Notes to the Consolidated Financial Statements
| Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 2. Significant Accounting Policies (continued) (y) Business Combinations Business combinations are accounted for using the acquisition method. The purchase price is determined based on the fair value of the assets transferred, liabilities incurred, and equity interest issued, after considering any transactions that are separate from the business combination. The Company allocates the aggregate of the fair value of the purchase consideration transferred to the tangible and intangible assets acquired and the liabilities assumed at their estimated fair values on the date of acquisition with any excess recorded as goodwill. The fair value determinations require judgement and may involve the use of significant estimates and assumptions, especially with respect to intangible assets and contingent liabilities. The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed. Any such measurement period adjustments are recognized to the assets and liabilities assumed, with the corresponding offset to goodwill, in the period in which the adjustment amounts are determined. Acquisition-related costs associated with the acquisition are expensed as incurred. (z) New and Amended Accounting Standards In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update primarily addresses the accounting for contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. The update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 - Revenue from Contracts with Customers, whereas prior to the adoption of the update, contract assets acquired and contract liabilities assumed in a business combination were recognized at fair value on the acquisition date. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company early adopted the update as of October 1, 2021 and therefore has applied the amendments to all acquisitions completed since January 1, 2021, which includes only the acquisition of SmartEquip, which was completed on November 2, 2021. | | (Tabular amounts expressed in thousands of United States dollars, except where noted)Ritchie Bros.
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Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 3. Significant judgments, estimatesJudgments, Estimates and assumptionsAssumptions The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Future differences arising between actual results and the judgments, estimates and assumptions made by the Company at the reporting date, or future changes to estimates and assumptions, could necessitate adjustments to the underlying reported amounts of assets, liabilities, revenues and expenses in future reporting periods. Judgments, estimates and underlying assumptions are evaluated on an ongoing basis by management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances and such changes are reflected in the assumptions when they occur. Significant items subject to estimates include, purchase price allocations, the carryingrecoverable amounts of goodwill and indefinite-lived intangible assets, the useful lives of long-lived assets share basedand finite-lived intangible assets, share-based compensation, share-based continuing employment costs, the determination of lease term and lease liabilities, deferred income taxes, reserves for tax uncertainties, derivative financial instruments and other contingencies. In December 2022, the Company performed a qualitative goodwill assessment of the A&M and Mascus reporting units, and concluded that there were no indicators of impairment. The Company performed a quantitative goodwill assessment of the Rouse and SmartEquip reporting units and concluded that the fair value of both reporting units exceeded their carrying amounts. Significant items subject to estimates and judgments in 2022 were made in accounting for the completed sale and leaseback transaction of our Bolton property (Note 18 & Note 26). The Company determined the following estimates in calculating the gain on sale: the present value of market rental payments of the Bolton property sold, the expected lease term in the leaseback arrangement and the Company’s incremental borrowing rate based on information available at the commencement date of the lease. Accounting for business combinations also requires estimates with respect to the fair value of the assets acquired and liabilities assumed. Such estimates of fair value may require valuation methods which use significant estimates and assumptions. At the acquisition of SmartEquip, we estimated the fair value of the intangible assets acquired, using valuation methods, which required management to make estimates with respect to expected future cash flows and growth rates, gross margins, attrition rates, royalty rates, discount rates, terminal value, and forecast period. The Company based these estimates on historical and anticipated results, industry trends, economic analysis, and various other assumptions that it believes are reasonable, including assumptions as to future events. Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 4. Business Combinations Proposed IAA Acquisition On November 7, 2022, the Company entered into an Agreement and Plan of Merger and Reorganization which was subsequently amended on January 22, 2023 (the “Merger Agreement”), pursuant to which it has agreed to acquire IAA, Inc. (“IAA”). Under the terms of the Merger Agreement, IAA stockholders will receive $12.80 in cash and 0.5252 shares of the Company for each share of IAA common stock they own. Pursuant to such terms, the Company will (i) issue approximately 70.3 million shares of its common stock to the stockholders of IAA and (ii) pay to the stockholders of IAA approximately $1.7 billion in cash consideration. In addition, the Company will repay approximately $1.2 billion of IAA’s net debt. Certain outstanding equity awards will also be cancelled and exchanged into equivalent outstanding equity awards covering the Company’s common shares based on the equity award exchange ratio. Upon completion of the acquisition, the Company’s shareholders will own approximately 59% of the common shares of the combined company on a fully diluted basis, IAA’s stockholders will own approximately 37%, and Starboard will own approximately 4% (Note 24). The acquisition of IAA is expected to close in the first half of 2023, subject to the satisfaction of various conditions, including, among other things, (1) the approval of the issuance of our common shares by the affirmative vote of a majority of the votes cast by holders of our outstanding common shares, (2) the adoption of the Merger Agreement by holders of a majority of the outstanding shares of IAA’s common stock, and (3) other customary closing conditions. In connection with the Merger Agreement, the Company entered into a debt commitment letter with certain financial institutions that committed to provide, subject to certain terms and conditions, a bridge loan facility in an aggregate principal amount of up to $2.8 billion and a backstop senior secured revolving credit facility in an aggregate principal amount of up to $750.0 million. On December 9, 2022, the Company subsequently closed an amendment to its existing credit agreement (Note 22) with a syndicate of lenders and obtained commitments for term loan A facility in an aggregate amount of up to $1.8 billion to be used to finance the proposed IAA acquisition. The amendment also allowed the Company to permanently terminate the backstop senior revolving credit commitments and reduce the senior secured bridge facility commitments by the amount of the term loan A facility and the amount of the existing term loans under the existing credit agreement. The Board of Directors of the Company also expectsto approve the payment of a one-time special dividend to the Company’s shareholders in the amount of $1.08 per share, contingent upon the completion of the merger and consent of the TSX. IAA stockholders will not be entitled to receive the special dividend with respect to any of the Company’s common shares received as consideration. We will not pay the special dividend if the Merger Agreement is terminated or if the merger is not completed. Furthermore, if the Merger Agreement is terminated under specified circumstances, the Company or IAA may be required to pay the other a termination amount of $189.0 million or the Company may be required to reimburse IAA for its out-of-pocket expenses incurred in connection with the Merger Agreement up to an aggregate amount of $5.0 million. VeriTread Acquisition On January 3, 2023, the Company acquired 8,889,766 units of VeriTread, LLC (“VeriTread”), a Florida limited liability company, for approximately $25.0 million from its existing unitholders and acquired another 1,056,338 units through an investment of $3.0 million cash. As a result, the Company increased its investment in VeriTread from 11% to 75%. VeriTread is a transportation technology company that provides an online marketplace solution for open deck transport, connecting shippers and service providers. Also, on January 3, 2023, the Company entered into a put/call agreement with one of the minority unitholders of VeriTread for their remaining units. Pursuant to this agreement, the minority unitholder has rights, in certain circumstances, to put its remaining units of VeriTread to the Company, subject to VeriTread achieving certain performance targets, and the Company has the right to call the remaining units of the minority unitholder upon achievement of certain integration milestones. Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 4. Business Combinations (continued) SmartEquip Acquisition On November 2, 2021, the Company acquired all of the issued and outstanding common shares of SmartEquip for a total cash purchase price of $173.7 million. During 2022, the Company finalized the net working capital adjustment under the purchase agreement and increased the purchase price by $0.1 million, resulting in a total purchase price of $173.8 million. The Company also decreased the deferred tax asset acquired by $3.8 million to $5.1 million, with a corresponding adjustment to goodwill, as a result of additional information obtained about the facts and circumstances that existed at the date of the acquisition. Accordingly, the purchase price allocation was finalized. SmartEquip is an innovative technology platform that supports customers' management of the equipment lifecycle and integrates parts procurement with both original equipment manufacturers and dealers. The acquisition was accounted for in accordance with ASC 805, Business Combinations. The following table summarizes the final allocation of the purchase price to the fair value of assets acquired and liabilities assumed. SmartEquip purchase price allocation | | | | Purchase price | | $ | 173,806 | | | | | Assets acquired: | | | | Cash and cash equivalents | | | 2,039 | Trade and other receivables | | | 2,926 | Other current assets | | | 486 | Property, plant and equipment | | | 120 | Other non-current assets | | | 75 | Deferred tax assets | | | 5,098 | Intangible assets | | | 71,700 | | | | | Liabilities assumed: | | | | Trade and other liabilities | | | 1,239 | Deferred revenue | | | 3,565 | Other non-current liabilities | | | 119 | Deferred tax liabilities | | | 18,178 | | | | | Fair value of identifiable net assets acquired | | | 59,343 | Goodwill acquired on acquisition | | $ | 114,463 |
The deferred tax assets are presented net of a valuation allowance of $0.9 million. The following table summarizes the fair values of the identifiable intangible assets acquired: | | | | | | | | Fair value | | Weighted average | Asset | | at acquisition | | amortization period | Customer relationships | | $ | 50,700 | | 4 - 15 years | Software and technology assets | | | 18,900 | | 7 years | Trade names and trademarks | | | 1,000 | | 3 years | Backlog | | | 1,100 | | 2 years | Total | | $ | 71,700 | | 11.3 years |
Goodwill relates to benefits expected from the acquisition of SmartEquip’s business, its assembled workforce and associated technical expertise, as well as anticipated synergies from applying the Company’s auction expertise and transactional capabilities to SmartEquip’s existing customer base. The transaction is considered a non-taxable business combination and the goodwill is not deductible for tax purposes. Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 4. Business Combinations (continued) Euro Auctions Acquisition On August 9, 2021, the Company entered into a Sale and Purchase Agreement (“SPA”) pursuant to which it agreed to purchase Euro Auctions Limited, William Keys & Sons Holdings Limited, Equipment & Plant Services Ltd, and Equipment Sales Ltd. (collectively, “Euro Auctions”), each being a private limited company incorporated in Northern Ireland (the “Euro Auctions Acquisition”). Under the terms of the SPA, the Company was to acquire all of the outstanding shares of Euro Auctions from their existing shareholders for approximately £775.0 million (approximately $1.02 billion) cash consideration, to be paid on closing. On April 29, 2022, the Company made a decision to discontinue the Phase 2 review by the United Kingdom’s Competition and Markets Authority (“CMA”). The SPA automatically terminated on June 28, 2022. In addition, in April 2022, the Company terminated, without cost, its deal contingent forward currency contracts (Note 13) and on May 4, 2022, redeemed all of the 2021 Notes (Note 22) at a redemption price equal to 100% of the original offering price of the notes, plus accrued and unpaid interest. 5. Segmented informationInformation The Company’s principal business activity is the management and disposition of used industrial equipment and other durable assets. The Company’s operations are comprised of 1one reportable segment and other business activities that are not reportable as follows: | ● | Auctions and Marketplaces – This is the Company’s only reportable segment, which consists of the Company’s live on siteonsite auctions, its online auctions and marketplaces, and its brokerage service; and |
| ● | Other includes the results of Ritchie Bros. Financial Services (“RBFS”), Rouse, SmartEquip, Mascus & RitchieList online services, and the results from various value-added services and make-ready activities, including the Company’s equipment refurbishment services, Asset Appraisal Services, and Ritchie Bros. Logistical Services.Services (“RB Logistics”) and appraisals and inspections. |
| | | | | | | | | | | | Year ended December 31, 2019 | | | A&M | | Other | | Consolidated | Service revenue | | $ | 678,823 | | $ | 125,201 | | $ | 804,024 | Inventory sales revenue | | | 514,617 | | | — | | | 514,617 | Total revenue | | $ | 1,193,440 | | $ | 125,201 | | $ | 1,318,641 | Costs of services | | | 99,821 | | | 65,156 | | | 164,977 | Cost of inventory sold | | | 480,839 | | | — | | | 480,839 | Selling, General and Administration expenses ("SG&A") | | | 358,016 | | | 24,373 | | | 382,389 | Segment profit | | $ | 254,764 | | $ | 35,672 | | $ | 290,436 | Acquisition-related costs | | | | | | | | | 777 | Depreciation and amortization expenses ("D&A") | | | | | | | | | 70,501 | Gain on disposition of property, plant and equipment ("PPE") | | | | | | | | | (1,107) | Foreign exchange gain | | | | | | | | | (2,937) | Operating income | | | | | | | | $ | 223,202 | Interest expense | | | | | | | | | (41,277) | Other income, net | | | | | | | | | 8,838 | Income tax expense | | | | | | | | | (41,623) | Net income | | | | | | | | $ | 149,140 |
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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4.5. Segmented informationInformation (continued)
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2018 | | Year ended December 31, 2022 | | | A&M | | Other | | Consolidated | | A&M | | Other | | Consolidated | Service revenue | | $ | 626,007 | | $ | 123,508 | | $ | 749,515 | | Service revenue: | | | | | | | | | | | Commissions | | | $ | 485,916 | | $ | — | | $ | 485,916 | Fees | | | | 366,079 | | | 198,588 | | | 564,667 | Total service revenue | | | | 851,995 | | | 198,588 | | | 1,050,583 | Inventory sales revenue | | | 420,511 | | | — | | | 420,511 | | | 683,225 | | | — | | | 683,225 | Total revenue | | $ | 1,046,518 | | $ | 123,508 | | $ | 1,170,026 | | $ | 1,535,220 | | $ | 198,588 | | $ | 1,733,808 | Costs of services | | | 87,430 | | | 71,628 | | | 159,058 | | | 104,902 | | | 63,225 | | | 168,127 | Cost of inventory sold | | | 374,339 | | | — | | | 374,339 | | | 608,574 | | | — | | | 608,574 | SG&A expenses | | | 363,549 | | | 19,127 | | | 382,676 | | Selling, general and administrative | | | | 466,251 | | | 73,682 | | | 539,933 | Segment profit | | $ | 221,200 | | $ | 32,753 | | $ | 253,953 | | $ | 355,493 | | $ | 61,681 | | $ | 417,174 | Acquisition-related costs | | | | | | | | | 5,093 | | | | | | | | | 37,261 | D&A expenses | | | | | | | | | 66,614 | | Gain on disposition of PPE | | | | | | | | | (2,731) | | Depreciation and amortization | | | | | | | | | | 97,155 | Foreign exchange gain | | | | | | | | | (212) | | | | | | | | | (954) | Total operating expenses | | | | | | | | | $ | 1,450,096 | Gain on disposition of property, plant and equipment | | | | | | | | | | 170,833 | Operating income | | | | | | | | $ | 185,189 | | | | | | | | $ | 454,545 | Interest expense | | | | | | | | | (44,527) | | | | | | | | | (57,880) | Interest income | | | | | | | | | | 6,971 | Change in fair value of derivatives | | | | | | | | | | 1,263 | Other income, net | | | | | | | | | 11,850 | | | | | | | | | 1,089 | Income tax expense | | | | | | | | | (31,006) | | | | | | | | | (86,230) | Net income | | | | | | | | $ | 121,506 | | | | | | | | $ | 319,758 |
| | | | | | | | | | | | Year ended December 31, 2017 | | | A&M | | Other | | Consolidated | Service revenue | | $ | 524,023 | | $ | 100,394 | | $ | 624,417 | Inventory sales revenue | | | 346,774 | | | — | | | 346,774 | Total revenue | | $ | 870,797 | | $ | 100,394 | | | 971,191 | Costs of services | | | 75,685 | | | 57,504 | | | 133,189 | Cost of inventory sold | | | 306,498 | | | — | | | 306,498 | SG&A expenses | | | 308,873 | | | 14,397 | | | 323,270 | Impairment loss | | | 8,911 | | | — | | | 8,911 | Segment profit | | $ | 170,830 | | $ | 28,493 | | $ | 199,323 | Acquisition-related costs | | | | | | | | | 38,272 | D&A expenses | | | | | | | | | 52,694 | Gain on disposition of PPE | | | | | | | | | (1,656) | Foreign exchange loss | | | | | | | | | 2,559 | Operating income | | | | | | | | $ | 107,454 | Interest expense | | | | | | | | | (38,291) | Other income, net | | | | | | | | | 8,231 | Income tax expense | | | | | | | | | (2,088) | Net income | | | | | | | | $ | 75,306 |
The carrying value of goodwill of $652,243,000 has been allocated to A&M and $20,067,000 has been allocated to Other in relation to the Mascus acquisition. As in prior periods, the CODM does not evaluate the performance of its operating segments based on segment assets and liabilities, nor does the Company classify liabilities on a segmented basis.
| | | | | | | As at December 31, | | 2019 | | 2018 | A&M | | $ | 652,243 | | $ | 651,359 | Other | | | 20,067 | | | 20,235 | Total Goodwill | | $ | 672,310 | | $ | 671,594 |
| | | | | | | | | | | | Year ended December 31, 2021 | | | A&M | | Other | | Consolidated | Service revenue: | | | | | | | | | | Commissions | | $ | 469,718 | | $ | — | | $ | 469,718 | Fees | | | 293,408 | | | 154,633 | | | 448,041 | Total service revenue | | | 763,126 | | | 154,633 | | | 917,759 | Inventory sales revenue | | | 499,212 | | | — | | | 499,212 | Total revenue | | $ | 1,262,338 | | $ | 154,633 | | $ | 1,416,971 | Costs of services | | | 97,423 | | | 57,835 | | | 155,258 | Cost of inventory sold | | | 447,921 | | | — | | | 447,921 | Selling, general and administrative | | | 406,360 | | | 49,843 | | | 456,203 | Segment profit | | $ | 310,634 | | $ | 46,955 | | $ | 357,589 | Acquisition-related costs | | | | | | | | | 30,197 | Depreciation and amortization | | | | | | | | | 87,889 | Foreign exchange loss | | | | | | | | | 792 | Total operating expenses | | | | | | | | $ | 1,178,260 | Gain on disposition of property, plant and equipment | | | | | | | | | 1,436 | Operating income | | | | | | | | $ | 240,147 | Interest expense | | | | | | | | | (36,993) | Interest income | | | | | | | | | 1,402 | Change in fair value of derivatives | | | | | | | | | (1,248) | Other income, net | | | | | | | | | 1,924 | Income tax expense | | | | | | | | | (53,378) | Net income | | | | | | | | $ | 151,854 |
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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4.5. Segmented informationInformation (continued)
| | | | | | | | | | | | Year ended December 31, 2020 | | | A&M | | Other | | Consolidated | Service revenue: | | | | | | | | | | Commissions | | $ | 452,882 | | $ | — | | $ | 452,882 | Fees | | | 291,775 | | | 126,939 | | | 418,714 | Total service revenue | | | 744,657 | | | 126,939 | | | 871,596 | Inventory sales revenue | | | 505,664 | | | — | | | 505,664 | Total revenue | | $ | 1,250,321 | | $ | 126,939 | | $ | 1,377,260 | Costs of services | | | 103,232 | | | 61,296 | | | 164,528 | Cost of inventory sold | | | 458,293 | | | — | | | 458,293 | SG&A expenses | | | 382,254 | | | 28,037 | | | 410,291 | Segment profit | | $ | 306,542 | | $ | 37,606 | | $ | 344,148 | Acquisition-related costs | | | | | | | | | 6,014 | D&A expenses | | | | | | | | | 74,921 | Foreign exchange loss | | | | | | | | | 1,612 | Total operating expenses | | | | | | | | $ | 1,115,659 | Gain on disposition of property, plant and equipment | | | | | | | | | 1,559 | Operating income | | | | | | | | $ | 263,160 | Interest expense | | | | | | | | | (35,568) | Interest income | | | | | | | | | 2,337 | Other income, net | | | | | | | | | 5,959 | Income tax expense | | | | | | | | | (65,530) | Net income | | | | | | | | $ | 170,358 |
The Chief Operating Decision Maker “CODM” does not evaluate the performance of the Company’s operating segments or assess allocation of resources based on segment assets and liabilities, nor does the Company classify liabilities on a segmented basis. The carrying values of goodwill are allocated as follows to A&M and Other: | | | | | | | At December 31, | | 2022 | | 2021 | A&M | | $ | 651,539 | | $ | 653,183 | Other | | | | | | | Mascus | | | 18,846 | | | 19,984 | Rouse | | | 163,968 | | | 163,968 | SmartEquip | | | 114,463 | | | 110,580 | Total Goodwill | | $ | 948,816 | | $ | 947,715 |
The Company’s geographic information as determined by the revenue and location of assets, which represents property, plant and equipment is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | United | | | | | | | | | | | | | | United | | | | | | | | | | | | | | | | | | States | | Canada | | Europe | | Other | | Consolidated | | States | | Canada | | Australia | | Europe | | Other | | Consolidated | Total revenue for the year ended: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | $ | 743,793 | | $ | 247,737 | | $ | 173,054 | | $ | 154,057 | | $ | 1,318,641 | | December 31, 2018 | | | 548,695 | | | 284,989 | | | 180,817 | | | 155,525 | | | 1,170,026 | | December 31, 2017 | | | 452,599 | | | 245,106 | | | 127,706 | | | 145,780 | | | 971,191 | | December 31, 2022 | | | $ | 970,848 | | $ | 375,670 | | $ | 181,339 | | $ | 143,232 | | $ | 62,719 | | $ | 1,733,808 | December 31, 2021 | | | | 748,730 | | | 281,105 | | | 149,551 | | | 183,004 | | | 54,581 | | | 1,416,971 | December 31, 2020 | | | | 754,815 | | | 305,236 | | | 119,490 | | | 158,999 | | | 38,720 | | | 1,377,260 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | United | | | | | | | | | | | | | | United | | | | | | | | | | | | | | | | | | States | | Canada | | Europe | | Other | | Consolidated | | States | | Canada | | Australia | | Europe | | Other | | Consolidated | Property, plant and equipment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | $ | 256,159 | | $ | 106,922 | | $ | 73,991 | | $ | 47,410 | | $ | 484,482 | | December 31, 2018 | | | 260,489 | | | 100,983 | | | 77,496 | | | 47,631 | | | 486,599 | | December 31, 2022 | | | $ | 241,937 | | $ | 87,264 | | $ | 20,035 | | $ | 86,702 | | $ | 23,199 | | $ | 459,137 | December 31, 2021 | | | | 232,351 | | | 93,826 | | | 21,478 | | | 75,538 | | | 25,894 | | | 449,087 |
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 5.6. Revenues
The Company’s revenue from the rendering of services and sale of inventory is as follows: | | | | | | | | | | | | | | | | | | | | | 2019 | | 2018 | | 2017 | | | | | | | | | | Service revenue: | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | 2022 | | 2021 | | 2020 | Commissions | | $ | 431,781 | | $ | 420,160 | | $ | 394,397 | | $ | 485,916 | | $ | 469,718 | | $ | 452,882 | Fees | | | 372,243 | | | 329,355 | | | 230,020 | | | | | | | | | | Auction related fees | | | | 366,079 | | | 293,408 | | | 291,775 | Financing fees | | | | 68,862 | | | 46,991 | | | 32,216 | Other fees | | | | 129,726 | | | 107,642 | | | 94,723 | Service revenue | | | | 1,050,583 | | | 917,759 | | | 871,596 | | | | 804,024 | | | 749,515 | | | 624,417 | | | | | | | | | | Inventory sales revenue | | | 514,617 | | | 420,511 | | | 346,774 | | | 683,225 | | | 499,212 | | | 505,664 | | | $ | 1,318,641 | | $ | 1,170,026 | | $ | 971,191 | | $ | 1,733,808 | | $ | 1,416,971 | | $ | 1,377,260 |
Auction related fees primarily relate to buyer transaction fees and other fees required to generate revenue from auction and marketplaces activities. Financing fees are fees earned in RBFS relating to loan origination services. Other fees include revenue from other services, including ancillary, parts, data, logistics, inspection, appraisal and online listing services. 6.7. Operating expensesExpenses
Costs of servicesServices | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 | Employee compensation expenses | | | $ | 66,081 | | $ | 58,808 | | $ | 54,977 | Ancillary and logistical service expenses | | $ | 59,252 | | $ | 66,576 | | $ | 54,176 | | | 52,628 | | | 52,301 | | | 59,982 | Employee compensation expenses | | | 50,093 | | | 41,391 | | | 35,440 | | Buildings, facilities and technology expenses | | | 7,865 | | | 9,477 | | | 8,359 | | Travel, advertising and promotion expenses | | | 31,652 | | | 27,606 | | | 23,994 | | | 22,604 | | | 18,536 | | | 22,636 | Other costs of services | | | 16,115 | | | 14,008 | | | 11,220 | | | 14,718 | | | 15,426 | | | 17,047 | Buildings, facilities and technology expenses | | | | 12,096 | | | 10,187 | | | 9,886 | | | $ | 164,977 | | $ | 159,058 | | $ | 133,189 | | $ | 168,127 | | $ | 155,258 | | $ | 164,528 |
SG&A expensesSelling, General and Administrative
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 | Employee compensation expenses | | $ | 246,028 | | $ | 249,115 | | $ | 208,370 | | Wages, salaries and benefits | | | $ | 323,686 | | $ | 285,535 | | $ | 257,797 | Share-based compensation expense | | | | 36,961 | | | 23,106 | | | 21,879 | Buildings, facilities and technology expenses | | | 61,177 | | | 60,930 | | | 53,151 | | | 88,852 | | | 73,490 | | | 62,755 | Travel, advertising and promotion expenses | | | 38,248 | | | 36,728 | | | 30,440 | | | 38,024 | | | 25,940 | | | 25,780 | Professional fees | | | 15,572 | | | 16,768 | | | 13,522 | | | 29,819 | | | 25,969 | | | 18,220 | Other SG&A expenses | | | 21,364 | | | 19,135 | | | 17,787 | | Other selling, general and administrative | | | | 22,591 | | | 22,163 | | | 23,860 | | | $ | 382,389 | | $ | 382,676 | | $ | 323,270 | | $ | 539,933 | | $ | 456,203 | | $ | 410,291 |
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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6.7. Operating expensesExpenses (continued)
Acquisition-related costsCosts Acquisition-related costs consist of operating expenses directly incurred as part of ain connection with business combination,combinations, such as due diligence, andadvisory, legal, integration planning, related to the IronPlanet acquisition (note 29), and share-based continuing employment costs that are recognized separately fromcosts. The following is a summary of our business combinations.acquisition-related costs: | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | IronPlanet: | | | | | | | | | | Other acquisition-related costs | | $ | 82 | | $ | 2,944 | | $ | 34,653 | Other acquisitions: | | | | | | | | | | Continuing employment costs | | | 128 | | | 2,091 | | | 3,418 | Other acquisition-related costs | | | 567 | | | 58 | | | 201 | | | $ | 777 | | $ | 5,093 | | $ | 38,272 |
Depreciation and amortization expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 | Depreciation expense | | $ | 29,112 | | $ | 29,021 | | $ | 28,337 | | Amortization expense | | | 41,389 | | | 37,593 | | | 24,357 | | IAA | | | $ | 21,282 | | $ | — | | $ | — | SmartEquip | | | | 3,052 | | | 4,965 | | | — | Euro Auctions | | | | 7,385 | | | 13,596 | | | — | Rouse | | | | 5,414 | | | 11,636 | | | 6,014 | Other | | | | 128 | | | — | | | — | | | $ | 70,501 | | $ | 66,614 | | $ | 52,694 | | $ | 37,261 | | $ | 30,197 | | $ | 6,014 |
During the year ended December 31, 2019, depreciation expense2022, the Company incurred $5.1 million (2021: $10.3 million; 2020: $0.8 million) of $410,000 (2018: $494,000; 2017: $1,207,000)share-based continuing employment costs for the acquisition of Rouse and amortization expense$2.4 million (2021: $0.4 million: 2020: nil) for the acquisition of $27,944,000 (2018: $18,996,000; 2017: $11,662,000) were recorded relating to software.SmartEquip, included within acquisition-related costs. 7. Impairment LossDepreciation and Amortization Expenses
Long-lived asset impairment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2022 | | 2021 | | 2020 | Depreciation | | $ | 31,421 | | $ | 32,401 | | $ | 31,330 | Amortization | | | 65,734 | | | 55,488 | | | 43,591 | | | $ | 97,155 | | $ | 87,889 | | $ | 74,921 |
Long-lived assets, which are comprised of property, plant and equipment and definite-lived intangible assets, are assessed for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, long-lived assets are grouped and tested for recoverability at the lowest level that generates independent cash flows from another asset group. The carrying amount of the long-lived asset group is not recoverable if it exceeds the sum of the future undiscounted cash flows expected to result from the long-lived asset group’s use and eventual disposition. Where the carrying amount of the long-lived asset group is not recoverable, its fair value is determined in order to calculate any impairment loss. An impairment loss is measured as the excess of the long-lived asset group’s carrying amount over its fair value.
During the year ended December 31, 2017, management identified indicators of impairment on certain software and software under development intangible assets (the “technology assets”). The indicators consisted of decisions made after the acquisition of IronPlanet that adversely impacted the extent or manner in which certain technology assets would be utilized. As part of its integration activities the Company determined that it was more likely than not that certain technology assets would not be utilized or developed as originally intended and no longer had value. As a result, management performed an impairment test that resulted in the recognition of an impairment loss of $8,911,000 on the technology assets.
8. Other incomeIncome For
Other income primarily includes rental income, as well as costs relating to settlement of legal disputes. In 2020, the period ended December 31, 2019, there were no significant items recorded in other income. In 2018,Company recognized $1.7 million of other income included a gain of $4,935,000 recognizedrelated to the contingent consideration received on the disposition of one of the Company’s equity accounted for investments. The Company received net proceeds of $6,147,000 on closing and is entitled to receive up to $1,020,000investments upon the satisfaction of certain escrow release conditions over a period of five years. The first escrow tranche was released during the period ended December 31, 2019. Additionally, the Company was entitled to receive up to $1,700,000 of contingent consideration upon the achievement of certain financial targets for the period from January 1, 2019 to December 31, 2019. The Company has not recognized any contingent consideration.targets. Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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9. Income taxesTaxes The expense for the year can be reconciled to income before income taxes as follows: | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 | | Earnings before income tax | | $ | 190,763 | | $ | 152,512 | | $ | 77,394 | | | $ | 405,988 | | $ | 205,232 | | $ | 235,888 | | Statutory federal and provincial tax rate in Canada | | | 27.00 | % | | 27.00 | % | | 26.00 | % | | Statutory federal and provincial tax rate in British Columbia, Canada | | | | 27.00 | % | | 27.00 | % | | 27.00 | % | Expected income tax expense | | $ | 51,506 | | $ | 41,178 | | $ | 20,122 | | | $ | 109,617 | | $ | 55,413 | | $ | 63,690 | | | | | | | | | | | | | | | | | | | | | | | Non-deductible expenses | | | 3,705 | | | 4,810 | | | 5,668 | | | | 7,978 | | | 7,853 | | | 4,732 | | Adjustment to prior year provision to statutory tax returns | | | 4 | | | 1,323 | | | (528) | | | Non-taxable gain on capital items | | | | (19,457) | | | (265) | | | (60) | | Changes in the valuation of deferred tax assets | | | (550) | | | (771) | | | (1,089) | | | | (2,302) | | | (355) | | | (2,027) | | Different tax rates of subsidiaries operating in foreign jurisdictions | | | (11,818) | | | (17,145) | | | (12,269) | | | | (6,394) | | | (6,257) | | | (12,016) | | U.S. tax reform impacts | | | 6,949 | | | 4,899 | | | (9,734) | | | | 7 | | | 3,584 | | | 17,105 | | Change in enacted tax rates | | | (1,016) | | | 93 | | | (229) | | | Change in estimate of deductibility of stock options | | | — | | | — | | | (1,557) | | | Deductions for tax purposes in excess of accounting expenses | | | | (754) | | | (2,698) | | | (1,566) | | Unrecognized tax benefits | | | (2,347) | | | (1,800) | | | 3,291 | | | | (1,476) | | | (474) | | | 817 | | Benefits of deductible stock options vested and exercised | | | (1,780) | | | (2,434) | | | (1,359) | | | Benefits of deductible stock options | | | | (1,518) | | | (2,121) | | | (4,070) | | Expired losses with full valuation allowance | | | | 689 | | | 620 | | | 725 | | Other | | | (3,030) | | | 853 | | | (228) | | | | (160) | | | (1,922) | | | (1,800) | | | | $ | 41,623 | | $ | 31,006 | | $ | 2,088 | | | $ | 86,230 | | $ | 53,378 | | $ | 65,530 | |
The income tax expense (recovery) consists of: | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 | Canadian: | | | | | | | | | | | | | | | | | | | Current tax expense | | $ | 19,752 | | $ | 13,209 | | $ | 14,245 | | $ | 60,897 | | $ | 21,664 | | $ | 27,766 | Deferred tax expense (recovery) | | | 3,346 | | | 3,958 | | | (10,192) | | Deferred tax expense | | | | 2,725 | | | 5,639 | | | 3,970 | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | Current tax expense before application of operating loss carryforwards | | | 24,815 | | | 19,851 | | | 8,987 | | | 29,573 | | | 30,093 | | | 30,280 | Tax benefit of operating loss carryforwards | | | (11,770) | | | (8,293) | | | (3,876) | | | (3,987) | | | (2,238) | | | (1,668) | Total foreign current tax expense | | | 13,045 | | | 11,558 | | | 5,111 | | Total current tax expense | | | | 25,586 | | | 27,855 | | | 28,612 | Deferred tax expense before adjustment | | | | | | | | | | | | | | | | | | | to opening valuation allowance | | | 5,727 | | | 2,386 | | | (6,317) | | | (2,978) | | | (1,781) | | | 6,127 | Adjustment to opening valuation allowance | | | (247) | | | (105) | | | (759) | | | — | | | 1 | | | (945) | Total foreign deferred tax expense (recovery) | | | 5,480 | | | 2,281 | | | (7,076) | | Total deferred tax (recovery) expense | | | | (2,978) | | | (1,780) | | | 5,182 | | | $ | 41,623 | | $ | 31,006 | | $ | 2,088 | | $ | 86,230 | | $ | 53,378 | | $ | 65,530 |
The foreign provision for income taxes is based on foreign pre-tax earnings of $108,714,000, $102,824,000,$93.1 million, $100.2 million, and $64,252,000,$117.2 million in 2019, 2018,2022, 2021, and 20172020, respectively. The Company’s consolidated financial statements provide for any related tax liability on undistributed earnings that we intend to repatriate in the foreseeable future. As ofAt December 31, 2019,2022, income taxes have not been provided on a cumulative total of $483,430,000 of such$744.0 million as we do not foresee repatriating these foreign earnings. The amount of unrecognized deferred tax liability related to these temporary differencesforeign earnings is estimated to be approximately $10,506,000.$17.7 million. Earnings retained by subsidiaries and equity-accounted investments amount to approximately $500,430,000 (2018: 484,510,000; 2017: 469,000,000)$767.0 million (2021: $702.7 million; 2020: $645.8 million). The Company accrues withholding and other taxes that would become payable on the distribution of earnings only to the extent that either the Company does not control the relevant entity or it is expected that these earnings will be remitted in the foreseeable future. Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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9. Income taxesTaxes (continued) The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities were as follows: | | | | | | | | | | | | | As at December 31, | | 2019 | | 2018 | | At December 31, | | | 2022 | | 2021 | Deferred tax assets: | | | | | | | | | | | | | Working capital | | $ | 13,307 | | $ | 4,703 | | $ | 15,357 | | $ | 16,622 | Property, plant and equipment | | | 5,579 | | | 6,385 | | | 5,049 | | | 6,098 | Share-based compensation | | | 5,973 | | | 4,923 | | | 10,580 | | | 5,661 | Tax losses and tax credit carryforwards | | | 33,248 | | | 48,881 | | | 22,131 | | | 31,001 | Lease liabilities | | | 29,523 | | | 2,578 | | | 29,553 | | | 28,769 | Notes receivable/payable | | | | 4,276 | | | 760 | Other | | | 3,088 | | | 12,266 | | | 7,429 | | | 6,576 | | | | 90,718 | | | 79,736 | | | 94,375 | | | 95,487 | Deferred tax liabilities: | | | | | | | | | | | | | Property, plant and equipment | | $ | (14,783) | | $ | (10,918) | | $ | (18,204) | | $ | (18,305) | Goodwill | | | (8,499) | | | (8,390) | | | (10,564) | | | (7,382) | Intangible assets | | | (50,531) | | | (54,810) | | | (59,909) | | | (66,320) | Right-of-use assets | | | (25,244) | | | — | | | (26,016) | | | (25,606) | Long-term debt | | | | (131) | | | (3,605) | Notes receivable/payable | | | | (9,893) | | | (879) | Other | | | (7,496) | | | (12,051) | | | (7,681) | | | (5,053) | | | | (106,553) | | | (86,169) | | | (132,398) | | | (127,150) | Net deferred tax assets (liabilities) | | $ | (15,835) | | $ | (6,433) | | Net deferred tax liabilities | | | $ | (38,023) | | $ | (31,663) | | | | | | | | | | | | | | Valuation allowance | | | (12,913) | | | (13,438) | | | (9,308) | | | (13,162) | | | $ | (28,748) | | $ | (19,871) | | $ | (47,331) | | $ | (44,825) |
At December 31, 2019,2022, the Company had non-capital loss carryforwards that are available to reduce taxable income in the future years. These non-capital loss carryforwards expire as follows: | | | | 2020 | | $ | 4,983 | 2021 | | | 3,543 | 2022 | | | 4,878 | 2023 | | | 2,964 | 2024 and thereafter | | | 69,462 | | | $ | 85,830 |
| | | | 2023 | | $ | 1,278 | 2024 | | | 194 | 2025 | | | 115 | 2026 | | | 31 | 2027 and thereafter | | | 39,955 | | | $ | 41,573 |
The Company has capital loss carryforwards of approximately $39,981,209 (2018: $9,292,000)$82.5 million (2021: $82.2 million) available to reduce future capital gains and interest deduction carryforwards of $23,746,000 (2018: $22,112,000)$1.8 million (2021: $2.5 million), both of which carryforward indefinitely. Tax losses are denominated in the currency of the countries in which the respective subsidiaries are located and operate. Fluctuations in currency exchange rates could reduce the U.S. dollar equivalent value of these tax loss and tax credit carry forwards in future years. In assessingAt December 31, 2022, the realizabilityCompany had gross unrecognized tax benefits of our deferred$16.0 million (2021: $18.9 million). Of this total, $6.9 million (2021: $8.6 million) represents the net amount of unrecognized tax assets, management considers whether it is more likely than notbenefits that, some portion or all ofif recognized, would favorably impact the deferredeffective tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which temporary differences become deductible and the loss carry forwards or tax credits can be utilized. Management considers projected future taxable income and tax planning strategies in making our assessment.rate.
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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9. Income taxesTaxes (continued) Uncertain tax positions
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amountReconciliation of the benefit to recognize in the financial statements. The tax position is measured as the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies unrecognized tax benefits that are not expected to result in the payment or receipt of cash within one year as non-current liabilities in the consolidated balance sheets.
At December 31, 2019, the Company had gross unrecognized tax benefits of $20,232,000 (2018: $22,584,000). Of this total, $8,854,000 (2018: $10,556,000) represents the amount of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate.
Reconciliation of unrecognized tax benefits:
| | | | | | | | | | | | | As at December 31, | | 2019 | | 2018 | | At December 31, | | | 2022 | | 2021 | Unrecognized tax benefits, beginning of year | | $ | 22,584 | | $ | 25,910 | | $ | 18,859 | | $ | 20,298 | Increases - tax positions taken in prior period | | | 700 | | | 725 | | Decreases - tax positions taken in prior period | | | (57) | | | (107) | | Increases - tax positions taken in current period | | | 1,268 | | | 2,644 | | Increases – tax positions taken in prior period | | | | 591 | | | 452 | Increases – tax positions taken in current period | | | | 590 | | | 1,077 | Settlement and lapse of statute of limitations | | | (4,364) | | | (4,944) | | | (3,570) | | | (3,303) | Currency translation adjustment | | | 101 | | | (1,644) | | | (479) | | | 335 | Unrecognized tax benefits, end of year | | $ | 20,232 | | $ | 22,584 | | $ | 15,991 | | $ | 18,859 |
Interest expense and penalties related to unrecognized tax benefits are recorded within the provision for income tax expense on the consolidated income statement. At December 31, 2019,2022, the Company had accrued $3,569,000 (2018: $4,170,000)$3.5 million (2021: $3.9 million) for interest and penalties. In the normal course of business, the Company is subject to audit by the Canadian federal and provincial taxing authorities, by the U.S. federal and various state taxing authorities and by the taxing authorities in various foreign jurisdictions. Tax years ranging from 2014 to 20192021 remain subject to examination in Canada, the United States, Luxembourg, and the Netherlands. The Canada Revenue Agency (“CRA”) has been conducting audits of the Company’s 2014, 2015, 2017, 2018 and 2019 taxation years. If the CRA challenges the manner in which the Company has filed its tax returns and reported its income with respect to any of the audits, the Company will have the option to appeal any such decision. While the Company believes it is, and has been, in full compliance with Canadian tax laws and expects to vigorously contest any proposed assessments or any notice of assessments or reassessments received from the CRA, the Company is unable to predict the ultimate outcome of these audits and the final disposition of any appeals pertaining to such audits. If the CRA makes an adverse determination and the Company is unsuccessful in appealing such determination reflected in any assessment or reassessment, then the Company could incur additional income taxes, penalties, and interest, which could have a material negative effect on its operations. On February 13, 2023, the CRA issued a proposal letter to Ritchie Bros. Auctioneers (International) Ltd. asserting that one of its Luxembourg subsidiaries was resident in Canada from 2010 through 2015 and that its worldwide income should be subject to Canadian income taxation. The Luxembourg subsidiary was in operation from 2010 until 2020. In the event that the CRA issues a notice of assessment or reassessment, the Company expects to vigorously contest such notice as the Company disagrees with the assertion regarding Canadian residency. In the event that a court of competent jurisdiction makes a final determination that the income of the Luxembourg subsidiary for 2010 through 2015 was subject to Canadian income tax laws, the Company may ultimately be liable for additional total Canadian federal and provincial income tax of approximately $26.0 million - $30.0 million, exclusive of interest and penalties, for the period specified in the proposal letter. The CRA may also challenge the manner in which the Company has filed its tax returns and reported its income with respect to 2016 to 2020 taxation years and may assert that the income of the Luxembourg subsidiary was subject to Canadian income tax because the Luxembourg subsidiary was also resident in Canada during these years. The Company could then incur additional income taxes, penalties and interest which could have a material negative effect on its operations. Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 10. Earnings per share attributablePer Share Attributable to stockholdersStockholders Basic earnings per share (“EPS”) attributable to stockholders was calculated by dividing the net income attributable to stockholders by the weighted average (“WA”) number of common shares outstanding during the period. Diluted EPS attributable to stockholders was calculated by dividing the net income attributable to stockholders by the WAweighted average number of shares of common stock outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include unvested PSUs, unvested RSUs, and outstanding stock options. The dilutive effect of potentially dilutive securities is reflected in diluted EPS by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. | | | | | | | | | | | | | | | | | | | Net income | | WA | | | | | Net income | | WA | | Per | | | attributable to | | number | | Per share | | attributable to | | number | | share | Year ended December 31, 2019 | | stockholders | | of shares | | amount | | Year ended December 31, 2022 | | | stockholders | | of shares | | amount | Basic | | $ | 149,039 | | 108,519,739 | | $ | 1.37 | | $ | 319,657 | | 110,781,282 | | $ | 2.89 | Effect of dilutive securities: | | | | | | | | | | | | | | | | | Share units | | | — | | 458,763 | | | — | | | — | | 516,144 | | | (0.01) | Stock options | | | — | | 780,621 | | | (0.01) | | | — | | 588,599 | | | (0.02) | Diluted | | $ | 149,039 | | 109,759,123 | | $ | 1.36 | | $ | 319,657 | | 111,886,025 | | $ | 2.86 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | WA | | Per | | | attributable to | | number | | share | Year ended December 31, 2021 | | stockholders | | of shares | | amount | Basic | | $ | 151,868 | | 110,315,782 | | $ | 1.38 | Effect of dilutive securities: | | | | | | | | | Share units | | | — | | 388,083 | | | (0.01) | Stock options | | | — | | 702,965 | | | (0.01) | Diluted | | $ | 151,868 | | 111,406,830 | | $ | 1.36 |
| | | | | | | | | | | Net income | | WA | | | | | | attributable to | | number | | Per share | Year ended December 31, 2020 | | stockholders | | of shares | | amount | Basic | | $ | 170,095 | | 109,054,493 | | $ | 1.56 | Effect of dilutive securities: | | | | | | | | | Share units | | | — | | 541,054 | | | (0.01) | Stock options | | | — | | 715,437 | | | (0.01) | Diluted | | $ | 170,095 | | 110,310,984 | | $ | 1.54 |
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
|
10. Earnings per share attributable to stockholders (continued)
| | | | | | | | | | | Net income | | WA | | | | | | attributable to | | number | | Per share | Year ended December 31, 2018 | | stockholders | | of shares | | amount | Basic | | $ | 121,479 | | 108,063,349 | | $ | 1.12 | Effect of dilutive securities: | | | | | | | | | Share units | | | — | | 459,503 | | | — | Stock options | | | — | | 865,384 | | | (0.01) | Diluted | | $ | 121,479 | | 109,388,236 | | $ | 1.11 |
| | | | | | | | | | | Net income | | WA | | | | | | attributable to | | number | | Per share | Year ended December 31, 2017 | | stockholders | | of shares | | amount | Basic | | $ | 75,027 | | 107,044,348 | | $ | 0.70 | Effect of dilutive securities: | | | | | | | | | Share units | | | (152) | | 353,880 | | | — | Stock options | | | — | | 714,923 | | | (0.01) | Diluted | | $ | 74,875 | | 108,113,151 | | $ | 0.69 |
11. Supplemental cash flow informationCash Flow Information | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 | Trade and other receivables | | $ | (8,611) | | $ | (43,341) | | $ | (19,161) | | $ | (44,059) | | $ | (11,607) | | $ | 22,079 | Inventory | | | 44,633 | | | (77,292) | | | (8,557) | | | (7,209) | | | (21,884) | | | (18,149) | Advances against auction contracts | | | 2,766 | | | (8,266) | | | 3,246 | | | (5,730) | | | 2,073 | | | 6,705 | Prepaid expenses and deposits | | | (3,403) | | | 646 | | | 1,178 | | | 2,613 | | | (17,739) | | | 2,196 | Income taxes receivable | | | (445) | | | 13,053 | | | (6,067) | | | 16,751 | | | (13,457) | | | 13 | Auction proceeds payable | | | 69,382 | | | 8,768 | | | 25,783 | | | 143,111 | | | 82,484 | | | (74,114) | Trade and other payables | | | (21,296) | | | 39,531 | | | 21,854 | | Trade and other liabilities | | | | 14,615 | | | 27,995 | | | 38,078 | Income taxes payable | | | 5,812 | | | 1,954 | | | (3,986) | | | 35,179 | | | (11,484) | | | 9,671 | Share unit liabilities | | | — | | | 1,070 | | | (5,421) | | Operating lease obligation | | | (13,404) | | | — | | | — | | | (12,932) | | | (11,844) | | | (11,162) | Other | | | 1,168 | | | (1,673) | | | 1,410 | | | 8,843 | | | (103) | | | (4,451) | Net changes in operating assets and liabilities | | $ | 76,602 | | $ | (65,550) | | $ | 10,279 | | $ | 151,182 | | $ | 24,434 | | $ | (29,134) |
Net capital spending, which consists of property, plant and equipment and intangible asset additions, net of proceeds on disposition of property, plant and equipment, was $35,075,000 for the year ended December 31, 2019 (2018: $32,426,000; 2017: $34,436,000).
| | | | | | | | | | Year ended December 31, | | 2022 | | 2021 | | 2020 | Interest paid, net of interest capitalized | | $ | 38,014 | | $ | 45,048 | | $ | 32,521 | Interest received | | | 6,971 | | | 1,402 | | | 2,338 | Net income taxes paid | | | 29,562 | | | 71,229 | | | 43,398 | | | | | | | | | | | Non-cash purchase of property, plant and equipment under finance lease | | | 13,365 | | | 7,720 | | | 11,326 | Non-cash right of use assets obtained in exchange for new lease obligations | | | 30,251 | | | 13,917 | | | 10,588 | Non-cash equity consideration in connection with Rouse acquisition | | | — | | | — | | | 1,459 |
| | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | Interest paid, net of interest capitalized | | $ | 37,046 | | $ | 39,429 | | $ | 23,360 | Interest received | | | 3,802 | | | 2,888 | | | 3,196 | Net income taxes paid | | | 26,699 | | | 10,352 | | | 28,281 | | | | | | | | | | | Non-cash purchase of property, plant and equipment under capital lease | | | 15,282 | | | 8,968 | | | 8,820 | Non-cash right of use assets obtained in exchange for new lease obligations | | $ | 29,117 | | $ | — | | $ | — |
| | | | | | | | | | | | | | | | | | | | At December 31, | | 2022 | | 2021 | | 2020 | Cash and cash equivalents | | $ | 494,324 | | $ | 326,113 | | $ | 278,766 | Restricted cash | | | | | | | | | | Current | | | 131,622 | | | 102,875 | | | 28,129 | Non-current | | | — | | | 933,464 | | | — | Cash, cash equivalents, and restricted cash | | $ | 625,946 | | $ | 1,362,452 | | $ | 306,895 |
| | | | | | | | | | | | 2019 | | 2018 | | 2017 | Cash and cash equivalents | | $ | 359,671 | | $ | 237,744 | | $ | 267,910 | Restricted cash | | | 60,585 | | | 67,823 | | | 63,206 | Cash, cash equivalents, and restricted cash | | $ | 420,256 | | $ | 305,567 | | $ | 331,116 |
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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12. Fair value measurementValue Measurement All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement or disclosure: | ● | Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at measurement date; |
| ● | Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and |
| ● | Level 3: Unobservable inputs for the asset or liability. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31,2019 | | December 31,2018 | | | | December 31, 2022 | | December 31, 2021 | | | | | Carrying | | | | | Carrying | | | | | | | Carrying | | | | | Carrying | | | | | | Category | | amount | | Fair value | | amount | | Fair value | | Category | | amount | | Fair value | | amount | | Fair value | Fair values disclosed: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | Level 1 | | $ | 359,671 | | $ | 359,671 | | $ | 237,744 | | $ | 237,744 | | Level 1 | | $ | 494,324 | | $ | 494,324 | | $ | 326,113 | | $ | 326,113 | Restricted cash | | Level 1 | | | 60,585 | | | 60,585 | | | 67,823 | | | 67,823 | | Level 1 | | | 131,622 | | | 131,622 | | | 1,036,339 | | | 1,036,339 | Loans receivable | | | Level 2 | | | 23,362 | | | 23,283 | | | 7,267 | | | 7,267 | Derivative financial assets | | | | | | | | | | | | | | | | Deal contingent forward contract | | | Level 3 | | | — | | | — | | | 751 | | | 751 | Forward currency contracts | | | Level 2 | | | 150 | | | 150 | | | — | | | — | Derivative financial liabilities | | | | | | | | | | | | | | | | Deal contingent forward contract | | | Level 3 | | | — | | | — | | | 2,005 | | | 2,005 | Forward currency contracts | | | Level 2 | | | 29 | | | 29 | | | — | | | — | Short-term debt | | Level 2 | | | 4,705 | | | 4,705 | | | 19,896 | | | 19,896 | | Level 2 | | | 29,118 | | | 29,118 | | | 6,147 | | | 6,147 | Long-term debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Senior unsecured notes | | Level 1 | | | 490,933 | | | 520,625 | | | 489,136 | | | 487,813 | | Term loans | | Level 2 | | | 154,548 | | | 155,355 | | | 222,162 | | | 224,582 | | Senior unsecured notes (as defined in Note 22) | | | | | | | | | | | | | | | | 2016 Notes | | | Level 1 | | | 496,331 | | | 491,875 | | | 494,531 | | | 508,125 | 2021 USD Notes | | | Level 2 | | | — | | | — | | | 598,052 | | | 625,125 | 2021 CAD Notes | | | Level 2 | | | — | | | — | | | 332,337 | | | 339,100 | Term loan | | | Level 2 | | | 85,166 | | | 85,523 | | | 92,821 | | | 93,226 | Long-term revolver loans | | | Level 2 | | | — | | | — | | | 219,699 | | | 219,772 |
The carrying valuevalues of the Company’s cash and cash equivalents, restricted cash, trade and other receivables, advances against auction contracts, loans receivable maturing within a year, auction proceeds payable, trade and other payables,liabilities, and short termshort-term debt approximate their fair values due to their short terms to maturity. The carrying valuefair values of the loan receivables with a maturity date greater than one year are determined by estimating discounted cash flows using market rates. The carrying values of the term loan and long-term revolver loans, before deduction of deferred debt issue costs, approximates itstheir fair valuevalues as the interest rates on the loans wereis short-term in nature. The fair valuevalues of the senior unsecured notes isare determined by reference to a quoted market price.price of the notes traded in an over-the-counter broker market. The Company holds derivative financial assets and liabilities that are required to be measured at fair value on a recurring basis. The fair values of the deal contingent forward contracts are determined using a probability weighted mark to market valuation and observable Level 2 inputs, including foreign currency spot exchange rates, forward pricing curves, and an unobservable Level 3 input, the expected date of settlement. The change in the valuation of the derivatives due to the range of possible expected settlement dates was not significant to the financial statements. The fair value of the forward currency contracts are determined using observable Level 2 inputs, including foreign currency spot exchange rates and forward pricing curves. The fair value considers the credit risk of the Company and its counterparties. Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 13. Derivative Financial Instruments The Company’s derivative financial instruments are accounted for as derivatives under ASC 815, Derivatives and Hedging, and are classified in other current assets and other current liabilities. The Company has not applied hedge accounting to these instruments. The Company enters into forward currency contracts from time to time to manage its exposure to foreign currency exchange rate fluctuations recognized by its subsidiaries on specific monetary loan receivables. In 2022, a loss of $4.6 million was recognized for the change in fair values of the forward currency contracts within foreign exchange loss (gain) in the consolidated income statement (2021: $nil). The Company also held two deal contingent foreign exchange forward currency contracts to manage its exposure to foreign currency exchange rate fluctuations against the U.S. and Canadian dollar on £343.0 million of the £775.0 million purchase consideration for the proposed Euro Auctions Acquisition. The notional amounts of the derivative instruments were £216.0 million (U.S. dollar forward) and £127.0 million (Canadian dollar forward). These forward contracts were terminated by the Company in April 2022 at no cost. 13.14. Trade and other receivablesOther Receivables
| | | | | | | | | | | | | As at December 31, | | 2019 | | 2018 | | At December 31, | | | 2022 | | 2021 | Trade receivables | | $ | 121,752 | | $ | 112,680 | | $ | 143,790 | | $ | 123,246 | Consumption taxes receivable | | | 12,108 | | | 16,099 | | | 31,183 | | | 20,359 | Loans receivable | | | | 8,017 | | | 7,267 | Other receivables | | | 3,542 | | | 478 | | | 3,458 | | | 23 | | | $ | 137,402 | | $ | 129,257 | | $ | 186,448 | | $ | 150,895 |
Trade receivables are generally secured by the equipment that they relate to as it is Company policy that equipment is not released until payment has been collected. Trade receivables are due for settlement within three to seven days of the date of sale, after which they are interest bearing. Other receivables are unsecured and non-interest bearing. As at December 31, 2019, there were $5,225,000 of impaired receivables that have been provided for (December 31, 2018: $5,942,000).
Consumption taxes receivable are deemed fully recoverable unless disputed by the relevant tax authority. Other receivables are unsecured and non-interest bearing. The other classes withinfollowing table presents the activity in the allowance for expected credit losses on trade and other receivables do not contain impaired assets.for the period ended December 31, 2022:
| | | | Ritchie Bros.Balance at December 31, 2021
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| $ | (4,396) | Current period provision | | | 65 | Write-offs charged against the allowance | | | 1,063 | Balance at December 31, 2022 | | $ | (3,268) |
Table of Contents
Notes to the Consolidated Financial Statements
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| (Tabular amounts expressed in thousands of United States dollars, except where noted)
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14.15. Inventory
At each period end, inventory is reviewed to ensure that it is recorded at the lower of cost and net realizable value. Specific consideration was given to the valuation of the surplus government inventory. The Company determined that the valuation provision to be insignificant.was not significant. During the year ended December 31, 2019,2022, the Company recorded an inventory write-down of $4,215,000 (2018: $1,011,000; 2017: $834,000)$4.4 million (2021: $2.7 million; 2020: $1.7 million). Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 15.16. Other current assetsCurrent Assets
| | | | | | | | | | | | | As at December 31, | | 2019 | | 2018 | | | | | December 31, | | December 31, | | | | 2022 | | 2021 | Advances against auction contracts | | $ | 12,925 | | $ | 15,558 | | $ | 8,891 | | $ | 4,102 | Assets held for sale | | | 15,051 | | | 15,051 | | | 323 | | | 17,538 | Prepaid expenses and deposits | | | 22,184 | | | 18,446 | | | 38,977 | | | 41,955 | Derivative financial asset | | | | 150 | | | 751 | | | $ | 50,160 | | $ | 49,055 | | $ | 48,341 | | $ | 64,346 |
Advances against auction contractsAgainst Auction Contracts Advances against auction contracts arise when the Company pays owners, in advance, a portion of the expected gross auction proceeds from the sale of the related assets at future auctions. The Company’s policy is to limit the amount of advances to a percentage of the estimated gross auction proceeds from the sale of the related assets, and before advancing funds, require proof of owner’s title to and equity in the assets, as well as receive delivery of the assets and title documents at a specified auction site, by a specified date and in a specified condition of repair. Advances against auction contracts are generally secured by the assets to which they relate, as the Company requires owners to provide promissory notes and security instruments registering the Company as a charge against the asset. Advances against auction contracts are usually settled within two weeks of the date of sale, as they are netted against the associated auction proceeds payable to the owner. Assets heldHeld for saleSale | | | | | | | Balance, December 31, 2017 | | $ | 584 | | Site preparation costs | | | — | | | | | | | Balance, December 31, 2020 | | | $ | — | Reclassified from property, plant and equipment | | | 20,610 | | | 17,779 | Disposal | | | (6,143) | | | (241) | Balance, December 31, 2018 | | | 15,051 | | Balance at December 31, 2021 | | | $ | 17,538 | Reclassified from (to) property, plant and equipment | | | 4,071 | | | (10,148) | Disposal | | | (4,071) | | | (7,067) | Balance, December 31, 2019 | | $ | 15,051 | | Balance at December 31, 2022 | | | $ | 323 |
AsOn March 17, 2022, the Company completed the sale and leaseback of a parcel of land including all buildings, in Bolton, Ontario, Canada for a total sale consideration of $208.2 million Canadian dollars (approximately $165 million) net of closing and transaction costs, and recognized a gain on disposition of property, plant and equipment of $169.1 million. The net book value of the Bolton property was $7.1 million. The payments for the lease were not considered to be at market rates given an initial two year rent free period and, accordingly, the Company adjusted the sales proceeds and the gain to fair value. The Bolton property continues to be used for auction operations under the operating leaseback agreement until the completion of the acquisition and development of a replacement property located in Amaranth, Ontario, Canada (Note 26). On February 3, 2023, the Company signed an amendment to its agreement to purchase a replacement property, and as a result of the vendor completing its conditions under the agreement, the Company anticipates to close the purchase of the Amaranth property of $22 million in early March 2023 and begin its development.
At December 31, 2019,2021, the Company’s assetsCompany also classified vacant land in Casa Grande, Arizona with a net book value of $10.5 million as an asset held for sale. During the quarter ended June 30, 2022, the Company assessed that the property no longer met the asset held for sale consisted of two excess auction sites located incriteria and therefore reclassified the United States. Management made the strategic decision to sell these properties to maximize the Company’s return on invested capital. The estimated sales proceeds are expected to be in excessnet book value of the current book value. The properties have been actively marketed for sale,property to property, plant and management expects the sales to be completed within 12 months of December 31, 2019. These properties belong to the A&M reportable segment.equipment. As at December 31, 2018, the Company’s assets held for sale consisted of excess auction sites located in the United States. Management made the strategic decision to sell this excess acreage to maximize the Company’s return on invested capital.
During the year ended December 31, 2019, the Company sold excess auction site acreage in Nashville, United States for net proceeds of $4,642,000 resulting in a gain of $571,000 (2018: $1,439,000 gain related to the sale of property located in Prince George, Canada and Albuquerque, United States; 2017: $602,000 gain related to the sale of property in Orlando, United States, and Truro, Canada).
Table of Contents Notes to the Consolidated Financial Statements
| Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 17. Property, Plant and Equipment | | | | | | | | | | | | | | | Accumulated | | | | At December 31, 2022 | | Cost | | depreciation | | Net book value | Land and improvements | | $ | 368,430 | | $ | (85,537) | | $ | 282,893 | Buildings | | | 245,444 | | | (134,969) | | | 110,475 | Yard and automotive equipment | | | 86,882 | | | (54,401) | | | 32,481 | Computer software and equipment | | | 82,891 | | | (72,496) | | | 10,395 | Office equipment | | | 37,554 | | | (28,664) | | | 8,890 | Leasehold improvements | | | 23,398 | | | (16,712) | | | 6,686 | Assets under development | | | 7,317 | | | — | | | 7,317 | | | $ | 851,916 | | $ | (392,779) | | $ | 459,137 |
| | | | | | | | | | | | | | | Accumulated | | | | At December 31, 2021 | | Cost | | depreciation | | Net book value | Land and improvements | | $ | 347,980 | | $ | (83,709) | | $ | 264,271 | Buildings | | | 250,692 | | | (129,237) | | | 121,455 | Yard and automotive equipment | | | 79,536 | | | (53,945) | | | 25,591 | Computer software and equipment | | | 84,371 | | | (73,330) | | | 11,041 | Office equipment | | | 37,187 | | | (26,957) | | | 10,230 | Leasehold improvements | | | 23,471 | | | (15,995) | | | 7,476 | Assets under development | | | 9,023 | | | — | | | 9,023 | | | $ | 832,260 | | $ | (383,173) | | $ | 449,087 |
In 2022, the Company completed the purchase of the Maltby property for a purchase price of $13.5 million. During the year ended December 31, 2022, interest of $0.1 million (2021: $0.1 million; 2020: $0.2 million) was capitalized to the cost of assets under development. These interest costs relating to qualifying assets are capitalized at a weighted average rate of 4.33% (2021: 2.54%; 2020: 3.02%). Additions during the year include $13.2 million (2021: $7.5 million; 2020: $11.4 million) of property, plant and equipment under finance leases. 18. Other Non-current Assets | | | | | | | | | December 31, | | December 31, | | | 2022 | | 2021 | Right-of-use assets | | $ | 122,934 | | $ | 114,414 | Tax receivable | | | 9,088 | | | 10,289 | Loans receivable | | | 15,346 | | | — | Deferred debt issue costs | | | 3,910 | | | 5,236 | Other | | | 12,097 | | | 12,565 | | | $ | 163,375 | | $ | 142,504 |
The Company recognized a right-of-use asset of $16.6 million as a result of the sale and leaseback transaction on the Bolton property in March 2022 (Note 16 and 26). In June 2022, the Company also recognized a right-of-use asset of $9.0 million as a result of a new lease signed on an auction site in Maltby, United Kingdom. On September 28, 2022, the Company completed the purchase of the Maltby property for $13.5 million (12.6 million GBP) and as a result derecognized the right of use asset and recognized the asset in property, plant and equipment (Note 26). | | (Tabular amounts expressed in thousands of United States dollars, except where noted)Ritchie Bros.
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Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 18. Other Non-Current Assets (continued) Loans Receivable At December 31, 2022, the Company participated in certain financing lending arrangements that are fully collateralized and secured by certain equipment. These financing lending arrangements have a term of one to four years. In the event of default under these agreements, the Company will take possession of the equipment as collateral to recover its loans receivable balance. The loans receivable balance at December 31, 2022 was $23.4 million, of which $8.0 million is recorded in trade and other receivables and $15.4 million in non-current loans receivable (December 31, 2021: $7.3 million, of which $7.3 million was recorded in trade and other receivables and nil in non-current loans receivable). The expected credit loss allowance is not significant. 16. Property, plant and equipment19. Intangible Assets
| | | | | | | | | | | | | | | Accumulated | | | | As at December 31, 2019 | | Cost | | depreciation | | Net book value | Land and improvements | | $ | 361,623 | | $ | (77,015) | | $ | 284,608 | Buildings | | | 252,774 | | | (115,423) | | | 137,351 | Yard and automotive equipment | | | 66,871 | | | (40,686) | | | 26,185 | Computer software and equipment | | | 80,756 | | | (68,431) | | | 12,325 | Office equipment | | | 31,760 | | | (21,776) | | | 9,984 | Leasehold improvements | | | 19,756 | | | (16,541) | | | 3,215 | Assets under development | | | 10,814 | | | — | | | 10,814 | | | $ | 824,354 | | $ | (339,872) | | $ | 484,482 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | At December 31, 2022 | | Cost | | amortization | | Net book value | | Trade names and trademarks | | $ | 54,023 | | $ | (2,889) | | $ | 51,134 | | Customer relationships | | | 245,407 | | | (85,657) | | | 159,750 | | Software and technology assets | | | 289,078 | | | (182,303) | | | 106,775 | | Software under development | | | 4,535 | | | — | | | 4,535 | | Backlog | | | 1,100 | | | (642) | | | 458 | | | | $ | 594,143 | | $ | (271,491) | | $ | 322,652 | |
| | | | | | | | | | | | | | | Accumulated | | | | As at December 31, 2018 | | Cost | | depreciation | | Net book value | Land and improvements | | $ | 362,781 | | $ | (72,547) | | $ | 290,234 | Buildings | | | 252,182 | | | (106,959) | | | 145,223 | Yard and automotive equipment | | | 57,983 | | | (36,640) | | | 21,343 | Computer software and equipment | | | 70,623 | | | (60,258) | | | 10,365 | Office equipment | | | 28,490 | | | (19,582) | | | 8,908 | Leasehold improvements | | | 19,735 | | | (16,240) | | | 3,495 | Assets under development | | | 7,031 | | | — | | | 7,031 | | | $ | 798,825 | | $ | (312,226) | | $ | 486,599 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | At December 31, 2021 | | Cost | | amortization | | Net book value | | Trade names and trademarks | | $ | 54,400 | | $ | (2,147) | | $ | 52,253 | | Customer relationships | | | 245,984 | | | (65,480) | | | 180,504 | | Software and technology assets | | | 255,636 | | | (144,309) | | | 111,327 | | Software under development | | | 5,424 | | | — | | | 5,424 | | Backlog | | | 1,100 | | | (92) | | | 1,008 | | | | $ | 562,544 | | $ | (212,028) | | $ | 350,516 | |
At December 31, 2022, a net carrying amount of $54.5 million (December 31, 2021: $55.6 million) included in intangible assets was not subject to amortization. During the year ended December 31, 2022, the cost of additions was reduced by $1.1 million for recognition of tax credits (2021: $2.2 million; 2020: $2.6 million). During the year ended December 31, 2019,2022, interest of $85,000 (2018: $110,000; 2017: $110,000)$0.4 million (2021: $0.3 million; 2020: $0.3 million) was capitalized to the cost of assetssoftware under development. These interest costs relating to qualifying assets are capitalized at a weighted average rate of 4.07% (2018: 4.06%4.82% (2021: 2.48%; 2017: 2.97%2020: 3.04%). Additions duringDuring the year include $15,282,000 (2018: $8,968,000; 2017: $8,820,000)ended December 31, 2022, the weighted average amortization period for all classes of property, plant and equipment under capital leases.intangible assets was 8.6 years (2021: 9.0; 2020: 9.1).
At December 31, 2022, estimated annual amortization expense for the next five years ended December 31 are as follows: 17. Other non-current assets
| | | | | | | As at December 31, | | 2019 | | 2018 | Right-of-use assets | | $ | 116,209 | | $ | — | Tax receivable | | | 11,792 | | | 12,705 | Equity-accounted investments | | | 4,276 | | | 4,010 | Deferred debt issue costs | | | 1,403 | | | 2,017 | Other | | | 11,999 | | | 10,663 | | | $ | 145,679 | | $ | 29,395 |
| | | | 2023 | | $ | 55,829 | 2024 | | | 41,016 | 2025 | | | 24,661 | 2026 | | | 20,672 | 2027 | | | 18,590 | | | $ | 160,768 |
Equity-accounted investments
The Company holds a 48% share interest in a group of companies detailed below (together, the “Cura Classis entities”), which have common ownership. The Cura Classis entities provide dedicated fleet management services in three jurisdictions to a common customer unrelated to the Company. The Company has determined the Cura Classis entities are variable interest entities and the Company is not the primary beneficiary, as it does not have the power to make any decisions that significantly affect the economic results of the Cura Classis entities. Accordingly, the Company accounts for its investments in the Cura Classis entities following the equity method.
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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17. Other non-current assets (continued)20. Goodwill
Equity-accounted investments (continued)
| | | | Balance, December 31, 2020 | | $ | 840,610 | Additions | | | 108,778 | Foreign exchange movement | | | (1,673) | Balance, December 31, 2021 | | $ | 947,715 | Additions | | | 3,882 | Foreign exchange movement | | | (2,781) | Balance, December 31, 2022 | | $ | 948,816 |
A condensed summary
In 2022, the Company recognized an increase in goodwill of $3.9 million as a result of finalizing the Company’s investmentsSmartEquip net working capital adjustment and acquisition purchase price allocation. In 2021, the Company recognized $110.6 million of goodwill from the acquisition of SmartEquip, as well as a reduction in goodwill of $1.8 million as a result of finalizing the Rouse acquisition purchase price allocation. 21. Trade and advancesOther Liabilities | | | | | | | At December 31, | | 2022 | | 2021 | Trade payables | | $ | 77,564 | | $ | 85,743 | Accrued liabilities | | | 141,401 | | | 116,647 | Social security and sales taxes payable | | | 38,741 | | | 41,608 | Net consumption taxes payable | | | 14,482 | | | 11,360 | Share unit liabilities | | | 6,267 | | | 10,056 | Other payables | | | 16,279 | | | 12,889 | Derivative financial liability | | | 29 | | | 2,005 | | | $ | 294,763 | | $ | 280,308 |
Table of Contents Notes to equity-accounted investees are as follows (inthe Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except percentages):where noted)
| | | | | | | | | | | Ownership | | December 31, | | December 31, | | | percentage | | 2019 | | 2018 | Cura Classis entities | | 48 | % | $ | 4,276 | | $ | 4,010 |
As a result of the Company’s investments, the Company is exposed to risks associated with the results of operations of the Cura Classis entities. The Company has no other business relationships with the Cura Classis entities. The Company’s maximum risk of loss associated with these entities is the investment carrying amount.
18. Intangible assets22. Debt
| | | | | | | | | | | | | | | Accumulated | | | | As at December 31, 2019 | | Cost | | amortization | | Net book value | Trade names and trademarks | | $ | 53,319 | | $ | (2,028) | | $ | 51,291 | Customer relationships | | | 124,865 | | | (34,666) | | | 90,199 | Software | | | 157,776 | | | (78,330) | | | 79,446 | Software under development | | | 12,444 | | | — | | | 12,444 | | | $ | 348,404 | | $ | (115,024) | | $ | 233,380 |
| | | | | | | | | | | | | | | Accumulated | | | | As at December 31, 2018 | | Cost | | amortization | | Net book value | Trade names and trademarks | | $ | 53,409 | | $ | (1,201) | | $ | 52,208 | Customer relationships | | | 124,986 | | | (22,010) | | | 102,976 | Software | | | 127,320 | | | (48,522) | | | 78,798 | Software under development | | | 11,640 | | | — | | | 11,640 | | | $ | 317,355 | | $ | (71,733) | | $ | 245,622 |
| | | | | | | | | Carrying amount | | | December 31, | | December 31, | | | 2022 | | 2021 | Short-term debt | | $ | 29,118 | | $ | 6,147 | | | | | | | | Long-term debt: | | | | | | | | | | | | | | Revolving facilities and delayed-draw term loan facility: | | | | | | | Delayed-draw term loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 5.86%, due in monthly installments of interest and quarterly installments of principal, maturing in September 2026 | | | 85,523 | | | 93,283 | Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.29%, due in monthly installments of interest only, maturing in September 2026 | | | - | | | 46,206 | Long-term revolver loan denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 2.29%, due in monthly installments of interest only, maturing in September 2026 | | | - | | | 56,492 | Long-term revolver loan denominated in U.S. dollars, secured, bearing interest at a weighted average rate of 5.42%, due in monthly installments of interest only, maturing in September 2026 | | | - | | | 117,000 | Less: unamortized debt issue costs | | | (357) | | | (463) | | | | | | | | Senior unsecured notes: | | | | | | | Bearing interest at 5.375% due in semi-annual installments, with the full amount of principal due in January 2025 (the "2016 Notes") | | | 500,000 | | | 500,000 | Less: unamortized debt issue costs | | | (3,669) | | | (5,469) | Bearing interest at 4.75% due in semi-annual installments, with the full amount of principal due in December 2031 (the "2021 USD Notes") | | | - | | | 600,000 | Less: unamortized debt issue costs | | | - | | | (1,948) | Bearing interest at 4.95% due in semi-annual installments, with the full amount of principal due in December 2029 (the "2021 CAD Notes") | | | - | | | 333,464 | Less: unamortized debt issue costs | | | - | | | (1,127) | Total long-term debt | | | 581,497 | | | 1,737,438 | | | | | | | | Total debt | | $ | 610,615 | | $ | 1,743,585 | | | | | | | | Long-term debt: | | | | | | | Current portion | | $ | 4,386 | | $ | 3,498 | Non-current portion | | | 577,111 | | | 1,733,940 | Total long-term debt | | $ | 581,497 | | $ | 1,737,438 |
DuringShort-term Debt
Short-term debt is comprised of drawings in different currencies on the year ended December 31, 2019, the Company recognized an impairment loss of NaN (2018: NaN; 2017: the Company recorded an impairment loss relating to certain softwareCompany’s committed revolving credit facilities and software under development $8,911,000) (note 7). At December 31, 2019, a net carrying amount of $62,589,000 (December 31, 2018: $61,883,000) included in intangible assets was not subject to amortization. During the year ended December 31, 2019, the cost of additions was reduced by $1,022,000 for recognition of tax credits (2018: $1,606,000; 2017: $888,000).
During the year ended December 31, 2019, interest of $402,000 (2018: $460,000; 2017: $281,000) was capitalized to the cost of software under development. These interest costs relating to qualifying assets are capitalized athas a weighted average interest rate of 4.01% (2018: 4.09%; 2017: 3.18%).
During the year ended December5.8% (December 31, 2019, the weighted average amortization period for all classes of intangible assets was 7.8 years (2018: 8.2; 2017: 7.9 years)2021: 1.8%).
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 22. Debt (continued) Long-term Debt | | (Tabular amounts expressed in thousands of United States dollars, except where noted)
a) |
Term Loan and Long-term Revolver Loans |
18. Intangible assets (continued)
As at December 31, 2019, estimated annual amortization expense for the next five years ended December 31 are as follows:
| | | | 2020 | | $ | 35,539 | 2021 | | | 29,706 | 2022 | | | 23,438 | 2023 | | | 17,214 | 2024 | | | 10,139 | | | $ | 116,036 |
19. Goodwill
| | | | Balance, December 31, 2017 | | $ | 670,922 | Additions | | | 3,671 | Foreign exchange movement | | | (2,999) | Balance, December 31, 2018 | | $ | 671,594 | Additions | | | 93 | Foreign exchange movement | | | 623 | Balance, December 31, 2019 | | $ | 672,310 |
20. Trade and other payables
| | | | | | | As at December 31, | | 2019 | | 2018 | Trade payables | | $ | 72,918 | | $ | 93,482 | Accrued liabilities | | | 69,539 | | | 63,666 | Social security and sales taxes payable | | | 27,737 | | | 19,390 | Net consumption taxes payable | | | 12,298 | | | 13,456 | Share unit liabilities | | | 5,130 | | | 3,714 | Other payables | | | 6,657 | | | 7,547 | | | $ | 194,279 | | $ | 201,255 |
Table of Contents
Notes to the Consolidated Financial Statements
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| (Tabular amounts expressed in thousands of United States dollars, except where noted)
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21. Debt
| | | | | | | | | Carrying amount | | | December 31, | | December 31, | | | 2019 | | 2018 | Short-term debt | | $ | 4,705 | | $ | 19,896 | | | | | | | | Long-term debt: | | | | | | | | | | | | | | Term loans: | | | | | | | Denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 3.958%, due in monthly installments of interest only and quarterly installments of principal, maturing in October 2021 | | | 155,355 | | | 161,891 | Denominated in United States dollars, secured, bearing interest at a weighted average rate of 3.715%, due in weekly installments of interest only and quarterly installments of principal, repaid in full in December 2019 | | | — | | | 62,690 | Less: unamortized debt issue costs | | | (807) | | | (2,419) | Senior unsecured notes: | | | | | | | Bearing interest at 5.375% due in semi-annual installments, with the full amount of principal due in January 2025 | | | 500,000 | | | 500,000 | Less: unamortized debt issue costs | | | (9,067) | | | (10,864) | Total long-term debt | | | 645,481 | | | 711,298 | | | | | | | | Total debt | | $ | 650,186 | | $ | 731,194 | | | | | | | | Long-term debt: | | | | | | | Current portion | | $ | 18,277 | | $ | 13,126 | Non-current portion | | | 627,204 | | | 698,172 | Total long-term debt | | $ | 645,481 | | $ | 711,298 |
On October 27,During 2016, the Company entered into a credit agreement (the “Credit Agreement”) with a syndicate of lenders.lenders (as amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). The Credit Agreement is comprised of multicurrency revolving facilities (the “Revolving Facilities”) and a delayed-draw term loan facility (the “DDTL Facility”, together with the Revolving Facilities, the “Facilities”).
At that time,
The Credit Agreement was amended in September 2021 (the “September 2021 Amendment”), which, among other things, (i) extended the maturity date of the Facilities from October 27, 2023 to September 21, 2026, (ii) increased the total size of the Facilities provided under the Credit Agreement providedto up to $1.0 billion, including $295.0 million of commitments under the DDTL Facility, (iii) reduced the applicable margin for base rate loans and LIBOR loans at each pricing tier level, (iv) reduced the applicable percentage per annum used to calculate the commitment fee in respect of the unused commitments under the Facilities at each pricing tier level, and (v) included customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate. Immediately prior to the September 2021 Amendment, the aggregate principal amount outstanding under the DDTL Facility was $90.0 million ($118.9 million Canadian dollars). In connection with the September 2021 Amendment, the Company with: ● | Multicurrency revolving facilities of up to $675,000,000 (the “Revolving facilities”); |
● | A delayed draw term loan facility of up to $325,000,000 (the “Term loans”); |
● | At the Company’s election and subject to certain conditions, including receipt of related commitments, incremental term loan facilities and/or increases to the Revolving facilities in an aggregate amount of up to $50,000,000. |
The Company may userefinanced that amount with the proceeds from the Revolving facilities for general corporate purposes. The amount available pursuant to the Terms loans was only available to finance the acquisition of IronPlanet and is not available for other corporate purposes upon repayment of amounts borrowed under that facility. On May 31, 2017, the Company borrowed $325,000,000a borrowing under the Term loans to financeDDTL Facility. Under the acquisitionterms of IronPlanet (note 29).the September 2021 Amendment, there were no mandatory principal repayments of borrowings under the DDTL Facility until the earlier of when the remaining $205.0 million is drawn or the third quarter of 2022. The Term loans amortize in equal quarterly installments in an annual amount of 5% forCompany did not draw on the first two yearsremaining $205.0 million before it expired on June 28, 2022 and, 10%therefore, mandatory principal repayments began in the third through fifth years,quarter of 2022. The principal payments are subject to an annual amortization rate of 5%, payable in quarterly installments, with the balance payable at maturity. Prepayments are applied against future scheduled mandatory payments. Upon the closingAs a result of the acquisitionexpiry of the unused portion of the DDTL Facility during 2022, the Company wrote off $0.7 million of deferred debt issuance costs included in non-current assets to interest expense.
The Credit Agreement was amended in December 2022 (the “December 2022 Amendment”), which, among other things, (i) permits the proposed merger with IAA (the “IAA merger”), (ii) provides commitments for a term loan A facility (the “TLA Facility”) in an aggregate principal amount of up to $1.8 billion to be used to finance, in part, the IAA merger, (iii) provides the Company the ability to borrow up to $200.0 million of the Revolving Facilities under the Credit Agreement became secured byon a limited conditionality basis to finance, in part, the assets ofIAA merger, and (iv) provides the ability for the Company to add a term loan B facility in a future incremental amendment, the proceeds of which would be used to finance, in part, the proposed IAA acquisition. The Company incurred total debt issuance costs of $0.8 million in connection with the December 2022 Amendment, of which $0.3 million has been included in non-current assets and certain of its subsidiaries$0.5 million in Canada and the United States. The Credit Agreement may become unsecured again, subject to the Company meeting specified credit rating or leverage ratio conditions.acquisition-related costs. On June 21, 2018, the Company reduced the amount available on the Company’s Revolving facilities by $185,000,000.
At December 31, 2019, the Company’s Credit Agreement provides2022, the Company with:had unamortized deferred debt issue costs relating to the Facilities and the TLA Facility of $4.3 million (2021: $5.7 million) ● | Revolving facilities of up to $490,000,000 |
● | Terms loans used to finance the acquisition of IronPlanet and |
● | At the Company’s election and subject to certain conditions, including receipt of related commitments, incremental Term loan facilities and/or increases to the Revolving facilities in an aggregate amount of up to $50,000,000. |
Table of Contents
Notes to the Consolidated Financial Statements
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| (Tabular amounts expressed in thousands of United States dollars, except where noted)
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21. Debt (continued)
For the year ended December 31, 2019,2022, the Company made scheduled debt repayments of $13,592,000 on the Term loans (2018: $11,013,000)DDTL Facility of $2.2 million (2021: $5.3 million). For the year ended December 31, 2019, theThe Company madedid not make any voluntary prepayments totalling $62,690,000 (2018: $80,000,000) on the term loan denominated in United States dollars. On December 21, 2016, the Company completed the offering of $500,000,000 aggregate principal amount of 5.375% senior unsecured notes due January 15, 2025 (the “Notes”). Interest on the Notes is payable semi-annually. The Notes are jointly and severally guaranteed on an unsecured basis, subject to certain exceptions, by each of the Company’s subsidiaries that is a borrower or guarantees indebtedness under the Credit Agreement. IronPlanet and certain of its subsidiaries were added as additional guarantors in connection with the acquisition of IronPlanet.
Short-term debt is comprised of drawings in different currencies on the Company’s committed revolving credit facilities and have a weighted average interest rate of 2.3% (December 31, 2018: 2.3%).
As at December 31, 2019, principal repayments for the remaining period to the contractual maturity dates are as follows:
| | | | | | Face value | 2020 | | $ | 18,277 | 2021 | | | 137,078 | 2022 | | | — | 2023 | | | — | 2024 | | | — | Thereafter | | | 500,000 | | | $ | 655,355 |
As at December 31, 2019, the Company had unused committed revolving credit facilities aggregating $489,937,000 of which $485,509,000 is available until October 27, 2021.
22. Other non-current liabilities
| | | | | | | As at December 31, | | 2019 | | 2018 | Operating lease liability | | $ | 111,322 | | $ | — | Tax payable | | | 20,232 | | | 22,583 | Finance lease liability | | | 16,336 | | | 10,146 | Other | | | 3,348 | | | 9,251 | | | $ | 151,238 | | $ | 41,980 |
23. Equity and dividends
Share capital
Preferred stock
Unlimited number of senior preferred shares, without par value, issuable in series.
Unlimited number of junior preferred shares, without par value, issuable in series.
All issued shares are fully paid. NaN preferred shares have been issued.
Table of Contents
Notes to the Consolidated Financial Statements
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| (Tabular amounts expressed in thousands of United States dollars, except where noted)
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23. Equity and dividends(continued)
Share capital (continued)
Share repurchase
There were 1,223,674 common shares repurchased for $42,012,000prepayments during the year ended December 31, 2019. There were 0 common shares repurchased in the years ended December 2018 and 2017.
Dividends
2022 (2021: Declared and paid$nil The Company declared and paid the following dividends during the years ended December 31, 2019, 2018, and 2017:
| | | | | | | | | | | | | | | | | Dividend | | | | Total | | | | | Declaration date | | per share | | Record date | | dividends | | Payment date | Year ended December 31, 2019: | | | | | | | | | | | | | Fourth quarter 2018 | | January 25, 2019 | | $ | 0.1800 | | February 15, 2019 | | $ | 19,568 | | March 8, 2019 | First quarter of 2019 | | May 8, 2019 | | | 0.1800 | | May 29, 2019 | | | 19,592 | | June 19, 2019 | Second quarter of 2019 | | August 8, 2019 | | | 0.2000 | | August 28, 2019 | | | 21,631 | | September 18, 2019 | Third quarter 2019 | | November 7, 2019 | | | 0.2000 | | November 27, 2019 | | | 21,744 | | December 18, 2019 | | | | | | | | | | | | | | Year ended December 31, 2018: | | | | | | | | | | | | | Fourth quarter 2017 | | January 26, 2018 | | $ | 0.1700 | | February 16, 2018 | | $ | 18,246 | | March 9, 2018 | First quarter of 2018 | | May 9, 2018 | | | 0.1700 | | May 30, 2018 | | | 18,342 | | June 20, 2018 | Second quarter of 2018 | | August 7, 2018 | | | 0.1800 | | August 29, 2018 | | | 19,528 | | September 19, 2018 | Third quarter 2018 | | November 8, 2018 | | | 0.1800 | | November 28, 2018 | | | 19,562 | | December 19, 2018 | | | | | | | | | | | | | | Year ended December 31, 2017: | | | | | | | | | | | | | Fourth quarter 2016 | | January 23, 2017 | | $ | 0.1700 | | February 10, 2017 | | $ | 18,160 | | March 3, 2017 | First quarter 2017 | | May 4, 2017 | | | 0.1700 | | May 23, 2017 | | | 18,188 | | June 13, 2017 | Second quarter 2017 | | August 4, 2017 | | | 0.1700 | | August 25, 2017 | | | 18,210 | | September 15, 2017 | Third quarter 2017 | | November 7, 2017 | | | 0.1700 | | November 29, 2017 | | | 18,227 | | December 20, 2017 |
Declared and undistributed
In addition to the above dividends, since the end of the year the Directors have recommended the payment of a final dividend of $0.20 cents per common share, accumulating to a total dividend of $21,906,000. The aggregate amount of the proposed final dividend is expected to be paid out of retained earnings on March 6, 2020 to stockholders of record on February 14, 2020. This dividend payable has not been recognized as a liability in the financial statements. The payment of this dividend will not have any tax consequence for the Company.
Foreign currency translation reserve
Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature, which generated net loss of $1,082,000 for 2019 (2018: net loss of $9,602,000; 2017: net gain of $18,129,000)).
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 22. Debt (continued) Long-term Debt (continued) | 2016 Notes On December 21, 2016, the Company completed the offering of $500.0 million aggregate principal amount of 5.375% senior unsecured notes due January 15, 2025 (the “2016 Notes”). Interest on the 2016 Notes is payable semi-annually. The 2016 Notes are jointly and severally guaranteed on an unsecured basis, subject to certain exceptions, by certain of the Company’s subsidiaries. IronPlanet, Rouse, SmartEquip, and certain of their respective subsidiaries were added as additional guarantors in connection with the acquisitions of IronPlanet, Rouse and SmatEquip, respectively. 2021 Notes On December 21, 2021, the Company completed the offering of two series of senior notes: (i) $600.0 million aggregate principal amount of 4.750% senior notes due December 15, 2031 and (ii) $425.0 million Canadian dollar aggregate principal amount of 4.950% senior notes due December 15, 2029 (together the “2021 Notes”). The gross proceeds from the 2021 Notes offering together with certain additional amounts including prepaid interest were placed into escrow accounts and were expected to be held in escrow until the completion of the proposed Euro Auctions Acquisition. On May 4, 2022, the Company redeemed all of the 2021 Notes at a redemption price equal to 100% of the original offering price of the notes, plus accrued and unpaid interest. The Company was relieved of its obligations for the 2021 Notes upon redemption and therefore recognized the difference of $4.8 million between the reacquisition price and the net carrying amount of the debt extinguished (which included unamortized deferred debt issuance costs) as a loss on redemption of the 2021 Notes in interest expense in the consolidated income statement during the second quarter of 2022. At December 31, 2022, principal repayments for the remaining period to the contractual maturity for our long term debt are as follows: | | | | | | Face value | 2023 | | $ | 4,386 | 2024 | | | 4,386 | 2025 | | | 504,386 | 2026 | | | 72,365 | 2027 | | | — | Thereafter | | | — | | | $ | 585,523 |
At December 31, 2022, the Company had unused committed revolving credit facilities aggregating $709.8 million that are available until September 2026 subject to certain covenant restrictions, unused uncommitted revolving credit facilities aggregating $5.0 million that are available until October 2023, and unused uncommitted revolving credit facilities aggregating $5.0 million with no maturity date.The Company was in compliance with all financial and other covenants applicable to the credit facilities at December 31, 2022. 23. Other Non-current Liabilities | | | | | | | | | December 31, | | December 31, | | | 2022 | | 2021 | Operating lease liability | | $ | 111,871 | | $ | 109,882 | Tax payable | | | 15,991 | | | 18,859 | Finance lease liability | | | 15,349 | | | 13,983 | Other | | | 4,079 | | | 4,536 | | | $ | 147,290 | | $ | 147,260 |
| | (Tabular amounts expressed in thousands of United States dollars, except where noted)Ritchie Bros.
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Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 24. Share-based paymentsEquity and Dividends Share-based payments consistShare Capital
Common Stock Unlimited number of common shares, without par value. Preferred Stock Unlimited number of senior preferred shares and junior preferred shares, without par value, issuable in series. All issued shares are fully paid. No preferred shares have been issued at December 31, 2022. In January 2023, the following compensation costs:Company entered into a securities purchase agreement with Starboard Value LP and certain of its affiliates (together, "Starboard") pursuant to which Starboard made a $485 million convertible preferred equity and a $15 million common share investment in the Company. The newly issued senior preferred shares are convertible into common shares at an initial conversion price of $73.00 per share. The preferred shares carry an initial 5.5% preferred dividend, which is payable quarterly, in cash or in shares at the Company's option, and are entitled to participate on an as-converted basis in the Company's common share dividends, subject to a $0.27 per share per quarter floor. If the IAA Acquisition is terminated, the Company has the right to redeem the preferred shares at a redemption price of 102% of par plus accrued and unpaid dividends. | | | | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | Stock option compensation expense: | | | | | | | | | | SG&A expenses | | $ | 4,697 | | $ | 7,895 | | $ | 8,948 | Acquisition-related costs | | | — | | | 357 | | | 4,752 | Share unit expense: | | | | | | | | | | Equity-classified share units | | | 8,047 | | | 11,256 | | | 3,529 | Liability-classified share units | | | 1,380 | | | 1,764 | | | 670 | Employee share purchase plan - employer contributions | | | 2,281 | | | 2,174 | | | 1,813 | | | $ | 16,405 | | $ | 23,446 | | $ | 19,712 |
Shares Issued for Business Combinations
Share unit expense and employer contributions to the employee share purchase plan are recognized in SG&A expenses.
Stock option plans
The Company has 3 stock option plans that provide forissued the awardfollowing common shares in connection with the acquisitions of stock optionsRouse and SmartEquip. These shares were issued to selected employees, directors,certain previous unitholders and officersshareholders of Rouse and SmartEquip, based on the fair market value of the Company: a) Amended and Restated Stock Option Plan, b) IronPlanet 1999 Stock Plan, and c) IronPlanet 2015 Stock Plan.Company’s common shares at the acquisition date. The IronPlanet 1999 Stock Plan and IronPlanet 2015 Stock Plan were assumed byCompany records share-based continuing employment costs in acquisition-related costs over the vesting period, with an increase to additional paid-in capital. The vesting of shares issued for business combinations is subject to continuing employment with the Company as partover various dates over a three year period from their respective acquisition dates. As and when the common shares vest, the Company will recognize the fair value of the acquisition of IronPlanet (note 29).issued common shares from additional paid-in capital to share capital. Stock optionShares issuance for business combination activity for the years ended December 31, 2019, 2018, and 2017 is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | WA | | | | Rouse | | SmartEquip | | Total | | | Common | | WA | | remaining | | Aggregate | | | | | | | | | | | | | | | | | shares under | | exercise | | contractual | | intrinsic | | | | | | | | | | | | | Weighted average | | | option | | price | | life (in years) | | value | Common | | Fair value | | Common | | Fair value | | Common | | fair value | Outstanding, December 31, 2016 | | 3,366,714 | | $ | 24.02 | | | 7.5 | | $ | 33,601 | | | | shares | | per common | | shares | | per common | | shares | | per common | | | issued | | shares | | issued | | shares | | issued | | shares | Outstanding, December 31, 2019 | | — | | $ | — | | — | | $ | — | | — | | $ | — | Granted | | 970,947 | | | 31.07 | | | | | | | 312,193 | | | 71.09 | | — | | | — | | 312,193 | | | 71.09 | Assumed in acquisition | | 737,358 | | | 14.26 | | | | | | | | Exercised | | (444,571) | | | 22.35 | | | | | | 3,762 | | Forfeited | | (170,704) | | | 19.38 | | | | | | | — | | | — | | — | | | — | | — | | | — | Outstanding, December 31, 2017 | | 4,459,744 | | $ | 24.29 | | | 7.5 | | $ | 17,649 | | Outstanding, December 31, 2020 | | 312,193 | | $ | 71.09 | | — | | $ | — | | 312,193 | | $ | 71.09 | Granted | | 923,199 | | | 32.14 | | | | | | | — | | | — | | 63,971 | | | 68.39 | | 63,971 | | | 68.39 | Exercised | | (1,235,154) | | | 23.10 | | | | | | 14,808 | | Vested | | (67,018) | | | 71.09 | | — | | | — | | (67,018) | | | 71.09 | Forfeited | | (132,624) | | | 25.91 | | | | | | | (55,510) | | | 71.09 | | — | | | — | | (55,510) | | | 71.09 | Expired | | (1,302) | | | 25.76 | | | | | | | | Outstanding, December 31, 2018 | | 4,013,863 | | $ | 26.41 | | | 7.2 | | $ | 25,374 | | Outstanding, December 31, 2021 | | 189,665 | | $ | 71.09 | | 63,971 | | $ | 68.39 | | 253,636 | | $ | 70.41 | Granted | | 914,068 | | | 34.03 | | | | | | | — | | | — | | — | | | — | | — | | | — | Exercised | | (1,672,022) | | | 24.58 | | | | | | 27,349 | | Vested | | (104,105) | | | 71.09 | | (21,325) | | | 68.39 | | (125,430) | | | 70.63 | Forfeited | | (458,092) | | | 32.15 | | | | | | | — | | | — | | — | | | — | | — | | | — | Expired | | (628) | | | 24.44 | | | | | | | | Outstanding, December 31, 2019 | | 2,797,189 | | $ | 29.05 | | | 7.1 | | $ | 38,874 | | Exercisable, December 31, 2019 | | 1,497,043 | | $ | 26.11 | | | 6.0 | | $ | 25,203 | | Outstanding, December 31, 2022 | | 85,560 | | $ | 71.09 | | 42,646 | | $ | 68.39 | | 128,206 | | $ | 70.19 | | | | | | | | | | | | | | | | |
Table of Contents Notes to the Consolidated Financial Statements |
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24. Share-based paymentsEquity and Dividends (continued) Stock option plans Share Capital (continued)
Stock options are granted with an exercise price equal toShares Issued for Business Combinations (continued)
In 2022, the fair market valueCompany recognized $8.6 million (2021: $4.8 million) of share capital from additional paid-in capital for the Company’sportion of common shares atpreviously issued in connection with the grant date, with vesting periods ranging from immediate to five yearsacquisitions of Rouse and terms not exceeding 10 years. SmartEquip that have vested as of December 31, 2022. At December 31, 2019, there were 7,222,978 (December 31, 2018: 2,478,321) shares authorized and available for grants of options under the stock option plans. The options outstanding at December 31, 2019 expire on dates ranging to August 12, 2029. The WA grant date fair value of options granted during the year ended December 31, 2019 was $7.52 per option (2018: $7.69; 2017: $7.22). The WA share price of options exercised during the year ended December 31, 2019 was $40.32 (2018: $35.08; 2017: $30.81). The significant assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2019, 2018, and 2017 are presented in the following table on a weighted average basis:
| | | | | | | | Year ended December 31, | | 2019 | | 2018 | | 2017 | | Risk free interest rate | | 2.5 | % | 2.7 | % | 2.0 | % | Expected dividend yield | | 2.06 | % | 2.11 | % | 2.15 | % | Expected lives of the stock options | | 5 | years | 5 | years | 5 | years | Expected volatility | | 26.8 | % | 28.1 | % | 27.8 | % |
In 2017, the fair value of the stock options assumed from the IronPlanet acquisition is estimated on the acquisition date using the Black-Scholes option pricing model. The weighted average fair value of the assumed options was $16.93. The significant assumptions used to estimate the fair value of these assumed stock options are presented in the following table on a weighted average basis:
| | | | Year ended December 31,
|
| 2017
|
| Risk free interest rate
| | 0.8
| %
| Expected dividend yield
| | 2.19
| %
| Expected lives of the stock options
| | 0.4
| years
| Expected volatility
| | 32.1
| %
|
As at December 31, 2019,2022, the unrecognized stock-based compensation cost related to the non-vested stock optionsshare-based continuing employment costs was $3,457,000,$3.2 million (2021: $10.7 million), which is expected to be recognized over a weighted average period of 2.01.1 years. Cash received from stock-based award exercises for
Share Repurchase There were no common shares repurchased during the year ended December 31, 2019 was $41,094,000 (2018: $28,524,000; 2017: $9,936,000). The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled $1,679,000 for2022. There were no common shares repurchased in the year ended December 2021 and 1,525,312 common shares repurchased for $53.2 million in the year ended December 2020. Change in Non-controlling Interests On September 13, 2021, the Company purchased the remaining 25% membership interest of Xcira, LLC, a Delaware limited liability Company, for a purchase price of $5.6 million. The transaction increased the Company’s ownership interest in Xcira, LLC to 100%. Dividends In January 2023, the Company announced that it expects its Board of Directors to approve the issuance of a one-time special dividend to the Company’s shareholders in the amount of $1.08 per common share, which will be payable to holders of record as of a pre-closing record date of the proposed IAA acquisition to be determined with the consent of the TSX and contingent on the closing of the proposed IAA acquisition (Note 4). Declared and Paid The Company declared and paid the following dividends during the years ended December 31, 2019 (2018: $2,793,000; 2017: $1,017,000).2022, 2021, and 2020: | | | | | | | | | | | | | | | | | Dividend | | | | Total | | | | | Declaration date | | per share | | Record date | | dividends | | Payment date | Year ended December 31, 2022: | | | | | | | | | | | | | Fourth quarter 2021 | | January 21, 2022 | | $ | 0.2500 | | February 11, 2022 | | $ | 27,659 | | March 4, 2022 | First quarter 2022 | | May 6, 2022 | | | 0.2500 | | May 27, 2022 | | | 27,693 | | June 17, 2022 | Second quarter 2022 | | August 3, 2022 | | | 0.2700 | | August 24, 2022 | | | 29,932 | | September 14, 2022 | Third quarter 2022 | | November 2, 2022 | | | 0.2700 | | November 23, 2022 | | | 29,935 | | December 14, 2022 | | | | | | | | | | | | | | Year ended December 31, 2021: | | | | | | | | | | | | | Fourth quarter 2020 | | January 22, 2021 | | $ | 0.2200 | | February 12, 2021 | | $ | 24,181 | | March 5, 2021 | First quarter 2021 | | May 7, 2021 | | | 0.2200 | | May 26, 2021 | | | 24,279 | | June 16, 2021 | Second quarter 2021 | | August 4, 2021 | | | 0.2500 | | August 25, 2021 | | | 27,607 | | September 15, 2021 | Third quarter 2021 | | November 3, 2021 | | | 0.2500 | | November 24, 2021 | | | 27,652 | | December 15, 2021 | | | | | | | | | | | | | | Year ended December 31, 2020: | | | | | | | | | | | | | Fourth quarter 2019 | | January 24, 2020 | | $ | 0.2000 | | February 14, 2020 | | $ | 21,905 | | March 6, 2020 | First quarter of 2020 | | May 6, 2020 | | | 0.2000 | | May 27, 2020 | | | 21,681 | | June 17, 2020 | Second quarter of 2020 | | August 5, 2020 | | | 0.2200 | | August 26, 2020 | | | 24,053 | | September 16, 2020 | Third quarter 2020 | | November 4, 2020 | | | 0.2200 | | November 25, 2020 | | | 24,098 | | December 16, 2020 |
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 24. Equity and Dividends (continued) Dividends (continued) Declared and Undistributed In addition to the above dividends, since the end of the year the Directors have recommended the payment of a final dividend of $0.27 per common share, accumulating to a total dividend of $27.8 million. The aggregate amount of the proposed final dividend is expected to be paid out of retained earnings on March 3, 2023 to stockholders of record on February 10, 2023. This dividend has not been recognized as a liability in the financial statements. The payment of this dividend will not have a tax consequence for the Company. Foreign Currency Translation Reserve Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature, which generated net loss of $10.5 million for 2022 (2021: net loss of $8.8 million; 2020: net gain of $10.8 million). 25. Share-based Payments Share-based payments consist of the following compensation costs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2022 | | 2021 | | 2020 | Selling, general and administrative: | | | | | | | | | | Stock option compensation expense | | $ | 12,145 | | $ | 8,365 | | $ | 5,853 | Equity-classified share units | | | 22,027 | | | 12,574 | | | 9,897 | Liability-classified share units | | | 3 | | | (580) | | | 3,635 | Employee share purchase plan - employer contributions | | | 2,786 | | | 2,747 | | | 2,497 | | | | 36,961 | | | 23,106 | | | 21,882 | Acquisition-related costs: | | | | | | | | | | Share-based continuing employment costs | | | 7,500 | | | 10,771 | | | 802 | | | | 7,500 | | | 10,771 | | | 802 | | | $ | 44,461 | | $ | 33,877 | | $ | 22,684 |
Stock Option Plans The Company has the following three stock option plans that provide for the award of stock options and premium-priced stock options to selected employees, directors, and officers of the Company: (i) Amended and Restated Stock Option Plan, (ii) IronPlanet 1999 Stock Plan, and (iii) IronPlanet 2015 Stock Plan. |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
|
24.25. Share-based paymentsPayments (continued)
Share unit plansStock Option Plans (continued)
Share unitStock option activity for the years ended December 31, 2019, 2018, and 2017 is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity-classified awards | | Liability-classified awards | Stock options | | Premium-priced stock options | | | PSUs | | RSUs | | PSUs(1) | | RSUs | | DSUs | | | | | | WA | | | | | | | | | | WA | | | | | | | | WA grant | | | | WA grant | | | | WA grant | | | | WA grant | | | | WA grant | Common | | WA | | remaining | | Aggregate | | Common | | WA | | remaining | | Aggregate | | | | | date fair | | | | date fair | | | | date fair | | | | date fair | | | | date fair | shares under | | exercise | | contractual | | intrinsic | | shares under | | exercise | | contractual | | intrinsic | | | Number | | value | | Number | | value | | Number | | value | | Number | | value | | Number | | value | option | | price | | life (in years) | | value | | option | | price | | life (in years) | | value | Outstanding, December 31, 2016 | | 243,968 | | $ | 27.48 | | — | | $ | — | | 311,329 | | $ | 23.96 | | 160,009 | | $ | 23.37 | | 73,520 | | $ | 25.41 | | Outstanding, December 31, 2019 | | 2,797,189 | | $ | 29.05 | | | 7.1 | | $ | 38,874 | | — | | $ | — | | | — | | $ | — | Granted | | 136,073 | | | 30.28 | | 125,152 | | | 26.93 | | 98,775 | | | 31.21 | | 878 | | | 32.30 | | 19,967 | | | 29.67 | 822,626 | | | 41.94 | | | — | | | — | | — | | | — | | | — | | | — | Transferred to (from) equity awards on modification | | 81,533 | | | 24.47 | | — | | | — | | (81,533) | | | 24.66 | | — | | | — | | — | | | — | | Vested and settled | | (27,326) | | | 26.82 | | — | | | — | | (49,873) | | | 23.64 | | (156,221) | | | 23.33 | | — | | | — | | Exercised | | (1,563,941) | | | 28.22 | | | — | | | 37,062 | | — | | | — | | | — | | | — | Forfeited | | — | | | — | | — | | | — | | (19,457) | | | 26.39 | | — | | | — | | — | | | — | (68,056) | | | 34.30 | | | — | | | — | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding, December 31, 2017 | | 434,248 | | $ | 27.83 | | 125,152 | | $ | 26.93 | | 259,241 | | $ | 26.38 | | 4,666 | | $ | 26.42 | | 93,487 | | $ | 26.32 | | Expired | | (2,064) | | | 20.74 | | | — | | | — | | — | | | — | | | — | | | — | Outstanding, December 31, 2020 | | 1,985,754 | | $ | 34.95 | | | 7.7 | | $ | 68,717 | | — | | $ | — | | | — | | $ | — | Granted | | 240,803 | | | 35.63 | | 91,251 | | | 32.10 | | — | | | — | | 66 | | | 34.70 | | 26,553 | | | 33.42 | 758,256 | | | 56.29 | | | — | | | — | | 1,017,064 | | | 91.24 | | | — | | | — | Transferred to equity awards on modification | | 257,659 | | | 31.30 | | — | | | — | | (257,659) | | | 26.38 | | — | | | — | | — | | | — | | Vested and settled | | (212,263) | | | 33.78 | | — | | | — | | — | | | — | | (4,732) | | | 26.54 | | (6,605) | | | 23.16 | | Exercised | | (495,021) | | | 32.83 | | | — | | | 14,147 | | — | | | — | | | — | | | — | Forfeited | | (50,159) | | | 31.41 | | (8,417) | | | 32.00 | | (1,582) | | | 26.45 | | — | | | — | | — | | | — | (40,932) | | | 45.86 | | | — | | | — | | — | | | — | | | — | | | — | Outstanding, December 31, 2018 | | 670,288 | | $ | 31.46 | | 207,986 | | $ | 28.99 | | — | | $ | — | | — | | $ | — | | 113,435 | | $ | 28.16 | | Outstanding, December 31, 2021 | | 2,208,057 | | $ | 42.55 | | | 7.7 | | $ | 41,884 | | 1,017,064 | | $ | 91.24 | | | 5.7 | | $ | — | Granted | | 170,208 | | | 36.13 | | 36,350 | | | 35.40 | | — | | | — | | — | | | — | | 24,810 | | | 35.99 | 710,847 | | | 58.08 | | | — | | | — | | 119,157 | | | 91.37 | | | — | | | — | Vested and settled | | (251,883) | | | 30.33 | | (265) | | | 31.98 | | — | | | — | | — | | | — | | (19,877) | | | 27.45 | | Exercised | | (159,920) | | | 36.72 | | | — | | | 4,494 | | — | | | — | | | — | | | — | Forfeited | | (159,889) | | | 33.21 | | (6,651) | | | 34.27 | | — | | | — | | — | | | — | | — | | | — | (28,689) | | | 48.09 | | | — | | | — | | (17,789) | | | 90.93 | | | — | | | — | Outstanding, December 31, 2019 | | 428,724 | | $ | 32.89 | | 237,420 | | $ | 29.72 | | — | | $ | — | | — | | $ | — | | 118,368 | | $ | 29.64 | | Outstanding, December 31, 2022 | | 2,730,295 | | $ | 46.88 | | | 7.3 | | $ | 31,151 | | 1,118,432 | | $ | 91.26 | | | 4.7 | | $ | — | Exercisable, December 31, 2022 | | 1,308,853 | | $ | 38.36 | | | 5.9 | | $ | 25,815 | | — | | $ | — | | | — | | $ | — |
Stock options The Company uses the Black Scholes option pricing model to fair value stock options. Stock options are granted with an exercise price equal to the fair market value of the Company’s common shares at the grant date, with a three year vesting period and terms not exceeding 10 years. At December 31, 2022, there were 3,919,069 (December 31, 2021: 4,705,117) shares authorized and available for grants of options under the stock option plans. The options outstanding at December 31, 2022 expire on dates ranging to December 16, 2032. The weighted average grant date fair value of options granted during the year ended December 31, 2022 was $14.35 per option (2021: $12.72; 2020: $8.69). The weighted average share price of options exercised during the year ended December 31, 2022 was $64.82 (2021: $61.40; 2020: $51.92). The significant assumptions used to estimate the fair value of stock options granted are presented in the following table on a weighted average basis: | | | | | | | | Year ended December 31, | | 2022 | | 2021 | | 2020 | | Risk free interest rate | | 2.2 | % | 0.5 | % | 0.7 | % | Expected dividend yield | | 1.74 | % | 1.64 | % | 1.96 | % | Expected lives of the stock options | | 4 | years | 4 | years | 5 | years | Expected volatility | | 31.8 | % | 32.3 | % | 28.0 | % |
At December 31, 2022, the unrecognized stock-based compensation cost related to non-vested stock options was $7.1 million, which is expected to be recognized over a weighted average period of 2.0 years. Cash received from stock-based award exercises for the year ended December 31, 2022 was $5.9 million (2021: $16.3 million; 2020: $44.1 million). The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled $0.4 million for the year ended December 31, 2022 (2021: $1.8 million; 2020: $4.6 million). | (1)Ritchie Bros. | Liability-classified PSUs include PSUs awarded under the employee PSU plan and the previous 2013 PSU plan, in place prior to 2015, are cash-settled and not subject to market vesting conditions.116 |
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 25. Share-based Payments (continued) Stock Option Plans (continued) Premium-priced Stock Options The Company also grants premium-priced stock options to the senior executives with exercise prices above the fair market value of the Company’s common shares on grant dates. The premium-priced stock options vest and become exercisable upon the third anniversary of their grant date. The premium-priced stock options granted in August and November 2021 expire on the sixth anniversary of their grant date, and those granted in June 2022 expire in August 2027 to coincide with the expiry of the August 2021 grant. The fair values of the premium-priced stock options were calculated on the grant date using a Monte Carlo simulation model. The weighted average estimated grant date fair value of premium-priced options for the year ended December 31, 2022 was $8.00 per option (2021: $8.59). The significant assumptions used to estimate the fair values were as follows: | | | | | | Year ended December 31, | | 2022 | | 2021 | | Risk free interest rate | | 3.0 | % | 1.1 | % | Expected dividend yield | | 1.63 | % | 1.59 | % | Expected lives of the stock options | | 4 | years | 5 | years | Expected volatility | | 30.2 | % | 30.6 | % |
In addition, the estimated fair value of a premium priced stock option is a function of the expected stock option exercise behaviour assumption. The Company estimated that vested premium priced stock options will be exercised at the midpoint between (i) the later of the date that the premium priced stock options are expected to vest and the date that the exercise price is achieved, and (ii) the end of the premium priced options contractual term. At December 31, 2022, the unrecognized stock-based compensation cost related to the premium-priced stock options was $5.6 million, which is expected to be recognized over a weighted average period of 1.9 years. Share Unit Plans Share unit activity is presented below: | | | | | | | | | | | | | | | | | | | | | | | | Equity-classified awards | | Liability-classified awards | | | PSUs | | PSUs with Market Conditions | | RSUs | | DSUs | | | | | WA grant | | | | WA grant | | | | WA grant | | | | | WA grant | | | | | date fair | | | | date fair | | | | date fair | | | | | date fair | | | Number | | value | | Number | | value | | Number | | value | | | Number | | value | Outstanding, December 31, 2019 | | 428,724 | | $ | 32.89 | | — | | $ | — | | 237,420 | | $ | 29.72 | | | 118,368 | | $ | 29.64 | Granted | | 303,829 | | | 42.09 | | — | | | — | | 45,781 | | | 51.36 | | | 19,146 | | | 47.01 | Vested and settled | | (156,238) | | | 31.94 | | — | | | — | | (98,542) | | | 27.68 | | | — | | | — | Forfeited | | (33,639) | | | 36.60 | | — | | | — | | (49,722) | | | 28.14 | | | — | | | — | Outstanding, December 31, 2020 | | 542,676 | | $ | 38.09 | | — | | $ | — | | 134,937 | | $ | 39.14 | | | 137,514 | | $ | 32.06 | Granted | | 160,713 | | | 57.67 | | 88,305 | | | 65.45 | | 46,675 | | | 60.98 | | | 19,075 | | | 58.48 | Vested and settled | | (161,248) | | | 31.14 | | — | | | — | | (93,426) | | | 35.04 | | | — | | | — | Forfeited | | (18,523) | | | 47.58 | | — | | | — | | (9,074) | | | 55.81 | | | — | | | — | Outstanding at December 31, 2021 | | 523,618 | | $ | 45.90 | | 88,305 | | $ | 65.45 | | 79,112 | | $ | 54.96 | | | 156,589 | | $ | 35.28 | Granted | | 236,855 | | | 58.53 | | 14,574 | | | 69.92 | | 34,495 | | | 57.71 | | | 21,824 | | | 58.24 | Vested and settled | | (93,241) | | | 36.42 | | — | | | — | | (37,714) | | | 50.29 | | | (70,048) | | | 36.13 | Forfeited | | (4,598) | | | 51.76 | | — | | | — | | (7,869) | | | 60.30 | | | — | | | — | Outstanding at December 31, 2022 | | 662,634 | | $ | 51.71 | | 102,879 | | $ | 66.08 | | 68,024 | | $ | 58.32 | | | 108,365 | | $ | 39.35 |
The total market value of liability-classified share units vested and released during the year ended December 31, 20192022 was $774,000 (2018: $410,000; 2017: $6,521,000)$4.9 million (2021: $nil; 2020: $nil). The Company modified the employee PSU plans from liability-classified to equity-classified share units prior Table of Contents Notes to the 2018 vesting.Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 25. Share-based Payments (continued) Share Unit Plans (continued) Senior executiveExecutive and employeeEmployee PSU plansPlans The Company grants PSUs under a senior executive PSU plan and an employee PSU plan (the “PSU Plans”). Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, and/or performance vesting conditions being met. The PSU Plans allow the Company to choose whether to settle the awards in cash or in shares. The Company intends to settle by issuance of shares for units granted in 2018 and onwards.shares. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) to issue a number of shares equal to the number of units that vest. The fair value of the equity-classified PSUs awarded in 20192022, 2021 and 2020 is estimated on grant date using the 20-day volume weighted averagemarket close price of the Company’s common shares listed on the New York Stock Exchange,NYSE, as these awards are not subject to market vesting conditions. PSUs awarded in 2018 and 2017 contained market vesting conditions and their fair value is estimated on modification date and on the date of grant using a Monte-Carlo simulation model. The significant assumptions used to estimate the fair value of the equity-classified PSUs awarded during 2018 and 2017 are presented in the following table on a weighted average basis: | | | | | | Year ended December 31, | | 2018 | | 2017 | | Risk free interest rate | | 1.92 | % | 1.40 | % | Expected dividend yield | | 2.09 | % | 1.92 | % | Expected lives of the PSUs | | 3 | years | 3 | years | Expected volatility | | 31.1 | % | 28.2 | % | Average expected volatility of comparable companies | | 34.1 | % | 37.0 | % |
Table of Contents
Notes to the Consolidated Financial Statements
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| (Tabular amounts expressed in thousands of United States dollars, except where noted)
|
|
24. Share-based payments (continued)
Share unit plans (continued)
Senior executive and employee PSU plans (continued)
The significant assumptions used to estimate fair value of the liability-classified PSUs awarded under the employee PSU plan during 2017 are presented in the following table on a weighted average basis:
| | | | Year ended December 31,
|
| 2017
|
| Risk free interest rate
| | 1.5
| %
| Expected dividend yield
| | 2.01
| %
| Expected lives of the PSUs
| | 3
| years
| Expected volatility
| | 28.9
| %
| Average expected volatility of comparable companies
| | 33.4
| %
|
Risk free interest rate is estimated using Bloomberg’s United States dollar Swap Rate as of the valuation date. Expected dividend yield assumes a continuation of the most recent quarterly dividend payments. Given the limited historical information available for the PSUs, the Company estimated the expected life of PSUs with reference to the expected life of stock options. Stock options have five-year expected lives, whereas PSUs vest after three years. As such, the Company estimates the expected life of the PSUs to equal the three-year vesting period. Expected volatility is estimated from Bloomberg’s volatility surface of the common shares as of the valuation date.
As atAt December 31, 2019,2022, the unrecognized share unit expense related to equity-classified PSUs was $5,015,000,$14.6 million, which is expected to be recognized over a weighted average period of 1.71.8 years.
Sign-on grant PSUs
On August 11, 2014,PSUs with Market Conditions
The Company also grants PSUs to senior executives with a market condition where vesting is conditional upon the Company awarded 102,375 one-time sign-on grant PSUs (the "SOG PSUs") that are subject to market vesting conditions relatedtotal stockholder return performance of the Company’s stock relative to the Company's share performance of a peer group over rolling two, a three, four, year performance period from the date of grant. The PSUs granted in August and five-year periods. This plan was modified in 2017 and 2018,November 2021 have a three year performance period and the nature, impact,PSUs granted in June 2022 have approximately a two year performance period to coincide with the remaining performance period of the August 2021 grant. The fair value per PSU granted during the year ended December 31, 2022 of $69.92 was calculated on the grant date using the Monte Carlo simulation model which takes into consideration a required post-vesting holding period of one year with a discount value of $5.34 per PSU. The discount was calculated using the Chaffe Protective Put Method and an effective tax rate of 35%. The significant assumptions used to determineestimate the fair value at modification are providedpresented in the following table:"Modifications" section below. This plan fully vested in August 2019 and there was 0
| | | | | | | Year ended December 31, | | 2022 | | | 2021 | | Risk free interest rate | | 2.7 | % | | 0.5 | % | Expected dividend yield | | 1.63 | % | | 1.63 | % | Expected lives of the PSUs | | 2 | years | | 3 | years | Expected volatility | | 33.4 | % | | 31.0 | % | Average expected volatility of comparable companies | | 34.4 | % | | 38.6 | % |
At December 31, 2022, the unrecognized share unit expense at December 31, 2019.related to equity-classified PSUs with market conditions was $3.9 million, which is expected to be recognized over a weighted average period of 1.6 years. RSUs The Company has RSUrestricted share unit plans (RSU plans) that are equity-settled and not subject to market vesting conditions. Fair values of RSUs are estimated on grant date using the 20-day volume weighted averagemarket close price of the Company's common shares listed on the New York Stock Exchange.NYSE. As atAt December 31, 2019,2022, the unrecognized share unit expense related to equity-classified RSUs was $2,455,000,$1.6 million, which is expected to be recognized over a weighted average period of 1.21.4 years.
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 25. Share-based Payments (continued) Share Unit Plans (continued) DSUs The Company has DSUdeferred share unit plans (DSU plans) that are cash-settled and not subject to market vesting conditions. Fair values of DSUsdeferred share units (“DSUs”) are estimated on grant date and at each reporting date using the 20-day volume weighted averagemarket close price of the Company's common shares listed on the New York Stock Exchange.NYSE. DSUs are granted under the DSU plan to members of the Board of Directors. There is no unrecognized share unit expense related to liability-classified DSUs as they vest immediately and are expensed upon grant. Table of Contents
Notes to the Consolidated Financial Statements
|
| (Tabular amounts expressed in thousands of United States dollars, except where noted)
|
|
24. Share-based payments (continued)
Share unit plans (continued)
DSUs (continued)
As atAt December 31, 2019,2022, the Company had a total share unit liability of $5,130,000 (2018: $3,714,000)$6.3 million (2021: $10.1 million) in respect of share units under the DSU plans presented in currenttrade and other liabilities.
Modifications
The Company modified various share-based payment plans in 2017 and 2018. The nature and impact of these modifications are discussed further below.
Employee and Executive PSU Plan modification
On March 1, 2018, the Company modified the market and performance vesting conditions for the PSUs. Concurrently, the PSUs under the employee PSU plan were reclassified to equity awards based on the Company’s settlement intentions. The weighted average fair value of the PSU awards outstanding on the modification date was $31.35. The incremental compensation recognized as a result of the vesting condition modification was $1,400,000. The share unit liability related to the employee PSUs, representing the portion of the fair value attributable to past service, was $6,701,000, which was reclassified to equity on that date. No incremental compensation was recognized as a result of the employee PSU settlement modification.
Sign-on Grants modifications
Prior to May 1, 2017, the Company was only able to settle the SOG PSU award in cash, and as such, the plan was classified as a liability award. On May 1, 2017 (the “2017 SOG modification date”), the shareholders approved amendments to the SOG PSU grant, allowing the Company to choose whether to settle the award in cash or in shares. The Company chose to settle in shares and, accordingly:
| ● | The shareholders authorized 150,000 shares to be issued for settlement of the SOG PSUs; and |
| ● | The share unit liability, representing the portion of the fair value attributable to past service, of $1,421,000 was reclassified to equity. |
The weighted average fair value of the SOG PSUs outstanding on the modification date was $24.47. No incremental compensation was recognized as a result of the modification. At the time of this modification, the SOG PSUs were contingently redeemable in cash in the event of death of the participant. Consequently, the Company reclassified $1,803,000 to temporary equity, representing the portion of the contingent redemption amount of the SOG PSUs as if redeemable on May 1, 2017, to the extent attributable to prior service.
On September 11, 2018, the Company modified the performance vesting conditions of the SOG PSUs. The modification impacted the third and fourth tranches of PSUs to vest. As a result of the modification, the actual number of units to vest will be determined by the Board of Directors of the Company based on absolute Total Shareholder Return (“TSR”) performance over the period commencing on July 1, 2017, and ending on the fourth and fifth anniversaries of the grant date. Prior to this modification, the absolute TSR performance period commenced on August 11, 2014.
Table of Contents
Notes to the Consolidated Financial Statements
|
| (Tabular amounts expressed in thousands of United States dollars, except where noted)
|
|
24. Share-based payments (continued)
Share unit plans (continued)
Modifications (continued)
The weighted average fair value of the PSU awards outstanding on the modification date was $43.34. The incremental compensation recognized as a result of the vesting condition modification was $838,000. It was determined based on the change in fair value of the equity-classified SOG PSUs immediately before and after modification. Significant assumptions used to estimate the fair value of the equity-classified SOG PSUs to determine the incremental compensation cost were as follows:
| | | | September 11, 2018
|
| 2018
|
| Risk free interest rate
| | 2.7
| %
| Expected dividend yield
| | 1.53
| %
| Expected lives of the PSU
| | 1
| year
| Expected volatility
| | 29.2
| %
|
Unrecognized compensation expense based on the fair value of the SOG PSU award on the modification has already amortized over the remaining service period.
RSU Modification
Prior to November 8, 2017, the Company was only able to settle the RSU awards in cash, and as such, the RSUs were classified as liability awards, which are fair valued on grant date and at each reporting date using the 20-day volume weighted average price of the Company’s common shares listed on the New York Stock Exchange. On November 8, 2017 (the “RSU modification date”), the Board of Directors approved amendments to the RSU plans, allowing the Company to choose whether to settle the awards in cash or in shares for new RSUs granted after the RSU modification date. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) to issue a number of shares equal to the number of units that vest, net of any applicable withholding, if any. The Company intends to settle in shares.
Employee share purchase planShare Purchase Plan The Company has an employee share purchase plan that allows all employees that have completed two months of service to contribute funds to purchase common shares at the current market value at the time of share purchase. Employees may contribute up to 4% of their salary. The Company will match between 50% and 100% of the employee’s contributions, depending on the employee’s length of service with the Company. 25. Leases
The Company's breakdown of lease expense is as follows:
| | | | | | | Year ended December 31, | | 2019 | | 2018 | Operating lease cost | | $ | 17,878 | | $ | 20,547 | Finance lease cost | | | | | | | Amortization of leased assets | | | 7,510 | | | 3,996 | Interest on lease liabilities | | | 800 | | | 389 | Short-term lease cost | | | 9,090 | | | 7,187 | Sublease income | | | (559) | | | (904) | | | $ | 34,719 | | $ | 31,215 |
Table of Contents Notes to the Consolidated Financial Statements |
| (Tabular amounts expressed in thousands of United States dollars, except where noted) |
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25.26. Leases(continued)
The Company's breakdown of lease expense is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | 2022 | | 2021 | | 2020 | Operating lease cost | | | $ | 22,966 | | $ | 17,932 | | $ | 16,927 | Finance lease cost | | | | | | | | | | | Amortization of leased assets | | | | 10,242 | | | 10,804 | | | 9,268 | Interest on lease liabilities | | | | 795 | | | 814 | | | 915 | Short-term lease cost | | | | 12,160 | | | 10,046 | | | 9,799 | Sublease income | | | | (111) | | | (76) | | | (429) | | | | $ | 46,052 | | $ | 39,520 | | $ | 36,480 |
The lease expenditure charged to earnings during the year ended December 31, 2022 was $35.1 million (2021: $28.0 million; 2020: $26.7 million). Operating leasesLeases The Company has entered into commercial leases for various auction sites and offices located in North America, Europe, the Middle East, Australia and Asia. The majority of these leases are non-cancellable. The Company also has further operating leases for computer equipment, certain motor vehicles and small office equipment where it is not in the best interest of the Company to purchase these assets. The majority of the Company's operating leases have a fixed term with a remaining life between one month and 2017 years, with renewal options included in the contracts. The leases have varying contract terms, escalation clauses and renewal options. Generally, there are no restrictions placed upon the lessee by entering into these leases, other than restrictions on use of property, sub-letting and alterations. At the inception of a lease, the Company determines whether it is reasonably certain to exercise a renewal option and includes the options in the determination of the lease term and the lease liability where it is reasonably certain to exercise the option. If the Company's intention is to exercise an option subsequent to the commencement of the lease, the Company will re-assess the lease term. The Company has included certain renewal options in its operating lease liabilities for key property leases for locations that have strategic importance to the Company such as its Corporate Head Office. The Company has not included any purchase options available within its operating lease portfolio in its determination of its operating lease liability. On March 17, 2022, the Company completed the sale and leaseback of its Bolton property, a parcel of land including all buildings, in Bolton, Ontario (Note 16). The Company intends to lease the Bolton property for a period of 28 months until such time that the replacement property is available for the relocation of the Company’s operations. The lease has an initial rent-free period of two years and an option to renew the lease for two additional one-year periods, during which time the lease is cancellable at one month’s notice. Upon completion of the sale, the Company recorded a $16.6 million ROU asset representing the right-of-use of the Bolton property for the estimated lease term and a $4.5 million long term lease liability representing the obligation to make lease payments arising from the operating lease at the end of the initial two-year period. Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 26. Leases (continued) Operating Leases (continued) The future aggregate minimum lease payments under non-cancellable operating leases are as follows: | | | | | | | 2020 | | $ | 16,051 | | 2021 | | | 13,646 | | 2022 | | | 12,266 | | 2023 | | | 10,532 | | $ | 17,397 | 2024 | | | 8,967 | | | 17,741 | 2025 | | | | 12,992 | 2026 | | | | 12,327 | 2027 | | | | 11,547 | Thereafter | | | 105,935 | | | 87,301 | Total future minimum lease payments | | $ | 167,397 | | $ | 159,305 | less: imputed interest | | | (45,158) | | | (34,689) | Total operating lease liability | | $ | 122,239 | | $ | 124,616 | less: operating lease liability - current | | | (10,917) | | | (12,745) | Total operating lease liability - non current | | $ | 111,322 | | $ | 111,871 |
At December 31, 2019,2022, the weighted average remaining lease term for operating leases is 15.612.4 years (December 31, 2021: 14.0 years) and the weighted average discount rate is 4.2%3.9% (December 31, 2021: 3.7%). There are no additional undiscounted commitments for leases not yet commenced at December 31, 2022 (December 31, 2021: $2.5 million). Finance leasesLeases The Company has entered into finance lease arrangements for certain vehicles, computer and yard equipment and office furniture. The majority of the leases have a fixed term with a remaining life of one month to sixfive years with renewal options included in the contracts. In certain of these leases, the Company has the option to purchase the leased asset at fair market value or a stated residual value at the end of the lease term. For certain leases such as vehicle leases the Company has included renewal options in the determination of its lease liabilities. As atAt December 31, 2019,2022, the net carrying amount of computer and yard equipment and other assets under capitalfinance leases is $23,258,000$24.1 million (December 31, 2018: $14,976,000)2021: $22.2 million), and is included in the total property, plant and equipment as disclosed on the consolidated balance sheets.
Assets recorded under finance leases are as follows: | | | | | | | | | | | | | | | Accumulated | | Net book | At December 31, 2022 | | Cost | | depreciation | | value | Auto equipment | | $ | 22,102 | | $ | (9,487) | | $ | 12,615 | Computer equipment | | | 14,325 | | | (8,021) | | | 6,304 | Yard and others | | | 14,072 | | | (8,930) | | | 5,142 | | | $ | 50,499 | | $ | (26,438) | | $ | 24,061 |
| | | | | | | | | | | | | | | Accumulated | | Net book | At December 31, 2021 | | Cost | | depreciation | | value | Auto equipment | | $ | 16,380 | | $ | (6,279) | | $ | 10,101 | Computer equipment | | | 13,920 | | | (7,728) | | | 6,192 | Yard and others | | | 16,628 | | | (10,683) | | | 5,945 | | | $ | 46,928 | | $ | (24,690) | | $ | 22,238 |
Table of Contents Notes to the Consolidated Financial Statements (Tabular amounts expressed in thousands of United States dollars, except where noted) 26. Leases (continued) Finance Leases (continued) The future aggregate minimum lease payments under non-cancellable finance leases are as follows: | | | | 2023 | | $ | 10,160 | 2024 | | | 7,624 | 2025 | | | 4,518 | 2026 | | | 2,936 | 2027 | | | 1,097 | Thereafter | | | — | Total future minimum lease payments | | $ | 26,335 | less: imputed interest | | | (1,683) | Total finance lease liability | | $ | 24,652 | less: finance lease liability - current | | | (9,303) | Total finance lease liability - non current | | $ | 15,349 |
At December 31, 2022, the weighted average remaining lease term for finance leases is 3.2 years (December 31, 2021: 2.9 years) and the weighted average discount rate is 4.4% (December 31, 2021: 3.5%). Subleases At December 31, 2022, the total future minimum sublease payments expected to be received under non-cancellable subleases is $1.0 million (2021: $nil; 2020: $0.1 million). 27. Commitments Commitments for Expenditures The Company is obligated to make $31.9 million in future payments under unconditional purchase obligations. Approximately $8.8 million (December 31, 2021: $1.1 million) is related to capital expenditures for property, plant and equipment and intangible assets and $23.1 million is related to services agreements as we invest in technology to further transition to a modern cloud-based architecture and build a digital technology platform. Commitment for Inventory Purchase The Company was awarded two new contracts with the United States Government Defense Logistics Agency (the “DLA”) on April 1, 2021. The new contracts (one for the Eastern portion of the United States and one for the Western portion of the United States) cover both surplus non-rolling and rolling stock. Both contracts commenced on June 1, 2021 and have a base term of two years with three one-year renewal options. During the first two years of the contracts, the Company is committed to purchase on a combined basis up to either: (i) 600,000 assets, or (ii) assets with an expected minimum value of up to $77.0 million; whichever is less. At December 31, 2022, the Company has reached its commitment on the contract and since June 1, 2021 has purchased 380,847 assets with a total value of $85.2 million. Table of Contents Notes to the Consolidated Financial Statements |
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25. Leases (continued)
Finance leases (continued)
Assets recorded under capital leases are as follows:
| | | | | | | | | | | | | | | Accumulated | | Net book | As at December 31, 2019 | | Cost | | depreciation | | value | Computer equipment | | $ | 15,314 | | $ | (7,832) | | $ | 7,482 | Yard and others | | | 21,525 | | | (5,749) | | | 15,776 | | | $ | 36,839 | | $ | (13,581) | | $ | 23,258 |
| | | | | | | | | | | | | | | Accumulated | | Net book | As at December 31, 2018 | | Cost | | depreciation | | value | Computer equipment | | $ | 9,428 | | $ | (3,992) | | $ | 5,436 | Yard and others | | | 12,125 | | | (2,585) | | | 9,540 | | | $ | 21,553 | | $ | (6,577) | | $ | 14,976 |
The future aggregate minimum lease payments under non-cancellable finance leases are as follows:
| | | | 2020 | | $ | 8,369 | 2021 | | | 7,014 | 2022 | | | 5,160 | 2023 | | | 3,443 | 2024 | | | 1,462 | Thereafter | | | 74 | Total future minimum lease payments | | $ | 25,522 | less: imputed interest | | | (1,600) | Total finance lease liability | | $ | 23,922 | less: finance lease liability - current | | | (7,586) | Total finance lease liability - non current | | $ | 16,336 |
At December 31, 2019, the weighted average remaining lease term for finance leases is 3.6 years and the weighted average discount rate is 4.0%.
Subleases
As at December 31, 2019, the total future minimum sublease payments expected to be received under non-cancellable subleases is $616,000 (2018: $1,187,000; 2017: $1,936,000). The lease expenditure charged to earnings during the year ended December 31, 2019 was $26,968,000 (2018: $27,734,000; 2017: $21,956,000).
26. Commitments
Commitments for expenditures
As at December 31, 2019, the Company had committed to, but not yet incurred, $2,697,000 in capital expenditures for property, plant and equipment and intangible assets (December 31, 2018: $1,151,000).
Table of Contents
Notes to the Consolidated Financial Statements
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26. Commitments (continued)
Commitment for inventory purchase
The Company entered into a two-year non-rolling stock surplus contract with the U.S. Government Defense Logistics Agency (the “DLA”) in December 2017 with the option to extend for up to four-years. Pursuant to the contract, the original performance period commenced in April 2018 and concludes in March 2020. The Company has exercised its option for one year, extending the performance period to March 2021.
The Company has committed to purchase between 150,000 and 245,900 units of property with an expected minimum value of $11,104,000 and up to $51,028,000 annually to the extent that goods are available from the DLA over the initial 12 month period relating to the purchase of inventory. At December 31, 2019, the Company has purchased $33,727,000 pursuant to the 12 month period of this contract which commenced in April 2019.
27.28. Contingencies
Legal and other claimsOther Claims The Company is subject to legal and other claims that arise in the ordinary course of its business. Management does not believe that the results of these claims will have a material effect on the Company’s consolidated balance sheet or consolidated income statement. Guarantee contractsContracts In the normal course of business, the Company will in certain situations guarantee to a consignor a minimum level of proceeds in connection with the sale at auction of that consignor’s equipment. At December 31, 2019,2022, there were $63,612,000$31.0 million of assets guaranteed under contract, of which 39%62% is expected to be sold prior to March 31, 20202023 with the remainder to be sold by June 30, 2020December 31, 2023 (December 31, 2018: $41,461,0002021: $43.5 million of which 51%61% was expected to be sold prior to the end of March 31, 20192022 with the remainder to be sold by MayDecember 31, 2020)2022). The outstanding guarantee amounts are undiscounted and before estimated proceeds from sale at auction. 28. Selected quarterly financial data (unaudited)29. Subsequent Event
Certain comparative figures have been restatedIn January 2023, the Company amended the terms of the Merger Agreement for the proposed acquisition of IAA and changed the consideration mix of cash/stock to conformbe issued to current presentation.IAA stockholders (Note 4). The following isCompany also received a summaryconcurrent investment of selected quarterly financial information (unaudited):$485 million convertible preferred equity and $15 million common share investment from Starboard (Note 24) and increased its investment in VeriTread from 11% to 75% (Note 4). Further, the Company announced that it expects to approve a one-time special dividend to its common shareholders, contingent on the closing of the proposed IAA acquisition (Note 24).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Attributable to stockholders | | | | | Operating | | Net | | Net | | Earnings per share | 2019 | | Revenues | | income | | income | | income | | Basic | | Diluted | First quarter | | $ | 303,429 | | $ | 33,588 | | $ | 18,172 | | $ | 18,164 | | $ | 0.17 | | $ | 0.17 | Second quarter | | | 393,222 | | | 77,970 | | | 54,131 | | | 54,036 | | | 0.50 | | | 0.49 | Third quarter | | | 289,796 | | | 40,160 | | | 25,272 | | | 25,266 | | | 0.23 | | | 0.23 | Fourth quarter | | | 332,194 | | | 71,484 | | | 51,565 | | | 51,573 | | | 0.47 | | | 0.47 |
On February 3, 2023, the Company amended an agreement to purchase a replacement property in Amaranth, Ontario, Canada (Note 16). On February 13, 2023, the Company received a proposal letter from the CRA with respect to certain taxation years under audit (Note 9). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Attributable to stockholders | | | | | | Operating | | Net | | Net | | Earnings per share | 2018 | | Revenues | | income | | income | | income | | Basic | | Diluted | First quarter | | $ | 260,178 | | $ | 32,873 | | $ | 17,207 | | $ | 17,138 | | $ | 0.16 | | $ | 0.16 | Second quarter | | | 308,530 | | | 64,795 | | | 45,727 | | | 45,717 | | | 0.42 | | | 0.42 | Third quarter | | | 245,346 | | | 31,194 | | | 23,112 | | | 23,138 | | | 0.21 | | | 0.21 | Fourth quarter | | | 355,972 | | | 56,327 | | | 35,460 | | | 35,486 | | | 0.33 | | | 0.32 |
Table of Contents
Notes to the Consolidated Financial Statements
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28. Selected quarterly financial data (unaudited) (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Attributable to stockholders | | | | | | Operating | | Net | | Net | | Earnings (loss) per share | 2017 | | Revenues | | income | | income (loss) | | income (loss) | | Basic | | Diluted | First quarter | | $ | 199,427 | | $ | 23,597 | | $ | 10,433 | | $ | 10,377 | | $ | 0.10 | | $ | 0.10 | Second quarter | | | 252,613 | | | 26,888 | | | 17,713 | | | 17,635 | | | 0.16 | | | 0.16 | Third quarter | | | 227,401 | | | 16,931 | | | 10,323 | | | 10,261 | | | 0.10 | | | 0.09 | Fourth quarter | | | 291,750 | | | 40,038 | | | 36,837 | | | 36,754 | | | 0.34 | | | 0.34 |
29. Business combinations
IronPlanet acquisition
On May 31, 2017 (the “IronPlanet Acquisition Date”), the Company acquired 100% of the issued and outstanding shares of IronPlanet for a total fair value consideration of $776,474,000. As at the acquisition date, cash consideration of $772,706,000, of which approximately $35,000,000 was placed in escrow, was paid to the former shareholders, vested option holders and warrant holders of IronPlanet. In addition to the cash consideration, non-cash consideration of $2,330,000 was issued attributable to the assumption of outstanding IronPlanet options, $1,771,000 was paid in cash and placed in escrow, related to customary closing adjustments, and $333,000 was related to settlement of intercompany payable transactions. Funds placed in escrow of $36,771,000 were released in March 2018.
A summary of the net cash flows and purchase price are detailed below
| | | | | | May 31, 2017 | Cash consideration paid to former equity holders | | $ | 723,810 | Settlement of IronPlanet's debt | | | 36,313 | Settlement of IronPlanet's transaction costs | | | 12,583 | Cash consideration paid on closing | | | 772,706 | Cash consideration paid related to closing adjustments | | | 1,771 | Less: cash and cash equivalents acquired | | | (95,626) | Less: restricted cash acquired | | | (3,000) | Acquisition of IronPlanet, net of cash acquired | | $ | 675,851 | | | | | Cash consideration paid on closing | | $ | 772,706 | Replacement stock option awards attributable to pre-combination services | | | 4,926 | Stock option compensation expense from accelerated vesting of awards attributable to post-combination services | | | (2,596) | Cash consideration paid relating to closing adjustments | | | 1,771 | Settlement of pre-existing intercompany balances | | | (333) | Purchase price | | $ | 776,474 |
IronPlanet is a leading online marketplace for selling and buying used equipment and other durable assets and an innovative participant in the multi–billion dollar used equipment market. The acquisition expands the breadth and depth of equipment disposition and management solutions the Company can offer its customers.
The acquisition was accounted for in accordance with ASC 805, Business Combinations. The assets acquired and liabilities assumed were recorded at their estimated fair values at the IronPlanet Acquisition Date. Goodwill of $568,566,000 was calculated as the fair value of consideration over the estimated fair value of the net assets acquired.
Table of Contents
Notes to the Consolidated Financial Statements
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29. Business combinations (continued)
IronPlanet acquisition (continued)
IronPlanet purchase price allocation
| | | | | | May 31, 2017 | Purchase price | | $ | 776,474 | | | | | Assets acquired: | | | | Cash and cash equivalents | | $ | 95,626 | Restricted cash | | | 3,000 | Trade and other receivables | | | 13,021 | Inventory | | | 600 | Advances against auction contracts | | | 4,623 | Prepaid expenses and deposits | | | 1,645 | Income taxes receivable | | | 55 | Property, plant and equipment | | | 2,381 | Other non-current assets | | | 2,551 | Deferred tax assets | | | 1,497 | Intangible assets | | | 188,000 | | | | | Liabilities assumed: | | | | Auction proceeds payable | | | 63,616 | Trade and other payables | | | 15,540 | Deferred tax liabilities | | | 25,935 | Fair value of identifiable net assets acquired | | | 207,908 | Goodwill acquired on acquisition | | $ | 568,566 |
~ Intangible assets consist of indefinite-lived trade names and trademarks, customer relationships with estimated useful lives of ranging from six to 13 years, and a technology platform with an estimated useful life of seven years.
Goodwill
The main drivers generating goodwill are the anticipated synergies from (1) the Company’s auction expertise and transactional capabilities to IronPlanet’s existing customer base, (2) IronPlanet providing existing technology to the Company’s current customer base, and (3) future growth from international expansion and new Caterpillar dealers. Other factors generating goodwill include the acquisition of IronPlanet’s assembled work force and their associated technical expertise.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ITEM 9A: CONTROLS AND PROCEDURES Disclosure Controls and Procedures Management of the Company, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the periodyear covered by this Form 10-K. The term “disclosure controls and procedures” means controls and other procedures established by the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of the Company’s disclosure controls and procedures, as of December 31, 2022, the CEO and the CFO concluded that the disclosure controls are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and arewere effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. The Company, including its CEO and CFO, does not expect that its internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management’s Annual Report on Internal Control Over Financial Reporting In accordance with Item 308 of SEC Regulation S-K, management is required to provide an annual report regarding internal controls over our financial reporting. This report, which includes management’s assessment of the effectiveness of our internal controls over financial reporting, is found below. Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s CEO and CFO, overseen by the Company’s Board of Directors and implemented by the Company’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and the requirements of the SEC. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies and procedures may deteriorate. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019.2022. In making this assessment, management used the criteria described in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on its assessment under the framework in COSO, management has concluded that internal control over financial reporting was effective as of December 31, 2019.2022. Attestation Report of Registered Public Accounting Firm The attestation report required under this Item 9A is set forth below under the caption “Report of Independent Registered Public Accounting Firm.” Changes in Internal Control over Financial Reporting Management, with the participation of the CEO and CFO, concluded that there were no changes in the Company’s internal control over financial reporting during the quarteryear ended December 31, 20192022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Ritchie Bros. Auctioneers Incorporated Opinion on Internal Control over Financial Reporting We have audited Ritchie Bros. Auctioneers Incorporated’s internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control—Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO” criteria)“COSO criteria”). In our opinion, Ritchie Bros. Auctioneers Incorporated (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 20192022 and 2018,2021, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2019,2022, and the related notes, and our report dated February 27, 202021, 2023, expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. | | /s/Ernst & Young LLP | | Chartered Professional Accountants | |
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| Vancouver, Canada | | February 27, 202021, 2023 | |
ITEM 9B: OTHER INFORMATION On February 25, 2020, the Compensation Committee approved additional incentive bonuses of $143,437.50 to each of Sharon Driscoll and Karl Werner as part of their previously disclosed compensation arrangement in connection with their service as our Interim Co-Chief Executive Officers.None.
ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. PART III ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information responsive to this Item is incorporated by reference to our definitive Proxy Statement for our 20202022 Annual and Special Meeting of Shareholders, to be filed within 120 days of December 31, 2019,2022, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the 20202023 Proxy Statement). We have adopted a written code of business conduct and ethics, which applies to all of our directors, officers and employees, including our principal executive officer and our principal financial and accounting officer. Our Code of Business Conduct and Ethics is available on our website, https://www.rbauction.com/cms_assets/pdf/corporate-governance/09-2018-Ritchie-Bros-Code-of-Business-Conduct-and-Ethics.pdf,investor.ritchiebros.com/governance/governance-documents/default.aspx, and can be obtained by writing to Ritchie Bros. Investor Relations, 9500 Glenlyon Parkway, Burnaby, British Columbia, Canada V5J 0C6 or by sending an email to our Investor Relations department at IR@ritchiebros.com. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K. Any amendments, other than technical, administrative or other non-substantive amendments, to our Code of Business Conduct and Ethics or waivers from the provisions of the Code of Business Conduct and Ethics for our principal executive officer and our principal financial and accounting officer will be promptly disclosed on our website following the effective date of such amendment or waiver. ITEM 11: EXECUTIVE COMPENSATION The information responsive to this Item is incorporated by reference to our 20202023 Proxy Statement. ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information responsive to this Item is incorporated by reference to our 20202023 Proxy Statement. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information responsive to this Item is incorporated by reference to our 20202023 Proxy Statement. ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES The information responsive to this Item is incorporated by reference to our 20202023 Proxy Statement. PART IV ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Documents Filed with this Report: 1. FINANCIAL STATEMENTS 2. FINANCIAL STATEMENT SCHEDULES None. 3. EXHIBITS The exhibits listed in (b) below are filed as part of this Annual Report on Form 10-K and incorporated herein by reference. (b) Exhibits: | | | Exhibit
Number | | Document | 2.1* | | Agreement and Plan of Merger, dated August 29, 2016, by and among the Company, Topaz Mergersub, Inc., IronPlanet, and Fortis Advisors LLC (as representative of the indemnifying securityholders thereunder) (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 31, 2016) | 2.2 | | Share Purchase Agreement, dated August 9, 2021, by and among the Purchaser and the Vendors (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 10, 2021) | 2.3 | | Agreement and Plan of Merger dated September 24, 2021 among Ritchie Bros. Auctioneers Incorporated, Ritchie Bros. Holdings Inc., Lego Merger Sub, Inc., SmartEquip, Inc., the Key Securityholders, the Rollover Members and Fortis Advisors LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 28, 2021) | 2.4 | | First Amendment to Agreement and Plan of Merger dated October 30, 2021, by and among Ritchie Bros. Holdings Inc., SmartEquip, Inc. and Fortis Advisors LLC (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on November 2, 2021) | 2.5* | | Agreement and Plan of Merger and Reorganization, dated as of November 7, 2022, by and among Ritchie Bros. Auctioneers Incorporated, Ritchie Bros. Holdings Inc., Impala Merger Sub I, LLC, Impala Merger Sub II, LLC, and IAA, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 7, 2022) | 2.6 | | Amendment to the Agreement and Plan of Merger and Reorganization, dated January 22, 2023, by and among Ritchie Bros. Auctioneers Incorporated, Ritchie Bros, Holdings Inc., Impala Merger Sub I, LLC, Impala Merger Sub II, LLC, and IAA, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 22, 2023) | 3.1 | | Articles of Amalgamation and Amendments (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 3.2 | | Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 10-K filed on February 1, 2023) | 3.3 | | Amended and Restated By-law No. 1 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 6-K furnished on February 27, 2015) | 4.1 | | Amended and Restated Shareholder Rights Plan Agreement dated as of February 28, 2019, between Ritchie Bros. Auctioneers Incorporated and Computershare Investor Services, Inc., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 28, 2019) | 4.2 | | Description of the Company’s Securities Registered Pursuant to Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on February 27, 2020) |
4.3 | | Indenture, dated as of December 21, 2016, among the Company, the guarantors party thereto and US Bank National Association, as trustee, relating to the Company’s 5.375% Senior Notes due 2025 (includes form of note) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 21, 2016) | 4.4 | | Indenture, dated as of December 21, 2021, between Ritchie Bros. Holdings Inc. and US Bank National Association, as trustee, relating to Ritchie Bros. Holdings Inc.’s 4.750% Senior Notes due 2031 (includes form of note) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 21, 2021)Indenture, dated as of December 21, 2021, among Ritchie Bros. Holdings Ltd. and US Bank National Association, as trustee, and TSX Trust Company as Canadian co-trustee, relating to Ritchie Bros. Holdings Ltd.’s 4.950% Senior Notes due 2029 (includes form of note) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on December 21, 2021) | 10.1# | | Amended and Restated Stock Option Plan, dated May 2, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2016) | 10.2# | | Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.3# | | Amended and Restated Executive Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.4# | | Non-Executive Director Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) |
10.5# | | Amended and Restated Senior Executive Restricted Share Unit Plan (incorporated by reference to Exhibit 4.1 to the Company’s registration statement on Form S-8 filed on November 9, 2017) | 10.6# | | Form of Restricted Share Unit Grant Agreement for Amended and Restated Senior Executive Restricted Share Unit Plan (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed February 26, 2018) | 10.7# | | Form of Restricted Share Unit Special Grant Agreement for Amended and Restated Senior Executive Restricted Share Unit Plan (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K filed February 26, 2018) | 10.8# | | Amended and Restated Employee Restricted Share Unit Plan (incorporated by reference to Exhibit 4.2 to the Company’s registration statement on Form S-8 filed on November 9, 2017) | 10.9# | | Form of Restricted Share Unit Grant Agreement for Amended and Restated Employee Restricted Share Unit Plan (incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed February 26, 2018) | 10.10# | | Amended and Restated Non-Executive Director Deferred Share Unit Plan (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed February 26, 2018) | 10.11# | | Executive Nonqualified Excess Plan (United States 10/10 Program) (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.12# | | Amended Executive Nonqualified Excess Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2018) | 10.13# | | Canada and All Non-United States Locations: 10/10 Compensation Arrangement (Canada 10/10 Program) (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.14# | | Senior Executive Performance Share Unit Plan (March 2015) (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.15# | | Amendment No. 1 to Senior Executive Performance Share Unit Plan dated August 8, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 11, 2018) | 10.16# | | Form of Performance Share Unit Grant Agreement for Senior Executive Performance Share Unit Plan (March 2015) (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.17# | | Employee Performance Share Unit Plan (March 2015) (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.18# | | Amendment No. 1 to Employee Performance Share Unit Plan dated August 8, 2018 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 11, 2018) | 10.19# | | Form of Performance Share Unit Grant Agreement for Employee Performance Share Unit Plan (March 2015) (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.20# | | 1999 Employee Stock Purchase Plan (as amended December 14, 2017) (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed February 26, 2018) | 10.21# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Ann Fandozzi, dated December 14, 2019 (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on February 27, 2020) | 10.22# | | Employment Agreement between Ritchie Bros. Auctioneers (America) Inc. and Jim Barr, dated November 3, 2014 (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) |
10.23# | | Employment Agreement between Ritchie Bros. Auctioneers (America) Inc. and Karl Werner, dated January 1, 2015 (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.24# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Todd Wohler, dated January 6, 2015 (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.25# | | Amendment to Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Todd Wohler, dated January 20, 2015 (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.26# | | Employment Agreement between Ritchie Bros. Auctioneers (America) Inc. and Kieran Holm, dated March 29, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2018) |
10.27# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Darren Watt, dated May 25, 2015 (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.28# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Sharon Driscoll, dated May 20, 2015 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.29# | | Form of Change of Control Agreement (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.30# | | Form of Indemnity Agreement (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.31 | | Lease Agreement with Great-West Life Assurance Company and London Life Insurance Company dated August 12, 2008 (incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.32 | | Development Agreement with Great-West Life Assurance Company and London Life Insurance Company dated August 12, 2008 (incorporated by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.33 | | Pre-Handover Occupancy Rental Agreement and Amendment to Development Agreement with Great-West Life Assurance Company and London Life Insurance Company dated November 25, 2009 (incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.34 | | Lease Modification Agreement with Great-West Life Assurance Company and London Life Insurance Company dated February 12, 2010 (incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.35 | | Lease Confirmation and Amendment to Development Agreement with Great-West Life Assurance Company and London Life Insurance Company dated May 6, 2010 (incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.36# | | Summary of Short-term Incentive Plan (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K filed on February 25, 2016) | 10.37# | | Amendment to Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Sharon Driscoll, dated February 26, 2016 (incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10‐K filed on February 21, 2017) | 10.38# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Marianne Marck, dated February 29, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2016) | 10.39** | | Strategic Alliance and Remarketing Agreement, entered into as of August 29, 2016, by and between the Company, IronPlanet, Inc. and Caterpillar, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2016)7, 2022) | 10.40 | | Amended and Restated Commitment Letter, dated September 16, 2016, from Goldman Sachs Bank USA and Royal Bank of Canada (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2016) | 10.41 | | Fourth Amended and Restated Commitment Letter, dated August 8, 2021, from Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 4, 2021) | 10.42 | | Credit Agreement, dated as of October 27, 2016, by and among the Company, the other borrowers and guarantors party thereto, Bank of America, N.A., as administrative agent, U.S. swing line lender and L/C issuer, Royal Bank of Canada, as Canadian swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on November 4, 2016) | 10.4210.43
| | First Amendment, dated as of January 17, 2017, to Credit Agreement, dated as of October 27, 2016, by and among the Company, the other borrowers and guarantors party thereto, Bank of America, N.A., as administrative agent, U.S. swing line lender and L/C issuer, Royal Bank of Canada, as Canadian swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.50 to the Company’s Annual Report on Form 10‐K filed on February 21, 2017) |
10.43#10.44
| | Third Amendment to Credit Agreement, dated as of August 14, 2020, among the Company, certain of its subsidiaries, each as a borrower and/or a guarantor, the lenders party thereto and Bank of America, N.A., as administrative agent, U.S. swing line lender and letter of credit issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 17, 2020) | 10.45 | | Fourth Amendment to Credit Agreement, dated as of September 21, 2021, among the Company, certain of its subsidiaries, each as a borrower and/or a guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, U.S. swing line lender and letter of credit issuer and Royal Bank of Canada, as Canadian swing line lender and letter of credit issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 21, 2021) | 10.46# | | IronPlanet, Inc. 1999 Stock Plan (incorporated by reference to Exhibit 4.1 to the Company’s registration statement on Form S-8 filed on June 1, 2017) | 10.44#10.47#
| | Form of Stock Option Agreement for IronPlanet, Inc. 1999 Stock Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2017) | 10.45#10.48#
| | IronPlanet Holdings, Inc. 2015 Stock Plan (incorporated by reference to Exhibit 4.2 to the Company’s registration statement on Form S-8 filed on June 1, 2017) | 10.46#10.49#
| | Form of Stock Option Agreement for IronPlanet Holdings, Inc. 2015 Stock Plan (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2017) | 10.47#10.50#
| | Form of Ritchie Bros. Auctioneers Incorporated Stock Option Assumption Notice (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2017) | 10.48#10.51#
| | Employment Agreement between Ritchie Bros. Auctioneers (America) Inc. and Douglas Feick, dated August 29, 2016 (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2017) | 10.49#10.52#
| | Employment Agreement between Ritchie Bros. Auctioneers (America) Inc. and James Jeter, dated August 28, 2016 (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2017) | 10.53# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Carmen Thiede, dated February 26, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 7, 2020) | 10.54# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Baron Concors, dated March 13, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 7, 2020) | 10.55# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and James Kessler dated May 1, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2020) | 10.56# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Kevin Geisner, dated August 4, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 5, 2020) | 10.57# | | Membership Interest Purchase Agreement, dated October 28, 2020, between the Company, Ritchie Bros. Auctioneers (America) Inc., Rouse, the members of Rouse, and Scott Rouse, in his capacity as seller representative (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 5, 2020) | 10.58 | | Agreement of Purchase and Sale, dated August 13, 2021, between Ritchie Bros. Properties Ltd. and 3 Manchester Court Holdings Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 4, 2021) | 10.59# | | Employment Agreement between Ritchie Bros. Auctioneers (Canada) Ltd. and Eric Jacobs, dated May 31, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 4, 2022) | 10.60 | | Commitment Letter, dated as of November 7, 2022, by and among Ritchie Bros. Auctioneers Incorporated, Goldman Sachs Bank, Bank of America, N.A., BofA Securities, Inc., Royal Bank of Canada and RBC Capital Markets, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 7, 2022) | 10.61 | | Sixth Amendment to Credit Agreement, dated as of December 9, 2022, among the Company, certain of its subsidiaries, each as a borrower and/or a guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, U.S. swing line lender and a letter of credit issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 12, 2022) | 10.62 | | Securities Purchase Agreement, dated as of January 22, 2023, by and among Ritchie Bros. Auctioneers Incorporated, Starboard Value LP, Jeffrey Smith and the purchasers named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 23, 2023) | 10.63 | | Registration Rights Agreement, dated as of February 1, 2023, by and among Ritchie Bros. Auctioneers Incorporated and the Purchasers named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 1, 2023) | 21.1 | | List of Company Subsidiaries | 23.1 | | Consent of Ernst & Young LLP |
# Indicates management contract or compensatory plan or arrangement. * Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish copies of any such schedules to the U.S. Securities and Exchange Commission upon request. ** Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the U.S. Securities and Exchange Commission.
ITEM 16: FORM 10-K SUMMARY Not applicable.
Pursuant to the requirements of Section 13 or 15(d) 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 | Date: February 27, 202021, 2023 | By: | /s/ Ann Fandozzi | | | Ann Fandozzi
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: | /s/s/ Ann Fandozzi | Chief Executive Officer
(principal executive officer) | February 27, 202021, 2023 | | Ann Fandozzi | | | | | | | By: | /s/ Sharon R. DriscollEric Jacobs | Chief Financial Officer
(principal financial officer and principal accounting officer) | February 27, 202021, 2023 | | Sharon R. DriscollEric Jacobs
| (principal financial officer) | | | | | | By: | /s/ Beverley A. BriscoeErik Olsson | Chair of the Board | February 27, 202021, 2023 | | Beverley A. BriscoeErik Olsson
| | | | | | | By: | /s/ Robert G. Elton | Director | February 27, 202021, 2023 | | Robert G. Elton | | | | | | | By: | /s/ Erik OlssonAdam DeWitt | Director | February 27, 202021, 2023 | | Erik OlssonAdam DeWitt
| | | | | | | By: | /s/ Sarah E Raiss | Director | February 27, 202021, 2023 | | Sarah E. Raiss | | | | | | | By: | /s/ Christopher Zimmerman | Director | February 27, 202021, 2023 | | Christopher Zimmerman | | | | | | | By: | /s/ Amy Guggenheim SkenkanLisa Hook | Director | February 27, 202021, 2023 | | Amy Guggenheim SkenkanLisa Hook
| | | | | | | By: | /s/ Kim FennellMahesh Shah | Director | February 27, 202021, 2023 | | Kim FennellMahesh Shah
| | | | | | | By: | /s/ Carol Stephenson | Director | February 21, 2023 | | Carol Stephenson | | |
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