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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 June 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
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<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 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
<PAGE> 3
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Auction revenues.................................. $29,570 $35,589 $56,339 $53,602
Direct expenses................................... 5,367 6,352 9,293 9,104
------- ------- ------- -------
24,203 29,237 47,046 44,498
Expenses:
Depreciation and amortization................... 1,988 1,500 3,706 2,234
General and administrative...................... 12,952 11,550 28,039 23,452
------- ------- ------- -------
14,940 13,050 31,745 25,686
------- ------- ------- -------
Income from operations............................ 9,263 16,187 15,301 18,812
Other income (expenses):
Interest expense................................ (910) (677) (1,656) (920)
Other........................................... 251 245 585 512
------- ------- ------- -------
(659) (432) (1,071) (408)
------- ------- ------- -------
Income before income taxes........................ 8,604 15,755 14,230 18,404
Income taxes:
Current......................................... 2,306 5,045 4,114 5,898
Future.......................................... 189 239 398 403
------- ------- ------- -------
2,495 5,284 4,512 6,301
------- ------- ------- -------
Net income........................................ $ 6,109 $10,471 $ 9,718 $12,103
======= ======= ======= =======
Net income per share:
Canadian GAAP:
Basic........................................... $ 0.36 $ 0.63 $ 0.58 $ 0.73
======= ======= ======= =======
Diluted......................................... $ 0.36 $ 0.61 $ 0.57 $ 0.71
======= ======= ======= =======
United States GAAP:
Basic........................................... $ 0.36 $ 0.63 $ 0.58 $ 0.73
======= ======= ======= =======
Diluted......................................... $ 0.36 $ 0.62 $ 0.58 $ 0.72
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 83,213 $ 55,921
Accounts receivable....................................... 29,187 9,645
Inventory................................................. 5,357 3,495
Advances against auction contracts........................ 257 856
Prepaid expenses and deposits............................. 2,126 1,221
Income taxes recoverable.................................. 3,760 865
-------- --------
123,900 72,003
Capital assets (note 2)..................................... 128,695 110,459
Goodwill.................................................... 30,942 31,767
Funds committed for debt repayment (note 3)................. 3,250 --
Future income taxes......................................... 1,519 1,917
-------- --------
$288,306 $216,146
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Auction proceeds payable.................................. $ 72,073 $ 16,178
Accounts payable and accrued liabilities.................. 17,903 17,891
Short-term debt........................................... 2,081 6,529
Current bank term loans (note 3).......................... 6,610 5,425
-------- --------
98,667 46,023
Bank term loans (note 3).................................... 47,391 35,728
-------- --------
146,058 81,751
SHAREHOLDERS' EQUITY
Share capital (note 4).................................... 69,131 69,130
Additional paid-in capital................................ 4,332 4,332
Retained earnings......................................... 73,770 64,052
Foreign currency translation adjustment................... (4,985) (3,119)
-------- --------
142,248 134,395
-------- --------
$288,306 $216,146
======== ========
</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
ADDITIONAL CURRENCY TOTAL
SHARE PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
CAPITAL CAPITAL EARNINGS ADJUSTMENT EQUITY
------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
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
======= ====== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
RITCHIE BROS. AUCTIONEERS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Cash provided by (used in)
Operations:
Net income................................................ $ 9,718 $ 12,103
Items not involving the use of cash
Depreciation........................................... 2,881 1,823
Employee share compensation............................ -- 1,345
Future income taxes.................................... 398 403
Amortization of goodwill............................... 825 411
Changes in non-cash working capital:
Accounts receivable.................................... (19,542) (14,309)
Inventory.............................................. (1,862) 23
Advances against auction contracts..................... 599 5,123
Prepaid expenses and deposits.......................... (905) (1,236)
Income taxes recoverable............................... (2,895) (2,887)
Auction proceeds payable............................... 55,895 72,103
Accounts payable and accrued liabilities............... 12 (3,096)
Foreign currency translation adjustment................... (1,866) (569)
-------- --------
43,258 71,237
-------- --------
Financing:
Issuance of share capital................................. 1 --
Bank term loans........................................... 12,848 26,520
Short-term debt........................................... (4,448) --
Funds committed for debt repayment........................ (3,250) --
-------- --------
5,151 26,520
-------- --------
Investments:
Goodwill (net of non-cash consideration).................. -- (25,616)
Capital asset additions, net.............................. (21,117) (16,436)
-------- --------
(21,117) (42,052)
Increase in cash and cash equivalents....................... 27,292 55,705
Cash and cash equivalents, beginning of period.............. 55,921 73,620
-------- --------
Cash and cash equivalents, end of period.................... $ 83,213 $129,325
======== ========
Supplemental disclosure of cash flow information
Interest paid............................................. $ 1,881 $ 1,163
Income taxes paid......................................... $ 7,002 $ 5,725
</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)
JUNE 30, 2000
(Information as at June 30, 2000 and for the six-month periods
ended June 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 June 30, 2000 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
-------- ------------ --------
<S> <C> <C> <C>
Land and improvements................................... $ 60,325 $ 1,793 $ 58,532
Buildings............................................... 62,646 4,322 58,324
Automotive equipment.................................... 7,194 2,330 4,864
Computer equipment...................................... 2,903 1,290 1,613
Computer software....................................... 1,196 345 851
Yard equipment.......................................... 3,905 1,541 2,364
Office equipment........................................ 3,366 1,491 1,875
Leasehold improvements.................................. 420 148 272
-------- ------- --------
$141,955 $13,260 $128,695
======== ======= ========
</TABLE>
Capital assets at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
-------- ------------ --------
<S> <C> <C> <C>
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
======== ======= ========
</TABLE>
7
<PAGE> 8
RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
JUNE 30, 2000
(Information as at June 30, 2000 and for the six-month periods
ended June 30, 2000 and 1999 is unaudited)
3. BANK TERM LOANS:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
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........................... $ 4,062 $ 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...................................................... 1,689 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 --
------- -------
54,001 41,153
Less current portion........................................ (6,610) (5,425)
------- -------
$47,391 $35,728
======= =======
</TABLE>
4. SHARE CAPITAL:
(a) SHARES ISSUED
<TABLE>
<S> <C>
Issued and outstanding, December 31, 1999................... 16,733,264
For cash, pursuant to stock options exercised............. 12,267
----------
Issued and outstanding, June 30, 2000....................... 16,745,531
==========
</TABLE>
8
<PAGE> 9
RITCHIE BROS. AUCTIONEERS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(TABULAR DOLLAR AMOUNTS EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
JUNE 30, 2000
(Information as at June 30, 2000 and for the six-month periods
ended June 30, 2000 and 1999 is unaudited)
(b) OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding, December 31, 1999.............................. 195,236 $ 0.10 - 38.625
Granted................................................... 78,000 26.625 - 26.688
Exercised................................................. (12,267) 0.10
Cancelled................................................. (7,900) 0.10 - 26.875
------- ----------------
Outstanding, June 30, 2000.................................. 253,069 $ 0.10 - 38.625
======= ================
</TABLE>
The options outstanding at June 30, 2000 expire from dates ranging to April
26, 2010.
(c) WARRANTS
<TABLE>
<S> <C>
Outstanding, December 31, 1999.............................. 400,000
Outstanding, June 30, 2000.................................. 400,000
</TABLE>
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
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
2000 1999
------ -------
<S> <C> <C>
Net income.................................................. $9,718 $12,103
Other comprehensive income adjustments
Foreign currency translation.............................. (1,866) (569)
------ -------
Comprehensive net income in accordance with United States
GAAP...................................................... $7,852 $11,534
====== =======
</TABLE>
9
<PAGE> 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 six-month periods ended June 30, 2000 compared to the three-month and
six-month periods ended June 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
June 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
<PAGE> 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 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.
Finally, in the first six months of 2000, the Company began a program of
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
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
AUCTION REVENUES
Auction revenues of $56.3 million for the six months ended June 30, 2000
increased by $2.7 million, or 5.10%, 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 $643.3 million for the six months ended June 30, 2000 increased $54.2
million, or 9.20%, from the comparable period in the prior year, primarily as a
result of increased gross auction sales in the United States and Asia, partially
offset by decreased gross auction sales in the United Arab Emirates. Results for
the first six 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 six months of 2000, the auction revenue
rate of 8.76% was marginally lower than the long-term average and lower than the
unusually high 9.10% 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 $9.3 million for the six
months ended June 30, 2000 increased by $0.2 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 1.44% for the six
months ending June 30, 2000, lower than the 1.55% ratio experienced in the first
six 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 six-month period ended June 30, 2000,
depreciation and amortization expense was $3.7 million, compared to $2.2 million
in the comparable 1999 period. This increase is the result of the depreciation
of new auction facilities constructed over the past year and goodwill
amortization charges of $0.8 million during the six-month period ending June 30,
2000. Management anticipates that depreciation
11
<PAGE> 12
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 six months ended June 30, 2000, the Company incurred G&A of
$28.0 million, as compared to $23.5 million for the comparable six-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 $15.3 million in the six months ended June 30,
2000 compared to $18.8 million in 1999. This decline is primarily the result of
increased G&A and depreciation and amortization expenses in the first six months
of 2000, partially offset by increased auction revenues for the six months ended
June 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 six months ended June 30, 2000 was $1.7 million,
compared to $0.9 million incurred in the six months ended June 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 $0.5 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 six months ended June 30, 2000
of $0.6 million did not change significantly from the comparable 1999 period.
INCOME TAXES
Income taxes of $4.5 million for the six months ended June 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 31.7% is lower than the
34.2% rate the Company experienced in the comparable 1999 period primarily due
to the different jurisdictions within which the income is earned.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
AUCTION REVENUES
Auction revenues of $29.6 million for the three months ended June 30, 2000
decreased by $6.0 million, or 16.91%, from the comparable period in 1999 due to
lower gross auction sales and a lower average percentage of auction revenues
earned on gross auction sales. Gross auction sales of $353.4 million for the
three months ended June 30, 2000 decreased $33.9 million, or 8.76%, from the
comparable period in the prior year, primarily as a result of decreased gross
auction sales in the United States, and the United Arab Emirates.
12
<PAGE> 13
Results for the second quarter of 2000 included significant auctions in Fort
Worth, Texas; and in the Port of Moerdijk, The Netherlands. Auction revenues as
a percentage of gross auction sales were 8.37% in the three months ended June
30, 2000 compared to 9.19% in the comparable 1999 period and a long-term average
of 8.80%.
DIRECT EXPENSES
Direct expenses of $5.4 million for the three months ended June 30, 2000
decreased by $1.0 million compared to the comparable 1999 period. As a
percentage of gross auction sales, direct expenses were 1.52% for the three
months ending June 30, 2000, lower than the 1.64% 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 June 30, 2000, depreciation and
amortization expense was $2.0 million, compared to $1.5 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 June 30, 2000, the Company incurred G&A of $13.0
million, as compared to $11.6 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 $9.3 million in the three months ended June 30,
2000 compared to $16.2 million in 1999. The decrease is primarily the result of
lower gross auction sales and a lower average percentage of auction revenues
earned on gross auction sales, as well as increased G&A and depreciation and
amortization expenses in the second quarter of 2000.
INTEREST EXPENSE
Interest expense for the three months ended June 30, 2000 was $0.9 million,
compared to $0.7 million incurred in the three months ended June 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 $0.2 million (1999 -- nil) of interest related to properties
under development during the period.
OTHER INCOME
Other income for the three months ended June 30, 2000 of $0.3 million did
not change significantly from the comparable 1999 period.
INCOME TAXES
Income taxes of $2.5 million for the three months ended June 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 29.0% is lower than the
33.5% rate the Company experienced in the comparable 1999 period primarily due
to the different jurisdictions within which the income is earned.
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
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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 June 30, 2000, working capital including cash was $25.2 million,
compared to $26.0 million at December 31, 1999.
Net capital expenditures by the Company during the six months ended June
30, 2000 were $21.1 million as compared to $16.4 million for the six months
ended June 30, 1999. In the 2000 period, the Company acquired land for use as
permanent auction sites and incurred related development costs in Canada, 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, Asia, and Australia. The Company presently
has access to credit lines for operations of approximately $97.7 million and to
credit lines for funding property acquisitions of approximately $82.5 million.
At June 30, 2000, there was no bank debt relating to operations and bank debt
related to property acquisitions and the acquisition of the auction business of
Forke totaled $56.1 million, leaving a net credit line of $26.4 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 Forke transaction, 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; the ability of the Company
to integrate the business acquired and personnel hired as a result of the Forke
transaction; 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.
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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 August 11, 2000 By /s/ ROBERT S. ARMSTRONG
----------------------------------------------
Robert S. Armstrong,
Corporate Secretary
</TABLE>
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