<PAGE> 1
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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 March 31, 1998
--------------------------------------
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 X Form 40-F __
[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
==============================================================================
<PAGE> 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 for the periods ended
April 30, 1997 and December 31, 1997 included in the Company's Rule 424(b)
Prospectus dated March 9, 1998 filed with the United States Securities and
Exchange Commission. Effective December 31, 1997, the Company changed its fiscal
year end from April 30 to December 31.
2
<PAGE> 3
RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $27,149 $ 88,878
Accounts receivable....................................... 6,744 58,091
Inventory................................................. 7,081 6,782
Advances against auction contracts........................ 1,261 4,250
Prepaid expenses and deposits............................. 1,218 1,468
------- --------
43,453 159,469
Fixed assets (note 2)....................................... 27,007 34,999
------- --------
$70,460 $194,468
======= ========
LIABILITIES AND EQUITY
Current liabilities:
Auction proceeds payable.................................. $17,728 $ 81,352
Accounts payable and accrued liabilities.................. 17,131 25,774
Current bank loans........................................ 730 730
Income taxes payable...................................... 4,542 1,289
------- --------
40,131 109,145
Bank term loans............................................. 4,623 4,382
------- --------
44,754 113,527
SHAREHOLDERS' EQUITY
Share capital (note 3).................................... 10,866 62,777
Retained earnings......................................... 16,958 20,335
Foreign currency translation adjustment................... (2,118) (2,171)
------- --------
25,706 80,941
------- --------
$70,460 $194,468
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS EXCEPT PER SHARE AMOUNTS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Auction revenues............................................ $ 13,710 $ 21,229
Direct expenses............................................. 2,325 3,567
---------- ----------
11,385 17,662
Expenses:
Depreciation.............................................. 550 600
General and administrative................................ 7,060 11,732
---------- ----------
7,610 12,332
---------- ----------
Income from operations...................................... 3,775 5,330
Other income (expenses):
Interest expense.......................................... (225) (741)
Other..................................................... 160 323
---------- ----------
(65) (418)
---------- ----------
Income before income taxes.................................. 3,710 4,912
Income taxes (note 4)....................................... 570 1,535
---------- ----------
Net income.................................................. $ 3,140 $ 3,377
========== ==========
Net income per share (note 5)............................... $ 0.25 $ 0.24
========== ==========
Net income per share -- diluted (note 5).................... $ 0.25 $ 0.24
========== ==========
Weighted average number of shares outstanding............... 12,715,667 13,991,833
========== ==========
Diluted weighted average number of shares outstanding....... 12,715,667 14,188,166
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
FOREIGN
CURRENCY TOTAL
SHARE RETAINED TRANSLATION SHAREHOLDERS'
CAPITAL EARNINGS ADJUSTMENT EQUITY
------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997.................... $10,866 $16,958 $(2,118) $25,706
Common shares issued........................ 51,911 -- -- 51,911
Net income.................................. -- 3,377 -- 3,377
Foreign currency translation adjustment..... -- -- (53) (53)
------- ------- ------- -------
Balance, March 31, 1998....................... $62,777 $20,335 $(2,171) $80,941
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998
------------------
<S> <C>
Cash provided by (used in)
Operations:
Net income................................................ $ 3,377
Items not involving the use of cash
Depreciation........................................... 600
Changes in non-cash working capital:
Accounts receivable.................................... (51,347)
Inventory.............................................. 299
Advances against auction contracts..................... (2,989)
Prepaid expenses and deposits.......................... (250)
Auctions proceeds payable.............................. 63,624
Accounts payable and accrued liabilities............... 8,643
Income taxes payable................................... (3,253)
Foreign currency translation adjustment................... (53)
-------
18,651
Financing:
Issuance of share capital, net of issue costs............. 51,911
Bank loans................................................ (241)
-------
51,670
Investments:
Fixed asset additions, net................................ (8,592)
-------
Increase in cash and cash equivalents....................... 61,729
Cash and cash equivalents, beginning of period.............. 27,149
-------
Cash and cash equivalents, end of period.................... $88,878
=======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
MARCH 31, 1998
(Information as at March 31, 1998 and for the three-month periods
ended March 31, 1998 and 1997 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") and its
predecessor businesses. These predecessor businesses comprised the Ritchie Bros.
Auctioneers group of companies and partnerships. A reorganization of the Company
and its predecessor businesses (the "Reorganization") was completed in December
1997 and is described more fully in the consolidated financial statements and
notes thereto included in the Company's rule 424(b) Prospectus dated March 9,
1998 filed with the United States Securities and Exchange Commission.
These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles for interim financial
information. Except as disclosed in note 6, these consolidated financial
statements comply, in all material respects, with generally accepted accounting
principles in the United States.
2. FIXED ASSETS
Fixed assets at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------- ------------ --------
<S> <C> <C> <C>
Land and improvements..................................... $12,830 $ 535 $12,295
Buildings................................................. 11,490 2,726 8,764
Automotive equipment...................................... 3,947 1,002 2,972
Computer equipment........................................ 1,384 433 951
Yard equipment............................................ 2,320 1,082 1,238
Office equipment.......................................... 1,454 874 580
Leasehold improvements.................................... 225 18 207
------- ------ -------
$33,677 $6,670 $27,007
======= ====== =======
</TABLE>
Fixed assets at March 31, 1998 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------- ------------ --------
<S> <C> <C> <C>
Land and improvements..................................... $19,285 $ 645 $18,640
Buildings................................................. 12,597 2,671 9,926
Automotive equipment...................................... 4,630 1,243 3,387
Computer equipment........................................ 1,392 496 896
Yard equipment............................................ 2,088 908 1,180
Office equipment.......................................... 1,669 885 784
Leasehold improvements.................................... 209 23 186
------- ------ -------
$41,870 $6,871 $34,999
======= ====== =======
</TABLE>
7
<PAGE> 8
RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
MARCH 31, 1998
(Information as at March 31, 1998 and for the three-month periods
ended March 31, 1998 and 1997 is unaudited)
3. SHARE CAPITAL:
SHARES ISSUED:
In March 1998, the Company issued 3,335,000 common shares in connection
with its initial public offering. Net proceeds raised from the offering, after
deducting underwriting commissions and other direct costs, were $51.9 million.
4. INCOME TAXES:
For the three months ended March 31, 1997, not all income earned by the
Group was subject to tax as, during the period prior to the Reorganization, many
of the Company's predecessor entities were partnerships and not subject to
corporate income tax.
5. NET INCOME PER SHARE:
Net income per share has been calculated based on the weighted average
number of shares outstanding after giving retroactive effect to the 12,715,667
common shares issued on the Reorganization.
6. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
The consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles for interim financial
information which differ, in certain respects, from accounting practices
generally accepted in the United States and from requirements promulgated by the
United States Securities and Exchange Commission.
Material differences to the consolidated financial statements and related
notes of the Company are as follows:
(a) CONSOLIDATED STATEMENT OF CASH FLOWS:
United States accounting principles require the following supplementary
information be presented to a statement of cash flows:
<TABLE>
<CAPTION>
MARCH 31,
1998
---------
<S> <C>
Interest paid............................................... $ 735
Income taxes paid........................................... $4,415
</TABLE>
(b) NET INCOME PER SHARE:
Under United States generally accepted accounting principles, basic and
diluted net income per share are the same as the corresponding basic and diluted
net income per share computed under Canadian generally accepted accounting
principles.
8
<PAGE> 9
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 months
ended March 31, 1998 compared to the three months ended March 31, 1997. This
discussion should be read in conjunction with the consolidated financial
statements and notes to the consolidated financial statements thereto included
in the Company's Rule 424(b) Prospectus dated March 9, 1998 filed with the
United States Securities and Exchange Commission. Effective December 31, 1997,
the Company changed its fiscal year end from April 30 to December 31. Data for
the three months ended March 31, 1997 is based on management estimates.
Ritchie Bros. is the world's leading auctioneer of industrial equipment,
operating through over 50 locations, including 13 permanent auction sites and 8
regional auction units, in 13 countries in North America, Europe, Asia,
Australia 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.
Income taxes reported in periods prior to the completion of the
reorganization (as described in the Company's Rule 424(b) Prospectus dated March
9, 1998, the "Reorganization") in December 1997 are not indicative of taxes that
would normally be incurred on reported income. Prior to the Reorganization, the
majority of Ritchie Bros.' business operations was carried on by predecessor
entities to the Company that were partnerships. Consequently, most of the income
of the predecessor partnerships was included for income tax purposes in the
income of the partner entities, many of which were not predecessor entities to
the Company. As a result of the Reorganization, the Company is subject to income
taxation in all relevant jurisdictions.
Prior to the Reorganization the Company's general and administrative
expense fluctuated significantly from period to period, primarily as a result of
the amount and timing of profit distributions paid as bonuses to certain of the
beneficial owners of the Company's predecessor entities. During this period,
certain other beneficial owners were remunerated through profit distributions
that did not result in charges against the
9
<PAGE> 10
Company's income. The differences in timing, magnitude and characterization of
remuneration will affect the quarter-to-quarter comparability of general and
administrative expense as between the year ended December 31, 1997 and the year
ending December 31, 1998, with some quarters reflecting increased expenses, and
others reflecting decreased expenses.
Although the Company cannot accurately anticipate the future effect of
inflation, inflation historically has not had a material effect on the Company's
operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Auction Revenues
Auction revenues of $21.2 million for the three months ended March 31, 1998
increased by $7.5 million, or 54.8%, from $13.7 million in the comparable period
in 1997 due to increased gross auction sales. Average commission rates for both
the 1998 and 1997 quarters of 9.33% were above the Company's longer-term average
commission rate of 8.80%. Gross auction sales of $227.6 million for the three
months ended March 31, 1998 increased by $80.7 million, or 55.0%, from $146.9
million in the comparable period in the 1997, primarily as a result of increased
gross auction sales in the United States, Europe and the United Arab Emirates.
Results for the 1998 period included significant gross auction sales for
auctions held by the Company in Rotterdam, the Netherlands, Fort Worth, Texas,
and Dubai, United Arab Emirates. No auction sales were held in the United Arab
Emirates in the three-month period ending March 31,1997.
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 the conduct of 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 costs specifically related to the auction. Direct expenses increased
by $1.2 million for the three months ended March 31, 1998 compared to the same
period in the prior year, reflecting increased costs from increased gross
auction sales. As a percentage of gross auction sales, direct expenses were
1.57% for the three-month period ending March 31, 1998, virtually unchanged from
the 1.58% rate experienced during the comparable period in 1997. As a percentage
of gross auction sales, direct expenses incurred in both periods were lower than
the longer-term average of 1.90% experienced by the Company, primarily due to
several larger auctions being held during these periods, which resulted in
certain efficiencies.
Depreciation Expense
Depreciation is calculated on capital assets employed in the Company's
business, including building and site improvements, automobiles, yard equipment,
and computers. In the three-month period ended March 31, 1998, depreciation
increased by $0.05 million compared to the comparable period in the prior year,
reflecting a moderate increase in investment in depreciable fixed assets.
Management anticipates that depreciation expense will increase as existing
auction sites are improved and additional permanent auction sites are acquired
and developed in keeping with the Company's growth strategy.
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 three months ended March 31, 1998, G&A increased by $4.7
million, or
10
<PAGE> 11
66.2%, from the comparable period in the prior year. Certain components of G&A
are not comparable on a period to period basis since the 1997 period reflects
results prior to the Reorganization. The increase is primarily a result of
increased employee compensation for the three months ended March 31, 1998
compared to the 1997 period, including accrued performance bonuses in
recognition of the Company's strong earnings growth. The G&A increase also
reflects an increased level of administrative infrastructure to support higher
levels of gross auction sales.
Income from Operations
Income from operations of $5.3 million in the three months ended March 31,
1998 increased by $1.5 million, or 41.2%, from $3.8 million in the comparable
period in 1997. The increase is primarily attributable to more and larger
auctions being held in the first three months of 1998 compared to 1997.
Interest Expense
Interest expense includes bank charges and interest paid on term bank debt.
Interest expense of $0.7 million for the three months ended March 31, 1998
increased by $0.5 million over the same period in 1997. The increase was
primarily due to additional short-term bank debt incurred by the Company as a
result of capital withdrawn in the course of the Reorganization. Management
plans to partially finance the acquisition of additional permanent auction sites
by incurring debt, which will result in an increase in interest expense in the
future.
Other Income
Other income arises from equipment appraisals performed by the Company and
other miscellaneous sources, and increased by $0.2 million in the three-month
period ended March 31, 1998 compared to the comparable period in 1997 due to
recoveries of miscellaneous prior period charges.
Income Taxes
Income taxes for the three months ended March 31, 1998 have been computed
based on actual rates of tax that apply in each of the tax jurisdictions in
which the company operates. The effective 31.3% rate of tax on net income for
the three-month period in 1998 is lower than the rate the Company would normally
expect for a full year period. Income taxes for the three months ended March 31,
1997 of $0.6 million are not meaningful since, during this period prior to the
Reorganization, many of the Company's predecessor entities were partnerships not
subject to corporate income taxation.
Liquidity and Capital Resources
The Company's cash can fluctuate significantly from period to period,
largely due to differences in timing of the receipt of gross auction 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.
At March 31, 1998 and December 31, 1997, working capital was $50.3 million
and $3.3 million, respectively. The increase in working capital of $47.0 million
resulted primarily from the receipt of net proceeds from the Company's initial
public offering in March 1998 of approximately $51.9 million, and from net
income after tax earned during the three months ended March 31, 1998. This
increase was partially offset by capital expenditures incurred by the Company
during the period.
Net capital expenditures by the Company during the three-month period ended
March 31, 1998 were $8.6 million as compared to $3.2 million for the eight
months ended December 31, 1997. In the 1998 period, the Company acquired land
for use as permanent auction sites and incurred related development costs in the
United States and Australia.
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<PAGE> 12
The Company is continuing with its plan to add additional permanent auction
sites around the world and is presently in various stages of commitments to
acquire land for development in the United States, Canada, and Europe.
Subsequent to the initial public offering, the Company has either completed
or is in the latter stages of establishing credit facilities with financial
institutions in the United States, Canada, Europe, and Australia. Upon
completion, the Company anticipates that it will have access to credit lines for
operations exceeding $65.0 million and to credit lines for funding property
acquisitions exceeding $30.0 million.
FORWARD-LOOKING STATEMENTS
Certain statements contained in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section of this Report on Form
6-K are forward-looking statements (as defined in Section 21E of the Securities
Exchange Act of 1934, as amended) that involve risks and uncertainties
including, in particular, statements relating to the anticipated improvement,
acquisition and development of permanent auction sites, and financing available
to the Company. 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 impact on the supply of and demand for used equipment; fluctuations in the
market values of used equipment; periodic and seasonal variations in operating
results or financial conditions; potential delays in construction or development
of auction sites; actions of competitors; and other risks and uncertainties as
detailed in the Company's Rule 424(b) Prospectus dated March 9, 1998.
Forward-looking statements should be considered in light of these factors.
12
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
<TABLE>
<CAPTION>
NUMBER
- ------ DESCRIPTION
<C> <S>
*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
</TABLE>
- ---------------
* 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.
<TABLE>
<S> <C>
RITCHIE BROS. AUCTIONEERS INCORPORATED
(Registrant)
Date May 18, 1998 By /s/ PETER J. BLAKE
----------------------------------------------
Peter J. Blake, Vice President Finance
and Chief Financial Officer
</TABLE>
13
