Annual Statements Open main menu

RB GLOBAL INC. - Quarter Report: 2020 September (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 001-13425

Graphic

Ritchie Bros. Auctioneers Incorporated

(Exact Name of Registrant as Specified in its Charter)

Canada

 

98-0626225

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

9500 Glenlyon Parkway

 

 

Burnaby, British Columbia, Canada

 

V5J 0C6

(Address of Principal Executive Offices)

 

(Zip Code)

(778) 331-5500

(Registrant’s Telephone Number, including Area Code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares

RBA

New York Stock Exchange

Common Share Purchase Rights

N/A

New York Stock Exchange

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

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

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

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

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

Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 109,400,129 common shares, without par value, outstanding as of November 4, 2020.

Table of Contents

RITCHIE BROS. AUCTIONEERS INCORPORATED

FORM 10-Q

For the quarter ended September 30, 2020

INDEX

PART I – FINANCIAL INFORMATION

ITEM 1:

Consolidated Financial Statements

1

ITEM 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

49

ITEM 4:

Controls and Procedures

49

PART II – OTHER INFORMATION

ITEM 1:

Legal Proceedings

50

ITEM 1A:

Risk Factors

50

ITEM 2:

Unregistered Sales of Equity Securities and Use of Proceeds

51

ITEM 3:

Defaults Upon Senior Securities

51

ITEM 4:

Mine Safety Disclosures

51

ITEM 5:

Other Information

51

ITEM 6:

Exhibits

52

SIGNATURES

53

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1:           CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Income Statements

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

(Unaudited)

Three months ended

Nine months ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Revenue:

  

  

  

  

Service revenue

$

222,679

$

178,577

$

639,941

$

585,555

Inventory sales revenue

 

108,863

 

111,219

 

353,906

 

400,892

Total revenue

 

331,542

 

289,796

 

993,847

 

986,447

Operating expenses:

 

  

 

  

 

  

 

  

Costs of services

 

39,223

 

36,382

 

118,026

 

122,719

Cost of inventory sold

 

96,253

 

102,410

 

320,972

 

372,703

Selling, general and administrative expenses

 

110,186

 

93,691

 

309,203

 

286,589

Acquisition-related costs

 

 

45

 

 

752

Depreciation and amortization expenses

 

18,436

 

17,692

 

55,586

 

51,919

Gain on disposition of property, plant and equipment

 

(276)

 

(821)

 

(1,536)

 

(1,071)

Foreign exchange loss

 

336

 

237

 

1,330

 

1,118

Total operating expenses

 

264,158

 

249,636

 

803,581

 

834,729

Operating income

 

67,384

 

40,160

 

190,266

 

151,718

Interest expense

 

(8,737)

 

(10,090)

 

(26,801)

 

(31,023)

Other income, net

 

2,280

 

1,962

 

6,714

 

5,680

Income before income taxes

 

60,927

 

32,032

 

170,179

 

126,375

Income tax expense

15,437

6,760

48,741

28,800

Net income

$

45,490

$

25,272

$

121,438

$

97,575

Net income attributable to:

 

  

 

  

 

  

 

  

Stockholders

$

45,387

$

25,266

$

121,239

$

97,466

Non-controlling interests

 

103

 

6

 

199

 

109

Net income

$

45,490

$

25,272

$

121,438

$

97,575

Earnings per share attributable to stockholders:

 

  

 

  

 

  

 

  

Basic

$

0.42

$

0.23

$

1.11

$

0.90

Diluted

$

0.41

$

0.23

$

1.10

$

0.89

Weighted average number of shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

109,018,469

 

108,003,390

 

108,887,026

 

108,453,525

Diluted

 

110,369,718

 

109,381,173

 

110,060,712

 

109,634,195

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros.

1

Table of Contents

Condensed Consolidated Statements of Comprehensive Income

(Expressed in thousands of United States dollars)

(Unaudited)

Three months ended

Nine months ended

    

September 30, 

September 30, 

2020

    

2019

    

2020

    

2019

Net income

$

45,490

$

25,272

$

121,438

$

97,575

Other comprehensive income (loss), net of income tax:

 

 

  

 

  

 

  

Foreign currency translation adjustment

 

12,549

 

(9,703)

 

7,445

 

(8,880)

Total comprehensive income

$

58,039

$

15,569

$

128,883

$

88,695

Total comprehensive income attributable to:

 

  

 

  

 

  

 

  

Stockholders

$

57,910

$

15,586

$

128,654

$

88,614

Non-controlling interests

 

129

 

(17)

 

229

 

81

$

58,039

$

15,569

$

128,883

$

88,695

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros.

2

Table of Contents

Condensed Consolidated Balance Sheets

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

(Unaudited)

September 30, 

December 31, 

    

2020

    

2019

Assets

Cash and cash equivalents

$

470,285

$

359,671

Restricted cash

 

120,014

 

60,585

Trade and other receivables

 

333,110

 

142,627

Less: allowance for credit losses

(4,635)

(5,225)

Inventory

 

62,101

 

64,956

Other current assets

 

26,279

 

50,160

Income taxes receivable

 

5,619

 

6,810

Total current assets

 

1,012,773

 

679,584

Property, plant and equipment

 

481,047

 

484,482

Other non-current assets

 

134,973

 

145,679

Intangible assets

 

220,791

 

233,380

Goodwill

 

672,746

 

672,310

Deferred tax assets

 

15,659

 

13,995

Total assets

$

2,537,989

$

2,229,430

Liabilities and Equity

 

  

 

  

Auction proceeds payable

$

496,936

$

276,188

Trade and other payables

 

215,110

 

194,279

Income taxes payable

 

11,241

 

7,809

Short-term debt

 

20,285

 

4,705

Current portion of long-term debt

 

9,926

 

18,277

Total current liabilities

 

753,498

 

501,258

Long-term debt

 

622,635

 

627,204

Other non-current liabilities

 

144,677

 

151,238

Deferred tax liabilities

 

52,312

 

42,743

Total liabilities

 

1,573,122

 

1,322,443

Commitments and Contingencies (Note 19 and Note 20 respectively)

 

  

 

  

Stockholders' equity:

 

  

 

  

Share capital:

 

  

 

  

Common stock; no par value, unlimited shares authorized, issued and outstanding shares: 109,381,891 (December 31, 2019: 109,337,781)

 

195,727

 

194,771

Additional paid-in capital

 

48,253

 

52,110

Retained earnings

 

767,188

 

714,051

Accumulated other comprehensive loss

 

(51,684)

 

(59,099)

Stockholders' equity

 

959,484

 

901,833

Non-controlling interest

 

5,383

 

5,154

Total stockholders' equity

 

964,867

 

906,987

Total liabilities and equity

$

2,537,989

$

2,229,430

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros.

3

Table of Contents

Condensed Consolidated Statements of Changes in Equity

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

(Unaudited)

Attributable to stockholders

 

    

    

Contingently

Additional

Accumulated

Non-

redeemable

Common stock

paid-In

other

controlling

performance

Number of

capital

Retained

comprehensive

interest

Total

share units

Three months ended September 30, 2020

    

shares

    

Amount

    

("APIC")

    

earnings

    

loss

    

("NCI")

    

equity

    

("PSUs")

Balance, June 30, 2020

108,630,537

$

169,255

$

47,958

$

746,048

$

(64,207)

$

5,254

$

904,308

Net income

 

 

 

45,387

 

 

103

 

45,490

 

Other comprehensive income (loss)

 

 

 

 

12,523

 

26

 

12,549

 

 

 

 

45,387

 

12,523

 

129

 

58,039

 

Stock option exercises

751,268

 

26,470

 

(5,701)

 

 

 

 

20,769

 

Issuance of common stock related to vesting of share units

86

 

2

 

(7)

 

 

 

 

(5)

 

Stock option compensation expense

 

 

1,671

 

 

 

 

1,671

 

Equity-classified share units expense

 

 

4,138

 

 

 

 

4,138

 

Equity-classified share units dividend equivalents

 

 

194

 

(194)

 

 

 

 

Cash dividends paid

 

 

 

(24,053)

 

 

 

(24,053)

 

Balance, September 30, 2020

109,381,891

$

195,727

$

48,253

$

767,188

$

(51,684)

$

5,383

$

964,867

Three months ended September 30, 2019

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Balance, June 30, 2019

107,836,674

$

150,585

$

54,633

$

680,915

$

(55,449)

$

5,165

$

835,849

1,049

Net income

 

 

 

 

25,266

 

 

6

 

25,272

 

Other comprehensive income (loss)

 

 

 

 

 

(9,680)

 

(23)

 

(9,703)

 

 

 

 

 

25,266

 

(9,680)

 

(17)

 

15,569

 

Stock option exercises

 

363,217

8,451

 

(135)

 

 

 

 

8,316

 

Issuance of common stock related to vesting of share units

 

10,444

737

 

 

1

 

 

 

738

 

(1,083)

Stock option compensation expense

 

 

 

1,653

 

 

 

 

1,653

 

Equity-classified share units expense

 

 

 

2,830

 

 

 

 

2,830

 

21

Equity-classified share units dividend equivalents

 

 

 

308

 

(320)

 

 

 

(12)

 

13

Cash dividends paid

 

 

 

 

(21,631)

 

 

 

(21,631)

 

Balance, September 30, 2019

 

108,210,335

$

159,773

$

59,289

$

684,231

$

(65,129)

$

5,148

$

843,312

Ritchie Bros.

4

Table of Contents

Condensed Consolidated Statements of Changes in Equity

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

(Unaudited)

    

Attributable to stockholders

    

    

Contingently

Additional

Accumulated

Non-

redeemable

Common stock

paid-In

other

controlling

performance

Number of

capital

Retained

comprehensive

interest

Total

share units

Nine months ended September 30, 2020

    

shares

    

Amount

    

("APIC")

    

earnings

    

loss

    

("NCI")

    

equity

    

("PSUs")

Balance, December 31, 2019

109,337,781

$

194,771

$

52,110

$

714,051

$

(59,099)

$

5,154

$

906,987

$

Net income

 

 

 

121,239

 

 

199

 

121,438

 

Other comprehensive income (loss)

 

 

 

 

7,415

 

30

 

7,445

 

 

 

 

121,239

 

7,415

 

229

 

128,883

 

Stock option exercises

1,430,545

 

50,611

 

(10,417)

 

 

 

 

40,194

 

Issuance of common stock related to vesting of share units

138,877

 

3,515

 

(7,459)

 

 

 

 

(3,944)

 

Stock option compensation expense

 

 

4,401

 

 

 

 

4,401

 

Equity-classified share units expense

 

 

9,155

 

 

 

 

9,155

 

Equity-classified share units dividend equivalents

 

 

463

 

(463)

 

 

 

 

Cash dividends paid

 

 

 

(67,639)

 

 

 

(67,639)

 

Shares repurchased

(1,525,312)

(53,170)

(53,170)

Balance, September 30, 2020

109,381,891

$

195,727

$

48,253

$

767,188

$

(51,684)

$

5,383

$

964,867

$

Nine months ended September 30, 2019

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Balance, December 31, 2018

 

108,682,030

$

181,780

$

56,885

$

648,255

$

(56,277)

$

5,067

$

835,710

$

923

Net income

 

 

 

 

97,466

 

 

109

 

97,575

 

Other comprehensive loss

 

 

 

 

 

(8,852)

 

(28)

 

(8,880)

 

 

 

 

 

97,466

 

(8,852)

 

81

 

88,695

 

Stock option exercises

 

544,576

 

14,119

 

(1,679)

 

 

 

 

12,440

 

Issuance of common stock related to vesting of share units

 

207,403

 

5,886

 

(10,064)

 

1

 

 

 

(4,177)

 

(1,083)

Stock option compensation expense

 

 

 

4,852

 

 

 

 

4,852

 

Equity-classified share units expense

 

 

 

8,640

 

 

 

 

8,640

 

114

Equity-classified share units dividend equivalents

 

 

 

655

 

(700)

 

 

 

(45)

 

46

Cash dividends paid

 

 

 

 

(60,791)

 

 

 

(60,791)

 

Shares repurchased

(1,223,674)

(42,012)

(42,012)

Balance, September 30, 2019

 

108,210,335

$

159,773

$

59,289

$

684,231

$

(65,129)

$

5,148

$

843,312

$

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros.

5

Table of Contents

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)

(Unaudited)

Nine months ended September 30, 

    

2020

    

2019

Cash provided by (used in):

 

  

 

  

 

Operating activities:

 

  

 

  

 

Net income

$

121,438

$

97,575

Adjustments for items not affecting cash:

 

 

  

Depreciation and amortization expenses

 

55,586

 

51,919

Stock option compensation expense

 

4,401

 

4,852

Equity-classified share unit expense

 

9,155

 

8,754

Deferred income tax expense (recovery)

 

8,250

 

(4,760)

Unrealized foreign exchange (gain) loss

 

2,049

 

(129)

Gain on disposition of property, plant and equipment

 

(1,536)

 

(1,071)

Amortization of debt issuance costs

 

2,375

 

2,701

Amortization of right-of-use assets

9,194

8,867

Gain on contingent consideration from equity investment

(1,700)

Other, net

 

2,427

 

1,025

Net changes in operating assets and liabilities

 

53,912

 

139,372

Net cash provided by operating activities

 

265,551

 

309,105

Investing activities:

 

 

  

Property, plant and equipment additions

 

(9,865)

 

(6,915)

Intangible asset additions

 

(19,886)

 

(18,377)

Proceeds on disposition of property, plant and equipment

 

16,277

 

5,610

Distribution from equity investment

4,212

Proceeds on contingent consideration from equity investment

 

1,700

 

Other, net

 

(2,630)

 

(1,000)

Net cash used in investing activities

 

(10,192)

 

(20,682)

Financing activities:

 

 

  

Share repurchase

(53,170)

(42,012)

Dividends paid to stockholders

 

(67,639)

 

(60,791)

Issuances of share capital

 

40,194

 

12,440

Payment of withholding taxes on issuance of shares

 

(3,870)

 

(5,260)

Proceeds from short-term debt

 

35,799

 

10,519

Repayment of short-term debt

 

(22,357)

 

(24,979)

Repayment of long-term debt

 

(11,134)

 

(29,022)

Debt issue costs

 

(2,038)

 

Repayment of finance lease obligations

 

(6,927)

 

(4,848)

Net cash used in financing activities

 

(91,142)

 

(143,953)

Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash

 

5,826

 

1,350

Increase

 

170,043

 

145,820

Beginning of period

 

420,256

 

305,567

Cash, cash equivalents, and restricted cash, end of period

$

590,299

$

451,387

See accompanying notes to the condensed consolidated financial statements.

Ritchie Bros.

6

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

1.    Summary of significant accounting policies

Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”) provide global asset management and disposition services, offering customers end-to-end solutions for buying and selling used industrial equipment and other durable assets through its unreserved live on site auctions, online marketplaces, listing services, and private brokerage services. 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”).

(a) Basis of preparation

These unaudited condensed consolidated interim financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”). They include the accounts of Ritchie Bros. Auctioneers Incorporated and its subsidiaries from their respective dates of formation or acquisition. All significant intercompany balances and transactions have been eliminated.

Certain information and footnote disclosure required by US GAAP for complete annual financial statements have been omitted and, therefore, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”). In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, cash flows and changes in equity for the interim periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the world. The extent of the impact of the COVID-19 pandemic on the operational and financial performance of the Company, including the ability to execute on business strategies and initiatives, will depend on future developments, including the duration and spread of the pandemic and related restrictions placed by oversight bodies and respective global governments, as well as supply and demand impacts driven by the Company’s consignor and buyer base, all of which are uncertain and cannot be easily predicted. Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its business operations, results of operations, cash flows or financial performance.

(b) Revenue recognition

Revenues are comprised of:

Service revenue, including the following:
i.Revenue from auction and marketplace (“A&M”) activities, including commissions earned at our live auctions, online marketplaces, and private brokerage services where we act as an agent for consignors of equipment and other assets, and various auction-related fees, including listing and buyer transaction fees; and
ii.Other services revenue, including revenue from listing services, refurbishment, logistical services, financing, appraisal fees and other ancillary service fees; and
Inventory sales revenue as part of A&M activities

The Company recognizes revenue when control of the promised goods or services is transferred to our customers, or upon completion of the performance obligation, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For live event-based auctions or online auctions, revenue is recognized when the auction sale is complete and the Company has determined that the sale proceeds are collectible. Revenue is measured at the fair value of the consideration received or receivable and is shown net of value-added tax and duties.

Service revenue

Commissions from sales at the Company’s auctions represent the percentage earned by the Company on the gross proceeds from equipment and other assets sold at auction. The majority of the Company’s commissions are earned as a pre-negotiated fixed rate of the gross selling price. Other commissions from sales at the Company’s auctions are earned from underwritten commission contracts, when the Company guarantees a certain level of proceeds to a consignor.

Ritchie Bros.

7

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

1.    Summary of significant accounting policies (continued)

The Company accepts equipment and other assets on consignment stimulating buyer interest through professional marketing techniques and matches sellers (also known as consignors) to buyers through the auction or private sale process. Prior to offering an item for sale on its online marketplaces, the Company also performs inspections.

Following the sale of the item, the Company invoices the buyer for the purchase price of the asset, taxes, and, if applicable, the buyer transaction fee, collects payment from the buyer, and remits the proceeds to the seller, net of the seller commissions, applicable taxes, and applicable fees. Commissions are calculated as a percentage of the hammer price of the property sold at auction. Fees are also charged to sellers for listing and inspecting equipment. Other revenue earned in the process of conducting the Company’s auctions include administrative, documentation, and advertising fees.

On the fall of the auctioneer’s hammer, the highest bidder becomes legally obligated to pay the full purchase price, which is the hammer price of the property purchased and the seller is legally obligated to relinquish the property in exchange for the hammer price less any seller’s commissions. Commission and fee revenue are recognized on the date of the auction sale upon the fall of the auctioneer’s hammer.

Under the standard terms and conditions of its auction sales, the Company is not obligated to pay a consignor for property that has not been paid for by the buyer, provided the property has not been released to the buyer. If the buyer defaults on its payment obligation, also referred to as a collapsed sale, the sale is cancelled in the period in which the determination is made, and the property is returned to the consignor or placed in a later event-based or online auction. Historically cancelled sales have not been material.

Online marketplace commission revenue is reduced by a provision for disputes, which is an estimate of disputed items that are expected to be settled at a cost to the Company, related to settlements of discrepancies under the Company’s equipment condition certification program. The equipment condition certification refers to a written inspection report provided to potential buyers that reflects the condition of a specific piece of equipment offered for sale, and includes ratings, comments, and photographs of the equipment following inspection by one of the Company’s equipment inspectors.

The equipment condition certification provides that a buyer may file a written dispute claim during an eligible dispute period for consideration and resolution at the sole determination of the Company if the purchased equipment is not substantially in the condition represented in the inspection report. Typically disputes under the equipment condition certification program are settled with minor repairs or additional services, such as washing or detailing the item; the estimated costs of such items or services are included in the provision for disputes.

Commission revenue are recorded net of commissions owed to third parties, which are principally the result of situations when the commission is shared with a consignor in an auction guarantee risk and reward sharing arrangement.

Underwritten commission contracts can take the form of guarantee contracts. 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 or is probable and estimable 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.

Other services revenue also includes fees for refurbishment, logistical services, financing, appraisal fees and other ancillary service fees. Fees are recognized in the period in which the service is provided to the customer.

Ritchie Bros.

8

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

1.    Summary of significant accounting policies (continued)

Inventory sales revenue

Underwritten commission contracts can take the form of inventory contracts. Revenue related to inventory contracts is recognized in the period in which the sale is completed, title to the property passes to the purchaser and the Company has fulfilled any other obligations that may be relevant to the transaction. In its role as auctioneer, the Company auctions its inventory to equipment buyers through the auction process. Following the sale of the item, the Company invoices the buyer for the purchase price of the asset, taxes, and, if applicable, the buyer transaction fee, and collects payment from the buyer.

On the fall of the auctioneer’s hammer, the highest bidder becomes legally obligated to pay the full purchase price, which is the hammer price of the property purchased. Title to the property is transferred in exchange for the hammer price, and if applicable, the buyer transaction fee plus applicable taxes.

(c) Costs of services

Costs of services are comprised of expenses incurred in direct relation to conducting auctions (“direct expenses”), earning online marketplace revenue, and earning other fee revenue. Direct expenses include direct labour, buildings and facilities charges, travel, advertising and promotion costs and fees paid to unrelated third parties who introduce the Company to equipment sellers who sell property at the Company’s auctions and marketplaces.

Costs of services incurred to earn online marketplace revenue in addition to the costs listed above also include inspection costs. Inspections are generally performed at the seller’s physical location. The cost of inspections includes payroll costs and related benefits for the Company’s employees that perform and manage field inspection services, the related inspection report preparation and quality assurance costs, fees paid to contractors who perform field inspections, related travel and incidental costs for the Company’s inspection service organization, and office and occupancy costs for its inspection services personnel. Costs of earning online marketplace revenue also include costs for the Company’s customer support, online marketplace operations, logistics, title and lien investigation functions.

Costs of services incurred in earning other fee revenue include ancillary and logistical service expenses, direct labour (including commissions on sales), software maintenance fees, and materials. Costs of services exclude depreciation and amortization expenses.

(d) Cost of inventory sold

Cost of inventory sold includes the purchase price of assets sold for the Company’s own account and is determined using a specific identification basis.

(e) Share-based payments

The Company classifies a share-based payment award as an equity or liability payment based on the substantive terms of the award and any related arrangement.

Equity-classified share-based payments

Share unit plans

The Company has a senior executive performance share unit (“PSU”) plan and an employee PSU plan that provides for the award of PSUs to certain senior executives and employees, respectively, of the Company. The Company has the option to settle certain share unit awards in cash or shares and expects to settle them in shares. The cost of PSUs granted is measured at the fair value of the underlying PSUs at the grant date. PSUs vest based on the passage of time and achievement of performance criteria.

The Company also has a senior executive restricted share unit (“RSU”) plan and an employee RSU plan that provides for the award of RSUs to certain senior executives and employees, respectively, of the Company. The Company has the option to settle certain share unit awards in cash or shares and expects to settle all grants in shares. The cost of RSUs granted is measured at the fair value based on the fair value of the Company’s common shares at the grant date. RSUs vest based on the passage of time and include restrictions related to employment.

Ritchie Bros.

9

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

1.    Summary of significant accounting policies (continued)

The fair value of awards expected to vest under these plans is expensed over the respective remaining service period of the individual awards, on an accelerated recognition basis, with the corresponding increase to APIC recorded in equity. 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 consolidated expense reflects the revised estimate, with a corresponding adjustment to equity. Dividend equivalents on the equity-classified PSUs and RSUs are recognized as a reduction to retained earnings over the service period.

Stock option plans

The Company has three stock option compensation plans that provide for the award of stock options to selected employees, directors and officers of the Company. The cost of options granted is measured at the fair value of the underlying option at the grant date using the Black-Scholes option pricing model. The fair value of options expected to vest under these plans is expensed over the respective remaining service period of the individual awards, on an accelerated recognition basis, with the corresponding increase to APIC recorded in equity. Upon exercise, any consideration paid on exercise of the stock options and amounts fully amortized in APIC are credited to the common shares.

Liability-classified share-based payments

The Company maintains other share unit compensation plans that vest over a period of up to three years after grant. Under those plans, the Company is either required or expects to settle vested awards on a cash basis or by providing cash to acquire shares on the open market on the employee’s behalf, where the settlement amount is determined based on the average price of the Company’s common shares prior to the vesting date or, in the case of deferred share unit (“DSU”) recipients, following cessation of service on the Board of Directors.

These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date. The determination of the fair value of the share units under these plans is described in note 17. The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability. Changes in fair value after vesting are recognized through compensation expense. Compensation expense reflects estimates of the number of instruments expected to vest.

The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the cumulative expense reflects the revisions, with a corresponding adjustment to the settlement liability. Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while settlements due beyond 12 months of the reporting date are presented in other non-current liabilities.

(f) Leases

The Company determines if an arrangement is a lease at inception. The Company may have lease agreements with lease and non-lease components, which are generally accounted for separately. Additionally, for certain vehicle and equipment leases, management applies a portfolio approach to account for the right-of-use (“ROU”) assets and liabilities for assets leased with similar lease terms.

Operating leases

Operating leases are included in other non-current assets, trade and other payables, and other non-current liabilities in our consolidated balance sheets if the initial lease term is greater than 12 months. For leases with an initial term of 12 months or less the Company recognizes those lease payments on a straight-line basis over the lease term.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. The Company includes lease payments for renewal or termination options in its determination of lease term, ROU asset, and lease liability when it is reasonably certain that the Company will exercise these options. Lease expense for lease payments is recognized on a straight-line basis over the lease term and are included in Costs of services or Selling, general, and administrative (“SG&A”) expenses.

Ritchie Bros.

10

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

1.    Summary of significant accounting policies (continued)

Finance leases

Finance lease ROU assets and liabilities are included in property, plant and equipment, trade and other payables, and other non-current liabilities in our consolidated balance sheets.

Finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. The Company includes lease payments for renewal, purchase options, or termination options in its determination of lease term, ROU asset, and lease liability when it is reasonably certain that the Company will exercise these options. Finance lease ROU assets are generally amortized over the lease term and are included in depreciation expense. The interest on the finance lease liabilities is included in interest expense.

(g) Inventories

Inventory consists of equipment and other assets purchased for resale in an upcoming live on site auction or online marketplace event. The Company typically purchases inventory for resale through a competitive process where the consignor or vendor has determined this to be the preferred method of disposition through the auction process. In addition, certain jurisdictions require auctioneers to hold title to assets and facilitate title transfer on sale. Inventory is valued at the lower of cost and net realizable value where net realizable value represents the expected sale price upon disposition less make-ready costs and the costs of disposal and transportation. As part of its government business, the Company purchases inventory for resale as part of its commitment to purchase certain surplus government property (note 19). The significant elements of cost include the acquisition price of the inventory and make-ready costs to prepare the inventory for sale that are not selling expenses and in-bound transportation costs. Write-downs to the carrying value of inventory are recorded in cost of inventory sold on the consolidated income statement.

(h) Impairment of long-lived and indefinite-lived assets

Long-lived assets, comprised of property, plant and equipment and intangible assets subject to amortization, are assessed for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. For the purpose of impairment testing, long-lived assets are grouped and tested for recoverability at the lowest level that generates independent cash flows. An impairment loss is recognized when the carrying value of the assets or asset groups is greater than the future projected undiscounted cash flows. The impairment loss is calculated as the excess of the carrying value over the fair value of the asset or asset group. Fair value is based on valuation techniques or third party appraisals. Significant estimates and judgments are applied in determining these cash flows and fair values.

Indefinite-lived intangible assets are tested annually for impairment as of December 31, and between annual tests if indicators of potential impairment exist. The Company has the option of performing a qualitative assessment to first determine whether the quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the carrying amount of the indefinite-lived intangible asset is less than its fair value. If the qualitative assessment indicates it is not more likely than not that the carrying amount is less than its fair value, a quantitative impairment test is not required. Where a quantitative impairment test is required, the procedure is to compare the indefinite-lived intangible asset’s fair value with its carrying amount. An impairment loss is recognized as the difference between the indefinite-lived intangible asset’s carrying amount and its fair value.

(i) Goodwill

Goodwill represents the excess of the purchase price of an acquired enterprise over the fair value assigned to the assets acquired and liabilities assumed in a business combination.

Goodwill is not amortized, but it is tested annually for impairment at the reporting unit level as of December 31, and between annual tests if indicators of potential impairment exist. The Company has the option of performing a qualitative assessment of a reporting unit to first determine whether the quantitative impairment test is necessary. This involves an assessment of qualitative factors to determine the existence of events or circumstances that would indicate whether it is more likely than not that the carrying amount of the reporting unit to which goodwill belongs is less than its fair value. If the qualitative assessment indicates it is not more likely than not that the reporting unit’s carrying amount is less than its fair value, a quantitative impairment test is not required.

Ritchie Bros.

11

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

1.    Summary of significant accounting policies (continued)

If a quantitative impairment test is required, the procedure is to identify potential impairment by comparing the reporting unit’s fair value with its carrying amount, including goodwill. The reporting unit’s fair value is determined using various valuation approaches and techniques that involve assumptions based on what the Company believes a hypothetical marketplace participant would use in estimating fair value on the measurement date. An impairment loss is recognized as the difference between the reporting unit’s carrying amount and its fair value. If the difference between the reporting unit’s carrying amount and fair value is greater than the amount of goodwill allocated to the reporting unit, the impairment loss is restricted by the amount of the goodwill allocated to the reporting unit.

(j) New and amended accounting standards

a.Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The new standard replaces the ‘incurred loss methodology’ credit impairment model with a new forward-looking “methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.” In applying the new standard, the Company has adopted the loss rate methodology to estimate historical losses on trade receivables. The historical data is adjusted to account for forecasted changes in the macroeconomic environment in order to calculate the current expected credit loss. The Company’s adoption of ASC 326 did not result in a material change in the carrying values of the Company’s financial assets on the transition date. Periods prior to January 1, 2020 that are presented for comparative purposes have not been adjusted.
b.In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides “optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.” The amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company’s use of LIBOR is applicable on short term drawings on the committed revolving credit facilities in certain jurisdictions. If applicable, the Company will use the optional expedients available when reference rate changes occur.
c.Effective January 1, 2020, the Company adopted ASU 2018-15, Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract on a prospective basis. The update aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service agreement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The adoption of ASU 2018-15 on January 1, 2020 using the prospective transition approach did not result in a material impact to the consolidated financial statements.

2.    Significant judgments, estimates and assumptions

The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Future differences arising between actual results and the judgments, estimates and assumptions made by the Company at the reporting date, or future changes to estimates and assumptions, could necessitate adjustments to the underlying reported amounts of assets, liabilities, revenues and expenses in future reporting periods.

Judgments, estimates and underlying assumptions are evaluated on an ongoing basis by management and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances and such changes are reflected in the assumptions when they occur. Significant items subject to estimates include purchase price allocations, the carrying amounts of goodwill, the useful lives of long-lived assets, share based compensation, the determination of lease term and lease liabilities, deferred income taxes, reserves for tax uncertainties, and other contingencies.

As of September 30, 2020, the Company performed a qualitative assessment of the A&M reporting unit and the Mascus reporting unit with consideration of the current global economic downturn as a result of COVID-19 and the Company concluded there were no indicators of impairment.

Ritchie Bros.

12

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

3.    Seasonality

The Company’s operations are both seasonal and event driven. Historically, revenues tend to be the highest during the second and fourth calendar quarters. The Company generally conducts more live, on site auctions during these quarters than during the first and third calendar quarters. Late December through mid-February and mid-July through August are traditionally less active periods. Online volumes are similarly affected as supply of used equipment is lower in the third quarter as it is actively being used and not available for sale.

The restrictions imposed and effects of the overall economic environment as a result of the COVID-19 pandemic may continue to impact these trends.

4.    Segmented information

The Company’s principal business activity is the management and disposition of used industrial equipment and other durable assets. The Company’s operations are comprised of one reportable segment and other business activities that are not reportable as follows:

Auctions and Marketplaces – This is the Company’s only reportable segment, which consists of the Company’s live on site auctions, its online auctions and marketplaces, and its brokerage service;
Other includes the results of Ritchie Bros. Financial Services (“RBFS”), Mascus online services, and the results from various value-added services and make-ready activities, including the Company’s equipment refurbishment services, asset appraisal services, and Ritchie Bros. Logistical Services.

Three months ended September 30, 2020

Nine months ended September 30, 2020

    

A&M

    

Other

    

Consolidated

    

A&M

    

Other

    

Consolidated

Service revenue

$

188,949

$

33,730

$

222,679

$

543,340

$

96,601

$

639,941

Inventory sales revenue

 

108,863

 

 

108,863

 

353,906

 

 

353,906

Total revenue

$

297,812

$

33,730

$

331,542

$

897,246

$

96,601

$

993,847

Costs of services

 

21,733

 

17,490

 

39,223

 

69,018

 

49,008

 

118,026

Cost of inventory sold

 

96,253

 

 

96,253

 

320,972

 

 

320,972

Selling, general and administrative expenses ("SG&A")

 

103,933

 

6,253

 

110,186

 

290,077

 

19,126

 

309,203

Segment profit

$

75,893

$

9,987

$

85,880

$

217,179

$

28,467

$

245,646

Depreciation and amortization expenses ("D&A")

 

  

 

  

 

18,436

 

  

 

  

 

55,586

Gain on disposition of property, plant and equipment ("PPE")

 

  

 

  

 

(276)

 

  

 

  

 

(1,536)

Foreign exchange loss

 

  

 

  

 

336

 

  

 

  

 

1,330

Operating income

 

  

 

  

$

67,384

 

  

 

  

$

190,266

Interest expense

 

  

 

  

 

(8,737)

 

  

 

  

 

(26,801)

Other income, net

 

  

 

  

 

2,280

 

  

 

  

 

6,714

Income tax expense

 

  

 

  

 

(15,437)

 

  

 

  

 

(48,741)

Net income

 

  

 

  

$

45,490

 

  

 

  

$

121,438

Ritchie Bros.

13

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

4.    Segmented information (continued)

Three months ended September 30, 2019

Nine months ended September 30, 2019

    

A&M

    

Other

    

Consolidated

    

A&M

    

Other

    

Consolidated

Service revenue

$

150,093

$

28,484

$

178,577

$

494,580

$

90,975

$

585,555

Inventory sales revenue

 

111,219

 

 

111,219

 

400,892

 

 

400,892

Total revenue

261,312

 

28,484

 

289,796

$

895,472

$

90,975

$

986,447

Costs of services

 

21,431

 

14,951

 

36,382

 

74,799

 

47,920

 

122,719

Cost of inventory sold

 

102,410

 

 

102,410

 

372,703

 

 

372,703

SG&A expenses

 

88,138

 

5,553

 

93,691

 

268,786

 

17,803

 

286,589

Segment profit

$

49,333

 

7,980

 

57,313

$

179,184

$

25,252

$

204,436

Acquisition-related costs

 

 

  

 

45

 

  

 

  

 

752

D&A expenses

 

  

 

 

17,692

 

  

 

  

 

51,919

Gain on disposition of PPE

 

 

 

(821)

 

  

 

  

 

(1,071)

Foreign exchange loss

 

 

 

237

 

  

 

  

 

1,118

Operating income

 

 

 

40,160

 

  

 

  

$

151,718

Interest expense

 

 

  

 

(10,090)

 

  

 

  

 

(31,023)

Other income, net

 

 

  

 

1,962

 

  

 

  

 

5,680

Income tax expense

 

  

 

  

 

(6,760)

 

  

 

  

 

(28,800)

Net income

 

  

 

  

 

25,272

 

  

 

  

$

97,575

The Company’s geographic breakdown of total revenue is as follows:

United 

  

States

Canada

Europe

Other

Consolidated

Total revenue for the three months ended:

    

  

    

  

    

  

    

  

    

  

September 30, 2020

$

177,883

$

58,059

$

41,891

$

53,709

$

331,542

September 30, 2019

156,380

 

56,129

 

34,522

 

42,765

 

289,796

Total revenue for the nine months ended:

 

 

 

 

 

September 30, 2020

$

573,001

$

191,692

$

115,659

$

113,495

$

993,847

September 30, 2019

552,186

 

178,069

 

136,590

 

119,602

 

986,447

5.    Revenue

The Company’s revenue breakdown is as follows:

Three months ended

Nine months ended

    

September 30, 

September 30, 

 

2020

2019

2020

2019

Service revenue:

  

    

  

    

  

    

  

Commissions

$

112,762

$

90,928

$

331,711

$

317,674

Fees

 

109,917

 

87,649

 

308,230

 

267,881

 

222,679

 

178,577

 

639,941

 

585,555

Inventory sales revenue

 

108,863

 

111,219

 

353,906

 

400,892

$

331,542

$

289,796

$

993,847

$

986,447

Ritchie Bros.

14

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

6.    Operating expenses

Costs of services

Three months ended

Nine months ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Ancillary and logistical service expenses

$

16,550

  

$

13,285

$

45,368

  

$

43,516

Employee compensation expenses

11,442

 

11,555

35,057

 

37,268

Buildings, facilities and technology expenses

1,653

 

1,655

7,768

 

5,961

Travel, advertising and promotion expenses

4,782

 

5,765

17,518

 

24,440

Other costs of services

4,796

 

4,122

12,315

 

11,534

$

39,223

$

36,382

$

118,026

$

122,719

SG&A expenses

Three months ended

Nine months ended

September 30, 

 

September 30, 

    

2020

    

2019

    

2020

    

2019

Employee compensation expenses

$

78,430

 

$

60,680

$

211,732

$

186,033

Buildings, facilities and technology expenses

 

15,901

 

14,569

 

46,108

 

45,066

Travel, advertising and promotion expenses

 

5,479

 

10,033

 

20,565

 

28,400

Professional fees

 

4,546

 

3,685

 

13,570

 

11,915

Other SG&A expenses

 

5,830

 

4,724

 

17,228

 

15,175

$

110,186

 

$

93,691

$

309,203

$

286,589

Depreciation and amortization expenses

Three months ended

Nine months ended

September 30, 

    

September 30, 

    

2020

    

2019

    

2020

    

2019

Depreciation expense

$

7,705

$

7,305

$

23,278

$

21,630

Amortization expense

 

10,731

 

10,387

 

32,308

 

30,289

$

18,436

$

17,692

$

55,586

$

51,919

Ritchie Bros.

15

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

7.    Income taxes

At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The estimate reflects, among other items, management’s best estimate of operating results. It does not include the estimated impact of foreign exchange rates or unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes.

For the three months ended September 30, 2020, income tax expense was $15,437,000, compared to an income tax expense of $6,760,000 for the same period in 2019. The effective tax rate was 25% in the third quarter of 2020, compared to 21% in the third quarter of 2019.

The effective tax rate increased in the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to an increased proportion of income taxed in jurisdictions with higher tax rates, a greater income tax expense related to increases in tax uncertainties in 2020 compared to 2019, and a higher estimate of non-deductible expenses. The higher estimate of non-deductible expenses are primarily due to final regulations published on April 8, 2020 by the United States Department of Treasury and the Internal Revenue Service (“IRS”) that clarified income tax benefits related to hybrid financing arrangements would not be deductible (“Hybrid Interest”).

For the nine months ended September 30, 2020, income tax expense was $48,741,000, compared to an income tax expense of $28,800,000 for the same period in 2019. The effective tax rate was 29% for the nine months ended September 30, 2020, compared to 23% for the nine months ended September 30, 2019.

The effective tax rate increased in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to Hybrid Interest benefits that are no longer deductible as of January 1, 2019. The Company had recorded approximately $6,228,000 in Hybrid Interest benefits in the twelve months ended December 31, 2019. In addition, there was greater income tax expense related to increases in tax uncertainties in 2020 than in 2019, and a greater proportion of income taxed in jurisdictions with higher tax rates. Partially offsetting these increases was the reduced impact of the US tax reform.

8.    Earnings per share attributable to stockholders

Basic earnings per share (“EPS”) attributable to stockholders was calculated by dividing the net income attributable to stockholders by the weighted average (“WA”) number of common shares outstanding during the period. Diluted EPS attributable to stockholders was calculated by dividing the net income attributable to stockholders by the WA number of shares of common stock outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include unvested PSUs, unvested RSUs, and outstanding stock options. The dilutive effect of potentially dilutive securities is reflected in diluted EPS by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.

Three months ended

Nine months ended

September 30, 2020

September 30, 2020

Net income

WA

Per

Net income

WA

Per

 

attributable to

 

number

 

share

attributable to

 

number

 

share

 

    

stockholders

    

of shares

    

amount

    

stockholders

    

of shares

    

amount

Basic

$

45,387

 

109,018,469

$

0.42

$

121,239

 

108,887,026

$

1.11

Effect of dilutive securities:

 

 

 

 

 

 

Share units

 

 

548,859

 

 

 

519,915

 

Stock options

 

 

802,390

 

(0.01)

 

 

653,771

 

(0.01)

Diluted

$

45,387

 

110,369,718

$

0.41

$

121,239

 

110,060,712

$

1.10

Ritchie Bros.

16

Table of Contents

Notes to the Condensed Consolidated Financial Statements

(Tabular amounts expressed in thousands of United States dollars, except where noted)

(Unaudited)

8.    Earnings per share attributable to stockholders (continued)

Three months ended

Nine months ended

September 30, 2019

September 30, 2019

Net income

WA

Per

Net income

WA

Per

 

attributable to

 

number

 

share

attributable to

 

number

 

share

    

stockholders

    

of shares

    

amount

stockholders

    

of shares

    

amount

Basic

25,266

108,003,390

0.23

$

97,466

 

108,453,525

$

0.90

Effect of dilutive securities:

 

 

 

Share units

481,268

 

 

430,175

 

Stock options

896,515

 

 

750,495

 

(0.01)

Diluted

$

25,266

109,381,173

$

0.23

$

97,466

 

109,634,195

$

0.89

9.    Supplemental cash flow information

Nine months ended September 30, 

2020

2019

Trade and other receivables

 

$

(185,899)

 

$

(123,667)

Inventory

3,938

58,791

Advances against auction contracts

6,566

4,528

Prepaid expenses and deposits

2,184

309

Income taxes receivable

1,191

(4,123)

Auction proceeds payable

213,596

248,587

Trade and other payables

20,675

(48,882)

Income taxes payable

4,179

14,050

Operating lease obligation

(8,809)

(10,762)

Other

(3,709)

541

Net changes in operating assets and liabilities

 

$

53,912

 

$

139,372

Nine months ended September 30, 

2020

2019

Interest paid, net of interest capitalized

 

$

31,173

 

$

34,955

Interest received

1,775

2,491

Net income taxes paid

32,750

23,193