Throughout this time, a few things remained constant and helped us navigate
through uncharted waters – our mission statement, our GROW-ADD-PERFORM strategic pillars and the
underlying core values that all Ritchie Bros. employees live and breathe. These constants were the
backdrop for our 2012 performance, and they are the foundation of our future plans.
2012: The Year in Review
Production levels finally caught up with demand for many categories of equipment and lead times for
new equipment came down to more reasonable levels. This impacted dealer inventory for both new
and used equipment, causing most dealers to cut back on their orders. The combination of
manufacturer and dealer activities together with reduced capital expenditures in some sectors
inevitably led to volatility in used equipment prices. Even with this choppy price environment, some of
our global markets experienced strong volumes in 2012, particularly Canada and Australia. In the USA,
lower dealer inventory levels in the early part of the year contributed to continuing intense competition
for equipment in many regions, and as a result our USA operating performance was flat overall.
Europe also remained challenging, particularly in the north, although we made some important inroads
in the region. Southern Europe is still coping with their financial crisis, but that has generated
equipment transactions and good volumes for Ritchie Bros. Early in the year, we had a successful first
auction at our new auction site in the UK, which we believe has set the stage for our growth in that
market. Our business model and our unique global presence enable us to match domestic supply with
3 global demand, an extremely valuable proposition for equipment owners, especially in countries such as
Spain, Italy and Greece that saw domestic demand shrink.
We reached some important milestones during the year including significant gains in our online
presence, with over 5 million unique visitors to our website and $1.3 billion in sales to online bidders at
our auctions. All this contributed to another growth year, with gross auction proceeds (“GAP”)
increasing to $3.9 billion. Our Canadian team recorded over $1 billion in GAP for the year, an amazing
feat given that GAP for the entire company was $1 billion only 15 years ago.
US$ bn
Gross Auction Proceeds
US$ m
Auction Revenues and EBITDA
5.0
4.0
3.0
2.0
1.0
0.0
3.6
3.5
3.3
3.7
3.9
0.7
0.8
0.9
1.1
1.3
500
400
300
200
100
0
355
377
357
438
396
141
159
130
146
161
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Gross Auction Proceeds
Online Gross Auction Proceeds
Auction Revenue
EBITDA
US$ m Adjusted Earnings and Dividends Paid
82
74
65
43
46
50
100
85
92
36
40
75
50
25
0
2008
2009
2010
2011
2012
Adjusted Net Earnings
Dividends Paid
During the year we continued to make strategic investments in our infrastructure, people and processes
that have created the capacity for our future growth, although we have not yet realized the full leverage
and benefits of these investments. We see improving economic signs on the horizon in many parts of
the world, particularly in the USA, and we believe in the prospects for further growth in our business in
2013 and beyond.
4 2013 and Beyond
When one is planning for the future, it is good practice to reflect on the past. Looking back at 2012, we
asked ourselves, “If we could have done a few things differently, what would they have been?” We
identified two answers: hire more territory managers and deliver better results on our at-risk business.
Territory managers are critical to our ability to deliver GAP and auction revenues, and we didn’t hire
enough of them in 2012. The poor performance of our at-risk business negatively impacted our auction
revenues. We felt 2012 was not an optimal year, even with adjusted net earnings growth of 17%
(excluding costs associated with AssetNation). If we had executed as planned we would have had an
even stronger year. So, we kept these misses in mind when we were setting our goals for 2013 and
beyond, and identified the ‘Big 3’ to focus on: grow, add and perform. If we execute like we know we
can and achieve success in these three areas, we believe 2013 will be a very good year for Ritchie Bros.
Our business is not complicated– it’s all about customer service and it’s based on relationships. To
achieve our sales objectives for 2013 and to set the stage for the ongoing growth of our core auction
business, we will focus on strengthening our existing customer relationships, and developing new ones.
We are entering a more familiar business environment within the equipment market and don’t expect
to face the same degree of headwinds that we have been dealing with in recent years. Against that
backdrop, we will focus on high potential growth areas in new and existing markets. This includes
holding our first auction in China and opening our newest auction site in Melbourne (Geelong),
Australia, as well as increased sales and management focus in the Middle East, African and Asian
markets. Early in the year our at-risk business performed below historical levels but after our corrective
action mid-year we enjoyed good success with our at-risk business in the fourth quarter; we plan to
continue this performance going forward. We will continue with our efforts to enhance our customers’
experiences with Ritchie Bros., whether they are viewing equipment specifications online, walking
through our yards on auction day or simply needing a question answered at the registration desk. We
intend to maintain our position as the customer service leader in our industry.
These are exciting times for our core unreserved auction business and we will not let anything distract
us from pursuing the tremendous growth potential we see in front of us.
5 We pride ourselves on being an innovative company. To stand still would be a disservice to our
customers, our employees and our shareholders. As our mission statement says, we are in the solutions
business. We exist to help the world’s builders exchange equipment. When we crafted our mission
statement in 2010, we explicitly acknowledged that some of the world’s builders have needs that are
not met by our unreserved auctions. We also recognized that Ritchie Bros. was uniquely positioned –
with our brand, our reputation, our experience and our expertise - to create a solution to meet those
needs. Ritchie Bros. EquipmentOne is complementary to our flagship auction business and allows us to
open up an entirely new segment of the equipment market. With the launch of Ritchie Bros.
EquipmentOne in January 2013, we believe we will be able to double our addressable market, which will
create value for our shareholders and opportunities for our employees.
All members of the Ritchie Bros. team are important; but in 2013, we will be placing extra emphasis on
the development of our sales team. A key focus for 2013 is to hire, train and develop the territory
managers we need to achieve our growth objectives. We weren’t good enough in this area in 2012 and
we have no intention of repeating that performance. We have also simplified the compensation
structures for our sales management and territory managers, and placed a renewed emphasis on arming
our sales team with the right support resources and tools to help them grow their business. In addition,
we have enhanced our sales management training. Recognizing the link between sales performance and
sales targets, we intend to make the growth and development of our sales team one of our top three
focuses in 2013.
In Conclusion
We have a number of initiatives underway in addition to the three outlined above; but we are
highlighting these three because we believe achieving these objectives will enable us to hit our 2013
targets and set us up for many years of growth and success.
Through the market turbulence, the resiliency and resolve of our people enabled us to achieve some
significant milestones during 2012. Our guiding lights have been our core values, which empower every
single employee to do what’s right for our customers and to have fun doing it. We could not have
succeeded or reached our current heights without the hard work and determination of the men and
women that make up the Ritchie Bros. team. We are lucky and grateful to work with such a dedicated
6 and passionate team and we look forward to their continuing contributions in the coming years as we
help the world’s builders to easily and confidently exchange equipment.
Our shareholders also deserve thanks, for their continued support and for trusting management’s
abilities to set the appropriate course for the future. We would also like to thank the growing
community of equipment owners who are choosing to work with Ritchie Bros. when they need to buy or
sell equipment. We truly appreciate your support and loyalty and are pleased and honoured that you
find good value in the services we provide.
Robert W. Murdoch
Chairman
Peter J. Blake
Chief Executive Officer
7 ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. These statements
are based on current expectations and estimates about our business, and include, among
others, statements relating to:
our future performance and long-term financial objectives;
impact of market uncertainty on equipment seller behaviour;
competition in the used equipment market;
anticipated pricing environment for late model equipment;
growth of our operations, including replacement of existing auction sites and adding
new auction sites;
growth potential in established and emerging markets;
our internet initiatives and the level of participation in our auctions by internet
bidders, including the timing of the next major release and full commercial launch of
our new online marketplace;
integration of AssetNation’s personnel, technology and e-commerce expertise to
reach new segments of the equipment market;
growth of used equipment and truck markets;
increases in the number of consignors and bidders participating in our auctions;
our principal operating strengths, our competitive advantages, and the appeal of our
auctions to buyers and sellers of industrial assets;
our ability to draw consistently significant numbers of local and international end-
user bidders to our auctions;
our ability to continue to grow our share of the used equipment market and to meet
the needs of our customers;
our ability to partner with our customers and potential customers;
our ability to utilize the excess capacity in our sales team and auction site network to
help sustain our growth;
our ability to grow our core auction business, including our ability to increase our
market share with traditional customer groups and do more business with new
customer groups in new markets, among others;
our ability to add new business and information solutions, including, among others,
utilizing technology to enhance our auction services and support additional value
added services;
our ability to perform by building an inspired high-performance customer focused
team, to improve sales force productivity and growth in our sales force;
our ability to improve sales force productivity, employee engagement and
management bench strength and increase operational efficiency of our sales and
operations teams;
our ability to leverage our Ritchie Bros. brand;
8
the relative percentage of Gross Auction Proceeds represented by straight
commission, guarantee and inventory contracts, and its impact on auction revenues
and profitability;
our Auction Revenue Rates, the sustainability of those rates, the impact of our
commission rate and fee changes, and the seasonality of Gross Auction Proceeds and
auction revenues;
our direct expense and income tax rates, depreciation and amortization expenses
and general and administrative expenses;
our future capital expenditures;
our future plans with regard to our strategic pillars;
the proportion of our revenues and operating costs denominated in currencies other
than the US dollar or the effect of any currency exchange and interest rate
fluctuations on our results of operations;
the impact of our new initiatives and services on us and our customers; and
financing available to us and the sufficiency of our working capital to meet our
financial needs.
Forward-looking statements are typically identified by such words as “anticipate”, “believe”,
“could”, “feel”, “continue”, “estimate”, “expect”, “intend”, “may”, “ongoing”, “plan”,
“potential”, “predict”, “will”, “should”, “would”, “could”, “likely”, “generally”, “future”,
“period to period”, “long term”, or the negative of these terms, and similar expressions
intended to identify forward-looking statements. Our forward-looking statements are not
guarantees of future performance and involve risks, uncertainties and assumptions that are
difficult to predict. While we have not described all potential risks related to our business
and owning our common shares, the important factors listed under “Risk Factors” below are
among those that we consider may affect our performance significantly or could cause our
actual financial and operational results to differ significantly from our predictions. Except as
required by applicable securities law and regulations of relevant securities exchanges, we do
not intend to update publicly any forward-looking statements, even if our predictions have
been affected by new information, future events or other developments. You should
consider our forward-looking statements in light of the factors listed under “Risk Factors”
below and other relevant factors.
9 Introduction
The following discussion summarizes significant factors affecting the consolidated operating
results and financial condition of Ritchie Bros. Auctioneers Incorporated (“Ritchie Bros.”, the
“Company”, “we” or “us”) for the year ended December 31, 2012 compared to the year
ended December 31, 2011. This discussion should be read in conjunction with our audited
consolidated financial statements and notes thereto for the year ended December 31, 2012,
and with the disclosures herein regarding forward-looking statements and risk factors.
The date of this discussion is as of February 22, 2013. Additional information relating to our
Company, including our Annual Information Form, is available on our website at
www.rbauction.com, on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. None of
the information on the SEDAR or EDGAR website is incorporated by reference into this
document by this or any other reference.
We prepare our consolidated financial statements in accordance with International Financial
Reporting Standards, or IFRS. Amounts discussed below are based on our audited
consolidated financial statements and are presented in US dollars. Unless indicated
otherwise, all tabular dollar amounts, including related footnotes, presented below are
expressed in thousands of dollars, except per share amounts.
Annual Review of the Used Equipment Market
In 2012 OEM production finally caught up with demand for many categories of equipment
and lead times for new equipment came down to more reasonable time frames. This
impacted dealer inventory levels, for both new and used equipment, which rose steadily
causing most dealers to cut back on purchase orders to allow these levels to flatten or
reduce. We believe this resulted in more used equipment transactions which will have a
positive effect on our business volumes.
The year started with robust used equipment pricing as demand for good quality, low hour
equipment was strong at our auctions across all regions and supply remained tight. The
pricing momentum carried forward before reaching a plateau at mid-year when there was
gradual softening of prices for older equipment though prices for well maintained, low hour
machines remained steady. Through the remainder of the year, used equipment prices
remained volatile and choppy across many equipment categories sold at our auctions.
Some of our global markets experienced strength through most of the year, particularly
Canada and Australia. Our largest market, the United States remained flat overall with the
Eastern and Central United States making up for weakness in the West. After years of
pessimistic economic news in the United States, there was an inflection in some of these
indicators at the end of the year as the political landscape became clear and a potential path
towards an economic recovery took shape. Europe remained challenging with Southern
Europe in particular still coping with the fallout from their financial crisis, but this created
some opportunities which we were able to capitalize on during the year.
10 Consolidated Highlights
Years ended December 31
($ millions, unless noted otherwise)
2012
2011
% Change
Consolidated Income Statements
Auction revenues
Earnings from operations
Net earnings
Diluted EPS
Cash Flows
$
437,955
$
396,099
120,039
79,546
0.74
103,712
76,633
0.72
Net cash generated by operating activities
$
134,060
$
141,146
Net cash used in investing activities
Net cash generated by (used in) financing activities
(110,870)
43,414
(70,101)
(24,674)
11%
16%
4%
4%
5%
-58%
276%
Other highlights
Gross Auction Proceeds(1),(2)
Auction Revenue Rate(1),(3)
EBITDA Margin(1),(4)
Adjusted Net Earnings(1),(5)
Adjusted Diluted EPS
Dividends Paid
$
3,907,991
$
3,714,281
5%
11.21%
36.8%
82,550
0.77
50,042
10.66%
0.55 pts.
36.9%
(0.01) pts.
73,638
0.69
46,183
12%
12%
8%
(1) These are non-IFRS measures that do not have a standardized meaning, and are therefore unlikely to be
comparable to similar measures presented by other companies. We believe that comparing Adjusted Net
Earnings, diluted Adjusted Net Earnings per Share, Gross Auction Proceeds and EBITDA Margin for
different financial periods provides more useful information about our performance for the relevant
financial period. A reconciliation of Adjusted Net Earnings to net earnings is given below under “Adjusted
Net Earnings”.
(2) Gross Auction Proceeds represents the total proceeds from all items sold at our auctions. It is not a
measure of our financial performance, liquidity or revenue and is not presented in our consolidated
financial statements. We believe that auction revenues, which is the most directly comparable measure in
our Income Statements, and certain other line items, are best understood by considering their relationship
to Gross Auction Proceeds.
(3) Auction Revenue Rate is our auction revenues divided by our Gross Auction Proceeds.
(4) Earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated using the information
disclosed in our annual consolidated financial statements by adding back depreciation and amortization
expense to earnings from operations. EBITDA is a non-IFRS measure. The EBITDA Margin is EBITDA as a
proportion of auction revenues.
(5) We define Adjusted Net Earnings as financial statement net earnings excluding the after-tax effects of
excess property sales and other non recurring items, and we have provided a reconciliation below.
Auction revenues increased by 11% in 2012 and were a record high for the Company.
Revenues increased as a result of record Gross Auction Proceeds and the increase in our
Auction Revenue Rate resulting from the revised administrative fee which we introduced on
July 1, 2011. Revenue growth was particularly strong in Canada and Europe which were up
24% and 18% respectively. U.S. revenue growth was more muted at 8% over 2011 while
auction revenues generated by the rest of the world were down by 15%.
Earnings from operations grew by 16% over 2011 as SG&A expenses grew by 10%; a
slightly lower rate than auction revenues. The increase in SG&A was primarily attributable
to the acquisition and operating costs of AssetNation as well as our expenses related to our
strategic initiatives. Depreciation and amortization expense decreased slightly year over
year.
11 Net Earnings grew by 4% over 2011. In 2012, the company incurred other expenses of $4.7
million related to the disposition and write-down of auctions sites. This contrasted with
2011 when the company had a gain on the sale of a former auction site. Finance costs
increased slightly due to increased borrowings related to our AssetNation acquisition. Our
tax rates remained consistent year over year.
Net cash generated by operating activities was down by 5% as changes in working capital
and an increase in cash taxes paid offset the increase as a result of net earnings.
Net cash used in investing activities was up by 58% as result of our acquisition of
AssetNation during the year. However, our capital expenditures decreased by approximately
$15 million or 19% as a result of our reduced development of new auction sites compared
to recent years passed.
Net cash generated by financing activities was up by over 200% due to our $64 million in
long-term borrowings related to our acquisition of AssetNation and our short-term
borrowings. During the year dividends paid increased by almost $4 million or approximately
8%.
Gross Auction Proceeds grew by 5% during the year compared to 2011. Growth was strong
in Canada with the Company for the first time exceeding $1 billion of Gross Auction
Proceeds. In addition, the Company saw positive growth in Australia and Europe. Gross
Auction Proceeds were relatively flat in the U.S. with decreases in the rest of the world.
Applying 2011 foreign exchange rates, our Gross Auction Proceeds would have been nearly
$50 million higher. This was mainly due to the decreased value of the Euro.
Auction Revenue Rate increased by 55 basis points in 2012 as a result of the full year effect
of our revised administrative fee, offset by a small decrease in our commission rate during
the year.
Our EBIDTA Margin in 2012 decreased by 1 basis point to 36.8% when compared to 2011
as our expenses grew consistently with our auction revenues.
Adjusted Net Earnings for the year ended December 31, 2012 were $82.6 million, or $0.77
per diluted share, compared to adjusted net earnings of $73.6 million, or $0.69 per diluted
share for the year ended December 31, 2011, an increase of approximately 12% compared
to 2011. The increase is primarily a result of higher auction revenues offset by the
acquisition and operating costs related to AssetNation. Excluding these costs, our Adjusted
Net Earnings growth would have been 17%.
A reconciliation of our net earnings to adjusted net earnings is as follows:
Net earnings
After-tax loss (gain) on
excess property (1, 2)
Adjusted Net Earnings
Years ended December 31,
2012
79,546
3,004
82,550
2011
76,633
(2,995)
73,638
$
$
$
$
(1) Net earnings for the twelve months ended December 31, 2011 included a gain of $3,482 ($2,995 after
tax, or $0.03 per diluted share) recorded on the sale of the Company’s former Vancouver, British
Columbia permanent auction site.
(2) Net earnings for the twelve months ended December 31, 2012 included a loss of $1,946 ($1,197 after
tax, or $0.01 per diluted share) recorded on the sale of the Company’s former Olympia, Washington
permanent auction site; a net impairment loss of $2,172 ($1,336 after tax, or $0.01 per diluted share)
recorded against the Company’s former permanent auction site that is held for sale in Statesville, North
Carolina; and, an impairment loss of $632 ($471 after tax, or $0.01 per diluted share) recorded against
the Company’s former permanent auction site in London, Ontario.
12 Our Strategy
Ritchie Bros. is the world’s largest auctioneer of used industrial equipment. Our world
headquarters are located in Vancouver, British Columbia, Canada, and as of the date of this
discussion, we operated from over 110 locations in more than 25 countries, including 44
auction sites worldwide. Our mission is to create compelling business solutions that enable
the world’s builders to easily and confidently exchange equipment. We sell, primarily
through unreserved public auctions, a broad range of used and unused industrial assets,
including equipment, trucks and other assets used in the construction, transportation,
agricultural, material handling, mining, forestry, petroleum and marine industries.
Value Proposition
Ritchie Bros. helps sellers achieve their objectives by bringing the global marketplace to the
sale of their assets, and providing them the certainty of sale that an unreserved auction
ensures. We do this by attracting large and diverse bidding audiences from around the
world, comprised primarily of end users, and allowing them to compete in a transparent and
fair bidding environment using a variety of on-site and online participation options. Ritchie
Bros. helps buyers achieve their objectives by centrally displaying the equipment in our
purpose built facilities and providing a truly transparent marketplace where buyers can be
confident they are only bidding against other market participants. In 2012, Ritchie Bros.
moved to expand our value proposition by adding additional transaction services (see our
strategy under ADD on the following pages).
Some specific Ritchie Bros. strengths include:
1. Our brand, which is supported by our reputation for conducting fair and transparent
unreserved auctions and our widely recognized commitment to honesty, integrity and
fair dealing.
2. Our ability to market equipment to our extensive customer base (over 560,000
customers from roughly 190 countries).
3. Our industry-leading 21-language web site on which all equipment is marketed including
related high-resolution photos and equipment specifications.
4. Our ability to provide an equipment-owner access to a global market of retail equipment
buyers and sell equipment at global market values.
5. Our ability to attract end users, specifically 70-80% of sales go to end users, such as
contractors with the remaining being purchased by dealers and brokers.
6. Our international network of auction sites provides high value and consistent service to
our customers as evidenced by approximately 55% of sales going to buyers from outside
the region of sale.
Growth potential
We recently updated our analysis of the used equipment marketplace and estimate that the
annual value of used equipment transactions, worldwide, is in excess of $200 billion. In this
market:
1. The market is highly fragmented and Ritchie Bros. is the largest player in this space with
only a small share of the total market
2. Private sales between equipment owners are the dominant form of transaction in the
used equipment business
3. Ritchie Bros. has a long history of growth and innovation and continues to expand its
customer base.
13 Strategy
In 2010, Ritchie Bros. adopted a new mission statement that transitioned us from strictly an
auction company to a company that provides solutions for the exchange of equipment. This
mission is supported by our three strategic pillars and our core values as outlined below:
Our three strategic pillars can be expanded upon as follows:
GROW
We believe unreserved public auctions offer significant benefits over other sales channels,
including certainty of sale, fairness and transparency. We continue to focus on increasing
our market share with our traditional customer groups, while simultaneously seeking to do
more business with new customer groups and in new markets.
We believe that most of our near-term growth will come from our established regions,
primarily the United States and Western Europe, and that emerging markets, such as China,
Brazil and other developing countries offer significant potential for growth in the long-term.
In addition, we intend to continue to invest in our network of auction sites by adding or
replacing existing auction sites as necessary to provide capacity for increased consignment
volumes. Our auction site network supports our long-term growth and is a critical
competitive advantage, which helps us to sustain efficient and scalable growth and give our
customers confidence. We also intend to continue to hold offsite auctions in new regions to
expand the scope of our operations.
Another key focus of this pillar is to streamline and simplify our auctions, to make them
easy for our customers. Many of our new customers have little or no experience buying or
selling at unreserved auctions; we want to make the process as easy and customer friendly
as possible, so they feel confident on auction day and throughout the whole process.
Lastly, as a part of this strategic initiative we are pursuing opportunities to partner with our
customers and potential customers by making strategic investments in various entities that
we expect will generate equipment consignments to our auctions over the long term.
14 ADD
We intend to add new business and information solutions that will assist the world’s builders
to easily and confidently exchange equipment.
Technology and innovation have played key roles in our business in the past, allowing us to
enhance our auctions and broaden their appeal to more equipment owners. We will continue
to investigate new services to meet the needs of equipment owners, and harness the latest
technology to supplement and enhance our auction services.
We are investing in new solutions enhanced business intelligence and data analysis tools to
improve our understanding of the equipment market, and position Ritchie Bros. as a
knowledge and information authority. We intend to continue to enhance our website at
www.rbauction.com by making it easier to use, more powerful and more valuable to
equipment owners, with the goal of making it the preferred global equipment website.
We have also invested in new solutions for equipment owners whose needs may not be met
by our unreserved auctions. Most significantly, on May 15, 2012, we purchased AssetNation,
an online marketplace and solutions provider for surplus and salvage assets. We will
leverage AssetNation’s technology and e-commerce expertise to develop new solutions that
we believe will double our addressable market and help us meet the diverse and evolving
preferences of a segment of the equipment market that we have not traditionally reached
with our unreserved auctions. While we believe that the opportunity is significant we expect
that it will take several years to have a material impact on our overall business results. We
believe that we will be able to significantly leverage our Ritchie Bros. brand through this
strategy and that this is a unique opportunity for our business.
PERFORM
To maintain our high standards of customer service we employ people who we believe
embody our core values, especially the value of putting our customers first.
grow our business we believe that we must continue to build a high performance customer
focused team, particularly our sales team.
In order to
Our primary focus areas in the coming years will be improving our sales force productivity
and the efficiency of our auction operations, as well as further enhancing employee
engagement and management bench strength. We are focused on developing future
managers and we are taking steps to improve our ability to attract, develop and retain key
employees.
These strategic pillars help us focus our time money and talent to ensure we are meeting
our mission. The table below outlines our recent and future priorities with regards to these
pillars:
15 Our Strategic Pillars
What we accomplished
in 2012
Our plans for 2013
Grow our core auction
business
Add new business and
information solutions
We added a new regional auction
site in Donington Park, United
Kingdom. Opened two
replacement sites in Raleigh-
Durham, North C arolina and
C hehalis, Washington.
Achieved our record Gross
Auction Proceeds and largest
ever Auction Revenues in the
C ompany's history.
On May 15, 2012 we purchased
AssetNation, an online
marketplace and solutions
providor for surplus and salvage
assets. We leveraged
AssetNation's technology and e-
commerce expertise to develop
new solutions for our customers.
To focus on high potential growth
opportunities in existing markets
and break our records for Gross
Auction Proceeds and Auction
Revenues and to focus on and
improve our at risk deal
performance.
Hold our first auction in C hina in
2013.
Launch and grow our new online
marketplace, Ritchie Bros.
EquipmentOne. Ritchie Bros.
EquipmentOne is a
complementary solution to our
flagship unreserved auction
business. This marketplace will
allow buyers and sellers to
negotiate, complete and settle
their transactions in a safe and
transparent environment. A full
commercial launch will be
scheduled for the second quarter
of 2013.
We expanded Ritchie Bros.
Financial Services to Europe,
Mexico and Australia.
C ontinue our focus on improving
our Business Intelligence and our
marketing insights.
Perform by building a
high performance
customer focused Ritchie
Bros. team
We realigned our organization
into Sales and Operations groups
allowing these respective teams
to focus on what they do best;
furthering our employee
engagement and management
bench strength.
We will hire additional Territory
Managers, Trainee Territory
Managers and Territory Sales
Support Staff. We will provide
additional and enhanced training
to our Regional Sales Managers.
We increased the number of
Sales personnel and Trainee
Territory Managers on our team.
We will continue to support our
sales team by introducing better
sales tools and processes.
We introduced and launched the
first phase of our new Regional
Sales Manager Training program
focusing on sales leadership with
100% of our RSMs taking part.
Our plans for 2013 reflect our urgent focus on specific strategies to grow both Gross Auction
Proceeds and auction revenues while achieving the leverage inherent in our business model
resulting in increased profitability and driving shareholder value.
16 Long-Term Financial Objectives
Our long-term financial objectives(1) are the targets that our strategic initiatives and
investments are designed to drive. These objectives reflect the growth, leverage and cash
flow generation inherent in our business model, and are presented below:
Adjusted EPS(2) growth of at least 15% on average
ROIC(3) of at least 15%
EBITDA Margin(4) of at least 40%
Prior to 2009 we had a history of achieving these targets. Since 2009 we have not achieved
these targets due to a number of factors including the severity of the global economic crisis
which affected all our markets but most significantly for our business, the United States. We
believe this reduced the volume of transactions in the used equipment marketplace and
affected our ability to grow our Gross Auction Proceeds. Additionally, we continued our long
term capital investment program during this period and built capacity for future growth,
although in the short term this raised our fixed costs and our invested capital.
Our focus continues to be on achieving these long term financial objectives by driving
growth in our Gross Auction Proceeds and leveraging our infrastructure that is in place.
We believe our investment and operating decisions over the last few years have positioned
us well, allowing us to grow our share of the used equipment market and to deliver
compelling solutions to meet the needs of our customers. Through these decisions we are
building a well developed sales team and an auction site network with considerable
capacity, both of which we anticipate will help sustain our growth. We also believe that,
over the long-term, designing and executing an appropriate growth strategy will continue to
be a significant determinant of our ability to grow our earnings and our margins, in part
because our share of the world market for used equipment is so small.
(1)
(2)
(3)
(4)
These are objectives of the Company and whether we can achieve them will depend on a number of factors,
some of which may not be within our control. Please refer to the discussion under “Risk Factors” below. As
these are objectives, there is no assurance that we will be able to achieve these objectives as set out above.
Adjusted EPS is a non-IFRS measure that does not have a standardized meaning, and is therefore unlikely to be
comparable to similar measures presented by other companies.
We define adjusted net earnings per share (Adjusted EPS) as financial statement net earnings per share
excluding the after-tax effects of sales of excess properties and other non recurring items.
ROIC is a non-IFRS measure that does not have a standardized meaning, and is therefore unlikely to be
comparable to similar measures presented by other companies.
Return on invested capital (ROIC) is calculated using the information disclosed in our consolidated financial
statements by dividing Adjusted Net Earnings into average invested capital, defined as average shareholders’
equity plus average non-current borrowings for the financial year.
EBITDA Margin is a non-IFRS measure that does not have a standardized meaning, and is therefore unlikely to
be comparable to similar measures presented by other companies. This measure has been defined above in the
“Consolidated Highlights” section.
17 Our Business and its Drivers
Our core business is our auctions and the adherence to the unreserved auction process is
one of our founding principles and, we believe, one of our most significant competitive
advantages. When we say “unreserved” we mean that there are no minimum bids or
reserve prices on anything sold at a Ritchie Bros. auction – each item sells to the highest
bidder on sale day, regardless of the price. In addition, consignors (or their agents) are not
allowed to bid on or buy back or in any way influence the selling price of their own
equipment. We maintain this commitment to the unreserved auction process because we
believe that an unreserved auction is an efficient, effective and fair way to exchange
equipment.
The world market for used equipment and trucks is driven by the cumulative supply of used
equipment and trucks, which is affected by the ongoing production of new equipment and
trucks and the motivation of equipment owners to realign and replace their fleets.
Consignment volumes at our auctions are affected by a number of factors, including regular
fleet upgrades and reconfigurations, financial pressure, retirements, and inventory
reductions, as well as by the timing of the completion of major construction and other
projects.
We believe that our ability to consistently draw significant numbers of local and international
bidders from many different end markets to our auctions, most of whom are end users
rather than resellers, is appealing to sellers of used equipment and trucks and helps us to
attract consignments to our auctions. Higher consignment volumes attract more bidders,
which in turn attract more consignments, and so on in a self-reinforcing process that has
helped us to achieve a history of significant growth and momentum in our business which is
reflected in our Gross Auction Proceeds growth. We generally cannot influence the decision
of an equipment owner whether to sell or not, but once they have made the decision to sell,
our sales team’s opportunity is to demonstrate the Ritchie Bros. Auctioneers value
proposition and have the equipment contributed to one of our unreserved auctions.
Gross Auction Proceeds represent the value of the equipment we sell at our auctions.
Auction revenues represent the revenue we earn in the course of conducting our auctions.
The portion of Gross Auction Proceeds that we do not retain is remitted to our customers
who consign the items to our auctions.
Auction revenues are comprised of auction commissions and auction fees. Auction
commissions are earned from consignors through straight commission and guarantee
auction contracts as well as the net profits or losses on the sale of inventory items. Auction
fees, primarily collected from our buyers are made up of administrative fees, internet
purchase fees, proxy purchase fees, documentation fees and storage fees. Beginning July 1,
2011 the internet purchase and proxy fees were eliminated and we expanded and simplified
our administrative fee to be applicable to all buyers at our auctions. We also earn revenue
from our insurance, warranty and customer finance programs and this revenue has been
recorded as a part of auction fees as they are not material. Our Auction Revenue Rate is our
auction revenues divided by our Gross Auction Proceeds. Our expected annual Auction
Revenue Rate is in the range of 11.0% to 11.75%.
All auction revenues are recognized when the auction sale is complete and we have
determined that the auction proceeds are collectible.
18 Auction Commissions
Straight commission contracts are our most common type of auction contract and are
used by us when we act as agent for consignors and earn a pre-negotiated, fixed
commission rate on the Gross Auction Proceeds of the consigned equipment at auction.
Straight commission sales were approximately 68% of our Gross Auction Proceeds in the
year ended December 31, 2012 and 72% for the fourth quarter of 2012. This is a slight
increase over 2011 but lower than our historic range of approximately 75-80% of our
annual Gross Auction Proceeds.
We generally refer to our guarantee and outright purchase business as our at risk, or
underwritten, business and we are generally indifferent between a guarantee contract
and an inventory contract. As we do not control the sale price of items sold at our auctions,
both a guarantee contract and an inventory contract represent a similar nature of risk and
opportunity for us. Our customers’ circumstances, risk tolerance and sale objectives will
ultimately determine the final form of the contract.
Our at risk business represented approximately 32% of our Gross Auction Proceeds in 2012,
and 28% for the fourth quarter of 2012. This is a decrease over 2011 but is higher than our
historic levels of approximately 20% to 25% of our annual Gross Auction Proceeds.
In the normal course of business, we guarantee minimum sales proceeds to a consignor and
earn a commission based on the actual results of the auction, typically including a pre-
negotiated percentage of any sales proceeds in excess of the guaranteed amount. The
consigned equipment is sold on an unreserved basis at the next practical auction in the
same manner as other consignments. If the actual auction proceeds are less than the
guaranteed amount, our commission is reduced, and if the proceeds are sufficiently less, we
can incur a loss on the sale.
Auction commissions also include the net profit or loss on the sale of inventory in cases
where we acquire ownership of equipment for a short time prior to an auction sale. We
purchase equipment for specific auctions and sell it at those auctions in the same manner as
other consignments. During the period that we retain ownership, the cost of the equipment
is recorded as inventory on our balance sheet. The net gain or loss on the sale is recorded
as a part of auction commissions.
The largest contributor to the variability of our Auction Revenue Rate (the two components
being commissions and fees) is the performance of our at risk business. When our at risk
business performs better or worse than expected our Auction Revenue rate could fall
outside our expected range of 11.0% to 11.75% of our Gross Auction Proceeds. Our straight
commission rate and our auction fees are not subject to a significant amount of variability
on an annual basis.
As we work with our customers to assist in their equipment transactions we will determine,
in certain strategic cases to present proposals that include at risk contracts in order to build
our business and position ourselves in the marketplace. In making the decision to
strategically use an at risk proposal, we consider a multitude of factors, including, the size
and the mix of the equipment in the proposal, the condition of the equipment, the timing of
the contract in relation to a particular auction and its impact on attracting additional
consignments, the competitive environment, our ability to build our market share and the
relationship with the customer. We have a rigorous approach to appraising and evaluating
the items included in a potential at risk deal and have a well developed, strict internal
approval process for entering into at risk contracts.
19 Due to the multiple strategic factors which motivate us to enter into at risk contracts, on an
annual basis the performance of our at risk business may be below that of our straight
commission business. Consistent with this, in four of the past five years the performance of
our at risk business has performed below our straight commission while our overall Auction
Revenue Rate has remained within our expected range.
The mix of contracts in a particular quarter or year fluctuates and is not necessarily
indicative of the mix in future periods. The composition of our auction commissions and our
Auction Revenue Rate are affected by the mix and performance of contracts entered into
with consignors in the particular period and fluctuates from period to period.
Auction Fees
Auction fees are generally earned from buyers at our auctions. Administrative fees are the
most significant component of auction fees and are charged to buyers on a fixed percentage
of the purchase price of each lot, to a maximum amount based on the value of the items
purchased. We also earn documentation fees and storage fees for services provided to both
our buyers and consignors. The changes to our fee structure that took effect July 1, 2011,
had an incremental effect of increasing our auction revenue by $25.9 million in 2012.
Other Influences on Auction Revenues
Our Gross Auction Proceeds and auction revenues are influenced by the seasonal nature of
the auction business, which is determined mainly by the seasonal nature of the construction
and natural resources industries in which many of our customers participate. Gross Auction
Proceeds and auction revenues tend to be higher during the second and fourth calendar
quarters, during which time we generally conduct more business than in the first and third
calendar quarters. This seasonality contributes to quarterly variability in our net earnings
because a significant portion of our operating costs is relatively fixed.
Because of these seasonal and period-to-period variations, we believe that our Gross
Auction Proceeds, auction revenues and net earnings are best compared on an annual basis.
Gross Auction Proceeds and auction revenues are also affected on a period-to-period basis
by the timing of major auctions. Also, in newer markets where we are developing
operations, the number and size of auctions and, as a result, the level of Gross Auction
Proceeds and auction revenues, are likely to vary more dramatically from period to period
than in our established markets, where the number, size and frequency of our auctions are
more consistent.
Operations
The majority of our industrial auctions are held at our permanent auction sites where we
generally own the land and facilities or at regional auction sites, where we usually lease the
land and typically have more modest facilities. We also hold off-site auctions at temporary
locations, often on land owned by one of the main consignors to the particular auction. Most
of our agricultural auctions are off-site auctions that take place on the consignor’s farm. For
the year ended December 31, 2012, approximately 90% of our Gross Auction Proceeds were
attributable to auctions held at our permanent auction sites and regional auction sites
(2011: 91%).
Our auction sites are enhanced by our online bidding service that allows bidders to
participate in our live auctions remotely over the internet. In 2012 approximately 50%
(2011: 45%) of our successful bidders and runner-up bids came from our customers
participating over the internet.
20 In addition, economies of scale are generally achieved as our operations in a region evolve
from conducting intermittent auctions, to establishing a regional auction site, and ultimately
to developing a permanent auction site. Economies of scale are also usually achieved when
our auctions increase in size.
For the year ended December 31, 2012 we had 39 permanent auction sites (2011: 39) and
we had five regional auction sites (2011: four). Further discussion of our auction site
definitions and a list of our auction sites is included in our Annual Information Form for the
year ended December 31, 2012; the auction site information is incorporated by reference
into this MD&A discussion.
21 The following selected consolidated financial information as at December 31, 2012 and
2011, and for each of the years ended December 31, 2012 and 2011, has been derived
from our audited consolidated financial statements. This data should be read together with
those financial statements, including the notes thereto, and the risk factors described below.
Overall Performance
Our net earnings for the year ended December 31, 2012 were $79.5 million, or $0.74 per
diluted share, compared to $76.6 million, or $0.72 per diluted share, for the year ended
December 31, 2011.
Financial Overview
Years ended December 31,
(in millions of U.S. dollars, except EPS)
2012
2011
Change
% Change
$
437,955
$
396,099
$
41,856
Auction revenues
Direct expense
SG&A expenses(1)
Earnings from operations
Other income (expenses)
Finance costs
Income tax expense
Net earnings
Adjusted Net Earnings (2),(3)
49,687
268,229
120,039
(3,584)
4,440
32,469
79,546
82,550
48,044
244,343
103,712
7,518
3,215
31,382
76,633
73,638
0.69
29.1%
1,643
23,886
16,327
11%
3%
10%
16%
(11,102)
-148%
1,225
1,087
2,913
8,912
0.08
n/a
193,710
n/a
n/a
n/a
$
$
38%
3%
4%
12%
12%
0%
5%
5%
-2%
0%
Diluted Adjusted EPS(2)
$
0.77
$
Effective tax rate
29.0%
Gross Auction Proceeds (2),(4)
$
3,907,991
$
3,714,281
Auction Revenue Rate(2),(5)
Direct Expense Rate
EBITDA Margin(2),(6)
11.21%
1.27%
36.8%
10.66%
1.29%
36.9%
(1) Selling, general and administrative expenses (SG&A) include depreciation and amortization expense.
(2) These are non-IFRS measures that do not have a standardized meaning, and are therefore unlikely to be
comparable to similar measures presented by other companies. We believe that comparing Adjusted Net
Earnings, diluted Adjusted Net Earnings per Share, Gross Auction Proceeds and EBITDA Margin for
different financial periods provides more useful information about our performance for the relevant
financial period. A reconciliation of Adjusted Net Earnings to net earnings is given below under “Net
Earnings and Adjusted net earnings”.
(3) We define Adjusted Net Earnings as financial statement net earnings excluding the after-tax effects of
excess property sales and other non-recurring items, and we have provided a reconciliation below.
(4) Gross Auction Proceeds represents the total proceeds from all items sold at our auctions. It is not a
measure of our financial performance, liquidity or revenue and is not presented in our annual consolidated
income statement. We believe that auction revenues, which is the most directly comparable measure in
our Income Statements, and certain other line items, are best understood by considering their relationship
to Gross Auction Proceeds.
(5) Auction Revenue Rate is our auction revenues divided by our Gross Auction Proceeds.
(6) Earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated using the information
disclosed in our annual condensed consolidated financial statements by adding back depreciation and
amortization expense to earnings from operations. EBITDA is a non-IFRS measure. The EBITDA Margin is
EBITDA as a proportion of auction revenues.
22 United States Dollar Exchange Rate Comparison
Value of one U.S. dollar
Years ended December 31,
2012
2011
% Change
Year-end exchange rate:
Canadian dollar
Euro
Average exchange rate:
Canadian dollar
Euro
$
$
0.9928
$
0.7579
0.9994
$
0.7780
1.0210
0.7716
0.9893
0.7192
-3%
-2%
1%
8%
Effect of Exchange Rate Movement on Income Statement Components
2012 results presented using
Years ended December 31,
average annual foreign
2012 using
2012 using
exchange rates
2012 rates
2011 rates
Change % Change
Gross Auction Proceeds
$
3,907,991
$
3,957,758
$
(49,767)
Auction revenues
Direct expense
SG&A expenses
437,955
49,687
268,229
443,803
50,411
272,089
(5,848)
(724)
(3,860)
-1%
-1%
-1%
-1%
We conduct operations around the world in a number of different currencies, but our
reporting currency is the U.S. dollar. In 2012, approximately 49% of our revenues and
approximately 56% of our operating costs were denominated in currencies other than the
U.S. dollar as compared to 45% and 60%, respectively, in 2011.
The main currencies other than the U.S. dollar in which our revenues and operating costs
are denominated are the Canadian dollar and the Euro. Over the past several years there
have been significant fluctuations in the value of the Canadian dollar and the Euro relative
to the U.S. dollar. These fluctuations affect our reported auction revenues and operating
expenses when non-U.S. dollar amounts are converted into U.S. dollars for financial
statement reporting purposes. It is difficult, if not impossible, to quantify how foreign
exchange rate movements affect such variables as the supply of and demand for the assets
we sell. However, excluding these impacts, the effect of foreign exchange fluctuations on
our translated auction revenues and operating expenses in our consolidated financial
statements largely offset, making the impact of the currency fluctuation on our net earnings
minimal.
23 Gross Auction Proceeds
Our Gross Auction Proceeds for the year ended December 31, 2012 were $3.9 billion, 5%
higher compared to the year ended December 31, 2011. Our Gross Auction Proceeds were
negatively impacted by foreign exchange by 1% or approximately $50 million.
Straight commission contracts generated the majority of our Gross Auction Proceeds with
the remainder being made up by our at risk business. In 2012, at risk business generated
approximately 32% of our Gross Auction Proceeds, a decrease compared to 36% in 2011.
Auction Revenues & Auction Revenue Rate
Auction revenues: (1)
United States
Canada
Europe
Other
Total
Gross Auction Proceeds
Auction Revenue Rate
Years ended December 31,
2012
2011
Change % Change
$
211,160
$
195,274
$
15,886
124,392
100,404
60,572
41,831
437,955
3,907,991
$
$
51,403
49,018
396,099
3,714,281
$
$
$
$
23,988
9,169
(7,187)
41,856
193,710
11.21%
10.66%
8%
24%
18%
-15%
11%
5%
5%
(1) Information by geographic segment is based on auction location.
Auction revenues for the year ended December 31, 2012 increased to $438.0 million
compared to $396.1 million for the same period in the prior year, due primarily to an
increase in our Auction Revenue Rate resulting from the impact of our revised
administrative fee as well as an increase in Gross Auction Proceeds. Approximately 48% of
our auction revenues in 2012 were earned from operations in the United States (2011:
50%), 28% were generated from auctions in Canada (2011: 25%) and the remaining 24%
were earned from operations in countries other than the United States and Canada,
primarily in Europe, the Middle East, Australia and Mexico (2011: 25%).
Auction revenues include both commissions charged to sellers (auction commissions) and
fee income earned from buyers (auction fees) at our auctions. Our Auction Revenue Rate for
the year ended December 31, 2012, increased to 11.21% from 10.66% for the same period
in 2011. This increase in the rate in 2012 is primarily a result of our revised administrative
fee that was introduced July 1, 2011, and had an approximately $25.9 million incremental
effect in the first six months of 2012 as compared to the first six months of 2011.
Offsetting the increase in our Auction Revenue Rate was our commission rate performance.
Our commission rate fluctuated during the year and was lower for the year as compared to
the prior year due to the performance of our at risk business. In 2012, our average
commission rate for the year was 9.0% compared to 9.3% in 2011. Over the past five years
our quarterly auction commission rate has ranged between 8.47% and 10.25%. Our auction
commission rate and overall Auction Revenue Rate is presented in the graph below.
24 Quarterly Auction Revenue Rate and
Quarterly Auction Commission Rate
5 Year History (1)
13.00%
12.50%
12.00%
11.50%
11.00%
10.50%
10.00%
9.50%
9.00%
8.50%
8.00%
Quarterly Auction Commission Rate
Quarterly Auction Revenue Rate
(1) The revised administrative fee that took effect on July 1, 2011 has contributed to an increase in our Auction
Revenue Rate of approximately 125 basis points since its introduction.
Direct Expense Rate
Our direct expenses are the costs we incur specifically to conduct an auction. Direct
expenses include the cost of hiring temporary personnel to work at the auction, advertising
costs directly related to the auction, travel costs for employees to attend and work at the
auction, security personnel hired to safeguard equipment at the auction site and rental
expenses for temporary auctions sites, among other costs.
Our direct expense rate, which represents direct expenses as a percentage of Gross Auction
Proceeds, fluctuates from period to period based in part on the size and location of the
auctions we hold during the particular period. The direct expense rate generally decreases
as the average size of our auctions increase. In addition, we usually experience lower direct
expense rates for auctions held at our permanent auction sites compared to auctions held at
offsite locations, mainly as a result of the economies of scale and other efficiencies that we
typically experience at permanent auction sites.
Our direct expense rate for the year ended December 31, 2012 decreased slightly to 1.27%
compared to 1.29% for the same period in 2011. This decrease in our direct expense rate
was due to efficiencies realized as the average size of our auctions was higher when
compared to the same period in 2011.
Selling, General & Administrative Expenses (SG&A)
SG&A expenses include such expenditures as employee compensation expense (salaries,
wages, bonuses and benefits), building and facilities expense (repairs and maintenance,
leases, rentals and utilities), non-auction related travel, promotion and other general and
administrative expense as well as depreciation and amortization expense. Approximately
60% of our other SG&A expenses on an annual basis are personnel costs.
25 SG&A expenses, excluding depreciation and amortization expense, for the year ended
December 31, 2012 increased to $227.1 million compared to $201.9 million in the same
period of 2011. This increase was primarily driven by $12.7 million of operating and
acquisition costs relating to AssetNation as well as increased costs of $7.5 million related to
our strategic initiatives such as our new value added services, Detailed Equipment
Information, and our realignment of our sales and operations teams. Partially offsetting
these amounts were changes in foreign exchange rates that decreased SG&A by $3.2 million
in 2012 compared to the rates realized in 2011. Excluding these items, our SG&A increased
by 4% or $8.2 million in 2012 as compared to 2011. This increase is due primarily to
increases in personnel costs.
The remaining portion of our SG&A is depreciation and amortization expense. Depreciation
and amortization expense is calculated on either a straight-line or declining-balance basis on
assets employed in our business, including buildings, computer hardware and software,
automobiles and yard equipment.
Depreciation and amortization expense decreased slightly in 2012 as a result of relatively
fewer assets being put into service in the past two years compared to the significant
additions that we made in the preceding three to four years. Additionally, changes in foreign
exchange rates decreased depreciation and amortization by $0.7 million in 2012 compared
to 2011. We expect our depreciation and amortization expense in future periods to increase
or decrease in line with our on-going capital expenditures. As our capital expenditure
program moderates, we would expect our depreciation and amortization expense also to
moderate.
Other Income
Other income includes the gains or losses from foreign exchange, the disposition of
property, plant and equipment and other income or loss not earned in the normal course of
business operations.
Other expense in 2012 included a loss of $1.9 million recorded on the sale of a former
permanent auction site in Olympia, Washington; and, net impairment losses of $2.8 million
on the company’s former permanent auction sites in Statesville, North Carolina and London,
Ontario. These expenses were partially offset by gains on other assets and other revenues.
In 2011, other income included a gain of $3.5 million recorded on the sale of another former
permanent auction site, as well as gains on the disposal of other assets (see net earnings
and adjusted earnings below).
Finance Costs
Finance costs include both the finance income earned on our excess cash and receivable
balances and the finance costs related to interest paid on long-term debt and revolving
credit facilities, offset by interest that has been capitalized as part of self-constructed
assets.
Our finance income fluctuates from period to period depending on the timing of receipt of
auction proceeds and on our cash position, which is affected by the timing, size and number
of auctions held during the period.
Finance costs increased in 2012 compared to 2011 due primarily to greater interest costs
relating to borrowings incurred to finance our acquisition of AssetNation.
26 Effective Tax Rate
Our effective tax rate of 29.0% for the year ended December 31, 2012 was consistent with
the rate of 29.1% achieved in 2011. In 2011 the Company recorded a gain on a property
disposition that was subject to a relatively low rate of tax, thereby reducing the 2011
effective tax rate. This low rate was maintained through 2012 as a result of a greater
portion of income in the year having been earned in jurisdictions subject to a lower rate of
tax.
Net Earnings and Adjusted Net Earnings
Net earnings and adjusted net earnings for the year ended December 31, 2012 were $79.5
million and $82.6 million, or $0.74 and $0.77 per diluted share, respectively, compared to
net earnings and adjusted net earnings of $76.6 million and $73.6 million, or $0.72 and
$0.69 per diluted share, respectively, for the year ended December 31, 2011.
Our adjusted net earnings for the year ended December 31, 2012 increased by
approximately 12% compared to the same period in 2011, primarily as a result of higher
auction revenues, offset partially by the increases in direct expenses and SG&A expenses.
Reconciliations of our net earnings to adjusted net earnings are as follows:
Net earnings
After-tax loss (gain) on
excess property (1, 2)
Adjusted Net Earnings
Years ended December 31,
2012
79,546
3,004
82,550
2011
76,633
(2,995)
73,638
$
$
$
$
(1) Net earnings for the twelve months ended December 31, 2011 included a gain of $3,482 ($2,995 after
tax, or $0.03 per diluted share) recorded on the sale of the Company’s former Vancouver, British
Columbia permanent auction site.
(2) Net earnings for the twelve months ended December 31, 2012 included a loss of $1,946 ($1,197 after
tax, or $0.01 per diluted share) recorded on the sale of the Company’s former Olympia, Washington
permanent auction site; a net impairment loss of $2,172 ($1,336 after tax, or $0.01 per diluted share)
recorded against the Company’s former permanent auction site that is held for sale in Statesville, North
Carolina; and, an impairment loss of $632 ($471 after tax, or $0.01 per diluted share) recorded against
the Company’s former permanent auction site in London, Ontario.
27 4%
4%
4%
8%
52%
2%
17%
43%
Selected Annual Information
(in millions of U.S. dollars)
Years ended December 31,
2012
2011
Change % Change
Statement of Operations data:
Net earnings
$
79,546
$
76,633
$
2,913
Net earnings per share - basic
Net earnings per share - diluted
Dividends declared per share(1)
Balance Sheet data (as at Dec 31):
0.75
0.74
0.47
0.72
0.72
0.44
0.03
0.03
0.04
Working capital (including cash)
$
96,053
$
63,296
$
32,757
Property, plant and equipment
Total assets
Non-current liabilities
Statement of Cash Flows data:
Property, Plant, and Equipment
and Intangible additions
655,677
1,132,498
226,419
644,333
967,241
158,791
11,344
165,257
67,628
$
62,340
$
77,053
$
(14,713)
-19%
(1) Cash dividends declared per share includes cash payments made during the financial year; there are
timing differences for the fourth quarter dividend which is paid in the subsequent year. For the fourth
quarter of 2012, we declared cash dividends of $0.1225 per common share (2011 – $0.1125) on January
21, 2013, which is not included in the 2012 amount.
Operations
During 2012 we conducted 221 unreserved industrial auctions at locations in North America,
Europe, the Middle East, Australia and Central America (2011: 228 auctions). Although our
auctions vary in size, our 12-month rolling average industrial auction results were as
follows:
Average per industrial auction
Years ended December 31,
Gross Auction Proceeds
Bidder registrations
Consignments
Lots
2012
2011
$
16.5 million
$
15.5 million
1,760
190
1,300
1,690
181
1,180
28 Key industrial auction metrics
Our key industrial auction metrics for 2012 and 2011 are shown below:
Totals per key industrial auction metric
Years ended December 31,
Consignments
Bidder registrations
Buyers
Lots
2012
42,100
389,500
99,250
287,000
2011
41,300
385,000
95,550
268,500
For a breakdown of these key industrial auction metrics by month, please refer to our website
www.rbauction.com. None of the information in our website is incorporated by reference into this document by
this or any other reference.
Website metrics
We sold over $1.3 billion of equipment, trucks and other assets to online bidders in 2012,
representing a 18% increase compared to the same period in 2011 (2011: $1.1 billion) and
approximately 33% of our total Gross Auction Proceeds, re-confirming our position as the
world’s largest auctioneer of used industrial equipment to online buyers.
The increase in our online presence was also demonstrated by a 40% increase in unique
visitors to our website during 2012 compared to 2011.
Unique visitors
Headcount
Years ended December 31,
2012
5.6 million
2011
4.0 million
Personnel increased over the prior year period primarily due to our strategic initiatives and
the purchase of AssetNation. People continue to be an important part of our growth strategy
and we are focused on improving our sales force productivity, employee engagement and
management bench strength. Our total headcount increased by approximately 80 people as
a result of the addition of the AssetNation workforce in the second quarter of 2012.
Full-time employees
Sales representatives (1)
Trainee territory managers
As at December 31,
2012
1,414
305
21
2011
1,279
294
16
(1) Our definition of sales representatives changed effective January 1, 2012 and now includes only our territory
managers and regional sales managers. The definition no longer includes divisional managers as this position
was eliminated effective January 1, 2012. Comparative numbers have been adjusted accordingly. AssetNation
sales representatives are not included in these numbers.
29 Summary of Fourth Quarter Results
Fourth quarter net earnings were $22.1 million, or $0.21 per diluted share, compared to net
earnings of $26.8 million, or $0.25 per diluted share, for the same period in 2011.
Financial Overview
Three months ended December 31,
(in millions of U.S. dollars, except EPS)
2012
2011
Change
% Change
$
117,140
$
113,403
$
3,737
Auction revenues
Direct expense
SG&A expenses(1)
Earnings from operations
Other income (expenses)
Finance costs
Income tax expense
Net earnings
Adjusted Net Earnings (2),(3)
12,771
71,238
33,131
(765)
(1,056)
9,207
22,103
22,399
Diluted Adjusted EPS(2)
$
0.21
$
Effective tax rate
29.4%
Gross Auction Proceeds (2),(4)
$
1,000,413
$
1,039,790
Auction Revenue Rate(2),(5)
Direct Expense Rate
EBITDA Margin(2),(6)
11.71%
1.28%
37.4%
10.91%
1.30%
43.3%
13,531
61,084
38,788
328
(671)
11,678
26,767
26,767
0.25
30.4%
(760)
10,154
(5,657)
(1,093)
(385)
(2,471)
(4,664)
(4,368)
(0.04)
n/a
(39,377)
n/a
n/a
n/a
$
$
3%
-6%
17%
-15%
-333%
57%
-21%
-17%
-16%
-16%
-3%
-4%
7%
-2%
-14%
(1) to (6) Refer to Overall Performance above for more information by line item.
Gross Auction Proceeds
Our Gross Auction Proceeds were $1.0 billion for the quarter ended December 31, 2012,
which is consistent with the same period in 2011. Foreign exchange did not have a
significant impact on our Gross Auction Proceeds when compared to 2011. Our at risk
business represented approximately 28% of our Gross Auction Proceeds in the fourth
quarter of 2012, compared to 39% in the fourth quarter of 2011.
Auction Revenues
We earned auction revenues of $117.1 million during the fourth quarter of 2012, compared
to auction revenues of $113.4 million in the same period of 2011. Our Auction Revenue Rate
increased to 11.71% from 10.91% in the respective periods, mainly as a result of the
improved performance of our at risk business in the fourth quarter of 2012.
Direct Expense
Our direct expense rate decreased to 1.28% for the fourth quarter of 2012 compared to
1.30% in the same period of 2011. This decrease in our quarterly direct expense rate was
due to efficiencies realized as the average size of our auctions was higher when compared
to the same period in 2011.
30 Selling, General & Administrative Expenses (SG&A)
Our SG&A expenses increased to $71.2 million in the fourth quarter of 2012, compared to
$61.1 million in the same period of 2011. This increase was primarily driven by $4.6 million
of operating expenses related to AssetNation. Changes in foreign exchange rates
contributed to an increased SG&A by $0.6 million in the fourth quarter of 2012 compared to
the rates used in the third quarter of 2011. Excluding these two items our SG&A increased
by $4.9 million compared to the fourth quarter of 2011 related primarily to personnel costs.
Effective Tax Rate
Our effective tax rate of 29.4% for the three months ended December 31, 2012 was lower
than the 30.4% recorded in the comparative period in 2011 as a result of a greater portion
of income in the quarter having been earned in jurisdictions subject to a lower rate of tax.
Net Earnings and Adjusted Net Earnings
Net earnings and adjusted net earnings for the three months ended December 31, 2012
were $22.1 million and $22.4 million, or $0.21 and $0.21 per diluted share, respectively,
compared to net earnings and adjusted net earnings of $26.8 million, or $0.25 per diluted
share, for the three months ended December 31, 2011.
Our adjusted net earnings for the three months ended December 31, 2012 decreased by
approximately 16% compared to the same period in 2011, primarily as a result of increases
in SG&A expenses offset by a slight increase in auction revenues.
Reconciliations of our net earnings to adjusted net earnings are as follows:
Net earnings
After-tax loss (gain) on
excess property (1, 2)
Adjusted Net Earnings
Three months ended December 31,
2012
22,103
296
22,399
2011
26,767
-
26,767
$
$
$
$
(1) Net earnings for the three months ended December 31, 2012 included an impairment reversal of $285
($175 after tax, or $0.00 per diluted share) recorded against the Company’s former permanent auction
site that is held for sale in Statesville, North Carolina.
(2) Net earnings for the three months ended December 31, 2012 included an impairment loss of $632
($471 after tax, or $0.01 per diluted share) recorded against the Company’s former permanent auction
site in London, Ontario.
Capital Expenditures
PP&E and intangible additions were $12.7 million for the fourth quarter of 2012, compared
to $21.1 million in the fourth quarter of 2011. Our capital expenditures in the fourth quarter
of 2012 related primarily to the development of permanent auction sites and our
information system enhancements.
31 Summary of Quarterly Results
The following tables present our unaudited consolidated quarterly results of operations for
each of our last eight fiscal quarters. This data has been derived from our unaudited
consolidated financial statements, which were prepared on the same basis as our annual
audited consolidated financial statements, and in our opinion, include all normal recurring
adjustments necessary for the fair presentation of such information. These unaudited
quarterly results should be read in conjunction with our audited consolidated financial
statements for the years ended December 31, 2012 and 2011, and our discussion above
about the seasonality of our business.
Gross Auction Proceeds
Auction revenues
Net earnings
Adjusted Net Earnings
Net earnings per share, basic
Net earnings per share, diluted
Adjusted Net Earnings per share, diluted
Gross Auction Proceeds
Auction revenues
Net earnings
Adjusted Net Earnings
Net earnings per share, basic
Net earnings per share, diluted
Adjusted Net Earnings per share, diluted
$
$
$
$
$
$
Q4 2012
Q3 2012
Q2 2012
Q1 2012
1,000,413
117,140
22,103
22,399
$
$
848,536
92,326
$
$
8,171
9,682
$
$
1,194,536
127,213
31,303
32,500
0.21
$
0.08
$
0.29
$
0.21
0.21
0.08
0.09
0.29
0.30
864,506
101,276
17,969
17,969
0.17
0.17
0.17
Q4 2011
Q3 2011
Q2 2011
Q1 2011
1,039,790
113,403
26,767
26,767
$
$
673,362
79,709
$
$
6,533
6,533
$
$
1,149,847
114,524
26,763
26,763
0.25
$
0.06
$
0.25
$
0.25
0.25
0.06
0.06
0.25
0.25
851,283
88,463
16,570
13,575
0.16
0.16
0.13
Gross Auction Proceeds and auction revenues are affected on a period-to-period basis by
the timing of major auctions. Also, in newer markets where we are developing our business,
the number and size of auctions and, as a result, our Gross Auction Proceeds and auction
revenues, are likely to vary more dramatically from period to period compared to our
established markets, where the number, size and frequency of our auctions are more
consistent.
Because of these seasonal and period-to-period variations, we believe that our Gross
Auction Proceeds, auction revenues and net earnings are best compared on an annual basis
or a year-over-year basis.
32 Outstanding Share Data
We are a public company and our common shares are listed under the symbol “RBA” on the
New York and Toronto Stock Exchanges. On February 22, 2013 we had 106,637,761
common shares issued and outstanding and stock options outstanding to purchase a total of
3,499,547 common shares.
Liquidity and Capital Resources
Working capital
$
96,053
$
2012
2011
63,296
% Change
52%
As at December 31,
Our cash position can fluctuate significantly from period to period, largely as a result of
differences in the timing, size and number of auctions, the timing of the receipt of auction
proceeds from buyers, and the timing of the payment of net amounts due to consignors. We
believe that working capital, including cash, is a more meaningful measure of our liquidity
than cash alone. Our working capital increased during 2012 primarily as a result of the cash
generated through our operating activities, partially offset by our spending on capital assets
and dividend payments.
At December 31, 2012, we had $39 million of short-term debt, which consisted of
borrowings under our revolving credit facilities with a weighted-average annual interest rate
of 3.0%. The remaining available borrowings under our credit facilities totalled $313 million,
including a $109 million five-year committed credit facility expiring in January 2014, and a
$100 million three-year uncommitted, non-revolving credit facility expiring in November
2014. We believe our existing working capital and availability under our credit facilities are
sufficient to satisfy our present operating requirements, as well as to fund future growth,
such as property acquisitions and development and the launch of Ritchie Bros.
EquipmentOne.
Contractual Obligations
Payments Due by Period
Total
In 2013
In 2014
and 2015
In 2016
and 2017
After 2017
Non-current debt obligations
$
200,746 $
15,000 $
61,171 $
60,326 $
64,249
Interest on long-term debt obligations
Operating leases obligations
Other non-current obligations
37,930
137,808
661
7,663
9,734
661
12,841
16,452
-
6,377
15,460
-
11,049
96,162
-
Total contractual obligations
$
377,145 $
33,058 $
90,464 $
82,163 $
171,460
Our long-term debt included in the table above is comprised of term loans put in place in
2005 with original terms to maturity of five years, which were subsequently extended, a
revolving loan drawn under a credit facility that is available until January 2014; as well as a
term loan put in place in 2009 with a term to maturity of seven years, and two term loans
put in place in 2012 with a term to maturity of ten years. Our operating leases relate
primarily to land on which we operate regional auction sites and administrative buildings.
These properties are located in Canada, the U.S.A., the Netherlands, Spain, Germany, the
United Kingdom, Portugal, China, Dubai, Mexico and Panama.
33 In the normal course of our business, we will sometimes guarantee to a consignor a
minimum level of proceeds in connection with the sale at auction of that consignor’s
equipment. Our total exposure as at December 31, 2012 from these guarantee contracts
was $20.3 million (compared to $44.7 million at December 31, 2011), which we anticipate
will be fully covered by the proceeds that we will receive from the sale at auction of the
related equipment, plus our commission. We do not record any liability in our financial
statements in respect of these guarantee contracts, and they are not reflected in the
contractual obligations table above.
Cash Flows
Cash provided by (used in):
2012
2011
% Change
Years ended December 31,
Operating activities
Investing activities
Financing activities
Effect of changes in foreign currency rates
(110,870)
43,414
2,124
$
134,060
$
141,146
Net increase in cash and cash equivalents
$
68,728
$
(70,101)
(24,674)
(5,233)
41,138
-5%
- 58%
276%
141%
67%
Our cash provided by operations can fluctuate significantly from period to period, due to
factors such as differences in the timing, size and number of auctions during the period, the
timing of the receipt of auction proceeds from buyers, and the timing of the payment of net
amounts due to consignors. Property, plant and equipment and intangible additions were
$62.3 million for the year ended December 31, 2012 compared to $77.1 million in the same
period in 2011.
We expect our annual capital expenditures will be in the range of $60 to $70 million per
year for the next several years. We plan to add an average of one new auction site to our
network per year, and to make improvements to and replace older existing sites. Actual
expenditures will depend on the availability and cost of suitable expansion opportunities,
and prevailing business and economic conditions. We also expect to undertake system
improvements, including expenditures on hardware, the development, purchase and
implementation of software, and related systems, in connection with our strategic initiatives
discussed above. We expect to fund future capital expenditures from operating cash flows
and borrowings under our credit facilities.
Our capital expenditures for the year ended December 31, 2012 related primarily to the
purchase of property for a future auction site in Melbourne, Australia, the development and
improvement of our auction sites in Chehalis, Washington and Raleigh-Durham, North
Carolina and investments in computer software and hardware. We also invested $63 million
in the acquisition of AssetNation in the second quarter of 2012.
We declared and paid regular cash dividends of $0.1125 per share for each of the quarters
ended December 31, 2011 and March 31, 2012, and declared and paid dividends of $0.1225
for each of the quarters ended June 30, 2012 and September 30, 2012. We have declared,
but not yet paid, dividends of $0.1225 per share for the quarter ended December 31, 2012.
Total dividend payments for 2012 were $50.0 million compared to total dividend payments
of $46.2 million in 2011. All dividends we pay are “eligible dividends” for Canadian income
tax purposes unless indicated otherwise.
34 Long-term Debt and Credit Facilities
Our long-term debt and available credit facilities at December 31, 2012 and December 31,
2011 were as follows:
Long-term debt
Committed
Revolving credit facilities
Revolving credit facilities available
Uncommitted
Revolving credit facilities
Revolving credit facilities available
Non-revolving credit facilities
Non-revolving credit facilities available
Total credit facilities
Total credit facilities available
Years ended December 31,
2012
2011
% Change
$
200,746
$
133,881
50%
235,000
118,848
105,475
93,832
225,000
100,314
565,672
312,994
235,000
146,687
103,475
94,979
225,000
166,236
563,475
407,902
0%
-19%
2%
-1%
0%
-40%
0%
-23%
Our credit facilities are with financial institutions in the United States, Canada, the
Netherlands and the United Kingdom. Certain of the facilities include commitment fees
applicable to the unused credit amount. As at December 31, 2012, we had outstanding fixed
rate and floating rate long-term debt bearing annual interest rates ranging from 2.0% to
6.4% (with a weighted-average annual interest rate of 4.0%). We were in compliance with
all financial and other covenants applicable to our credit facilities at December 31, 2012.
Future scheduled interest payments over the next five years relating to our long term debt
outstanding as at December 31, 2012 were as follows:
In 2013
In 2014
In 2015
In 2016
In 2017
Thereafter
Scheduled interest payments
Interest payments
on long-term debt
$
7,663 $
6,458 $
6,383 $
3,853 $
2,524 $
11,049
Quantitative and Qualitative Disclosure about Market Risk
We conduct operations in local currencies in countries around the world, but we use the US
dollar as our reporting currency. As a result we are exposed to currency fluctuations and
exchange rate risk. We cannot accurately predict the future effects of foreign currency
fluctuations on our financial condition or results of operations, or quantify their effects on
the macroeconomic environment. The proportion of revenues denominated in currencies
other than the U.S. dollar in a given period will differ from the annual proportion depending
on the size and location of auctions held during the period. However, on an annual basis, we
expect these amounts to largely offset and generally act as a natural hedge against
exposure to fluctuations in the value of the U.S. dollar. We have not adopted a long-term
hedging strategy to protect against foreign currency fluctuations associated with our
operations denominated in currencies other than the U.S. dollar, but we may consider
hedging specific transactions if we deem it appropriate in the future.
35 During 2012, we recorded a net increase in our foreign currency translation adjustment
balance of $2.1 million, compared to a net decrease of $6.1 million in 2011. Our foreign
currency translation adjustment arises from the translation of our net assets denominated in
currencies other than the U.S. dollar to the U.S. dollar for reporting purposes.
We have not experienced significant interest rate exposure historically, as our long-term
debt generally bears fixed rates of interest. However, borrowings under our global revolving
credit facility are available at both fixed and floating rates of interest. If we determine our
exposure to short-term interest rates is too high, we may consider fixing a larger portion of
our portfolio. As at December 31, 2012 we had a total of $30.0 million (December 31,
2011: $30.0 million) in revolving loans bearing floating rates of interest.
Although we cannot accurately anticipate the future effect of inflation on our financial
condition or results of operations, inflation historically has not had a material impact on our
operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a
current or future material effect on our financial condition, changes in financial condition,
revenues or expenses, financial performance, liquidity, capital expenditures or capital
resources.
Legal and Other Proceedings
From time to time we have been, and expect to continue to be, subject to legal proceedings
and claims in the ordinary course of our business. Such claims, even if lacking merit, could
result in the expenditure of significant financial and managerial resources. We are not aware
of any legal proceedings or claims that we believe will have, individually or in the aggregate,
a material adverse effect on us or on our financial condition or results of operations or that
involve a claim for damages, excluding interest and costs that could be material.
Critical Accounting Policies and Estimates
In preparing our consolidated financial statements in conformity with IFRS, we must make
decisions that impact the reported amounts and related disclosures. Such decisions include
the selection of the appropriate accounting principles to be applied and the assumptions on
which to base accounting estimates. In reaching such decisions, we apply judgments based
on our understanding and analysis of the relevant circumstances and historical experience.
On an ongoing basis, we evaluate these judgments and estimates, including consideration
of uncertainties relating to revenue recognition criteria, valuation of consignors’ equipment
and other assets subject to guarantee contracts, recoverability of property, plant and
equipment, intangibles, goodwill and deferred income tax assets, and the assessment of
possible contingent assets or liabilities that should be recognized or disclosed in our
consolidated financial statements. Actual amounts could differ materially from those
estimated by us at the time our consolidated financial statements are prepared.
The following discussion of critical accounting policies and estimates is intended to
supplement the significant accounting policies presented as note 2 to our consolidated
financial statements, which summarizes the accounting policies and methods used in the
preparation of those consolidated financial statements. The policies and the estimates
discussed below are included here because they require more significant judgments and
estimates in the preparation and presentation of our consolidated financial statements than
other policies and estimates.
36 Accounting for Income Taxes
We record income taxes relating to our business in each of the jurisdictions in which we
operate. We estimate our actual current tax exposure and the temporary differences
resulting from differing treatment of items for tax and book accounting purposes. These
differences result in deferred income tax assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood that our deferred income
tax assets will be recovered from future taxable income. If recovery of these deferred tax
assets is considered unlikely, we must calculate our best estimate of the recovery. To the
extent we either establish or increase our best estimate in a period, we must include an
expense within the tax provision in the consolidated income statements. Significant
management judgment is required in determining our provision for income taxes, our
measurement of deferred tax assets and liabilities, and any change in best estimate
recorded against our net deferred tax assets. If actual results differ from these estimates or
we adjust these estimates in future periods, we may need to change our best estimate
which could materially impact the presentation of our financial position and results of
operations.
Valuation of Goodwill
We assess the possible impairment of goodwill in accordance with IFRS on an annual basis.
The standards stipulate that goodwill is allocated to Cash-Generating Units (CGUs), or
groups of CGU’s, that are expected to benefit from the synergies of the business
combination from which it arose. The allocation is based on the level at which goodwill is
monitored internally. A CGU is the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other groups. An
impairment loss is recognized if the CGU’s carrying amount (including goodwill) exceeds the
recoverable value, which is the greater of fair value less costs to sell and value in use, which
is based on the net present value of future cash flows.
We perform the goodwill test annually or more frequently if events or changes in
circumstances indicate that goodwill might be impaired. We performed the latest test at
December 31, 2012 and determined that no impairment had occurred.
Presentation of Inventory Contracts
We present the revenue from straight commission and guarantee contracts and the net
proceeds from inventory contracts as auction revenues. We have one sales team that
generates all of our revenue, and regardless of the type of contract, all of the equipment
sold at our auctions is sold to the highest bidder on an unreserved basis. Although we take
title to the equipment we sell under inventory contracts, the period of direct ownership is
relatively short and the equipment is processed in the same manner as other consigned
equipment. As a result, we present the results of all equipment sold at our auctions on a net
basis as auction revenues because it is more reflective of the substance of the transaction.
We value our inventory at the lower of cost and net realizable value on a specific item basis.
In addition, we monitor the results from the sale of this inventory at auction after the
balance sheet date up to the release of our financial statements and record any losses
realized on inventory contracts.
Changes in Accounting Policies
There have been no accounting policy changes implemented during the period.
37 Recent Accounting Pronouncements
There were no accounting pronouncements made during 2012 that impact our accounting
policies or the presentation of our consolidated financial position or financial performance.
Disclosure Controls and Procedures
We have established and maintained disclosure controls and procedures in order to provide
reasonable assurance that material information relating to our Company is made known to
the appropriate level of management in a timely manner.
Based on current securities legislation in Canada and the United States, our Chief Executive
Officer and Chief Financial Officer are required to certify that they have assessed the
effectiveness of our disclosure controls and procedures as at December 31, 2012.
We performed an evaluation under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures as at December 31, 2012. Based on that evaluation, we concluded that our
disclosure controls and procedures were effective as of that date to provide reasonable
assurance that information required to be disclosed by us in the reports that we file or
submit is accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Furthermore, we
concluded that our disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports filed under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods specified in
the U.S. Securities and Exchange Commission’s rules and forms.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining an adequate internal control
structure and procedures for financial reporting. Under the supervision and with the
participation of management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in “Internal Control – Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in “Internal Control – Integrated Framework”, management
concluded that our internal control structure and procedures over financial reporting were
effective as of December 31, 2012.
The effectiveness of our internal controls over financial reporting as of December 31, 2012
has been audited by KPMG LLP, the independent registered public accounting firm that
audited our December 31, 2012 consolidated annual financial statements, as stated in their
report, which is included in our consolidated financial statements.
Changes in Internal Controls Over Financial Reporting
There has been no change in our internal control over financial reporting during 2012 that
has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
38 Risk Factors
Our business is subject to a number of risks and uncertainties, and our past performance is
no guarantee of our performance in future periods. Some of the more important risks that
we face are outlined below and holders of our common shares should consider these risks.
The risks and uncertainties described below are a summary of key risks we face. Additional
risks and uncertainties not currently known to us or that we currently deem immaterial may
also adversely affect our financial condition or impair our business or results of operations.
If any of the following risks actually occur, our business, results of operations and financial
condition would suffer.
Damage to our reputation for fairness, integrity and conducting live auctions that
are truly unreserved could harm our business.
One of our founding principles is that our auctions are strictly unreserved and we believe
this is one of our most significant competitive advantages. Closely related to this is our
reputation for fairness and honesty in our dealings with our customers. Our ability to attract
new customers and continue to do business with existing customers could be harmed if our
reputation for fairness, integrity and conducting auctions that are strictly unreserved was
damaged. If we are unable to maintain our reputation and enforce our unreserved policy we
could lose business and our results of operations and financial condition would suffer.
Competition in our core markets could result in reductions in our future auction
revenues and profitability.
The used truck and equipment sectors of the global industrial equipment market, and the
auction segment of those markets, are highly fragmented. We compete directly for potential
purchasers of industrial equipment with other auction companies. Our indirect competitors
include equipment manufacturers, other third party methods which utilize an intermediary,
and equipment rental companies. When sourcing equipment to sell at our auctions, we
compete with other auction companies, other third party methods, and equipment owners
that have traditionally disposed of equipment in private sales.
Our direct competitors are primarily regional auction companies. Some of our indirect
competitors have significantly greater financial and marketing resources and name
recognition than we do. New competitors with greater financial and other resources may
enter the industrial equipment auction market in the future. Additionally, existing or future
competitors may succeed in entering and establishing successful operations in new
geographic markets prior to our entry into those markets. They may also compete against
us through internet-based services. If existing or future competitors seek to gain or retain
market share by reducing commission rates, or our strategy to compete against them is not
effective, we may also be required to reduce commission rates, which may reduce our
revenues and harm our results of operations and financial condition, or we may lose market
share.
We currently generate the vast majority of our revenues through unreserved auctions. We
may be susceptible to loss of business as a result of our restrictive service offering if
competing models become more appealing to customers. If our selling model becomes
undesirable or we are not successful adding services complimentary to our existing selling
model and business, we may not be successful increasing market penetration over the long
term, which could prevent us from achieving our long-term earnings growth targets.
39 Decreases in the supply of, demand for, or market values of industrial assets,
primarily used industrial equipment, could harm our business.
Our auction revenues could decrease if there was significant erosion in the supply of,
demand for, or market values of used industrial equipment, which could adversely affect our
financial condition and results of operations. We have no control over any of the factors that
affect the supply of, and demand for, used industrial equipment, and the circumstances that
cause market values for industrial equipment to fluctuate – including, among other things,
economic uncertainty, disruptions to credit and financial markets, lower commodity prices,
and our customers’ restricted access to capital – are beyond our control. Recent economic
conditions have caused fluctuations in the supply, mix and market values of used equipment
available for sale, which has a direct impact on our auction revenues. In addition, price
competition and the availability of industrial equipment directly affect the supply of, demand
for, and market value of used industrial equipment. Climate change initiatives, including
significant changes to engine emission standards applicable to industrial equipment, may
also adversely affect the supply of, demand for or market values of industrial equipment.
We may incur losses as a result of our guarantee and outright purchase contracts
and advances to consignors.
Straight commission contracts are our most common type of auction contract and are used
by us when we act as agent for consignors and earn a pre-negotiated, fixed commission
rate on the gross sales price of the consigned equipment at auction. In recent years,
approximately 60-80% of our annual business has been conducted on a straight commission
basis. In certain other situations we will either offer to:
guarantee a minimum level of sale proceeds to the consignor, regardless of the
ultimate selling price of the consignment at the auction; or
purchase the equipment outright from the consignor for sale in a particular auction.
The level of guaranteed proceeds or inventory purchase price is based on appraisals
performed on equipment by our internal personnel. Inaccurate appraisals could result in
guarantees or inventory values that exceed the realizable auction proceeds. In addition, a
change in market values could also result in guarantee or inventory values exceeding the
realizable auction proceeds. If auction proceeds are less than the guaranteed amount, our
commission will be reduced and, in certain circumstances, we could incur a loss. If auction
proceeds are less than the purchase price we paid for equipment that we take into inventory
temporarily, we will incur a loss. Because all of our auctions are unreserved, there is no way
for us to protect against these types of losses by bidding on or acquiring any of the items at
the auction. In addition, we do not hold inventory indefinitely waiting for market conditions
to improve. If our exposure to at risk contracts increases, this risk would be compounded.
Occasionally we advance to consignors a portion of the estimated auction proceeds prior to
the auction. We generally make these advances only after taking possession of the assets to
be auctioned and upon receipt of a security interest in the assets to secure the obligation. If
we were unable to auction the assets or if auction proceeds were less than amounts
advanced, we could incur a loss.
We may have difficulties sustaining and managing our growth.
One of the main elements of our strategy is to continue to grow our core auction business,
primarily by increasing our presence in markets in which we already operate and by
expanding into new geographic markets and market segments in which we have not had a
significant presence in the past. As part of this strategy, we may from time to time acquire
additional assets or businesses from third parties. We may not be successful in growing our
business or in managing this growth.
40 For us to grow our core auction business successfully, we need to accomplish a number of
objectives, including:
recruiting and retaining suitable sales and managerial personnel;
developing and enhancing an appropriate sales strategy;
identifying and developing new geographic markets and market sectors;
expanding awareness of our brand, including value proposition and competitive
advantages, in existing and new markets;
successfully executing the realignment of our sales and operations teams;
identifying and acquiring, on terms favourable to us, suitable land on which to build
new auction facilities and, potentially, businesses that might be appropriate
acquisition targets;
obtaining necessary financing on terms favourable to us, and securing the availability
of our credit facilities to fund our growth initiatives;
receiving necessary authorizations and approvals from governments for proposed
development or expansion;
integrating successfully new facilities and any acquired businesses into our existing
operations, including, without limitation, the AssetNation business;
achieving acceptance of the auction process in general by potential consignors,
bidders and buyers;
establishing and maintaining favourable relationships with and meeting the needs of
consignors, bidders and buyers in new markets and market sectors, and maintaining
these relationships in our existing markets;
capturing relevant market data and utilizing it to generate insight and understanding
of key company and industry drivers and market trends;
developing appropriate responses based on data collected to meet the needs of
existing and potential customers to achieve customer retention targets;
succeeding against local and regional competitors in existing and new geographic
markets;
capitalizing on changes in the supply of and demand for industrial assets, and
understanding and responding to changing market dynamics, in our existing and new
markets; and
designing and implementing business processes and operating systems that are able
to support profitable growth.
We will likely need to hire additional employees to manage our growth. In addition, growth
may increase the geographic scope of our operations and increase demands on both our
operating and financial systems. These factors will increase our operating complexity and
the level of responsibility of existing and new management personnel. It may be difficult for
us to attract and retain qualified sales personnel, managers and employees, and our
existing operating and financial systems and controls may not be adequate to support our
growth. We may not be able to improve our systems and controls as a result of increased
costs, technological challenges, or lack of qualified employees. Our past results and growth
may not be indicative of our future prospects or our ability to expand into new markets,
many of which may have different competitive conditions and demographic characteristics
than our existing markets.
41 We are pursuing a long-term growth strategy that requires upfront investment,
with no guarantee of long-term returns.
We continue to pursue a long-term growth strategy that contemplates investments in
growing our core business and exploring and developing new solutions to meet the needs of
equipment owners whose needs are not met by the unreserved auction method, including
investments in frontier markets that may not generate profitable growth in the near term,
adding new business and information solutions, and developing our people. Planning for
future growth requires investments to be made now in anticipation of growth that may not
materialize, and if our strategies do not successfully address the needs of current and
potential customers we may not be successful growing our Gross Auction Proceeds and our
earnings may be adversely impacted. A large component of our SG&A expenses is
considered fixed costs that we will incur regardless of Gross Auction Proceeds growth. There
can be no assurances that our Gross Auction Proceeds and auction revenues will grow at a
more rapid rate than our fixed costs. If we proceed with an acquisition we may not be able
to appropriately integrate that business into our existing business.
Our internet-related initiatives are subject to technological obsolescence and
potential service interruptions and may not contribute to improved operating
results over the long-term; in addition, we may not be able to compete with
technologies implemented by our competitors.
We have invested significant resources in the development of our internet platform,
including our online bidding service and website. We use and rely on intellectual property
owned by third parties, which we license for use in providing our online bidding service. Our
internet technologies may not result in any material long-term improvement in our results
of operations or financial condition and may require further significant investment to avoid
obsolescence. We may not be able to continue to adapt our business to new technologies,
including but not limited to internet commerce and we may not be able to compete
effectively against internet auction services offered by our competitors.
The success of our online bidding service and other services that we offer over the internet,
including equipment-searching capabilities and historical price information, will continue to
depend largely on the performance and reliability of the hardware and software we utilize,
our ability to use suitable intellectual property licensed from third parties, further
development and maintenance of our information technology infrastructure and the internet
in general. Our ability to offer online services depends on the performance of the internet,
as well as our internal hardware and software systems.
“Viruses”, “worms”, denial of service attacks and other similar cyber threats, which have in
the past caused periodic outages and other internet access delays, may in the future
interfere with the performance of the internet and some of our internal systems. These
outages and delays could reduce the level of service we are able to offer over the internet.
We could lose customers and our reputation could be harmed if we were unable to provide
services over the internet at an acceptable level of performance or reliability.
The availability and performance of our technology infrastructure is critical to our
business.
The satisfactory performance, reliability and availability of our website, enterprise resource
planning system, processing systems and network infrastructure are important to our
reputation and our business. We will need to continue to expand and upgrade our
technology, transaction processing systems and network infrastructure both to meet
increased usage of our online bidding service and other services offered on our website and
to implement new features and functions. Our business and results of operations could be
harmed if we were unable to expand and upgrade in a timely manner our systems and
infrastructure to accommodate any increases in the use of our internet services, or if we
were to lose access to or the functionality of our internet systems for any reason.
42 We use both internally developed and licensed systems for transaction processing and
accounting, including billings and collections processing. We continually upgrade and
improve these systems to accommodate growth in our business. If we are unsuccessful in
continuing to upgrade our technology, transaction processing systems or network
infrastructure to accommodate increased transaction volumes, it could harm our operations
and interfere with our ability to expand our business.
Our future expenses may increase significantly and our operations and ability to
expand may be limited as a result of environmental and other regulations.
A variety of federal, provincial, state and local laws, rules and regulations throughout the
world, including local tax and accounting rules, apply to our business. These relate to,
among other things, the auction business, imports and exports of equipment, worker safety,
privacy of customer information, and the use, storage, discharge and disposal of
environmentally sensitive materials. Complying with revisions to laws, rules and regulations
could result in an increase in expenses and a deterioration of our financial performance.
Failure to comply with applicable laws, rules and regulations could result in substantial
liability to us, suspension or cessation of some or all of our operations, restrictions on our
ability to expand at present locations or into new locations, requirements for the acquisition
of additional equipment or other significant expenses or restrictions.
The development or expansion of auction sites depends upon receipt of required licenses,
permits and other governmental authorizations. Our inability to obtain these required items
could harm our business. Additionally, changes or concessions required by regulatory
authorities could result in significant delays in, or prevent completion of, such development
or expansion.
Under some environmental laws, an owner or lessee of, or other person involved in, real
estate may be liable for the costs of removal or remediation of hazardous or toxic
substances located on or in, or emanating from, the real estate, and related costs of
investigation and property damage. These laws often impose liability without regard to
whether the owner, lessee or other person knew of, or was responsible for, the presence of
the hazardous or toxic substances. Environmental contamination may exist at our owned or
leased auction sites, or at other sites on which we may conduct auctions, or properties that
we may be selling by auction, from prior activities at these locations or from neighbouring
properties. In addition, auction sites that we acquire or lease in the future may be
contaminated, and future use of or conditions on any of our properties or sites could result
in contamination. The costs related to claims arising from environmental contamination of
any of these properties could harm our financial condition and results of operations.
Climate change may not affect us directly, but government regulation in response to this
area of global concern may affect the ability of equipment owners to transport certain
equipment between specified jurisdictions or the saleability of older equipment. One
example of these restrictions is environmental certification requirements in the United
States, which prevent non-certified equipment from entering into commerce in the United
States. These restrictions, or changes to environmental laws, could inhibit materially the
ability of customers to ship equipment to or from our auction sites, reducing our Gross
Auction Proceeds and harming our business, financial condition and results of operations.
International bidders and consignors could be deterred from participating in our auctions if
governmental bodies impose additional export or import regulations or additional duties,
taxes or other charges on exports or imports. Reduced participation by international bidders
and consignors could reduce Gross Auction Proceeds and harm our business, financial
condition and results of operations.
43 Our substantial international operations expose us to foreign exchange rate
fluctuations and political and economic instability that could harm our results of
operations.
We conduct business in many countries around the world and intend to continue to expand
our presence in international markets, including emerging markets. Fluctuating currency
exchange rates, acts of terrorism or war, and changing social, economic and political
conditions and regulations, including income tax and accounting regulations, and political
interference, may negatively affect our business in international markets and our related
results of operations. Currency exchange rate fluctuations between the different countries in
which we conduct our operations impact the purchasing power of buyers, the motivation of
consignors, asset values and asset flows between various countries, including those in which
we do not have operations. These factors and other global economic conditions may harm
our business and our results of operations.
Although we report our financial results in U.S. dollars, a significant portion of our auction
revenues are generated at auctions held outside the United States, mostly in currencies
other than the U.S. dollar. Currency exchange rate changes against the U.S. dollar,
particularly for the Canadian dollar and the Euro, could affect the presentation of our results
in our financial statements and cause our earnings to fluctuate.
Our business has significant operations in foreign jurisdictions.
We are exposed to risks related operating in foreign jurisdictions. These risks and
uncertainties vary from country to country and our operations may be affected in varying
degrees by government regulations. Failure to comply strictly with applicable laws,
regulations and local practices relating to auction regulations and other business regulations
could impact our ability to operate in these jurisdictions. The occurrence of these various
factors and uncertainties cannot be accurately predicted and could have a material adverse
effect on the Company’s operations or profitability.
Our business could be harmed if we lost the services of one or more key
personnel.
The growth and performance of our business depends to a significant extent on the efforts
and abilities of our executive officers and senior managers. Our business could be harmed if
we lost the services of any of these individuals. We do not maintain key man insurance on
the lives of any of our executive officers. Our future success largely depends on our ability
to attract, develop and retain skilled employees in all areas of our business, as well as to
design an appropriate organization structure and plan effectively for succession.
Our business is subject to risks relating to our ability to safeguard the security and
privacy of our customers' confidential information.
We maintain proprietary databases containing confidential personal information about our
customers and the results of our auctions, and we must safeguard the security and privacy
of this information. Despite our efforts to protect this information, we face the risk of
inadvertent disclosure of this sensitive information or an intentional breach of our security
measures.
Security breaches could damage our reputation and expose us to a risk of loss or litigation
and possible liability for damages. We may be required to make significant expenditures to
protect against security breaches or to alleviate problems caused by any breaches. Our
insurance policies may not be adequate to reimburse us for losses caused by security
breaches.
44 We may incur losses as a result of legal and other claims.
We are subject to legal and other claims that arise in the ordinary course of our business.
While the results of these claims have not historically had a material effect on our business,
financial condition or results of operations, we may not be able to defend ourselves
adequately against these claims in the future and we may incur losses. Aggregate losses
from and the legal fees associated with these claims could be material.
Our business continuity plan may not operate effectively in the event of a
significant interruption of our business.
We depend on our information and other systems and processes for the continuity and
effective operation of our business. We have implemented a formal business continuity plan
covering most significant aspects of our business that would take effect in the event of a
significant interruption to our business, or the loss of key systems as a result of a natural or
other disaster. Although we have tested our business continuity plan as part of the
implementation, there can be no assurance that it will operate effectively or that our
business, results of operations and financial condition will not be materially affected in the
event of a significant interruption of our business.
We are in the process of implementing a formal disaster recovery plan, however, it is not
yet complete. If we were subject to a disaster or serious security breach, it could materially
damage our business, results of operations and financial condition.
Our insurance may be insufficient to cover losses that may occur as a result of our
operations.
We maintain property and general liability insurance. This insurance may not remain
available to us at commercially reasonable rates, and the amount of our coverage may not
be adequate to cover all liabilities that we may incur. Our auctions generally involve the
operation of large equipment close to a large number of people, and despite our focus on
safe work practices, an accident could damage our facilities or injure auction attendees. Any
major accident could harm our reputation and our business. In addition, if we were held
liable for amounts exceeding the limits of our insurance coverage or for claims outside the
scope of our coverage, the resulting costs could harm our results of operations and financial
condition.
Certain global conditions may affect our ability to conduct successful auctions.
Like most businesses with global operations, we are subject to the risk of certain global
conditions, such as pandemics or other disease outbreaks or natural disasters that could
hinder our ability to conduct our scheduled auctions, or restrict our customers’ travel
patterns or their desire to attend auctions. If this situation were to occur, we may not be
able to generate sufficient equipment consignments to sustain our business or to attract
enough bidders to our auctions to achieve world fair market values for the items we sell.
This could harm our results of operations and financial condition.
45 Our operating results are subject to quarterly variations.
Historically, our revenues and operating results have fluctuated from quarter to quarter. We
expect to continue to experience these fluctuations as a result of the following factors,
among others:
the size, timing and frequency of our auctions;
the seasonal nature of the auction business in general, with peak activity typically
occurring in the second and fourth calendar quarters, mainly as a result of the
seasonal nature of the construction and natural resources industries;
the performance of our underwritten business (guarantee and outright purchase
contracts);
general economic conditions in our markets; and
the timing of acquisitions and development of auction facilities and related costs.
In addition, we usually incur substantial costs when entering new markets, and the
profitability of operations at new locations is uncertain as a result of the increased variability
in the number and size of auctions at new sites. These and other factors may cause our
future results to fall short of investor expectations or not to compare favourably to our past
results.
We may not continue to pay regular cash dividends.
We declared and paid total quarterly cash dividends of $0.47 per outstanding common share
for the four quarters ended December 31, 2012. Any decision to declare and pay dividends
in the future will be made at the discretion of our Board of Directors, after taking into
account our operating results, financial condition, cash requirements, financing agreement
restrictions and other factors our Board may deem relevant. We may be unable or may elect
not to continue to declare and pay dividends, even if necessary financial conditions are met
and sufficient cash is available for distribution.
46 Consolidated Financial Statements of
RITCHIE BROS. AUCTIONEERS
INCORPORATED
Years ended December 31, 2012 and 2011
47 KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet
Independent Auditors’ Report of Registered Public Accounting Firm
To the Shareholders and Board of Directors of Ritchie Bros. Auctioneers Incorporated
We have audited the accompanying consolidated financial statements of Ritchie Bros.
Auctioneers Incorporated and its subsidiaries (the “Company”), which comprise the consolidated
balance sheets as at December 31, 2012 and 2011, the consolidated income statements,
statements of comprehensive income, changes in equity and cash flows for the years then
ended, and notes, comprising a summary of significant accounting policies and other
explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We conducted our audits in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we comply with ethical requirements and plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we
consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
48
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of Ritchie Bros. Auctioneers Incorporated as at December 31,
2012 and 2011, and of its consolidated financial performance and its consolidated cash flows for
the years then ended in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Other Matters
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2012, based on the criteria established in Internal Control – Integrated
Framework issued by the committee of Sponsoring Organization of the Treadway Commission
(COSO), and our report dated February 22, 2013 expressed an unmodified opinion on the
effectiveness of the Company’s internal control over financial reporting.
KPMG LLP
Chartered Accountants
Vancouver, Canada
February 22, 2013
49
KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Ritchie Bros. Auctioneers Incorporated
We have audited Ritchie Bros. Auctioneers Incorporated’s (“the Company”) internal control over
financial reporting as of December 31, 2012, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company's internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
50
In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2012, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company as of
December 31, 2012 and 2011 and the related consolidated income statements, statements of
comprehensive income, changes in equity and cash flows for the years ended December 31,
2012 and 2011 and our report dated February 22, 2013 expressed an unqualified opinion on
those consolidated financial statements.
KPMG LLP
Chartered Accountants
Vancouver, Canada
February 22, 2013
51
RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Income Statements
(Expressed in thousands of United States dollars, except share and per share amounts)
Year ended December 31,
Auction revenues (note 5)
Direct expenses (note 6)
Selling, general and administrative expenses (note 6)
Earnings from operations
Other income (expense):
Foreign exchange loss
Gain (loss) on disposition of property, plant and equipment
Other
Finance income (costs) (note 7):
Finance income
Finance costs
Earnings before income taxes
Income tax expense (note 8):
Current
Deferred
Net earnings
Net earnings per share (note 9):
Basic
Diluted
2012
2011
$
437,955
49,687
388,268
268,229
120,039
(619)
(2,074)
(891)
(3,584)
2,420
(6,860)
(4,440)
396,099
48,044
348,055
244,343
103,712
(585)
3,861
4,242
7,518
2,326
(5,541)
(3,215)
112,015
108,015
30,371
2,098
32,469
79,546
0.75
0.74
$
$
$
26,096
5,286
31,382
76,633
0.72
0.72
$
$
$
$
Weighted average number of shares outstanding:
Basic
Diluted
106,469,665
106,923,852
106,164,237
106,983,757
See accompanying notes to consolidated financial statements.
These consolidated financial statements are authorized for issue by the Board of Directors on February 22, 2013.
/s/ Beverley A Briscoe
Beverley A Briscoe
Director
Peter J Blake
Chief Executive Officer
52 RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Comprehensive Income
(Expressed in thousands of United States dollars)
Year ended December 31,
2012
2011
Net earnings
Other comprehensive income (loss):
Foreign currency translation adjustment
Total comprehensive income
$
$
79,546
$
76,633
2,085
(6,070)
81,631
$
70,563
See accompanying notes to consolidated financial statements.
53 RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)
Assets
Current assets:
Cash and cash equivalents
Trade and other receivables (note 10)
Inventory (note 11)
Advances against auction contracts
Prepaid expenses and deposits (note 12)
Assets held for sale (note 13)
Current portion of loan receivable (note 16)
Other current assets
Income taxes receivable (note 8)
Property, plant and equipment (note 14)
Investment property (note 15)
Loan receivable (note 16)
Other non-current assets
Intangible assets (note 17)
Goodwill (note 18)
Deferred tax assets (note 8)
Liabilities and Shareholders’ Equity
Current liabilities:
Auction proceeds payable
Trade and other payables (note 19)
Income taxes payable (note 8)
Current borrowings (note 20)
Non-current borrowings (note 20)
Other non-current liabilities
Deferred tax liabilities (note 8)
Shareholders’ equity:
Share capital (note 22)
Additional paid-in capital
Retained earnings
Foreign currency translation reserve
December 31,
2012
December 31,
2011
$
$
$
$
178,051
76,066
60,947
6,816
14,881
958
118
-
7,764
345,601
655,677
6,902
4,797
8,410
25,570
84,247
1,294
1,132,498
87,139
117,766
5,163
39,480
249,548
200,746
5,193
20,480
475,967
118,694
27,080
510,222
535
656,531
1,132,498
$
$
$
$
109,323
60,980
49,212
11,784
9,923
-
111
81
12,426
253,840
644,333
7,890
4,915
8,857
-
45,957
1,449
967,241
69,004
100,868
8,077
12,595
190,544
133,881
4,309
20,601
349,335
115,961
22,777
480,718
(1,550)
617,906
967,241
Commitments (note 25) contingencies (note 26)
See accompanying notes to consolidated financial statements.
54 RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Changes in Equity
(Expressed in thousands of United States dollars, except share amounts)
Balance, December 31, 2010
105,648,035 $
Number of
Shares
Share Capital
Additional
Paid-In
Capital
103,978 $ 21,101 $ 450,268 $
Total
Retained Translation Shareholders’
Equity
Reserve
Earnings
579,867
4,520 $
Amount
Foreign
Currency
Balance, December 31, 2011
106,386,339 $
115,961 $ 22,777 $ 480,718 $ (1,550) $
Total comprehensive income
Net earnings
Foreign currency
translation adjustment
Exercise of stock options
Share-based compensation
tax adjustment
Share-based compensation
expense
(note 23(b))
Cash dividends paid (note 21)
Total comprehensive income
Net earnings
Foreign currency
translation adjustment
Exercise of stock options
Share-based compensation
tax adjustment
Share-based compensation
expense
(note 23(b))
Cash dividends paid (note 21)
-
-
-
-
-
-
-
-
-
76,633
-
76,633
-
76,633
(6,070)
(6,070)
(6,070)
70,563
738,304
-
11,983
-
(2,260)
61
-
-
-
-
-
-
3,875
-
-
(46,183)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79,546
2,085
2,085
79,546
-
79,546
210,472
-
2,733
-
(513)
513
-
-
-
-
9,723
61
3,875
(46,183)
617,906
2,085
81,631
2,220
513
Balance, December 31, 2012
106,596,811 $
118,694 $ 27,080 $ 510,222 $
See accompanying notes to consolidated financial statements.
-
-
-
-
4,303
-
-
(50,042)
-
-
535 $
4,303
(50,042)
656,531
55 RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
Year ended December 31,
2012
2011
Cash generated by (used in):
Operating activities:
Net earnings
Items before changes in non-cash working capital:
Depreciation
Amortization
Impairment loss
Share-based compensation expense
Deferred income tax expense
Foreign exchange loss
Loss (gain) on disposition of property, plant
and equipment
Changes in non-cash working capital:
Trade and other receivables
Inventory
Advances against auction contracts
Prepaid expenses and deposits
Income taxes receivable
Income taxes payable
Auction proceeds payable
Trade and other payables
Other
Interest paid
Income taxes paid
Net cash generated by operating activities
Investing activities:
Acquisition of subsidiaries, net of cash acquired
Property, plant and equipment additions
Intangible asset additions
Proceeds on disposition of property, plant
and equipment
Other
Net cash used in investing activities
Financing activities:
Issuance of share capital
Dividends on common shares
Proceeds from short-term borrowings
Repayment of short-term borrowings
Proceeds from long-term borrowings
Other
Net cash generated by (used in) financing activities
Effect of changes in foreign currency rates on
cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to consolidated financial statements.
$
79,546
$
76,633
39,177
1,961
2,172
4,303
2,098
619
2,074
52,404
(14,027)
(11,325)
4,962
(4,095)
4,662
24,172
9,286
22,403
2,346
38,384
(9,005)
(27,269)
134,060
(55,617)
(58,707)
(3,633)
6,349
738
(110,870)
2,220
(50,042)
81,847
(53,951)
62,919
421
43,414
2,124
68,728
109,323
178,051
$
$
42,408
-
-
3,875
5,286
585
(3,861)
48,293
(3,653)
(23,011)
(9,520)
625
2,209
21,096
27,804
20,224
1,606
37,380
(6,115)
(15,045)
141,146
-
(77,053)
-
10,072
(3,120)
(70,101)
9,723
(46,183)
56,170
(44,765)
-
381
(24,674)
(5,233)
41,138
68,185
109,323
56 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
1. General information:
Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”) sell
industrial equipment and other assets for the construction, transportation, material handling, mining, forestry,
petroleum, marine, real estate, and agricultural industries at its unreserved auctions worldwide.
Ritchie Bros. Auctioneers Incorporated is a company incorporated in Canada under the Canada Business
Corporations Act, whose shares are publicly traded on the Toronto Stock Exchange (“TSX”) and the New York
Stock Exchange (“NYSE”). The address of its registered office is located at 1300 – 777 Dunsmuir Street,
Vancouver, British Columbia, Canada. Its principal place of business is located at 9500 Glenlyon Parkway,
Burnaby, British Columbia, Canada.
2. Significant accounting policies:
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to the years presented unless otherwise stated.
(a) Basis of preparation:
These consolidated financial statements,
including comparatives, present
the consolidated income
statements, statements of comprehensive income, balance sheets, statements of changes in equity and
statements of cash flows of the Company. The consolidated financial statements have been prepared on
the historical cost basis, except for cash flows and the financial instruments valued at fair value through
profit and loss that is measured at fair value. A summary of the principal accounting policies is set out
below.
(b) Statement of compliance:
The consolidated financial statements of the Company have been prepared under International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)
incorporating Interpretations issued by the IFRS Interpretations Committee (“IFRICs”), and complying
with the Canada Business Corporations Act 1997.
(c) Basis of consolidation:
(i) Subsidiaries:
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Ritchie
Bros. Auctioneers Incorporated for the years presented and the results of all subsidiaries for the years
then ended.
Subsidiaries are all those entities that the Company controls, defined as having the power to govern the
financial and operating policies, generally accompanying an equity holding of more than one-half of the
voting rights.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are
de-consolidated from the date that control ceases. Inter-entity transactions, balances and unrealized gains
on transactions between entities within the consolidated company are eliminated. Unrealized losses are
also eliminated unless the transaction provides evidence of impairment of the asset transferred. The
Company’s accounting policies are applied consistently throughout the organization.
57 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(c) Basis of consolidation (continued):
(ii) Ultimate parent entity
Ritchie Bros. Auctioneers Incorporated is the ultimate parent entity of the consolidated Company.
(d) Revenue recognition:
Auction revenues are comprised mostly of auction commissions, which are earned by the Company acting
as an agent for consignors of equipment and other assets, but also include net profits on the sale of
inventory, as well as auction fees. Auction fees are made up of internet purchase fees (incurred until June
2011), administrative and documentation fees on the sale of certain lots and auction advertising fees.
Auction commissions represent the percentage earned by the Company on the gross proceeds from
equipment and other assets sold at auction. The majority of auction commissions are earned as a pre-
negotiated fixed rate of the gross selling price. Other commissions are earned from at risk contracts, when
the Company guarantees a certain level of proceeds to a consignor or purchases inventory from customers
for sale at auction.
Guarantee contracts typically include a pre-negotiated percentage of the guaranteed gross proceeds plus a
percentage of proceeds in excess of the guaranteed amount. If actual auction proceeds are less than the
guaranteed amount, commission is reduced; if proceeds are sufficiently lower, the Company can incur a
loss on the sale. Losses, if any, resulting from guarantee contracts are recorded in the period in which the
relevant auction is completed. If a loss relating to a guarantee contract held at the period end to be sold
after the period end is known at the financial statement reporting date, the loss is accrued in the financial
statements for that period. The Company’s exposure from these guarantee contracts fluctuates over time
(note 26(b)).
For inventory contracts, the Company acquires title to items for a short time prior to a particular auction
sale. Revenue from inventory sales is presented net within auction revenues on the income statement, as
the Company takes title only for a short period of time and the risks and rewards of ownership are not
substantially different than the Company’s other at risk contracts.
Revenue is measured at the fair value of the consideration received or receivable. Revenue is shown net of
value-added tax and duties.
The Company recognizes revenue when the auction sale is complete and the Company has determined
that the auction proceeds are collectible.
(e) Foreign currency translation:
The parent entity’s presentation and functional currency is the United States dollar. The functional
currency for each of the parent entity’s subsidiaries is the currency of the primary economic environment,
which is usually the currency of the country of residency.
58 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(e) Foreign currency translation (continued):
Accordingly, the financial statements of the Company’s subsidiaries that are not denominated in United
States dollars have been translated into United States dollars using the exchange rate at the end of each
reporting period for asset and liability amounts and the monthly average exchange rate for amounts
included in the determination of earnings. Any gains of losses from the translation of asset and liability
amounts are included in foreign currency translation reserve in other comprehensive income, which is
included as a separate component of shareholders’ equity.
In preparing the financial statements of the individual subsidiaries, transactions in currencies other than
the entity’s functional currency are recognized at the rates of exchange prevailing at the dates of the
transaction. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Foreign currency differences arising on retranslation are
recognized in earnings. Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
(f) Cash and cash equivalents:
Cash and cash equivalents is comprised of cash on hand, deposits with financial institutions, and other
short-term, highly liquid investments with original maturities of three months or less when acquired, that
are readily convertible to known amounts of cash.
Included are certain amounts held in segregated
accounts where required by applicable local law which are used to settle auction proceeds payable.
(g) Inventory:
Inventory is represented by goods held for auction and has been valued at the lower of cost, determined
by the specific identification method, and net realizable value.
(h) Financial instruments:
(i) Recognition of financial instruments:
Financial instruments are recognized when the Company becomes a party to the contractual provisions of
the instrument.
Financial assets are derecognized when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset, and substantially all the risks and rewards of ownership of the asset,
to another entity.
Financial liabilities are derecognized when the Company’s obligations are discharged, cancelled or they
expire.
(ii) Financial assets at fair value through profit or loss:
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified as held for trading if it has been acquired principally for the purpose of selling in the short term
or if so designated by management and meets the criteria to designate at fair value. The policy of
management is to designate a financial asset as held for trading if the possibility exists that it will be sold
in the short term and the asset is subject to frequent changes in fair value.
.
59 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(h) Financial instruments (continued):
(ii) Financial assets at fair value through profit or loss (continued):
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss
recognized in earnings. The net gain or loss recognized in earnings incorporates any dividends or interest
earned on the financial asset.
In previous periods, the Company classified cash and cash equivalents in
this category; these were reclassified at their fair value to loans and receivables at January 1, 2012. The
Company has no other assets classified as fair value through profit or loss.
(iii) Loans and receivables:
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise when the Company provides services with no intention of selling
the receivable. They are measured at amortized cost using the effective interest method, less any
impairment. Interest income is recognized by applying the effective interest rate, except for short term
receivables when the recognition of interest would be immaterial.
Assets in this category are classified as current assets, except for those with maturities greater than 12
months after the balance sheet date, which are classified as non-current assets. Loans and receivables are
comprised of cash and cash equivalents, trade and other receivables, advances against auction contracts,
other current assets and loan receivable on the balance sheet.
(iv) Effective interest method:
The effective interest method is a method of calculating the amortized cost of a financial asset or financial
liability and of allocating interest income or interest expense over the relevant period. The effective
interest rate is the rate that discounts estimated future cash receipts or payments (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the financial asset or financial liability, or, where
appropriate, a shorter period.
Income is recognized on an effective interest basis for debt instruments other than those financial assets
designated as fair value through profit or loss.
(v) Impairment of financial assets:
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of
impairment at each balance sheet date. Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been impacted.
Objective evidence of impairment could include:
a. Significant financial difficulty of the issuer or counterparty;
b. Default or delinquency in interest or principal payments; or
c.
It becomes probable that the borrower will enter bankruptcy or financial re-organization.
.
60 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(h) Financial instruments (continued):
(v) Impairment of financial assets (continued):
For financial assets carried at amortized cost, the amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets. If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment was
recognized, the previously recognized impairment loss is reversed through earnings to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the
amortized cost would have been had the impairment not been recognized.
(vi) Financial liabilities:
Auction proceeds payable, trade and other payables and borrowings are measured at amortized cost using
the effective interest method. Transaction costs are offset against the outstanding principal of the related
borrowings and are amortized using the effective interest rate method.
(i) Property, plant and equipment:
All property, plant and equipment are stated at cost less accumulated depreciation. Cost includes all
expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the
assets to working condition for their intended use, the costs of dismantling and removing items and
restoring the site on which they are located (if applicable) and capitalized interest on qualifying assets.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably. All repairs and maintenance costs are
charged to earnings during the financial period in which they are incurred. Gains and losses on disposal of
an item of property, plant and equipment are determined by comparing the proceeds from disposal with
the carrying amount of the item, and are recognized net within other income on the income statement.
When major components of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment and depreciated over their respective
lives. Depreciation is provided to charge the cost of the assets to operations over their estimated useful
lives based on their usage as follows:
Asset
Basis
Land improvements
Buildings
Computer software
Yard equipment
Automotive equipment
Computer equipment
Office equipment
Leasehold improvements
Declining balance
Straight-line
Straight-line
Declining balance
Declining balance
Straight-line
Declining balance
Straight-line
Rate / term
10%
15 - 30 years
3 - 5 years
20 - 30%
30%
3 - 5 years
20%
terms of leases
No depreciation is provided on freehold land or on assets in the course of construction or development.
61 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(i) Property, plant and equipment (continued):
Property, plant and equipment
is reviewed for
impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable. Where assets
are to be taken out of use, an impairment charge is levied. Where assets’ useful lives are changed, an
estimate is made of their new lives and the depreciation is charged at the new rate.
At the end of each reporting period, the Company reviews the carrying amounts of property, plant
and equipment to determine whether depreciation policies and useful lives remain appropriate and
also if there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the cash-generating unit (“CGU”)
to which the asset belongs. CGUs are identified as the smallest group of assets that includes the asset
and generates cash inflows that are largely independent of the cash inflows from other assets or
groups of assets. The recoverable amount of the CGU is determined as the higher of fair value less
costs to sell and value in use. The value in use is calculated by applying a pre-tax discounted cash
flow modeling to management’s projection of future cash flows and any impairment is determined by
comparing the carrying value with the value in use. If the recoverable amount of an asset (or CGU) is
estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced
to its recoverable amount. An impairment loss is recognized immediately in earnings.
Legal obligations to retire and constructive obligations to restore property, plant and equipment and
assets under operating leases are recorded at management’s best estimate in the period in which
they are incurred, if a reasonable estimate can be made, with a corresponding increase in asset
carrying value. The liability is accreted to face value over the remaining estimated useful life of the
asset. The Company does not have any significant asset retirement obligations.
(j)
Investment property:
The Company’s investment property is held for capital appreciation, not for sale in the ordinary course
of business or for administrative purposes, and is carried at cost.
(k) Non-current assets held for sale:
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be
recovered primarily through sale rather than through continuing use, are classified as held for sale.
Immediately before classification as held for sale, the assets, or components of a disposal group, are
measured at carrying amount in accordance with the Company’s accounting policies. Thereafter the
assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost
to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining
assets and liabilities on a pro rata basis. Impairment losses on initial classification as held for sale and
subsequent gains or losses on re-measurement are recognized in earnings.
62 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(l)
Intangible assets:
Intangible assets have finite useful lives and are measured at cost less accumulated amortization and
accumulated impairment losses, except trade names and trademarks as they have indefinite useful
lives.
Amortization is recognized in net earnings on a straight-line basis over the estimated useful lives of
intangible assets from the date that they are available for use, since this most closely reflects the
expected pattern of consumption of the future economic benefits embodied in the asset. The
estimated useful lives are as follows:
Asset
Customer relationships
Non-compete agreements
Software assets
Basis
Straight-line
Straight-line
Straight-line
(m) Goodwill:
Rate / term
10 years
terms of agreements
3 - 5 years
Goodwill represents non-identifiable intangible assets acquired on business combinations. Goodwill is
not amortized and is tested for impairment at least annually, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. Goodwill acquired in a business
combination is allocated to the cash-generating unit (“CGU”), or the group of CGUs, that is expected
to benefit from the synergies of the combination. This allocation is subject to an operating segment
ceiling test and reflects the lowest level at which that goodwill
is monitored for internal reporting
purposes. The impairment test compares the carrying amount of the goodwill against its implied fair
value. To the extent that the carrying amount of goodwill exceeds its fair value, an impairment loss is
charged against earnings.
(n) Share-based payments:
The Company has a stock-based compensation plan, which is described in the share-based payment
note. The Company uses a fair value method to account for employee share-based compensation;
cost attributable to options granted to employees is measured at the fair value of the underlying
option at the grant date using the Black-Scholes option pricing model. Details regarding this
determination are described in note 23. Compensation expense is recognized over the period in which
the service conditions are fulfilled with a corresponding increase to equity, ending on the date the
employees become fully entitled to the award. At the end of each reporting period, the Company
revises its estimate of the number of equity instruments expected to vest. The impact of the revision
of the original estimates, if any, is recognized in earnings such that the cumulative expense reflects
the revised estimate, with a corresponding adjustment to equity.
(o) Taxes:
Income tax expense represents the sum of current tax expense and deferred tax expense.
63 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(o) Taxes (continued):
(i) Current tax:
The current tax expense is based on taxable profit for the period and includes any adjustments to tax
payable in respect of previous years. Taxable profit differs from earnings before income taxes as
reported in the consolidated income statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Company’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
(ii) Deferred tax:
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet
liability method. Deferred tax liabilities are generally
recognized for all taxable temporary differences and deferred tax assets are generally recognized for
all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such assets and
liabilities are not recognized if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor earnings before income taxes.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments
in subsidiaries except where the Company is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments
and interests are only recognized to the extent that it is probable that there will be sufficient taxable
profits against which to utilize the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which
they can be utilized. The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the balance sheet date. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
Company expects, at the reporting date, to recover or settle the carrying amount of its assets and
liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income taxes levied by the
same taxation authority and the Company intends to settle its current tax assets and liabilities on a
net basis.
64 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
2. Significant accounting policies (continued):
(o) Taxes (continued):
(iii) Current and deferred tax for the period:
Current and deferred tax are recognized as an expense or income in earnings, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognized directly
in equity, or where they arise from the initial accounting for a business combination.
(p) Net earnings per share:
Net earnings per share has been calculated based on the weighted average number of common
shares outstanding. Diluted net earnings per share has been calculated after giving effect to
outstanding dilutive options calculated by adjusting the earnings attributable to shareholders and the
weighted average number of shares outstanding for all dilutive shares.
(q) New and amended accounting standards:
At the date of authorization of these financial statements, the following applicable standards and
interpretations were issued but not yet effective:
In 2009, the IASB issued the first part of IFRS 9 Financial Instruments. This standard is
anticipated to be effective for periods starting on or after January 1, 2015. The Company is
currently evaluating the impact of this new standard on its consolidated financial statements.
In May 2011, the IASB issued new standards addressing scope of reporting entity. IFRS 10
Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests
in Other Entities. These new standards are effective for years beginning on or after January 1,
2013 with early adoption permitted under certain circumstances. The IASB also renamed IAS 27
as Separate Financial Statements, to reflect that the content now only deals with such, and
revised and reissued IAS 28 Investments in Associates and Joint Ventures to align with the new
consolidation guidance. The Company is currently evaluating the impact of these new standards
on its consolidated financial statements.
In May 2011, the IASB also issued IFRS 13 Fair Value Measurement intended to provide a single
source of guidance on how to measure fair value where it is already required or permitted by
another IFRS, enhancing disclosure requirements for information about fair value measurements.
This new standard is effective for years beginning on or after January 1, 2013. The Company is
currently evaluating the impact of this new standard on its consolidated financial statements.
The IASB has a number of other projects outstanding that will result in exposure drafts and
eventually new standards issued. However, the timing and outcome of these projects are too
uncertain to list here.
65 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
3. Critical accounting estimates and judgments:
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies and assumptions. Estimates and judgments are continually evaluated and
are based on historical experience and other factors including expectations of future events that are
believed to be reasonable under the circumstances.
Key sources of estimation uncertainty are the areas where assumptions and estimates have a significant
risk of causing a material adjustment to the carrying amount of assets and liabilities. These include
valuation of cash-generating units (CGUs); valuation of at risk business contracts including inventory held
at the period end and commitments under guarantee; valuation and recognition of
income taxes;
depreciation and amortization methods and the calculation of share-based payments. The methods of
calculating these estimates are discussed elsewhere in these consolidated financial statements. Actual
results may differ from these estimates.
Critical
judgments that have a higher degree of
judgment and the most significant effect on the
Company’s financial
reporting, apart
from those involving estimates (discussed above),
include:
determination of operating segments and identification of cash-generating units.
4. Segmented information:
The Company’s principal business activity is the sale of industrial equipment and other assets at auctions.
This business represents a single reportable segment.
The Company determines its activities by geographic segment based on the location of its auctions.
Summarized information by geographic segment is as follows:
Year ended December 31, 2012:
Auction revenues
Property, plant and
equipment, investment
property, intangible
assets and goodwill
Liabilities
Year ended December 31, 2011:
Auction revenues
Property, plant and
equipment, investment
property, intangible
assets and goodwill
Liabilities
United
States
Canada
Europe
Other
Combined
$
211,160 $
124,392 $
60,572 $
41,831 $
437,955
407,078
(150,298)
172,942
(272,354)
106,073
(33,298)
86,303
(20,017)
772,396
(475,967)
$
195,274 $
100,404 $
51,403 $
49,018 $
396,099
352,463
(111,591)
168,924
(182,495)
105,086
(30,479)
71,707
(24,770)
698,180
(349,335)
66 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
5. Auction revenues:
Year ended December 31,
Auction commissions
Auction fees
$
$
Net profits on inventory sales included in auction commissions are:
Year ended December 31,
Revenue from inventory sales
Cost of inventory sold
$
$
2012
351,017
86,938
437,955
$
$
2012
795,396
(749,160)
46,236
$
$
2011
342,774
53,325
396,099
2011
820,312
(763,121)
57,191
6. Expenses by nature:
The Company classifies expenses according to function in the consolidated income statements. The
following items are listed by function into additional components by nature:
Direct expenses:
Year ended December 31,
Employee compensation expense
Travel, advertising and promotion
Other direct expenses
Selling, general and administrative expenses:
Year ended December 31,
Employee compensation expense
Buildings and facilities
Travel, advertising and promotion
Other general and administrative expenses
Depreciation of property, plant and equipment
Amortization of intangible assets
2012
19,209
19,613
10,865
49,687
2012
145,479
39,312
18,754
23,546
227,091
39,177
1,961
268,229
$
$
$
$
$
$
$
$
$
$
2011
17,574
19,407
11,063
48,044
2011
127,780
38,723
15,485
19,947
201,935
42,408
-
244,343
67 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
6.
Expenses by nature (continued):
(a) Employee compensation expense:
Year ended December 31,
2012
2011
Wages, salaries and other benefits
Annual leave and other short-term compensated absences
Social security costs
Pension costs – defined contribution plans
Employee share purchase plan contributions
Share based payment expense
Profit-sharing and bonuses
$
$
127,115
376
9,906
2,883
1,279
4,303
18,826
164,688
$
$
113,850
500
8,877
2,195
1,203
3,875
14,854
145,354
(b) Defined contribution plans:
The employees of the Company are members of retirement benefit plans to which the Company
matches up to a specified percentage of employee contributions or,
in certain jurisdictions,
contributes a specified percentage of payroll costs as mandated by the local authorities. The only
obligation of the Company with respect to the retirement benefit plans is to make the specified
contributions.
During the year, a total expense of $2,883,000 (2011: $2,195,000) was recognized in earnings,
representing Company contributions to these defined contribution plans at rates specified in the terms
of the plans.
7. Finance income and costs:
The finance income and costs for the Company are disaggregated as follows:
Years ended December 31,
2012
2011
Finance income:
Interest income on short-term bank deposits
Other interest income
Finance costs:
Interest on borrowings
Other interest expense
$
$
$
$
781
1,639
2,420
6,570
290
6,860
$
$
$
$
734
1,592
2,326
5,382
159
5,541
68 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
8.
Income taxes:
(a) Income tax recognized in earnings:
Year ended December 31,
2012
2011
Current tax expense:
Current period
Adjustments recognized in the current year in relation
to the current tax of prior years
Deferred tax expense (recovery):
Origination and reversal of temporary differences
Adjustments recognized in the current year in relation
to the deferred tax of prior years
Change in unrecognized deferred tax assets:
Deferred income tax assets previously unrecognized
used to reduce current tax
Deferred income tax assets previously unrecognized
used to reduce deferred tax
Other changes in unrecognized deferred income
tax assets
Total income tax expense
$
$
$
$
$
29,564
$
27,550
807
30,371
1,194
(538)
$
$
(104)
(847)
2,393
2,098
32,469
$
$
(1,454)
26,096
(1,078)
1,744
494
-
4,126
5,286
31,382
The expense for the year can be reconciled to earnings before income taxes as follows:
Year ended December 31,
2012
2011
Earnings before income taxes
Statutory federal and state tax rate in the United States
Expected income tax expense
Non-deductible expenses
Change in unrecognized deferred income tax assets
Different tax rates of subisidaries operating in foreign
$
$
jurisdictions
Other
$
$
112,015
38.50%
43,126
3,184
1,443
(19,025)
3,741
$
32,469
$
108,015
38.50%
41,586
2,715
4,620
(17,967)
428
31,382
(b) Income tax recognized directly in equity:
Year ended December 31,
2012
2011
Current tax:
Excess tax deductions related to share-based compensation
$
(175) $
(1,485)
Deferred tax:
Arising on income and expenses taken directly to equity:
Translation of net investments of foreign operations
Arising on transactions with equity participants:
Share-based compensation
97
(338)
(416) $
(155)
1,428
(212)
$
69 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
8.
Income taxes (continued):
(c) Deferred tax balances:
As at December 31,2012
Opening
Balance
Net
Income
Equity
Acquisitions
/ Disposals
Other
Comprehensive
Income
Recognized in
$
Working capital
Property, plant and
equipment
Goodwill
Intangible assets
Unused tax losses
Share-based compensation
Other
$
1,087
(12,273)
(10,081)
-
1,866
1,589
(1,340)
311
1,465
(1,076)
(264)
(21)
(1,151)
(1,362)
$
- $
-
-
-
338
-
17 $
1,018
-
(6,387)
7,239
-
-
8
(223)
(23)
(3)
(299)
-
379
$
Closing
Balance
1,423
(10,013)
(11,180)
(6,654)
8,785
776
(2,323)
$ (19,152) $ (2,098) $
338
$
1,887 $
(161) $ (19,186)
As at December 31,2011
Opening
Balance
Net
Income
Equity
Acquisitions
/ Disposals
Recognized in
Working capital
Property, plant and
equipment
Goodwill
Unused tax losses
Share-based compensation
Other
$
210
(11,030)
(9,044)
5,131
3,318
(1,453)
$
864
(1,386)
(1,054)
(3,236)
(301)
(173)
$
- $
-
-
-
(1,428)
-
$ (12,868) $ (5,286) $ (1,428) $
Other
Comprehensive
Income
Closing
Balance
- $
-
-
-
-
-
- $
13
143
17
(29)
286
430
$
1,087
(12,273)
(10,081)
1,866
1,589
(1,340)
$ (19,152)
-
As at December 31,
2012
2011
2012
2011
2012
2011
Assets
Liabilities
Net
Working capital
Property, plant and
equipment
Goodwill
Intangible assets
Unused tax losses
Share-based compensation
Other
Netting of tax assets and
$
1,423 $
1,087 $
- $
- $
1,423 $
1,087
682
-
-
8,785
776
2,766
669
-
-
1,866
1,589
1,663
(10,695)
(11,180)
(6,654)
-
-
(5,089)
(12,942)
(10,081)
-
-
-
(3,003)
(10,013)
(11,180)
(6,654)
8,785
776
(2,323)
(12,273)
(10,081)
-
1,866
1,589
(1,340)
liabilities
(13,138)
(5,425)
13,138
5,425
-
-
$
1,294 $
1,449 $
(20,480) $
(20,601) $
(19,186) $
(19,152)
70 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
8.
Income taxes (continued):
(c) Deferred tax balances (continued):
Deferred tax assets have not been recognized at the balance sheet date for the following:
As at December 31,
Tax losses that expire in less than one year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
5 years and later, including those with no expiry ~
Total tax losses and temporary differences
$
$
2012
- $
226
786
1,484
35,936
38,432
$
2011
12
87
329
1,173
32,499
34,100
~ As at December 31,2012 balances that do not expire include deductible temporary differences of
$4,501,000 (December 31, 2011: $2,387,000).
Earnings retained by subsidiaries and equity-accounted investments amount to approximately $414
million (2011: $381 million). The Company accrues withholding and other taxes that would become
payable on the distribution of these earnings only to the extent that either the Company does not control
the relevant entity or it is expected that these earnings will be remitted in the foreseeable future.
9. Net earnings per share:
Year ended December 31, 2012
Basic net earnings per share
Effect of dilutive securities:
Stock options
Diluted net earnings per share
Year ended December 31, 2011
Basic net earnings per share
Effect of dilutive securities:
Stock options
Diluted net earnings per share
Net
earnings
Shares
Per share
amount
79,546
106,469,665
$
0.75
-
454,187
(0.01)
79,546
106,923,852
$
0.74
Net
earnings
Shares
Per share
amount
76,633
106,164,237
$
0.72
-
819,520
-
76,633
106,983,757
$
0.72
$
$
$
$
For the year ended December 31, 2012, stock options to purchase 2,108,024 common shares were
outstanding but were excluded from the calculation of diluted earnings per share as they were anti-dilutive
(2011: 884,811).
71 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
10. Trade and other receivables:
As at December 31,
2012
2011
Trade receivables
Consumption taxes receivable
Other receivables
$
$
46,385 $
27,565
2,116
76,066 $
33,139
26,157
1,684
60,980
Trade receivables are secured by the equipment that they relate to as it is Company policy that equipment
is not released until payment has been collected. Trade receivables are due for settlement within seven
days of the date of sale, after which they are interest bearing. Other receivables are unsecured and non-
interest bearing.
As at December 31, 2012, trade receivables of $46,385,000 are more than seven days past due but not
considered impaired (December 31, 2011: $33,139,000). As at December 31, 2012 there are $2,724,000
of impaired receivables that have been provided for in the balance sheet because they are over six months
old or specific situations where recovering the debt
is considered unlikely (December 31, 2011:
$2,653,000).
Consumption taxes receivable are deemed fully recoverable unless disputed by the relevant tax authority
at which point they are written off as appropriate. The other classes within trade and other receivables do
not contain impaired assets.
11. Inventory:
Every period end inventory is reviewed to ensure that it is recorded at the lower of cost and net realizable
value. As at December 31, 2012 a write-down of $160,000 (December 31, 2011: $469,000) was
recorded.
Of inventory held at December 31, 2012, 72% is expected to be sold prior to the end of March 2013, with
the remainder to be sold by the end of December 2013 (December 31, 2011: 99% sold prior to the end of
March 2012, with the remainder sold in April 2012). During the year ended December 31, 2012,
inventory was held for an average of approximately 29 days (2011: 21 days).
12. Prepaid expenses and deposits:
Year ended December 31,
Prepaid expenses
Refundable deposits
2012
8,559 $
6,322
14,881 $
$
$
2011
6,378
3,545
9,923
72 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
13. Assets held for sale:
Balance, December 31, 2011
Reclassified from property, plant and equipment
Impairment loss
Other
Balance, December 31, 2012
$
$
-
3,127
(2,172)
3
958
At December 31, 2012, the Company held land and buildings for sale relating to a former permanent
auction site in North Carolina, USA. During the year ended December 31, 2012, the Company recognized
an impairment loss on that site. The impairment loss has been recognized through other expense in the
consolidated income statement.
73 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
14. Property, plant and equipment:
Land and
improvements
Buildings
Land, buildings
and leasehold
improvements
under
development
Yard and
automotive
equipment
Computer
software
and
equipment
Computer
software and
equipment
under
development
Office
equipment
Leasehold
improvements
Cost:
Balance, December 31, 2010
$
338,270 $
258,091 $
15,303 $
54,530 $
67,508 $
1,788 $
20,308 $
12,934 $
Additions ~
Disposals
Transfers from property under
development to completed assets
Foreign exchange movement
2,007
(2,857)
5,169
(2,652)
277
(155)
700
(2,604)
55,953
-
(9,367)
(11)
8,971
(7,395)
719
(822)
894
(154)
8,042
(1,715)
9,918
(224)
(8,042)
(56)
460
(315)
206
(359)
97
(204)
2,573
(221)
Total
768,732
78,577
(11,304)
-
(8,440)
Balance, December 31, 2011
$
339,937 $
256,309 $
61,878 $
56,003 $
74,575 $
3,384 $
20,300 $
15,179 $
827,565
Acquisitions from business
combination (note 24)
Additions ~
Disposals *
Transfers from property under
development to completed assets
Reclassified as held for sale *
Foreign exchange movement
-
100
-
347
(3,293)
(3,592)
26,707
(1,518)
(302)
24,404
(3,105)
1,681
-
37,050
(28)
(56,036)
-
252
-
10,147
(6,694)
2,203
-
723
187
225
(3,304)
6,192
-
1,987
26
9,837
-
(5,975)
-
160
113
718
(331)
1,839
-
263
1
283
(90)
666
-
141
327
58,707
(17,332)
-
(4,623)
4,905
Balance, December 31, 2012
$
361,631 $
276,044 $
43,116 $
62,382 $
79,862 $
7,432 $
22,902 $
16,180 $
869,549
~ During the year ended December 31, 2012, the cost of additions was adjusted by $1,095,000 in relation to tax credits (2011: $1,937,000).
* At March 31, 2012, assets with a cost of $6,582,000 and accumulated depreciation of $2,108,000 relating to the former permanent auction site in Washington, USA,
were reclassified as held for sale. Those assets were sold by June 30, 2012 and are included in the disposal totals per the above table.
74 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
14. Property, plant and equipment (continued):
Land and
improvements
Buildings
Land, buildings
and leasehold
improvements
under
development
Yard and
automotive
equipment
Computer
software
and
equipment
Computer
software and
equipment
under
development
Office
equipment
Leasehold
improvements
Total
Accumulated depreciation:
Balance, December 31, 2010
$
(24,592) $
(48,797) $
- $
(26,648) $
(37,321) $
- $
(9,001) $
(3,389) $
(149,748)
Depreciation for the year
Disposals
Foreign exchange movement
(7,341)
(9,256)
72
331
72
618
-
-
-
(7,876)
(14,090)
4,782
411
706
1,228
-
-
-
(2,383)
(1,462)
(42,408)
228
197
201
78
6,061
2,863
Balance, December 31, 2011
$
(31,530) $
(57,363) $
- $
(29,331) $
(49,477) $
- $
(10,959) $
(4,572) $
(183,232)
Depreciation for the year
(7,136)
(9,703)
366
150
(621)
1,748
1,346
(694)
-
-
-
-
(8,212)
(10,218)
4,476
-
(458)
3,303
-
(1,332)
-
-
-
-
(2,241)
(1,667)
(39,177)
274
-
(64)
57
-
(14)
10,224
1,496
(3,183)
(38,771) $
(64,666) $
- $
(33,525) $
(57,724) $
- $
(12,990) $
(6,196) $
(213,872)
308,407 $
198,946 $
61,878 $
26,672 $
25,098 $
3,384 $
9,341 $
10,607 $
644,333
322,860 $
211,378 $
43,116 $
28,857 $
22,138 $
7,432 $
9,912 $
9,984 $
655,677
Disposals *
Reclassified as held for sale *
Foreign exchange movement
Balance, December 31, 2012
Net carrying amount:
As at December 31, 2011
As at December 31, 2012
$
$
$
During the year ended December 31, 2012, interest of $1,948,000 (2011: $1,171,000) was capitalized to the cost of assets under development. These interest costs
relating to qualifying assets are capitalized at a weighted average rate of 4.99% (2011: 3.96%).
75 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
15. Investment property:
Balance, December 31, 2010
Foreign exchange movement
Balance, December 31, 2011
Disposal
Foreign exchange movement
Balance, December 31, 2012
$
$
$
8,246
(356)
7,890
(1,302)
314
6,902
Investment property held at the balance sheet date is comprised of land and site improvements which are
non-depreciated asset categories. The fair value of investment property as at December 31, 2012 was
approximately $36 million (December 31, 2011: $36 million). The fair value of the Company’s investment
property has been arrived at on the basis of a valuation carried out on December 31, 2012 by local real estate
agents not related to the Company. These agents are members of appropriate real estate associations for their
jurisdiction, and have the appropriate recent experience in the valuation of properties in the relevant locations.
The valuation was arrived at by reference to market evidence of recent transaction prices for similar
properties.
At September 30, 2012, land with a cost of $1,302,000 relating to investment property in Alberta, Canada,
was reclassified as held for sale. That land was sold by December 31, 2012.
16. Loan receivable:
The loan receivable is a secured promissory note of $5,300,000 repayable by the debtor in monthly
instalments with the final payment due February 28, 2014. The note is secured by a first-ranking deed of trust
registered against the property owned by the debtor and leased to the Company. The note bears interest at a
fixed rate of 6.00% per annum and can be repaid early without penalty.
17. Intangible assets:
Trade names
and trademarks
Non-compete
agreements
Customer
relationships
Software ~
Total
Cost:
Balance, December 31, 2011 $
Acquisitions from business
combination (note 24)
Additions
-
$
-
$
-
$
-
$
-
800
-
97
-
19,500
-
3,501
3,633
23,898
3,633
Balance, December 31, 2012 $
800 $
97 $
19,500 $
7,134 $
27,531
76 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
17. Intangible assets (continued):
Trade names
and trademarks
Non-compete
agreements
Customer
relationships
Software ~
Total
- $
-
-
$
- $
(39)
- $
(1,219)
- $
(703)
-
(1,961)
(39) $
(1,219) $
(703) $
(1,961)
Accumulated amortization:
Balance, December 31, 2011 $
Amortization for the period
Balance, December 31, 2012
$
Net carrying amount:
As at December 31,2011
As at December 31,2012
$
$
- $
800 $
- $
58 $
- $
- $
-
18,281 $
6,431 $
25,570
~ The carrying value of software assets under development included within software assets at December 31,
2012 is $3,562,000 (2011: nil).
18. Goodwill:
Cost:
Balance, December 31, 2010
Foreign exchange movement
Balance, December 31, 2011
Additions (note 24)
Foreign exchange movement
Balance, December 31, 2012
$
$
$
46,254
(297)
45,957
37,931
359
84,247
Goodwill is subject to annual impairment reviews. Goodwill is attributed to the Company’s CGUs or groups of
CGUs and the recoverable amount of each CGU or group of CGUs is determined based on calculating its value
in use. This is calculated by applying discounted cash flow modeling to management’s own projections,
adjusted to remove the effect of future capital expenditures, covering a five year period. Management’s five
year projections have been prepared on the basis of historical results, strategic plans, knowledge of the
market and management’s views on achievable growth in market share over the longer term. Cash flows
beyond the five year period are extrapolated using a long term growth rate estimated to be 2%. A weighted
average pre-tax discount rate of 12% is used, which is the Company’s discount rate with a risk premium
reflecting the relative risks in the markets in which the CGU’s with goodwill operate. The value in use is
compared to the carrying amount in order to determine whether impairment has occurred.
The carrying value of goodwill has been allocated for impairment testing purposes to the following CGU or
group of CGUs:
As at December 31,
USA Auction CGU
USA AssetNation CGU
Canada Auction CGU
There has been no impairment of goodwill.
2012
$
33,326
37,930
12,991
84,247
$
2011
33,326
-
12,631
45,957
$
$
77 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
18. Goodwill (continued):
A sensitivity analysis has been performed on the base case assumptions used for assessing goodwill.
Management has concluded that there are no reasonably possible changes in key assumptions which would
cause the carrying amount of any component of goodwill to exceed its value in use in the foreseeable future.
19. Trade and other payables:
As at December 31,
2012
2011
Trade payables
Accrued liabilities
Social security and sales taxes payable
Net consumption taxes payable
Other payables
$
$
$
34,086
41,333
21,223
9,884
11,240
22,168
40,637
21,490
7,422
9,151
117,766
$
100,868
Trade payables are normally settled on 30 day terms and accrued liabilities have an average term of two
months. All current trade and other payables are interest-free and payable within 12 months.
78 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
20. Borrowings:
As at December 31,
Current Borrowings
Non-current Borrowings
Term loan, denominated in Canadian dollars, unsecured,
bearing interest at 4.225%, due in quarterly installments of
interest only, with the full amount of the principal due in
May 2022.
Term loan, denominated in United States dollars, unsecured,
bearing interest at 3.59%, due in quarterly installments of
interest only, with the full amount of the principal due in
May 2022.
Term loan, denominated in Canadian dollars, unsecured,
bearing interest at 6.385%, due in quarterly installments of
interest only, with the full amount of the principal due in
May 2016.
Revolving loan, denominated in Canadian dollars, unsecured,
bearing interest at Canadian bankers' acceptance rate plus a
margin between 0.65% and 1.00%, due in monthly
installments of interest only. The revolving credit facility is
available until January 2014.
Term loan, denominated in United States dollars, unsecured,
bearing interest at a base rate of 1.65% plus a margin
between 0.65% and 1.00%, due in quarterly installments of
interest only, with the full amount of the principal due in
July 2013, which the Company intends to refinance on a
long-term basis by drawing on its available committed credit
facilities.
Term loan, denominated in United States dollars, unsecured,
bearing interest at a base rate of 1.16% plus a margin
between 0.65% and 1.00%, due in quarterly installments of
interest only, with the full amount of the principal due in
January 2013, which the Company intends to refinance on a
long-term basis by drawing on its available committed credit
facilities.
Total Borrowings
Carrying value
2012
$
39,480 $
2011
12,595
$
34,248 $
30,000
-
-
60,327
58,627
31,171
30,254
15,000
15,000
30,000
200,746 $
240,226 $
$
$
30,000
133,881
146,476
Current borrowings at December 31, 2012 are comprised of drawings in different currencies on the Company’s
committed revolving credit facility, and have a weighted average interest rate of 3.01% (December 31, 2011:
2.48%).
79 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
20. Borrowings (continued):
As at December 31, 2012, principal repayments for the remaining period to the contractual maturity dates are
as follows:
2013
2014
2015
2016
2017
Thereafter
Face value
84,480
31,226
-
60,438
-
64,248
240,392
$
$
As at December 31, 2012, the Company had available committed revolving credit facilities aggregating
$118,848,000, of which $108,848,000 is available until January 2014. The Company also had uncommitted
credit facilities aggregating $194,146,000, of which $100,314,000 expires November 2014.
In 2011, the
Company entered into a committed seasonal bulge credit facility of $50 million, which is available in February,
March, August and September until January 2014. This bulge credit facility is not included in the available
credit facilities totals above as at December 31, 2012.
Subsequent to December 31, 2012, the Company refinanced the $30 million unsecured term loan that fell due
by borrowing $30 million of term debt under its committed, revolving credit facility. The refinanced loan is
denominated in United States dollars, unsecured, bears interest at a base rate of 0.48% plus a margin
between 0.65% and 1.00%, and is due in quarterly installments of interest only, with the full amount of the
principal due in January 2014.
21. Dividends paid and proposed:
(a) Declared and paid:
Year ended December 31,
2012
2011
Dividends on common shares expressed in cents per share:
Final dividend for 2011: 11.25 (2010: 10.5)
Interim (first quarter) dividend for 2012: 11.25 (2011: 10.5)
Interim (second quarter) dividend for 2012: 12.25 (2011: 11.25)
Interim (third quarter) dividend for 2012: 12.25 (2011: 11.25)
$
$
11,969 $
11,973
13,047
13,053
50,042 $
11,109
11,149
11,962
11,963
46,183
(b) Declared and undistributed:
In addition to the above dividends, since the end of the year the Directors have recommended the
payment of a final dividend of 12.25 cents per share (2011: 11.25 cents per share), accumulating to a
total dividend of $13,063,000 (2011: $11,969,000). The aggregate amount of the proposed final dividend
is expected to be paid on March 8, 2013 out of retained earnings. This dividend payable has not been
recognized as a liability in the financial statements. The payment of this dividend will not have any tax
consequence for the Company.
80 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
22. Share capital:
(a) Authorized:
Unlimited number of common shares, without par value.
Unlimited number of senior preferred shares, without par value, issuable in series.
Unlimited number of junior preferred shares, without par value, issuable in series.
(b) Issued:
All issued shares are fully paid. No preferred shares have been issued.
23. Share-based payments:
(a) Stock option plan:
The Company has a stock option plan that provides for the award of stock options to selected employees,
directors and officers of the Company and to other persons approved by the Board of Directors. Stock
options are granted at the fair market value of the Company’s common shares at the grant date, with
vesting periods ranging from immediate to five years and a term not exceeding 10 years. At December
31, 2012, there were 4,114,036 (2011: 4,856,892) shares authorized and available for grants of options
under the stock option plan.
Stock option activity for the year ended December 31, 2012 and 2011 is presented below:
December 31, 2012
December 31, 2011
Common
Weighted
Common
Shares Under
Average
Shares Under
Weighted
Average
Option
Exercise Price
Option
Exercise Price
Outstanding, beginning of period
Granted
Exercised
Cancelled
Outstanding, end of period
3,008,169
828,344
(210,472)
(85,544)
3,540,497
Exercisable, end of period
2,413,937
$
$
$
18.97
22.71
10.56
22.30
20.27
3,234,776
517,460
(738,304)
(5,763)
3,008,169
18.94
2,080,095
$
$
$
16.57
25.73
13.17
22.37
18.97
17.42
The options outstanding at December 31, 2012 expire on dates ranging to July 3, 2022. The weighted
average share price of options exercised during the year ended December 31, 2012 was $21.53 (2011:
$26.19).
81
RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
23. Share-based payments (continued):
(a) Stock option plan (continued):
The following is a summary of stock options outstanding and exercisable at December 31, 2012:
Options Outstanding
Options Exercisable
Weighted
Weighted
Average
Remaining
Life (years)
Average
Exercise
Price
0.1
1.7
5.4
5.8
8.3
6.9
6.7
$
$
5.18
10.05
14.54
19.07
22.71
25.26
20.27
Number
8,994
130,200
897,651
454,272
1,200,013
849,367
3,540,497
Weighted
Average
Exercise
Price
$
$
5.18
10.05
14.54
18.68
21.84
25.07
18.94
Number
8,994
130,200
885,251
311,478
418,842
659,172
2,413,937
Range of
Exercise Prices
$
$
$
$
$
$
5.18
8.82 - $
14.23 - $
18.67 - $
21.66 - $
24.39 - $
10.80
14.70
19.95
23.44
25.91
(b) Share-based compensation:
During the year ended December 31, 2012, the Company recognized compensation cost of $4,303,000
(2011: $3,875,000) in respect of options granted under its stock option plan. This amount was calculated
in accordance with the fair value method of accounting.
The fair value of the stock option grants was estimated on the date of the grant using the Black-Scholes
option pricing model with the following assumptions:
Risk free interest rate
Expected dividend yield
Expected lives of options
Expected volatility
2012
1.1%
1.99%
5 years
35.4%
2011
2.5%
1.64%
5 years
34.9%
Risk free interest rate is the US Treasury Department five year treasury yield curve rate on the date of the
grant. Expected dividend yield assumes a continuation of the most recent dividend payment for the
coming quarterly dividends. Expected lives of options is based on the age of the options on the exercise
date over the past five years. Expected volatility is based on the historical share price volatility over the
past five years.
The weighted average grant date fair value of options granted during the year ended December 31, 2012
was $6.25 per option (2011: $7.69). The fair value method requires that this amount be amortized over
the relevant vesting periods of the underlying options.
(c) Other share-based payment:
The Company has an employee share purchase plan that allows all employees that have completed one
year of service to contribute funds to purchase common shares at the current market value at the time of
share purchase. Employees may contribute up to 4% of their salary. The Company will match between
50% and 100% of the employee’s contributions, depending on the employee’s length of service with the
Company.
82 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
23. Share-based payments (continued):
(c) Other share-based payment (continued):
The Company has an Executive Long Term Incentive Plan (“ELTIP”) available to the Company's executives
and certain other members of senior management, to facilitate their direct investment in and ownership of
common shares of the Company.
The maximum ELTIP award available to participants ranges from
$50,000 to $125,000 and is only paid by the Company when a participant contributes an equivalent
amount to the ELTIP, which amount is invested by the ELTIP administrator in common shares purchased
in the open market on the NYSE. Award entitlement may be carried forward for one year should a
participant choose not to contribute to the ELTIP in a particular year; any unused entitlement expires after
one year. Participants generally may not withdraw shares from the ELTIP until retirement.
The Company also has a Long Term Incentive Plan for Non-Executive Directors (“LTIP”), to facilitate their
direct investment in and ownership of common shares of the Company. A designated portion of each non-
executive director’s annual fee is paid into the LTIP: $144,000 for the Board Chairman and $60,000 for
each of the Board Members.
These funds are invested by the LTIP administrator in open market
purchases of common shares of the Company. Participants may not withdraw shares from the LTIP until
retirement.
24. Business combination:
(a) Summary of acquisition:
On May 15, 2012, the Company gained control of AssetNation LLC and its subsidiaries (the “AN Group”) by
acquiring 100% of the issued shares of AssetNation LLC and its subsidiaries; listed as follows:
C ountry of
incorporation
Proportion of
ownership
interest
Principal activity
Name of subsidiary
AssetNation, Inc.
Spindletop Group, LLC
USA
USA
SalvageSale Services, Inc.
SalvageSale Mexico Holding LLC
SalvageSale Limited
SalvageSale De Mexico S. de R.L. de C .V.
SalvageSale Servicios, S. de R.L. de C .V.
USA
USA
United Kingdom
Mexico
Mexico
100%
100%
100%
100%
100%
100%
100%
E-commerce marketplace
Development and marketing
company
Value-added services
Holding company
E-commerce marketplace
E-commerce marketplace
Administrative services
83 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
24. Business combination (continued):
(b) Purchase price allocation:
Details of the fair value of the net assets acquired and goodwill are as follows:
C ash and cash equivalents
Trade and other receivables
Prepaid expenses and deposits
Property, plant and equipment
Intangible assets
Deferred tax assets
Auction proceeds payable
Trade and other payables
Other current liabilities
Deferred tax liabilities
Fair value of net assets acquired
Goodwill acquired on acquisition
May 15, 2012
$
$
7,375
320
579
327
23,898
7,067
(7,031)
(2,564)
(60)
(5,180)
24,731
37,931
62,662
The main driver generating goodwill
is the Company’s ability to leverage the AN Group’s e-commerce
expertise and technology platform to enhance current business opportunities and develop and launch
unique new services for equipment owners.
There was no contingent consideration under the terms of the acquisition, and as such no acquisition
provisions were created.
During the three months ended December 31, 2012, acquired software assets of $3,501,000 were
reclassified from property, plant and equipment to intangible assets.
(c) Assets and liabilities acquired:
At the date of acquisition, the carrying values of the assets and liabilities acquired approximated their fair
values, except property, plant and equipment, intangible assets, and deferred income taxes, whose fair
values were determined using appropriate valuation techniques.
(d) Contributed revenue and net earnings:
The results of the AN Group’s operations are included in these consolidated financial statements from the
date of acquisition. The AN Group’s contribution to the Company’s auction revenues and net earnings for
the period from May 15, 2012 to December 31, 2012 was insignificant. Furthermore, if the acquisition had
occurred on January 1, 2012, there would have been an insignificant impact on the Company’s auction
revenues and net earnings.
(e) Acquisition-related costs:
Expenses totalling $2,129,000 for legal and related acquisition costs are included in the consolidated
income statement for the year ended December 31, 2012.
84 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
25. Commitments:
(a) Commitments for expenditure:
As at December 31, 2012, the Company had committed to, but not yet incurred, $2,902,000 in capital
expenditure for property, plant and equipment (2011: $7,097,000).
(b) Operating lease commitments – the Company as lessee:
The Company has entered into commercial leases for various auction sites and offices located in Canada,
the U.S.A., the Netherlands, Spain, Germany, the U.K., Portugal, China, Dubai, Mexico, and Panama. The
majority of these leases are non-cancellable. The Company also has further operating leases for certain
motor vehicles and small office equipment where it is not in the best interest of the Company to purchase
these assets.
The majority of the Company’s operating leases have a fixed term with a remaining life between one
month and 21 years with renewal terms included in the contracts. The leases have varying contract terms,
escalation clauses and renewal rights. There are no restrictions placed upon the lessee by entering into
these leases, other than restrictions on use of property, sub-letting and alterations. In certain leases there
are options to purchase; if the intention to take this option changes subsequent to the commencement of
the lease, the Company re-assesses the classification of the lease as operating.
The future aggregate minimum lease payments under non-cancellable operating leases, excluding
reimbursed costs to the lessor, are as follows:
As at December 31,
2012
2011
Not later than one year
Later than one year and no later than five years
Later than five years
$
$
9,734 $
31,912
96,162
137,808 $
9,230
29,448
104,067
142,745
As at December 31, 2012, the total future minimum sublease payments expected to be received under
non-cancellable subleases is $1,243,000 (December 31, 2011: $1,085,000). The lease expenditure
charged to earnings during the year ended December 31, 2012 was $15,948,000 (2011: $15,510,000).
(c) Operating lease commitments – the Company as lessor:
Company leases portions of its administrative offices in Canada and the U.S.A., as well as some of its
investment property in Canada. The majority of these operating leases are non-cancellable and have
fixed terms with remaining periods between six months and five years. The leases have varying contract
terms, escalation clauses and renewal rights. There are no restrictions placed upon the lessee by entering
into these leases, other than restrictions on use of property, sub-letting and alterations. The lessee does
not have an option to purchase the property at the expiry of the lease period.
85 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
25. Commitments (continued):
(c) Operating lease commitments – the Company as lessor (continued):
The future aggregate minimum lease payments under non-cancellable operating leases, excluding
reimbursed costs to the lessor, are as follows:
December 31,
2012
2011
Not later than one year
Later than one year and no later than five years
Later than five years
$
$
776
$
1,918
1,099
3,793
$
483
1,239
18
1,740
26. Contingencies:
(a) Legal and other claims:
The Company is subject to legal and other claims that arise in the ordinary course of its business. The
Company does not believe that the results of these claims will have a material effect on the Company’s
balance sheet or income statement.
(b) Guarantee contracts:
In the normal course of its business, the Company will in certain situations guarantee to a consignor a
minimum level of proceeds in connection with the sale at auction of that consignor’s equipment.
At December 31, 2012 there was $5,323,000 of industrial equipment guaranteed under contract, all of
which is expected to be sold prior to the end of March 2013 (December 31, 2011: $23,537,000 of which
76% sold prior to the end of March 2012, with the remainder sold in April 2012).
At December 31, 2012 there was $14,995,000 of agricultural equipment guaranteed under contract, of
which 94% is expected to be sold prior to the end of April 2013, with the remainder to be sold prior to the
end of June 2013 (December 31, 2011: $21,187,000 of which 79% sold prior to the end of April 2012,
with the remainder to be sold in June 2012).
The outstanding guarantee amounts are undiscounted and before estimated proceeds from sale at
auction.
27. Related party transactions:
There have been no guarantees provided or received for any related party receivables.
(a) Transactions with subsidiaries:
The names of the Company’s subsidiaries are set out in note 30.
There are no outstanding balances as at December 31, 2012 and 2011 as all significant inter-company
balances and transactions have been eliminated upon consolidation.
86 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
27. Related Party Transactions (continued):
(b) Transactions with key management personnel:
The Company’s key management personnel include the directors of the Company and Board appointed
officers.
Total aggregate compensation made to key management personnel of the Company is set out below:
Year ended December 31,
2012
2011
Short-term employee benefits
Post-employment benefits
Share-based payment
28. Capital risk management:
$
$
$
6,260
28
1,236
7,524
$
7,726
59
1,568
9,353
The Company’s objectives when managing its capital are to maintain a financial position suitable for providing
financial capacity and flexibility to meet its growth strategies, to provide an adequate return to shareholders,
and to return excess cash through the payment of dividends. The Company’s invested capital is defined as the
sum of shareholders’ equity and long-term borrowings.
The Company executes a planning and budgeting process to determine the funds required to ensure the
Company has appropriate liquidity to meets its operating and growth objectives. The Company ensures that
there are sufficient credit facilities to meet its current and future business requirements, taking into account its
anticipated cash flows from operations and its holding of cash and cash equivalents.
The Company complies with covenant criteria established by its lenders. These include tangible net worth and
leverage ratio measurements. As at December 31, 2012 and 2011, the Company is in compliance with these
covenants.
The Company is not subject to any statutory capital requirements, and has not made any changes with respect
to its overall capital management strategy during the years ended December 31, 2012 and 2011.
29. Financial instruments:
(a) Fair value:
The fair value of financial instruments traded in active markets is based on quoted market prices at the
balance sheet date. The quoted market price used for financial assets held by the Company is the current
bid price: the appropriate quoted market price for financial liabilities is the current ask price.
The fair value of financial
instruments that are not traded in an active market is determined using
valuation techniques. The Company uses a variety of methods and makes assumptions that are based on
market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar
instruments are used for non-current borrowings. Other techniques, such as estimated discounted cash
flows, are used to determine fair value for the remaining financial instruments, if any.
87 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
29. Financial instruments (continued):
(a) Fair Value (continued):
The carrying value of the Company’s trade and other current receivables, advances against auction
contracts, current portion of the loan receivable, auction proceeds payable, trade and other payables, and
current borrowings approximate their fair values due to their short terms to maturity. Based on this
methodology, the fair value of the non-current portion of its loan receivable as at December 31, 2012
approximates the carrying value of $4,797,000 (2011: $4,915,000). Based on this methodology, the fair
value of its non-current borrowings as at December 31, 2012 was approximately $203,199,000 (2011:
$139,633,000) as compared to the carrying value of $200,746,000 (2011: $133,881,000).
(b) Financial risk management:
The Company and its subsidiaries are exposed to a variety of financial risks by virtue of its activities,
including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Board of Directors has
overall responsibility for the oversight of the Company’s risk management.
(i) Foreign currency risk:
The Company operates internationally and is exposed to foreign currency risk, primarily relating to the
Canadian and U.S. dollars, and the Euro, arising from sales, purchases and loans that are denominated in
currencies other than the respective functional currencies of the Company’s international operations. The
Company also has various investments in non-U.S. dollar functional currency subsidiaries, whose net
assets are exposed to foreign currency translation risk. The Company has elected not to actively manage
this exposure at this time.
For the year ended December 31, 2012, with other variables unchanged, a 1.00% strengthening of the
U.S. dollar against the Canadian dollar and Euro would impact the Company’s financial statements as
follows:
decrease net earnings by approximately $209,000 (2011: increase by $13,000) due to the translation
of the foreign operations’ statements of operations into the Company’s reporting currency, the U.S.
dollar;
decrease net earnings by approximately $20,000 (2011: decrease by $94,000) due to the revaluation
of significant foreign currency denominated monetary items; and
decrease other
comprehensive income by approximately $2,730,000 (2011: decrease by
$3,010,000).
(ii) Interest rate risk:
The Company’s interest rate risk mainly arises from the interest rate impact on the Company’s cash and
cash equivalents and floating rate debt. Cash and cash equivalents earn interest based on market interest
rates. As at December 31, 2012 and 2011, the Company is not exposed to significant interest rate risk on
its cash and cash equivalents.
The Company’s interest rate management policy is generally to borrow at fixed rates. However, floating
rate funding has been used if the terms of borrowings are favourable. The Company will consider utilizing
derivative instruments such as interest rate swaps to minimize its exposure to interest rate risk. As at
December 31, 2012, approximately 15.26% (2011: 24.47%) of the Company’s borrowings are at floating
88 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
29. Financial instruments (continued):
(b) Financial risk management (continued):
(ii) Interest rate risk (continued):
rates of interest. The weighted average interest rate paid by the Company on its outstanding floating rate
borrowings during the year was 2.03% (2011: 1.97%).
During the year a portion of the Company’s interest was capitalized as it relates to the development of
various new and replacement auction sites as well as other capital expenditures. As a result, changes in
interest rates on these borrowings will have a smaller affect the Company’s net earnings or other
comprehensive income until such time as these developments are put into use and amortized. However,
cash outflows have the potential to be negatively impacted by increases in interest rates. For the year
ended
December 31, 2012, with other variables unchanged, a 100 basis points or 1.00% increase (decrease) in
interest rates would decrease (increase) net earnings by approximately $217,000 (2011: $108,000).
(iii) Credit risk:
Credit risk is the risk of financial loss to the Company arising from the non-performance by counterparties
of contractual financial obligations. The Company is not exposed to significant credit risk on accounts
receivable because it does not extend credit to buyers at its auctions, and it has a large diversified
customer base.
The Company is not exposed to significant credit risk on advances against auction contracts because it
limits the amounts advanced to a percentage of the Company’s estimated value of the assets to be sold.
In addition, assets purchased at the Company’s auctions are not normally released to the buyers until
they are paid in full. The Company’s maximum exposure to credit risk on accounts receivable and
advances against auction contracts at the reporting date is the carrying value of its accounts receivable
and advances against auction contracts, less those receivables relating to assets that have not been
released to the buyers.
The Company’s credit risk exposure on liquid financial assets, being cash and cash equivalents, is limited
since it maintains its cash and cash equivalents in a range of large financial institutions around the world.
The Company limits its credit risk on its note receivable by performing credit verification procedures prior
to the issuance of the note receivable. In addition, the note receivable is secured by the underlying
property and a neighbouring property, and is monitored on an ongoing basis. To date, the counterparty
has not failed to meet its financial obligations to the Company.
(iv) Liquidity risk:
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company manages its liquidity risk by maintaining adequate cash and cash equivalent balances,
generally by releasing payments to consignors only after receivables from buyers have been collected. The
Company also utilizes its established lines of credit (note 20) for short-term borrowings on an as-needed
basis. The Company continuously monitors and reviews both actual and forecast cash flows to ensure
there is sufficient working capital to satisfy its operating requirements.
89 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
30. Subsidiaries:
These consolidated financial statements include financial statements of Ritchie Bros. Auctioneers Incorporated
and the subsidiaries listed in the following table:
Name of subsidiary
Ritchie Bros. Holdings Inc.
Ritchie Bros. Holdings (America) Inc.
Ritchie Bros. Auctioneers (America) Inc.
Ritchie Bros. Properties Inc.
Ritchie Bros. Auctioneers (International)
Finance LLC
Ritchie Bros. Financial Services (America) Inc.
Ritchie Bros. Auctioneers Holdings Inc.
AssetNation, Inc.
Spindletop Group, LLC
SalvageSale Services, Inc.
SalvageSale Mexico Holding LLC
Ritchie Bros. Holdings Ltd.
Ritchie Bros. Auctioneers (Canada) Ltd.
Ritchie Bros. Real Estate Service Ltd.
Bridgeport Agencies Ltd.
Ritchie Bros. Properties Ltd.
Ritchie Bros. Financial Services Ltd.
Ritchie Bros. Auctioneers (International) Ltd.
Ritchie Bros. Auctioneers (Japan) Ltd.
Ritchie Bros. Holdings (Cyprus) Limited
Ritchie Bros. Auctioneers Limited
Ritchie Bros. Auctioneers (ME) Limited
Ritchie Bros. (Hungary) Kft.
Ritchie Bros. Auctioneers India Private Limited
Ritchie Bros. Holdings B.V.
Ritchie Bros. Auctioneers B.V.
Ritchie Bros. Shared Services B.V.
Ritchie Bros. Properties B.V.
Ritchie Bros. Technical Servies B.V.
Ritchie Bros. Auctioneers (Poland) Sp.z.o.o.
Ritchie Bros. Properties S.r.l.
Ritchie Bros. Auctioneers S.r.l.
Ritchie Bros. Auctioneers (Spain) S.L.
Ritchie Bros. Properties (Spain) S.L.
Ritchie Bros. Auctioneers (UK) Limited
SalvageSale Limited
Ritchie Bros. Auctioneers GmbH
Ritchie Bros. Auctioneers (Belgium) N.V.
SVV Ritchie Bros. Auctioneers France
Ritchie Bros. Services SARL
Ritchie Bros. Holdings SARL
Ritchie Bros. Properties EURL
Ritchie Bros. Holdings Pty Ltd.
Ritchie Bros. Auctioneers Pty Ltd.
Ritchie Bros. Properties Pty Ltd.
Country of
incorporation
United States of
America ("USA")
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Cyprus
Cyprus
Cyprus
Hungary
India
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
Poland
Italy
Italy
Spain
Spain
United Kingdom
United Kingdom
Germany
Belgium
France
France
France
France
Australia
Australia
Australia
Proportion of
ownership
interest
Principal activity
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Holding company
Holding company
Auction services
Property management
Holding company
Brokerage services
Holding company
E-commerce marketplace
Development and
marketing company
Value-added services
Holding company
Holding company
Auction services
Real estate auction
services
Asset management
Property management
Brokerage services
Holding company
Administrative services
Holding company
Holding company
Auction services
Holding company
Auction services
Holding company
Auction services
Administrative services
Property management
Administrative services
Auction services
Property management
Auction services
Auction services
Property management
Auction services
E-commerce marketplace
Auction services
Administrative services
Auction services
Administrative services
Holding company
Property management
Holding company
Auction services
Property management
90 RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to the Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
Years ended December 31, 2012 and 2011
30. Subsidiaries (continued):
Name of subsidiary
Ritchie Bros. Properties Japan K.K.
Ritchie Bros. Auctioneers (Japan) K.K.
Ritchie Bros. Auctioneers Pte Ltd.
Ritchie Bros. Auctioneers (Beijing) Co. Ltd.
Ritchie Auction (Beijing) Co. Ltd.
Ritchie Bros. Auctioneers Mexico Services, S.
de R.L. de C.V.
Ritchie Bros. Auctioneers de Mexico, S. de R.L.
de C.V.
Ritchie Bros. Properties, S. de R.L. de C.V.
SalvageSale De Mexico S. de R.L. de C.V.
SalvageSale Servicios, S. de R.L. de C.V.
Ritchie Bros. Auctioneers (Panama) S.A.
Ritchie Bros. Auctioneers Comercial de
Equipamentos Industriais Ltda
Ritchie Bros. Auctioneers Muzayede
Danismanlik ve Ticaret Limited Sirketi
Ritchie Bros. Auctioneers LLC (Russia)
Ritchie Bros. Holdings Luxembourg SARL
Ritchie Bros. Luxembourg SARL
Country of
incorporation
Proportion of
ownership
interest
Principal activity
Japan
Japan
Singapore
China
China
Mexico
Mexico
Mexico
Mexico
Mexico
Panama
Brazil
100%
100%
100%
100%
100%
Property management
Auction services
Auction services
Auction services
Auction services
100%
Administrative services
100%
100%
100%
100%
100%
Auction services
Property management
E-commerce marketplace
Administrative services
Auction services
100%
Administrative services
Turkey
Russia
Luxembourg
Luxembourg
100%
100%
100%
100%
Auction services
Administrative services
Holding company
Holding company
91 SUPPLEMENTAL QUARTERLY DATA
(Unaudited; tabular dollar amounts expressed in thousands of United States dollars, except per share data)
2012 (1)
1st quarter
2nd quarter
3rd quarter
4th quarter
2011 (1)
1st quarter
2nd quarter
3rd quarter
4th quarter
2010 (1)
1st quarter
2nd quarter
3rd quarter
4th quarter
2009 (1)
1st quarter
2nd quarter
3rd quarter
4th quarter
2008 (1)
1st quarter
2nd quarter
3rd quarter
4th quarter
Gross
Auction Proceeds
$
$
864,506
1,194,536
848,536
1,000,413
3,907,991
Gross
Auction Proceeds
$
$
851,283
1,149,847
673,362
1,039,789
3,714,281
Gross
Auction Proceeds
776,659
951,634
750,912
798,566
$
$
Auction
Revenues
$
101,276
127,213
92,326
117,140
$
437,955
Auction
Revenues
$
88,463
114,524
79,709
113,403
$
396,099
Auction
Revenues
$
83,544
103,300
82,229
88,296
3,277,771
$
357,369
Gross
Auction Proceeds
$
$
798,291
1,109,331
693,288
891,111
3,492,021
Gross
Auction Proceeds
$
$
781,969
1,163,546
767,718
853,927
3,567,160
Auction
Revenues
$
83,675
120,459
75,934
97,143
$
377,211
Auction
Revenues
$
81,394
115,822
75,909
81,693
$
354,818
Net
Earnings
17,969
31,303(2)
8,171(2)
22,103(2)
79,546(2)
Net
Earnings
16,570(3)
26,763
6,533
26,767
76,633(3)
Net
Earnings
12,707
26,054(4)
13,375
13,539
65,675(4)
Net
Earnings
19,879(5)
38,847
12,892
21,834(5)
93,452(5)
Net
Earnings
16,407(6)
45,919(6)
11,934(6)
27,140(6)
101,400(6)
$
$
$
$
$
$
$
$
$
$
Net Earnings Per Share
Closing
Basic
Diluted
Stock Price
$
$
0.17
0.29(2)
0.08(2)
0.21(2)
0.75(2)
$
$
0.17
0.29(2)
0.08(2)
0.21(2)
0.74(2)
$
23.76
21.25
19.23
20.89
Net Earnings Per Share
Closing
Basic
Diluted
Stock Price
0.16(3)
0.25
0.06
0.25
0.72 (3)
$
$
0.16(3)
0.25
0.06
0.25
0.72 (3)
$
28.15
27.49
20.19
22.08
Net Earnings Per Share
Closing
Basic
Diluted
Stock Price
0.12
0.25(4)
0.13
0.13
0.62 (4)
$
$
0.12
0.25(4)
0.13
0.13
0.62 (4)
$
21.53
18.22
20.77
23.05
Net Earnings Per Share
Closing
Basic
Diluted
Stock Price
0.19(5)
0.37
0.12
0.21 (5)
0.89 (5)
$
$
0.19(5)
0.37
0.12
0.21 (5)
0.88 (5)
$
18.59
23.45
24.54
22.43
Net Earnings Per Share (7)
Basic
Diluted
Closing
Stock Price(7)
0.16 (6)
0.44 (6)
0.11 (6)
0.26 (6)
0.97 (6)
$
$
0.16 (5)
0.43 (5)
0.11 (5)
0.26 (5)
0.96 (5)
$
27.37
27.13
23.36
21.42
$
$
$
$
$
$
$
$
(1) 2012, 2011 and 2010 figures presented in accordance with International Financial Reporting Standards. 2009 and 2008 figures presented in accordance with
previous Canadian Generally Accepted Accounting Principles.
(2) Net earnings in the second quarter of 2012 included a $1.9 million ($1.2 million after tax) loss on the sale of excess property. Excluding the impact of this item, net
earnings for the second quarter of 2012 would have been $32.5 million. Net earnings in the third and fourth quarters of 2012 included net impairment losses of $2.5
million ($1.5 million after tax) and $0.3 million ($0.3 million after tax), respectively, on excess property. Excluding the impact of these items, net earnings for the
third and fourth quarters of 2012 would have been $9.7 million and $22.4 million, respectively.
(3) Net earnings in the first quarter of 2011 include a gain of $3.5 million ($3.0 million after tax) recorded on the sale of excess property. Excluding the impact of this
item, net earnings for the first quarter of 2011 would have been $13.6 million ($0.13 per share, basic and diluted), and net earnings for the full year 2011 would
have been $73.6 million ($0.69 per share, basic and diluted).
(4) Net earnings in the second quarter of 2010 included a gain of $1.2 million ($0.7 million after tax) recorded on the sale of excess property. Excluding the impact of
this item, net earnings for the second quarter of 2010 would have been $25.3 million ($0.24 per share, basic and diluted), and net earnings for the full year 2010
would have been $65.2 million ($0.62 per basic share and $0.61 per diluted share).
(5) Net earnings in the first quarter of 2009 included the impact of foreign exchange on U.S. dollar denominated bank debt held by a Canadian subsidiary, which was
assigned in January 2009 to an affiliate whose functional currency is the U.S. dollar to eliminate the impact of currency fluctuations on this debt in future periods.
The foreign exchange impact of this bank debt in the first quarter of 2009 was a $0.8 million gain ($0.7 million after tax). Excluding the impact of this item, net
earnings for the first quarter of 2009 would have been $19.2 million ($0.18 per share, basic and diluted).
Additionally, net earnings in the fourth quarter of 2009 included a gain of $1.1 million ($0.7 million after tax) recorded on the sale of excess property. Excluding the
impact of this item, net earnings for the fourth quarter of 2009 would have been $21.1 million ($0.20 per share, basic and diluted).
Excluding the impact of all items above, net earnings for the full year 2009 would have been $92.0 million ($0.87 per share, basic and diluted).
(6) Net earnings in the first, second, third and fourth quarters of 2008 included the foreign exchange impact of the U.S. dollar denominated bank debt held by a
Canadian subsidiary. The foreign exchange impact of this bank debt in the first, second, third and fourth quarters of 2008 was a $1.0 million ($0.8 million after tax)
loss, $0.2 million ($0.2 million after tax) gain, $1.3 million ($1.1 million after tax) loss, and $3.8 million ($3.2 million after tax) loss, respectively.
In addition, net earnings in the first, second and fourth quarters of 2008 included the reclassification of foreign currency translation gains relating to the settlement
of foreign currency denominated intercompany loans. The foreign exchange impact of this reclassification in the first, second and fourth quarters of 2008 was $2.1
million ($2.0 million after tax), $0.7 million ($0.5 million after tax) and $12.3 million ($11.1 million after tax), respectively.
Finally, net earnings in the second quarter of 2008 included a gain of $8.3 million ($7.3 million after tax) recorded on the sale of excess property.
Excluding the impact of all items above, net earnings for the first, second, third and fourth quarters of 2008 would have been $15.3 million ($0.15 per basic share
and $0.14 per diluted share), $37.9 million ($0.36 per share, basic and diluted), $13.0 million ($0.12 per share, basic and diluted) and $19.2 million ($0.18 per
share, basic and diluted), respectively. Net earnings for the full year 2008 would have been $85.5 million ($0.82 per basic share and $0.81 per diluted share).
(7) The Company's common shares split on a three-for one basis on April 24, 2008. All per share amounts in this table have been adjusted on a retroactive basis for the
stock split. As well, the closing stock prices presented in this table have been adjusted for ease of comparison.
92 SELECTED FINANCIAL AND OPERATING DATA
(Tabular dollar amounts expressed in thousands of United States dollars, except per share and operating data)
Years ended December 31,
2012(1)
2011(1)
2010(1)
2009(1)
2008(1)
$
$
$
$
Gross auction proceeds (unaudited)
Statement of operations data:
Auction revenues(5)
Direct expenses(5)
Depreciation and amortization
General and administrative(5)
Earnings from operations
Other income (expense)(5):
Foreign exchange gain (loss)(3)(5)
Gain (loss) on disposition of capital
Other income (loss)
assets(2)
Finance income (costs)(5):
Interest expense
Interest income(5)
Earnings before income taxes
Income taxes
Net earnings(2)(3)
Net earnings per share-diluted(4)
Balance sheet data (end of year):
Working capital (including cash)
Total assets
Long-term debt
Total shareholders' equity
Selected operating data (unaudited):
Auction revenues as percentage of gross
auction proceeds
Number of consignors at industrial auctions(6)
Number of bidders at industrial auctions(6)
Number of buyers at industrial auctions(6)
Number of permanent auction
sites (end of year)
3,907,991
$ 3,714,281
$ 3,277,771
$ 3,492,021
$ 3,567,160
437,955
(49,687)
388,268
$
396,099
(48,044)
348,055
$
357,369
(47,021)
310,348
$
377,211
(49,890)
327,321
$
354,818
(49,750)
305,068
(41,138)
(227,091)
(42,408)
(201,935)
(37,813)
(181,020)
(31,761)
(168,312)
(24,764)
(164,556)
120,039
103,712
91,515
127,248
115,748
(619)
(2,074)
(891)
2,420
(6,860)
112,015
(32,469)
(585)
3,861
4,242
(5,541)
2,326
108,015
(31,382)
(49)
250
1,823
(5,216)
2,035
90,358
(24,683)
(1,085)
647
2,857
(544)
2,400
131,523
(38,071)
79,546
0.74
$
$
76,633
0.72
$
$
65,675
0.62
$
$
93,452
0.88
$
$
96,053
1,132,498
200,746
656,531
11.21%
42,100
389,500
99,250
63,296
967,241
133,881
617,906
10.66%
41,300
385,000
95,550
45,543
872,558
135,886
579,867
10.90%
40,360
340,600
95,100
30,510
857,821
130,394
544,411
10.80%
37,050
336,000
97,800
11,656
6,370
1,375
(859)
4,994
139,284
(37,884)
101,400
0.96
47,109
689,488
67,411
465,162
9.95%
36,580
378,500
83,950
39
39
35
32
30
(1) 2012, 2011 and 2010 figures presented in accordance with International Financial Reporting Standards. 2009 and 2008 figures presented in
accordance with previous Canadian Generally Accepted Accounting Principles.
(2) Net earnings for 2012 included a net loss on the sale of excess property of $1.9 million ($1.2 million after tax, or $0.01 per diluted share).
Net earnings for 2011, 2009, and 2008 included net gains on sales of excess properties of $3.5 million ($3.0 million after tax, or $0.03 per
diluted share), $1.1 million ($0.7 million after tax, or $0.01 per diluted share), and $8.3 million ($7.3 million after tax, or $0.07 per diluted
share), respectively.
(3) Net earnings for the full year 2009 included the impact of foreign exchange on U.S. dollar denominated bank debt held by a Canadian
subsidiary, which was assigned in January 2009 to an affiliate whose functional currency is the U.S. dollar to eliminate the impact of currency
fluctuations on this debt in future periods. The foreign exchange impact of this bank debt in the first quarter of 2009 was a $0.8 million gain
($0.7 million, or less than $0.01 per diluted share, after tax). The equivalent amount in 2008 was a foreign exchange loss of $5.8 million
($5.0 million after tax, or $0.05 per diluted share).
Net earnings for the full year 2008 also included the reclassification of $15.0 million ($13.6 million after tax, or $0.13 per diluted share) of
foreign currency translation gains relating to the settlement of foreign currency denominated intercompany loans.
The Company does not expect such foreign exchange gains or losses relating to financial transactions to recur in future periods.
(4) Share and per share amounts have been adjusted on a retroactive basis to reflect the three-for-one stock split that occurred on April 24,
2008.
(5) Figures for 2008 to 2010 have been reclassified to conform with presentation adopted in 2011.
(6) Figures for 2008 to 2010 have been rounded to conform with presentation adopted in 2011.
93 Shareholder Information
Address
Corporate Governance Information
Ritchie Bros. Auctioneers Incorporated
9500 Glenlyon Parkway
Burnaby, BC, Canada, V5J 0C6
Telephone:
Canada (toll-free): 1.800.663.1739
1.800.663.8457
USA (toll-free):
778.331.5501
Facsimile:
www.rbauction.com
Web site:
778.331.5500
Board of Directors
Robert W. Murdoch
Chairman and Independent Director
Peter J. Blake
Director & Chief Executive Officer
Beverley A. Briscoe
Independent Director
Robert Elton
Eric Patel
Independent Director
Independent Director
Edward B. Pitoniak
Independent Director
Christopher Zimmerman
Independent Director
Shareholders wishing to speak to the Chairman should call
778.331.5500 or send an email to leaddirector@rbauction.com.
Management Advisory Committee
Chief Executive Officer
Peter J. Blake (1)
Richard J. Aldersley
Robert S. Armstrong (1) Chief Strategic Development Officer
Bradley M. Bass
Senior Valuation Analyst – Europe
VP – US South West
Robert G. Blackadar
VP – Strategic Accounts
Joseph P. Boyle
VP – US North East
Brent M. Bradshaw
VP – Group Operations (US West)
Stephen H. Branch
VP – Asia
William A. Cooksley
VP – Information Technology
Shane Eshuis
VP – Group Operations (Europe & Middle East)
Robert W. Giroux
VP – US North West
Brian L. Glenn
VP – Western Canada
Curtis C. Hinkelman
Senior VP – Eastern USA
David W. Hobbs
VP – US South Central
Kieran Holm
VP – US North Central
Michael D. Johnston
Senior VP – US West
Kevin Kobus
VP – Group Operations (US East)
Jacob W. Lawson
Kenton H. Low (1)
Robert K. Mackay (1)
Warwick N. Mackrell
Robert A. McLeod (1)
Andrew Muller (1)
Nicole Nicelli
VP – Eastern Canada
Chief Marketing Officer
President
VP – Australia
Chief Financial Officer
Chief People Officer
VP – Europe South
David D. Nicholson
Senior VP – Central USA
Doug W. Olive
VP – Pricing & Valuations
Oliver E. Piekaar
VP – Finance
Victor E. Pospiech
Senior VP – Sales Performance
Jeroen L.J. Rijk
Senior VP – Europe
Gary L. Seybold
VP – US South East
Anna Sgro
Steven C. Simpson (1) Chief Sales Officer
Robert G. Thompson
Senior VP - Sales
VP – Properties
Kevin R. Tink
Senior VP – Canada & Agriculture
Guylain Turgeon
Senior VP – Middle East
Simon A. Wallan
VP – Agriculture
Darren J. Watt
General Counsel & VP Corporate Development,
and Corporate Secretary
Karl W. Werner
Senior VP – Auction Operations
Frank D. Wilson
VP – Group Operations (US Central)
(1) Member of Senior Leadership Team
Further Corporate Governance information, including our Report on
Corporate Governance, which is included in our Information Circular for
our annual meeting of Shareholders, is available on our website at
www.rbauction.com.
Investor Relations
Analysts, portfolio managers, investors and representatives of financial
institutions seeking financial and operating information may contact:
Investor Relations Department
Ritchie Bros. Auctioneers
9500 Glenlyon Parkway
Burnaby, BC
Canada, V5J 0C6
Telephone:
Canada (toll-free):
USA (toll-free):
Email:
778.331.5500
1.800.663.1739
1.800.663.8457
ir@rbauction.com
Copies of the Company’s filings with the U.S. Securities & Exchange
Commission and with Canadian securities commissions are available to
shareholders and other interested parties on request or can be
accessed directly on the internet at www.rbauction.com.
Annual Meeting
The annual meeting of the Company’s shareholders will be held at
11am on Thursday April 25, 2013 at the Company’s head office located
at 9500 Glenlyon Parkway, Burnaby, BC, V5J 0C6.
Stock Exchanges
Ritchie Bros. Auctioneers Incorporated is listed on the New York Stock
Exchange and the Toronto Stock Exchange and on both exchanges,
trades under the symbol “RBA”.
Transfer Agent
Communications concerning transfer requirements, address
changes and lost certificates should be directed to:
Computershare Trust Company of Canada
510 Burrard Street
2nd Floor
Vancouver, British Columbia
Canada, V6C 3B9
Telephone:
Canada and USA (toll-free): 1.800.564.6253
Facsimile:
Facsimile (toll-free):
Self-service:
604.661.0226
604.661.9401
1.800.249.7775
www.computershare.com
Co-agent in the United States:
Computershare Trust Company of New York
New York, NY
Auditors
KPMG LLP
Vancouver, Canada
Dividends
All dividends paid by Ritchie Bros. Auctioneers are eligible dividends,
unless indicated otherwise in the Company’s quarterly reports or by
press release
94