-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DmguCRA3zsgOhX1FcpWGyZnziQqW/LBCkjx13eSfSRx/FD668ZPL54bc4JuQ+3ny prjXvwece6cM9gSnubmqPw== /in/edgar/work/0000891020-00-001940/0000891020-00-001940.txt : 20001110 0000891020-00-001940.hdr.sgml : 20001110 ACCESSION NUMBER: 0000891020-00-001940 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RITCHIE BROS AUCTIONEERS INC CENTRAL INDEX KEY: 0001046102 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 001-13425 FILM NUMBER: 756967 BUSINESS ADDRESS: STREET 1: 9200 BRIDGEPORT RD STREET 2: RICHMOND, BRITISH COLUMBIA CITY: CANADA STATE: A1 BUSINESS PHONE: 6042737964 6-K 1 o05048e6-k.txt FORM 6-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------------------ Form 6-K REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2000 ------------------------------------ RITCHIE BROS. AUCTIONEERS INCORPORATED 9200 Bridgeport Road Richmond, BC, Canada V6X 1S1 (604) 273 7564 (Address of principal executive offices) ------------------------------------ [indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F] Form 20-F Form 40-F X --- --- [indicate by check mark whether the registrant by furnishing information contained in this Form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934] Yes No X --- --- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements do not include all information and footnotes required by Canadian or United States generally accepted accounting principles. However, in the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the relevant periods have been made. Results for the interim periods are not necessarily indicative of the results to be expected for the year or any other period. These financial statements should be read in conjunction with the summary of accounting policies and the notes to the consolidated financial statements included in the Company's Annual Report on Form 40-F for the fiscal year ended December 31, 1999, a copy of which has been filed with the Securities and Exchange Commission. 2 3 RITCHIE BROS. AUCTIONEERS INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS EXCEPT PER SHARE AMOUNTS) (unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 2000 1999 2000 1999 ------- ------- ------- ------- Auction revenues.................................. $21,554 $20,699 $77,893 $74,301 Direct expenses................................... 3,449 2,924 12,742 12,028 ------- ------- ------- ------- 18,105 17,775 65,151 62,273 Expenses: Depreciation and amortization................... 2,100 1,608 5,806 3,842 General and administrative...................... 13,411 12,457 41,450 35,909 ------- ------- ------- ------- 15,511 14,065 47,256 39,751 ------- ------- ------- ------- Income from operations............................ 2,594 3,710 17,895 22,522 Other income (expenses): Interest expense................................ (858) (852) (2,514) (1,772) Other........................................... 425 345 1,010 857 ------- ------- ------- ------- (433) (507) (1,504) (915) ------- ------- ------- ------- Income before income taxes........................ 2,161 3,203 16,391 21,607 Income taxes: Current......................................... 487 850 4,601 6,748 Future.......................................... 171 207 569 610 ------- ------- ------- ------- 658 1,057 5,170 7,358 ------- ------- ------- ------- Net income........................................ $ 1,503 $ 2,146 $11,221 $14,249 ======= ======= ======= ======= Net income per share: Canadian GAAP: Basic........................................... $ 0.09 $ 0.13 $ 0.67 $ 0.85 ======= ======= ======= ======= Diluted......................................... $ 0.09 $ 0.13 $ 0.66 $ 0.84 ======= ======= ======= ======= United States GAAP: Basic........................................... $ 0.09 $ 0.13 $ 0.67 $ 0.85 ======= ======= ======= ======= Diluted......................................... $ 0.09 $ 0.13 $ 0.67 $ 0.84 ======= ======= ======= =======
See accompanying notes to consolidated financial statements. 3 4 RITCHIE BROS. AUCTIONEERS INCORPORATED CONSOLIDATED BALANCE SHEETS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $102,786 $ 55,921 Accounts receivable....................................... 33,457 9,645 Inventory................................................. 8,809 3,495 Advances against auction contracts........................ 4,551 856 Prepaid expenses and deposits............................. 1,381 1,221 Income taxes recoverable.................................. 3,747 865 -------- -------- 154,731 72,003 Capital assets (note 2)..................................... 136,885 110,459 Goodwill.................................................... 30,529 31,767 Funds committed for debt repayment (note 3)................. 3,250 -- Future income taxes......................................... 1,330 1,917 -------- -------- $326,725 $216,146 ======== ======== LIABILITIES AND EQUITY Current liabilities: Auction proceeds payable.................................. $110,738 $ 16,178 Accounts payable and accrued liabilities.................. 14,375 17,891 Short-term debt........................................... 6,662 6,529 Current bank term loans (note 3).......................... 6,578 5,425 -------- -------- 138,353 46,023 Bank term loans (note 3).................................... 46,712 35,728 -------- -------- 185,065 81,751 SHAREHOLDERS' EQUITY Share capital (note 4).................................... 69,131 69,130 Additional paid-in capital................................ 4,332 4,332 Retained earnings......................................... 75,273 64,052 Foreign currency translation adjustment................... (7,076) (3,119) -------- -------- 141,660 134,395 -------- -------- $326,725 $216,146 ======== ========
See accompanying notes to consolidated financial statements. 4 5 RITCHIE BROS. AUCTIONEERS INCORPORATED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS) (unaudited)
FOREIGN ADDITIONAL CURRENCY TOTAL SHARE PAID-IN RETAINED TRANSLATION SHAREHOLDERS' CAPITAL CAPITAL EARNINGS ADJUSTMENT EQUITY ------- ---------- -------- ----------- ------------- Balance, December 31, 1999.............. $69,130 $4,332 $64,052 $(3,119) $134,395 Net income............................ -- -- 3,609 -- 3,609 Foreign currency translation adjustment......................... -- -- -- (1,233) (1,233) ------- ------ ------- ------- -------- Balance, March 31, 2000................. 69,130 4,332 67,661 (4,352) 136,771 Net proceeds on stock options exercised.......................... 1 -- -- -- 1 Net income............................ -- -- 6,109 -- 6,109 Foreign currency translation adjustment......................... -- -- -- (633) (633) ------- ------ ------- ------- -------- Balance, June 30, 2000.................. $69,131 $4,332 $73,770 $(4,985) $142,248 Net income............................ -- -- 1,503 -- 1,503 Foreign currency translation adjustment......................... -- -- -- (2,091) (2,091) ------- ------ ------- ------- -------- Balance, September 30, 2000............. $69,131 $4,332 $75,273 $(7,076) $141,660 ======= ====== ======= ======= ========
See accompanying notes to consolidated financial statements. 5 6 RITCHIE BROS. AUCTIONEERS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS) (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 2000 1999 -------- -------- Cash provided by (used in) Operations: Net income................................................ $ 11,221 $ 14,249 Items not involving the use of cash Depreciation........................................... 4,568 3,017 Employee share compensation............................ -- 1,345 Future income taxes.................................... 587 610 Amortization of goodwill............................... 1,238 825 Changes in non-cash working capital: Accounts receivable.................................... (23,812) (28,052) Inventory.............................................. (5,314) (8,592) Advances against auction contracts..................... (3,695) 4,920 Prepaid expenses and deposits.......................... (160) (588) Income taxes recoverable............................... (2,882) (4,201) Auction proceeds payable............................... 94,560 66,492 Accounts payable and accrued liabilities............... (3,516) (2,323) Foreign currency translation adjustment................... (3,957) (214) -------- -------- 68,838 47,488 -------- -------- Financing: Issuance of share capital................................. 1 -- Bank term loans........................................... 12,137 37,606 Short-term debt........................................... 133 -- Funds committed for debt repayment........................ (3,250) -- -------- -------- 9,021 37,606 -------- -------- Investments: Goodwill (net of non-cash consideration).................. -- (25,616) Capital asset additions, net.............................. (30,994) (38,635) -------- -------- (30,994) (64,251) Increase in cash and cash equivalents....................... 46,865 20,843 Cash and cash equivalents, beginning of period.............. 55,921 73,620 -------- -------- Cash and cash equivalents, end of period.................... $102,786 $ 94,463 ======== ======== Supplemental disclosure of cash flow information Interest paid............................................. $ 2,934 $ 1,780 Income taxes paid......................................... $ 7,493 $ 8,630
See accompanying notes to consolidated financial statements. 6 7 RITCHIE BROS. AUCTIONEERS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS) SEPTEMBER 30, 2000 (Information as at September 30, 2000 and for the nine-month periods ended September 30, 2000 and 1999 is unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES: (a) BASIS OF PRESENTATION: These unaudited consolidated financial statements present the financial position, results of operations and changes in shareholders' equity and cash flows of Ritchie Bros. Auctioneers Incorporated (the "Company"). These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information. There are no measurement differences between Canadian and United States generally accepted accounting principles in the Company's interim consolidated financial statements other than in the calculation of earnings per share. 2. CAPITAL ASSETS Capital assets at September 30, 2000 are as follows:
ACCUMULATED NET BOOK COST DEPRECIATION VALUE -------- ------------ -------- Land and improvements................................... $ 66,716 $ 1,873 $ 64,843 Buildings............................................... 64,681 4,844 59,837 Automotive equipment.................................... 7,577 2,608 4,969 Computer equipment...................................... 3,134 1,393 1,741 Computer software....................................... 1,516 465 1,051 Yard equipment.......................................... 4,055 1,664 2,391 Office equipment........................................ 3,349 1,578 1,771 Leasehold improvements.................................. 455 173 282 -------- ------- -------- $151,483 $14,598 $136,885 ======== ======= ========
Capital assets at December 31, 1999 are as follows:
ACCUMULATED NET BOOK COST DEPRECIATION VALUE -------- ------------ -------- Land and improvements................................... $ 55,404 $ 1,426 $ 53,978 Buildings............................................... 49,891 3,535 46,356 Automotive equipment.................................... 6,633 2,224 4,409 Computer equipment...................................... 2,492 1,131 1,361 Computer software....................................... 525 185 340 Yard equipment.......................................... 3,474 1,391 2,083 Office equipment........................................ 2,999 1,329 1,670 Leasehold improvements.................................. 380 118 262 -------- ------- -------- $121,798 $11,339 $110,459 ======== ======= ========
7 8 RITCHIE BROS. AUCTIONEERS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS) SEPTEMBER 30, 2000 (Information as at September 30, 2000 and for the nine-month periods ended September 30, 2000 and 1999 is unaudited) 3. BANK TERM LOANS:
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Term loan of NLG 9.6 million, secured by deeds of trust on specific property, bearing interest at the Amsterdam Interbank Offered Rate plus 7/8%, due in quarterly installments of NLG 125,000 including interest, with the final payment occurring in 2013........................... $ 3,713 $ 4,395 Term loan, unsecured, with $25 million bearing interest at 7.21% and $10 million bearing interest at 6.70%, due in minimum annual installments of $5 million ($1.75 million towards principal, $3.25 million towards a sinking fund), with the final payment occurring in 2004.................. 33,250 35,000 Term loan of AUD $2.7 million, secured by deeds of trust on specific property, with $1.5 million bearing interest at 6.5% and $1 million bearing interest at the Australian prime rate due in quarterly installments of AUD $75,000, including interest, with final payment occurring in 2010...................................................... 1,327 1,758 Term loan, unsecured, of $5 million bearing interest at 7.81%, due in minimum annual installments of $250,000, with final payment occurring in 2005...................... 5,000 -- Term loan, unsecured, of $5 million bearing interest at 7.91%, due in minimum annual installments of $250,000, with final payment occurring in 2005...................... 5,000 -- Term loan, unsecured, of $5 million bearing interest at 7.91%, due in minimum annual installments of $714,300 ($250,000 towards principal, $464,300 towards a sinking fund), with the final payment occurring in 2005........... 5,000 -- ------- ------- 53,290 41,153 Less current portion........................................ (6,578) (5,425) ------- ------- $46,712 $35,728 ======= =======
4. SHARE CAPITAL: (a) SHARES ISSUED Issued and outstanding, December 31, 1999................... 16,733,264 For cash, pursuant to stock options exercised............. 13,699 ---------- Issued and outstanding, September 30, 2000.................. 16,746,963 ==========
8 9 RITCHIE BROS. AUCTIONEERS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS) SEPTEMBER 30, 2000 (Information as at September 30, 2000 and for the nine-month periods ended September 30, 2000 and 1999 is unaudited) (b) OPTIONS
NUMBER OF SHARES EXERCISE PRICE --------- ----------------- Outstanding, December 31, 1999............................. 195,236 $ 0.10 - 38.625 Granted.................................................. 78,000 $26.625 - 26.6875 Exercised................................................ (13,699) $ -0.10 Cancelled................................................ (7,900) $ -0.10 ------- ----------------- Outstanding, September 30, 2000............................ 251,637 $ 0.10 - 38.625 ======= =================
The options outstanding at September 30, 2000 expire from dates ranging to April 26, 2010. (c) WARRANTS Outstanding, December 31, 1999.............................. 400,000 Outstanding, September 30, 2000............................. 400,000
The warrants are fully vested and have an exercise price of $26.69 per share and expire on April 1, 2001. 5. OTHER: CONSOLIDATED STATEMENTS OF COMPREHENSIVE NET INCOME
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 2000 1999 ------- ------- Net income.................................................. $11,221 $14,249 Other comprehensive income adjustments Foreign currency translation.............................. (3,957) (214) ------- ------- Comprehensive income in accordance with United States GAAP...................................................... $ 7,264 $14,035 ======= =======
9 10 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion summarizes the significant factors affecting the consolidated operating results and financial condition of Ritchie Bros. Auctioneers Incorporated ("Ritchie Bros." or the "Company") for the three-month and nine-month periods ended September 30, 2000 compared to the three-month and nine-month periods ended September 30, 1999. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included herein and included in the Company's Annual Report and Report on Form 40-F for the year ended December 31, 1999. The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles in Canada. There are no measurement differences between Canadian and United States generally accepted accounting principles in the Company's interim consolidated financial statements other than in the calculation of earnings per share. Amounts discussed below are based on consolidated financial statements prepared in accordance with Canadian accounting principles. Ritchie Bros. is the world's leading auctioneer of industrial equipment. At September 30, 2000, the Company operated from over 80 locations in North and Central America, Europe, Asia, Australia, Africa and the Middle East. The Company sells, through unreserved public auctions, a broad range of used equipment, including equipment utilized in the construction, transportation, mining, forestry, petroleum and agricultural industries. Gross auction sales represent the aggregate selling prices of all items sold at Ritchie Bros. auctions during the periods indicated. Gross auction sales are key to understanding the financial results of the Company, since the amount of auction revenues and to a lesser extent, certain expenses, are dependent on it. Auction revenues include commissions earned as agent for consignors through both straight commission and gross guarantee contracts, plus the net profit on the sale of equipment purchased and sold by the Company as principal. Under a gross guarantee contract, the consignor is guaranteed a minimum amount of proceeds on the sale of its equipment. When the Company guarantees gross proceeds, it earns a commission on the guaranteed amount and typically participates in a negotiated percentage of proceeds, if any, in excess of the guaranteed amount. If auction proceeds are less than the guaranteed amount, the Company's commission would be reduced, or, if sufficiently lower, the Company would incur a loss. Auction revenues are reduced by the amount of any losses on gross guarantee consignments and sales by the Company as principal. Auction revenues also include interest income earned that is incidental to the auction business. The Company's gross auction sales and auction revenues are affected by the seasonal nature of the auction business. Gross auction sales and auction revenues tend to increase during the second and fourth calendar quarters during which the Company generally conducts more auctions than in the first and third calendar quarters. The Company's gross auction sales and auction revenues are also affected on a period-to-period basis by the timing of major auctions. In newer markets where the Company is developing operations, the number and size of auctions and, as a result, the level of gross auction sales and auction revenues, is likely to vary more dramatically from period-to-period than in the Company's established markets where the number, size and frequency of the Company's auctions are more consistent. Finally, economies of scale are achieved as the Company's operations in a region mature from conducting intermittent auctions, establishing a regional auction unit, and ultimately to developing a permanent auction site. Economies of scale are also achieved when the size of the Company's auctions increases. The Company is aware of potential restrictions that may affect the ability of equipment owners to transport certain equipment between some jurisdictions. Management believes that these potential restrictions have not had a significant impact on the Company's business, financial condition or results of operations to date. However, the extent of any future impact on the Company's business, financial condition or results of operations from these potential restrictions cannot be predicted at this time. Although the Company cannot accurately anticipate the future effect of inflation, inflation historically has not had a material effect on the Company's operations. 10 11 During the first quarter of 2000, the Company purchased 318 acres of land (with plans to develop 125 acres) in Edmonton, Alberta with the intention of constructing a permanent auction site to service the Edmonton market. The new site is expected to replace the Company's existing 24 acre Edmonton permanent auction site in the second half of 2001. In addition, in the first quarter of 2000, the Company opened new permanent auction sites in Perris, California and Morris, Illinois, replacing existing regional auction units. During the second quarter of 2000, the Company opened a permanent auction site in Montreal, Quebec, replacing an existing regional auction unit. The Company also opened a new auction facility at its regional auction unit in Dubai, the United Arab Emirates. During the third quarter of 2000, the Company held its largest auction sale ever in North America at Fort Worth, Texas generating gross auction sales of more than $44 million. The Company also opened a new auction facility at its regional auction unit in Singapore. Additionally, in the first nine months of 2000, the Company hosted several live auction broadcasts over the Internet and continued its work on other Internet initiatives designed to enhance the Company's auction business. RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 AUCTION REVENUES Auction revenues of $77.9 million for the nine months ended September 30, 2000 increased by $3.6 million, or 4.83%, from the comparable period in 1999 due to increased gross auction sales, partially offset by a lower average percentage of auction revenues earned by the Company on gross auction sales. Gross auction sales of $874.8 million for the nine months ended September 30, 2000 increased $66.8 million, or 8.26%, from the comparable period in the prior year, primarily as a result of increased gross auction sales in the United States, partially offset by decreased gross auction sales in the United Arab Emirates. Results for the first nine months of 2000 included significant auctions in Ocala, Florida; Fort Worth, Texas; and in the Port of Moerdijk, the Netherlands. Auction revenues as a percentage of gross auction sales have averaged approximately 8.80% on a long-term basis. In the first nine months of 2000, the auction revenue rate of 8.90% was marginally higher than the long-term average and lower than the unusually high 9.19% rate experienced in the comparable 1999 period. The Company's expectations with respect to the long-term average auction revenue rate remain unchanged. DIRECT EXPENSES Direct expenses are expenses that are incurred as a direct result of an auction sale being held. Direct expenses include the costs of hiring personnel to assist in conducting the auction, lease expenses for temporary auction sites, travel costs for full time employees to attend and work at the auction site, security hired to safeguard equipment while at the auction site and advertising specifically related to the auction. Direct expenses of $12.7 million for the nine months ended September 30, 2000 increased by $0.7 million compared to the comparable 1999 period due to increased auction activity generated by the Company in 2000. As a percentage of gross auction sales, direct expenses were 1.46% for the nine months ending September 30, 2000, lower than the 1.49% ratio experienced in the first nine months of 1999. Direct expenses as a percentage of gross auction sales are expected to fluctuate slightly based on the size and location of auctions held each period. Management expects that, on average, direct expenses as a percentage of gross auction sales should average approximately 1.5% over the course of a full year. DEPRECIATION AND AMORTIZATION EXPENSE Depreciation is calculated on capital assets employed in the Company's business, including building and site improvements, automobiles, yard equipment, and computers. Amortization results from expensing, over 20 years, the $33.0 million of goodwill recorded as a result of the acquisition of the auction business of Forke in April 1999. In the nine-month period ended September 30, 2000, depreciation and amortization expense 11 12 was $5.8 million, compared to $3.8 million in the comparable 1999 period. This increase is the result of the depreciation of new auction facilities constructed over the past year. Management anticipates that depreciation expense will increase as existing auction sites are improved and additional permanent auction sites are acquired and developed. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expense ("G&A") includes employee expenses such as salaries, wages, performance bonuses and benefits, non-auction related travel, institutional advertising, insurance, general office, and computer expenses. For the nine months ended September 30, 2000, the Company incurred G&A of $41.5 million, as compared to $35.9 million for the comparable nine-month period in 1999. This increase in expenditures is attributable to an increase in employee numbers and infrastructure to support the growth initiatives of the Company, and costs associated with a Company-wide meeting held during the first three months of 2000, as well as costs related to the operation of new permanent auction sites and an administrative office in the United States as part of the acquisition of the auction business of Forke. INCOME FROM OPERATIONS Income from operations was $17.9 million in the nine months ended September 30, 2000 compared to $22.5 million in 1999. This decline is primarily the result of increased G&A and depreciation and amortization expenses in the first nine months of 2000, partially offset by increased auction revenues for the nine months ended September 30, 2000 compared to the same period in 1999. INTEREST EXPENSE Interest expense includes interest and bank charges paid on term bank debt. Interest expense for the nine months ended September 30, 2000 was $2.5 million, compared to $1.8 million incurred in the nine months ended September 30, 1999. The increase resulted primarily from debt incurred by the Company in connection with the acquisition of the auction business and certain assets of Forke in 1999, as well as debt incurred over the past year to finance the development of additional permanent auction sites. This increase was partially offset by the capitalization of $0.7 million (1999 -- nil) of interest related to properties under development during the period. Management anticipates that interest expense will increase further as debt is incurred to finance the development of additional permanent auction sites. See "-- Overview" and "Liquidity and Capital Resources." OTHER INCOME Other income arises from equipment appraisals performed by the Company, and other miscellaneous sources. Other income for the nine months ended September 30, 2000 of $1.0 million compared to $0.9 million for the comparable 1999 period. INCOME TAXES Income taxes of $5.2 million for the nine months ended September 30, 2000 have been computed based on rates of tax that apply in each of the tax jurisdictions in which the Company operates. The effective tax rate of 31.5% on net income is lower than the 34.1% rate the Company experienced in the comparable 1999 period due to the different jurisdictions in which the Company operates and earns its income. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 AUCTION REVENUES Auction revenues of $21.6 million for the three months ended September 30, 2000 increased by $0.9 million, or 4.1%, from the comparable period in 1999 due to increased gross auction sales. Gross auction sales of $231.6 million for the three months ended September 30, 2000 increased $12.5 million, or 5.72%, from 12 13 the comparable period in the prior year, primarily as a result of increased gross auction sales in Canada and Asia. Results for the third quarter of 2000 included a significant auction in Fort Worth, Texas. Auction revenues as a percentage of gross auction sales were 9.31% in the three months ended September 30, 2000 compared to 9.45% in the comparable 1999 period and a long-term average of 8.80%. DIRECT EXPENSES Direct expenses of $3.4 million for the three months ended September 30, 2000 increased by $0.5 million compared to the comparable 1999 period. As a percentage of gross auction sales, direct expenses were 1.49% for the three months ending September 30, 2000, higher than the 1.34% experienced during the 1999 period. Direct expenses are expected to fluctuate slightly based on the size and location of auctions held each period. DEPRECIATION AND AMORTIZATION EXPENSE In the three-month period ended September 30, 2000, depreciation and amortization expense was $2.1 million, compared to $1.6 million in the comparable 1999 period. This increase is primarily the result of the depreciation of new auction facilities constructed over the past year. GENERAL AND ADMINISTRATIVE EXPENSE For the three months ended September 30, 2000, the Company incurred G&A of $13.4 million, as compared to $12.5 million for the comparable three-month period in 1999. This increase in expenditures is attributable to an increase in employee numbers and infrastructure to support the growth initiatives of the Company, as well as costs related to the operation of new permanent auction sites. INCOME FROM OPERATIONS Income from operations was $2.6 million in the three months ended September 30, 2000 compared to $3.7 million in 1999. The decline is primarily the result of increased G&A and depreciation expense in the third quarter of 2000. INTEREST EXPENSE Interest expense for the three months ended September 30, 2000 of $0.9 million, did not change significantly from the comparable 1999 period. OTHER INCOME Other income of $0.4 million for the three months ended September 30, 2000 increased from $0.3 million for the comparable period in 1999. INCOME TAXES Income taxes of $0.7 million for the three months ended September 30, 2000 have been computed based on rates of tax that apply in each of the tax jurisdictions in which the Company operates. The effective tax rate of 30.4% on net income is lower than the 33.0% rate the Company experienced in the comparable 1999 period due to the different jurisdictions in which the Company operates and earns its income. LIQUIDITY AND CAPITAL RESOURCES The Company's cash can fluctuate significantly from period to period, largely due to differences in timing of receipt of gross sale proceeds from buyers and the payment of net amounts due to consignors. If auctions are conducted near a period end, the Company may hold cash in respect of those auctions that will not be paid to consignors until after the period end. Accordingly, management believes a more meaningful measure of the Company's liquidity is working capital, including cash. 13 14 At September 30, 2000, working capital including cash was $16.4 million, compared to $26.0 million at December 31, 1999. Net capital expenditures by the Company during the nine months ended September 30, 2000 were $31.0 million as compared to $38.6 million for the nine months ended September 30, 1999. In the 2000 period, the Company acquired land for use as permanent auction sites and incurred related development costs in Canada and the United States, and continued to incur site development costs in the United States, Singapore and the United Arab Emirates. The Company is continuing with its plan to add additional permanent auction sites in selected locations and is presently in various stages of commitments to acquire land for development in the United States. The Company has established credit facilities with financial institutions in the United States, Canada, Europe, and Australia. The Company presently has access to credit lines for operations of approximately $97.1 million and to credit lines for funding property acquisitions of approximately $81.6 million. At September 30, 2000, the Company had bank debt of $0.8 million related to operations and bank debt of $59.2 million related to property acquisitions, leaving net credit lines of $96.3 million available for operations and $22.4 million available for property acquisitions. See "-- Overview". 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 the Company's business. These statements include, in particular, statements relating to auction revenue rates, direct expense rates, G&A increases, income tax rates, the anticipated improvement, acquisition and development of permanent auction sites, the development of Internet-related initiatives, and the financing available to the Company. Words such as "expects", "intends", "plans", "believes", "estimates", "anticipates" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. The following important factors, among others, could affect the Company's actual results and could cause such results to differ materially from those expressed in the Company's forward-looking statements: the many factors that have an impact on the supply of and demand for used equipment; fluctuations in the market values of used equipment; potential inability to achieve and manage growth; periodic and seasonal variations in operating results or financial conditions; the timing and location of auctions; potential delays in construction or development of auction sites; actions of competitors; adverse changes in economic conditions; restrictions affecting the ability of equipment owners to transport equipment between jurisdictions; potential losses from price guarantees, purchases of inventory, advances by the Company and guarantees of clear title; risks of noncompliance with governmental and environmental regulation; potential inadequacy of insurance coverage; risks of international operations; dependence of key personnel; failure, pace or lack of development of Internet-related initiatives; and other risks and uncertainties as detailed in the Company's periodic filings with the United States Securities and Exchange Commission including its annual return for 1999 filed on Form 40-F on March 24, 2000. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements should be considered in light of these factors. 14 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS
NUMBER - ------ DESCRIPTION *3.1 Articles of Amalgamation, as amended *3.2 By-laws *4.1 Form of common share certificate 4.2 Description of capital shares contained in the Articles of Amalgamation (see Exhibit 3.1) 4.3 Description of rights of securityholders contained in the By-laws (see Exhibit 3.2) *10.1 1997 Stock Option Plan, as amended *10.2 Form of Indemnity Agreement for directors and officers
- --------------- * Incorporated by reference to the same exhibit number from the Registration Statement on Form F-1 filed on September 26, 1997, as amended (File No. 333-36457). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RITCHIE BROS. AUCTIONEERS INCORPORATED (Registrant) Date November 9, 2000 By /s/ ROBERT S. ARMSTRONG ---------------------------------------------- Robert S. Armstrong, Corporate Secretary
15 -----END PRIVACY-ENHANCED MESSAGE-----