RITCHIE BROS AUCTIONEERS INC, 10-Q filed on 5/7/2020
Quarterly Report
v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
May 06, 2020
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
Document Transition Report false  
Entity File Number 001-13425  
Entity Registrant Name Ritchie Bros. Auctioneers Incorporated  
Entity Incorporation, State or Country Code CA  
Entity Tax Identification Number 98-0626225  
Entity Address, Address Line One 9500 Glenlyon Parkway  
Entity Address, Address Line Two Burnaby  
Entity Address, City or Town British Columbia  
Entity Address, Country CA  
Entity Address, Postal Zip Code V5J 0C6  
City Area Code 778  
Local Phone Number 331-5500  
Title of 12(b) Security Common shares  
Trading Symbol RBA  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   108,265,310
Entity Central Index Key 0001046102  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
v3.20.1
Condensed Consolidated Income Statements - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenues:    
Total revenue $ 273,255 $ 303,429
Operating expenses:    
Selling, general and administrative expenses 98,385 95,184
Acquisition-related costs   669
Depreciation and amortization expenses 19,293 17,115
Gain on disposition of property, plant and equipment (47) (149)
Foreign exchange loss 602 478
Total operating expenses 239,173 269,841
Operating income 34,082 33,588
Interest expense (9,182) (10,816)
Other income, net 3,577 2,039
Income before income taxes 28,477 24,811
Income tax expense 5,648 6,639
Net income 22,829 18,172
Net income attributable to:    
Stockholders 22,809 18,164
Non-controlling interests 20 8
Net income $ 22,829 $ 18,172
Earnings per share attributable to stockholders:    
Basic $ 0.21 $ 0.17
Diluted $ 0.21 $ 0.17
Weighted average number of shares outstanding:    
Basic 109,248,880 108,765,489
Diluted 110,482,837 110,044,213
Service Revenue [Member]    
Revenues:    
Total revenue $ 183,123 $ 172,372
Operating expenses:    
Direct expenses 39,355 36,069
Inventory Sales Revenue [Member]    
Revenues:    
Total revenue 90,132 131,057
Operating expenses:    
Direct expenses $ 81,585 $ 120,475
v3.20.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Condensed Consolidated Statements of Comprehensive Income    
Net income $ 22,829 $ 18,172
Other comprehensive loss, net of income tax:    
Foreign currency translation adjustment (15,868) (1,634)
Total comprehensive income 6,961 16,538
Total comprehensive income attributable to:    
Stockholders 6,949 16,542
Non-controlling interests 12 (4)
Total comprehensive income $ 6,961 $ 16,538
v3.20.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets    
Cash and cash equivalents $ 290,094 $ 359,671
Restricted cash 65,831 60,585
Trade and other receivables 249,454 142,627
Less: allowance for credit losses (3,727) (5,225)
Inventory 61,747 64,956
Other current assets 38,043 50,160
Income taxes receivable 8,027 6,810
Total current assets 709,469 679,584
Property, plant and equipment 477,327 484,482
Other non-current assets 132,476 145,679
Intangible assets 225,291 233,380
Goodwill 670,136 672,310
Deferred tax assets 13,019 13,995
Total assets 2,227,718 2,229,430
Liabilities and Equity    
Auction proceeds payable 344,311 276,188
Trade and other payables 187,783 194,279
Income taxes payable 1,891 7,809
Short-term debt 33,081 4,705
Current portion of long-term debt 16,944 18,277
Total current liabilities 584,010 501,258
Long-term debt 613,536 627,204
Other non-current liabilities 142,569 151,238
Deferred tax liabilities 42,632 42,743
Total liabilities 1,382,747 1,322,443
Commitments and Contingencies (Note 19 and Note 20 respectively)
Share capital:    
Common stock; no par value, unlimited shares authorized, issued and outstanding shares: 108,198,739 (December 31, 2019: 109,337,781) 153,801 194,771
Additional paid-in capital 46,147 52,110
Retained earnings 714,816 714,051
Accumulated other comprehensive loss (74,959) (59,099)
Stockholders' equity 839,805 901,833
Non-controlling interest 5,166 5,154
Total stockholders' equity 844,971 906,987
Total liabilities and equity $ 2,227,718 $ 2,229,430
v3.20.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2020
Dec. 31, 2019
Condensed Consolidated Balance Sheets    
Common stock, no par value $ 0 $ 0
Common stock, issued shares 108,198,739 109,337,781
Common stock, outstanding shares 108,198,739 109,337,781
v3.20.1
Condensed Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Common stock [Member]
Additional paid-in capital ("APIC") [Member]
Retained earnings [Member]
Accumulated other comprehensive income (loss) [Member]
Non-controlling interest ("NCI") [Member]
Contingently Redeemable Performance Share Units [Member]
Total
Balance at Dec. 31, 2018 $ 181,780 $ 56,885 $ 648,255 $ (56,277) $ 5,067 $ 923 $ 835,710
Balance, shares at Dec. 31, 2018 108,682,030            
Net income     18,164   8   18,172
Other comprehensive loss       (1,622) (12)   (1,634)
Comprehensive income     18,164 (1,622) (4)   16,538
Stock option exercises $ 2,478 (850)         1,628
Stock option exercises, shares 82,926            
Issuance of common stock related to vesting of share units $ 5,039 (10,064)         (5,025)
Issuance of common stock related to vesting of share units, shares 193,950            
Stock option compensation expense   1,539         1,539
Equity-classified PSU expense   2,322       46 2,322
Equity-classified PSU dividend equivalents   222 (237)     15 (15)
Cash dividends paid     (19,568)       (19,568)
Balance at Mar. 31, 2019 $ 189,297 50,054 646,614 (57,899) 5,063 $ 984 833,129
Balance, shares at Mar. 31, 2019 108,958,906            
Balance at Dec. 31, 2019 $ 194,771 52,110 714,051 (59,099) 5,154   906,987
Balance, shares at Dec. 31, 2019 109,337,781            
Net income     22,809   20   22,829
Other comprehensive loss       (15,860) (8)   (15,868)
Comprehensive income     22,809 (15,860) 12   6,961
Stock option exercises $ 8,684 (1,630)         $ 7,054
Stock option exercises, shares 247,446           247,446
Issuance of common stock related to vesting of share units $ 3,516 (7,445)         $ (3,929)
Issuance of common stock related to vesting of share units, shares 138,824            
Stock option compensation expense   1,187         1,187
Equity-classified PSU expense   1,786         1,786
Equity-classified PSU dividend equivalents   139 (139)        
Cash dividends paid     (21,905)       (21,905)
Shares repurchased $ (53,170)           (53,170)
Shares repurchased, shares (1,525,312)            
Balance at Mar. 31, 2020 $ 153,801 $ 46,147 $ 714,816 $ (74,959) $ 5,166   $ 844,971
Balance, shares at Mar. 31, 2020 108,198,739            
v3.20.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Operating activities:    
Net income $ 22,829 $ 18,172
Adjustments for items not affecting cash:    
Depreciation and amortization expenses 19,293 17,115
Stock option compensation expense 1,187 1,539
Equity-classified share unit expense 1,786 2,368
Deferred income tax expense 1,331 1,057
Unrealized foreign exchange (gain) loss 782 (48)
Gain on disposition of property, plant and equipment (47) (149)
Amortization of debt issuance costs 756 934
Gain on contingent consideration from equity investment (1,700)  
Amortization of right-of-use assets 3,343 2,976
Other, net 1,282 534
Net changes in operating assets and liabilities (46,710) 27,405
Net cash provided by operating activities 4,132 71,903
Investing activities:    
Property, plant and equipment additions (3,495) (2,801)
Intangible asset additions (7,220) (5,625)
Proceeds on disposition of property, plant and equipment 333 262
Distribution from equity investment 4,212  
Proceeds on contingent consideration from equity investment 1,700  
Other, net (2,804)  
Net cash used in investing activities (7,274) (8,164)
Financing activities:    
Share repurchase (53,170)  
Dividends paid to stockholders (21,905) (19,568)
Issuances of share capital 7,054 1,628
Payment of withholding taxes on issuance of shares (2,984) (2,047)
Proceeds from short-term debt 29,069 6,741
Repayment of short-term debt   (17,946)
Repayment of long-term debt (4,236) (12,235)
Repayment of finance lease obligations (2,189) (1,269)
Net cash provided by (used in) financing activities (48,361) (44,696)
Effect of changes in foreign currency rates on cash, cash equivalents, and restricted cash (12,828) (1,376)
Increase (decrease) (64,331) 17,667
Beginning of period 420,256 305,567
Cash, cash equivalents, and restricted cash, end of period $ 355,925 $ 323,234
v3.20.1
Summary of significant accounting policies
3 Months Ended
Mar. 31, 2020
Summary of significant accounting policies  
Summary of significant accounting policies

1.    Summary of significant accounting policies

Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”) provide global asset management and disposition services, offering customers end-to-end solutions for buying and selling used industrial equipment and other durable assets through its unreserved live on site auctions, online marketplaces, listing services, and private brokerage services. Ritchie Bros. Auctioneers Incorporated is a company incorporated in Canada under the Canada Business Corporations Act, whose shares are publicly traded on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”).

(a) Basis of preparation

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

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

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

(b) Revenue recognition

Revenues are comprised of:

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

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

Service revenue

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

1.    Summary of significant accounting policies (continued)

(b) Revenue recognition (continued)

Service revenue (continued)

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

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

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

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

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

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

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

Underwritten commission contracts can take the form of guarantee contracts. Guarantee contracts typically include a pre-negotiated percentage of the guaranteed gross proceeds plus a percentage of proceeds in excess of the guaranteed amount. If actual auction proceeds are less than the guaranteed amount, commission is reduced; if proceeds are sufficiently lower, the Company can incur a loss on the sale. Losses, if any, resulting from guarantee contracts are recorded in the period in which the relevant auction is completed. If a loss relating to a guarantee contract held at the period end to be sold after the period end is known or is probable and estimable at the financial statement reporting date, the loss is accrued in the financial statements for that period. The Company’s exposure from these guarantee contracts fluctuates over time.

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

1.    Summary of significant accounting policies (continued)

(b) Revenue recognition (continued)

Inventory sales revenue

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

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

(c) Costs of services

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

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

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

(d) Cost of inventory sold

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

(e) Share-based payments

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

Equity-classified share-based payments

Share unit plans

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

The Company also has a senior executive restricted share unit (“RSU”) plan and an employee RSU plan that provides for the award of RSUs to certain senior executives and employees, respectively, of the Company. The Company has the option to settle certain share unit awards in cash or shares and expects to settle all grants on and after 2017 in shares. The cost of RSUs granted is measured at the fair value based on the fair value of the Company’s common shares at the grant date. RSUs vest based on the passage of time and include restrictions related to employment.

1.    Summary of significant accounting policies (continued)

(e) Share-based payments (continued)

Equity-classified share-based payments (continued)

Share unit plans (continued)

This fair value of awards expected to vest under these plans is expensed over the respective remaining service period of the individual awards, on an accelerated recognition basis, with the corresponding increase to APIC recorded in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in earnings, such that the consolidated expense reflects the revised estimate, with a corresponding adjustment to equity. Dividend equivalents on the equity-classified PSUs and RSUs are recognized as a reduction to retained earnings over the service period.

Stock option plans

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

Liability-classified share-based payments

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

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

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

(f) Leases

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

Operating leases

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

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

1.    Summary of significant accounting policies (continued)

(f) Leases (continued)

Finance leases

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

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

(g) Inventories

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

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

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

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

(i) Goodwill

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

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

1.    Summary of significant accounting policies (continued)

(i) Goodwill (continued)

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

(j) New and amended accounting standards

a.

Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The new standard replaces the ‘incurred loss methodology’ credit impairment model with a new forward-looking “methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.” In applying the new standard, the Company has adopted the loss rate methodology to estimate historical losses on trade receivables. The historical data is adjusted to account for forecasted changes in the macroeconomic environment in order to calculate the current expected credit loss.

The Company's adoption of ASC 326 did not result in a material change in the carrying values of the Company's financial assets on the transition date. Periods prior to January 1, 2020 that are presented for comparative purposes have not been adjusted.

b.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides "optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued." The amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating existing contracts and the optional expedients provided by the new standard.

c.

Effective January 1, 2020, the Company adopted ASU 2018-15, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract on a prospective basis. The update aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service agreement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The adoption of ASU 2018-15 during the quarter ended March 31, 2020 using the prospective transition approach did not result in a material impact to the consolidated financial statements.

v3.20.1
Significant judgments, estimates and assumptions
3 Months Ended
Mar. 31, 2020
Significant judgments, estimates and assumptions  
Significant judgments, estimates and assumptions

2.    Significant judgments, estimates and assumptions

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

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

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

For the quarter ended March 31, 2020, the Company performed a qualitative assessment of the A&M reporting unit and the Mascus reporting unit with consideration of the current global economic downturn as a result of COVID-19 and the Company concluded there were no indicators of impairment.

v3.20.1
Seasonality
3 Months Ended
Mar. 31, 2020
Seasonality  
Seasonality

3.    Seasonality

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

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

v3.20.1
Segmented information
3 Months Ended
Mar. 31, 2020
Segmented information  
Segmented information

4.    Segmented information

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

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

Three months ended March 31, 2020

    

A&M

    

Other

    

Consolidated

Service revenue

$

154,743

$

28,380

$

183,123

Inventory sales revenue

 

90,132

 

 

90,132

Total revenue

$

244,875

$

28,380

$

273,255

Costs of services

 

25,095

 

14,260

 

39,355

Cost of inventory sold

 

81,585

 

 

81,585

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

 

91,585

 

6,800

 

98,385

Segment profit

$

46,610

$

7,320

$

53,930

Depreciation and amortization expenses ("D&A")

 

  

 

  

 

19,293

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

 

  

 

  

 

(47)

Foreign exchange loss

 

  

 

  

 

602

Operating income

 

  

 

  

$

34,082

Interest expense

 

  

 

  

 

(9,182)

Other income, net

 

  

 

  

 

3,577

Income tax expense

 

  

 

  

 

(5,648)

Net income

 

  

 

  

$

22,829

Three months ended March 31, 2019

    

A&M

    

Other

    

Consolidated

Service revenue

$

143,437

$

28,935

$

172,372

Inventory sales revenue

 

131,057

 

 

131,057

Total revenue

$

274,494

$

28,935

$

303,429

Costs of services

 

20,817

 

15,252

 

36,069

Cost of inventory sold

 

120,475

 

 

120,475

SG&A expenses

 

89,182

 

6,002

 

95,184

Segment profit

$

44,020

$

7,681

$

51,701

Acquisition-related costs

 

  

 

  

 

669

D&A expenses

 

  

 

  

 

17,115

Gain on disposition of PPE

 

  

 

  

 

(149)

Foreign exchange loss

 

  

 

  

 

478

Operating income

 

  

 

  

$

33,588

Interest expense

 

  

 

  

 

(10,816)

Other income, net

 

  

 

  

 

2,039

Income tax expense

 

  

 

  

 

(6,639)

Net income

 

  

 

  

$

18,172

4.    Segmented information (continued)

The Company’s geographic breakdown of total revenue as determined by the revenue and location of assets, which represents property, plant and equipment, is as follows:

United 

  

States

Canada

Europe

Other

Consolidated

Total revenue for the three months ended:

    

  

    

  

    

  

    

  

    

  

March 31, 2020

$

190,530

$

35,643

$

26,338

$

20,744

$

273,255

March 31, 2019

183,573

 

31,531

 

54,785

 

33,540

 

303,429

v3.20.1
Revenue
3 Months Ended
Mar. 31, 2020
Revenue  
Revenue

5.    Revenue

The Company’s revenue from the rendering of services is as follows:

Three months ended

March 31, 

2020

2019

Service revenue:

    

  

    

  

Commissions

$

93,484

$

92,280

Fees

 

89,639

 

80,092

 

183,123

 

172,372

Inventory sales revenue

 

90,132

 

131,057

$

273,255

$

303,429

v3.20.1
Operating expenses
3 Months Ended
Mar. 31, 2020
Operating expenses  
Operating expenses

6.    Operating expenses

Costs of services

Three months ended

March 31, 

    

2020

    

2019

Ancillary and logistical service expenses

$

12,758

  

$

13,759

Employee compensation expenses

12,304

 

10,807

Buildings, facilities and technology expenses

4,039

 

2,134

Travel, advertising and promotion expenses

6,575

 

5,868

Other costs of services

3,679

 

3,501

$

39,355

$

36,069

SG&A expenses

Three months ended

 

March 31, 

    

2020

    

2019

Employee compensation expenses

$

62,495

$

61,464

Buildings, facilities and technology expenses

 

15,591

 

15,915

Travel, advertising and promotion expenses

 

10,269

 

9,142

Professional fees

 

4,447

 

4,075

Other SG&A expenses

 

5,583

 

4,588

$

98,385

$

95,184

Depreciation and amortization expenses

Three months ended

    

March 31, 

    

2020

    

2019

Depreciation expense

$

8,037

$

7,168

Amortization expense

 

11,256

 

9,947

$

19,293

$

17,115

v3.20.1
Income taxes
3 Months Ended
Mar. 31, 2020
Income taxes  
Income taxes

7.    Income taxes

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

For the three months ended March 31, 2020, income tax expense was $5,648,000 compared to an income tax expense of $6,639,000 for the same period in 2019. The effective tax rate was 20% in the first quarter of 2020, compared to 27% in the first quarter of 2019. The effective tax rate decreased in the first quarter of 2020 compared to the first quarter of 2019 primarily due to the reduced impact of the U.S. tax reform and a greater proportion of annual income subject to tax in jurisdictions with lower tax rates.

The Tax Cuts and Jobs Act, or TCJA, was enacted on December 22, 2017. It is possible that additional legislation, regulations and/or guidance may be issued, and possibly with retroactive effect, in the future that may result in additional adjustments to the tax expense recorded related to the TCJA. For additional information see Note 21.

v3.20.1
Earnings per share attributable to stockholders
3 Months Ended
Mar. 31, 2020
Earnings per share attributable to stockholders  
Earnings per share attributable to stockholders

8.    Earnings per share attributable to stockholders

Basic earnings per share (“EPS”) attributable to stockholders was calculated by dividing the net income attributable to stockholders by the weighted average (“WA”) number of common shares outstanding during the period. Diluted EPS attributable to stockholders was calculated by dividing the net income attributable to stockholders by the WA number of shares of common stock outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include unvested PSUs, unvested RSUs, and outstanding stock options. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share 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

Per

attributable to

 

number

 

share

 

Three months ended March 31, 2020

    

stockholders

    

of shares

    

amount

Basic

$

22,809

 

109,248,880

$

0.21

Effect of dilutive securities:

 

 

 

Share units

 

 

586,074

 

Stock options

 

 

647,883

 

Diluted

$

22,809

 

110,482,837

$

0.21

Net income

WA

Per

attributable to

 

number

 

share

Three months ended March 31, 2019

stockholders

    

of shares

    

amount

Basic

$

18,164

 

108,765,489

$

0.17

Effect of dilutive securities:

 

 

 

Share units

 

 

486,626

 

Stock options

 

 

792,098

 

Diluted

$

18,164

 

110,044,213

$

0.17

v3.20.1
Supplemental cash flow information
3 Months Ended
Mar. 31, 2020
Supplemental cash flow information  
Supplemental cash flow information

9.    Supplemental cash flow information

Three months ended March 31, 

2020

2019

Trade and other receivables

 

$

(113,115)

 

$

(91,605)

Inventory

1,297

37,135

Advances against auction contracts

4,923

(1,041)

Prepaid expenses and deposits

(597)

(492)

Income taxes receivable

(1,217)

(1,458)

Auction proceeds payable

72,687

120,036

Trade and other payables

(3,138)

(36,887)

Income taxes payable

(5,030)

1,496

Operating lease obligation

(2,310)

(2,296)

Other

(210)

2,517

Net changes in operating assets and liabilities

 

$

(46,710)

 

$

27,405

Three months ended March 31, 

2020

2019

Interest paid, net of interest capitalized

 

$

15,171

 

$

16,521

Interest received

778

855

Net income taxes paid

12,442

6,339

Non-cash purchase of property, plant and equipment under capital lease

 

3,502

 

2,564

Non-cash right of use assets obtained (reassessed) in exchange for new lease obligations

 

(1,001)

 

784

March 31, 

December 31, 

2020

2019

Cash and cash equivalents

 

$

290,094

$

359,671

Restricted cash

65,831

60,585

Cash, cash equivalents, and restricted cash

 

$

355,925

$

420,256

v3.20.1
Fair value measurement
3 Months Ended
Mar. 31, 2020
Fair value measurement  
Fair value measurement

10.    Fair value 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.

March 31, 2020

December 31, 2019

Carrying

Carrying

    

Category

    

amount

    

Fair value

    

amount

    

Fair value

Fair values disclosed:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

 

Level 1

$

290,094

$

290,094

$

359,671

$

359,671

Restricted cash

 

Level 1

 

65,831

 

65,831

 

60,585

 

60,585

Short-term debt

 

Level 2

 

33,081

 

33,081

 

4,705

 

4,705

Long-term debt

 

  

 

  

 

  

 

  

Senior unsecured notes

 

Level 1

 

491,381

 

502,813

 

490,933

 

520,625

Term loans

 

Level 2

 

139,099

 

139,785

 

154,548

 

155,355

The carrying value of the Company’s cash and cash equivalents, restricted cash, trade and other receivables, advances against auction contracts, auction proceeds payable, trade and other payables, and short term debt approximate their fair values due to their short terms to maturity. The carrying value of the term loans, before deduction of deferred debt issue costs, approximates their fair value as the interest rates on the loans were short-term in nature. The fair value of the senior unsecured notes is determined by reference to a quoted market price.

v3.20.1
Trade receivables
3 Months Ended
Mar. 31, 2020
Trade receivables  
Trade Receivables

11.    Trade receivables

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. The following table presents the activity in the allowance for expected credit losses for the period ended March 31, 2020:

Opening balance at January 1, 2020

    

(5,225)

Current period provision

 

(658)

Write-off charged against the allowance

 

2,156

Balance, March 31, 2020

$

(3,727)

v3.20.1
Other current assets
3 Months Ended
Mar. 31, 2020
Other current assets  
Other current assets

12.    Other current assets

March 31, 

December 31, 

    

2020

    

2019

Advances against auction contracts

$

7,830

$

12,925

Assets held for sale

 

8,163

 

15,051

Prepaid expenses and deposits

 

22,050

 

22,184

$

38,043

$

50,160

Assets held for sale

Balance, December 31, 2019

    

 

15,051

Reclassified from (to) property, plant and equipment

 

(6,888)

Disposal

 

Balance, March 31, 2020

$

8,163

As at March 31, 2020, the Company’s assets held for sale consisted of one excess auction site located in the United States. Management made the strategic decision to sell this property to maximize the Company’s return on invested capital. The estimated sales proceeds are expected to be in excess of the current book value. The property has been actively marketed for sale, and management expects the sales to be completed within 12 months of March 31, 2020. The property belongs to the A&M reportable segment.

v3.20.1
Other non-current assets
3 Months Ended
Mar. 31, 2020
Other non-current assets  
Other non-current assets

13.    Other non-current assets

March 31, 

December 31, 

    

2020

    

2019

Right-of-use assets

$

107,646

$

116,209

Tax receivable

10,126

11,792

Equity-accounted investments

 

 

4,276

Deferred debt issue costs

 

1,211

 

1,403

Other

 

13,493

 

11,999

$

132,476

$

145,679

During the quarter, the Company received a final distribution of its equity-accounted investments in the Cura Classis entities. The transaction did not result in a material gain or loss.

v3.20.1
Debt
3 Months Ended
Mar. 31, 2020
Debt  
Debt

14.    Debt

    

Carrying amount

March 31, 

December 31, 

    

2020

    

2019

Short-term debt

$

33,081

$

4,705

Long-term debt:

 

  

 

  

Term loan:

 

  

 

  

Denominated in Canadian dollars, secured, bearing interest at a weighted average rate of 3.905%, due in monthly installments of interest only and quarterly installments of principal, maturing in October 2021

 

139,785

 

155,355

Less: unamortized debt issue costs

 

(686)

 

(807)

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

 

(8,619)

 

(9,067)

Total long-term debt

 

630,480

 

645,481

Total debt

$

663,561

$

650,186

Long-term debt:

 

  

 

  

Current portion

$

16,944

$

18,277

Non-current portion

 

613,536

 

627,204

Total long-term debt

$

630,480

$

645,481

Short-term debt is comprised of drawings in different currencies on the Company’s committed revolving credit facilities, and for the three months ended March 31, 2020, have a weighted average interest rate of 3.1% (December 31, 2019: 2.3%).

As at March 31, 2020, the Company had unused committed revolving credit facilities aggregating $461,660,000 of which $457,225,000 is available until October 27, 2021 subject to certain covenant restrictions. The Company was in compliance with all financial and other covenants applicable to the credit facilities at March 31, 2020.

v3.20.1
Other non-current liabilities
3 Months Ended
Mar. 31, 2020
Other non-current liabilities  
Other non-current liabilities

15.    Other non-current liabilities

March 31, 

December 31, 

    

2020

    

2019

Operating lease liability

$

103,947

$

111,322

Tax payable

19,189

20,232

Finance lease liability

 

16,602

 

16,336

Other

 

2,831

 

3,348

$

142,569

$

151,238

v3.20.1
Equity and dividends
3 Months Ended
Mar. 31, 2020
Equity and dividends  
Equity and dividends

16.    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. No preferred shares have been issued.

Share repurchase

There were 1,525,312 common shares repurchased for $53,170,000 during the three months ended March 30, 2020 (March 30, 2019: no repurchased common shares).

16.    Equity and dividends (continued)

Dividends

Declared and paid

The Company declared and paid the following dividends during the three months ended March 31, 2020 and 2019:

    

    

Dividend  

    

    

Total

    

Declaration date

per share

Record date

dividends

Payment date

Fourth quarter 2019

January 24, 2020

$

0.2000

February 14, 2020

$

21,905

March 6, 2020

Fourth quarter 2018

January 25, 2019

$

0.1800

February 15, 2019

$

19,568

March 8, 2019

Declared and undistributed

Subsequent to March 31, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.20 cents per common share, payable on June 17, 2020 to stockholders of record on May 27, 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 consequences for the Company.

Foreign currency translation reserve

Foreign currency translation adjustments include intra-entity foreign currency transactions that are of a long-term investment nature, which generated a net loss of $7,492,000 for the three months ended March 31, 2020 (2019: net loss of $855,000).

v3.20.1
Share-based payments
3 Months Ended
Mar. 31, 2020
Share-based payments  
Share-based payments

17.    Share-based payments

Share-based payments consist of the following compensation costs:

Three months ended March 31,

    

2020

    

2019

Stock option compensation expense:

 

  

 

  

SG&A expenses

$

1,187

$

1,539

Share unit expense:

 

  

 

  

Equity-classified share units

 

1,786

 

2,368

Liability-classified share units

 

(1,156)

 

150

Employee share purchase plan - employer contributions

 

590

 

553

$

2,407

$

4,610

Share unit expense and employer contributions to the employee share purchase plan are recognized in SG&A expenses.

Stock option plans

Stock option activity for the three months ended March 31, 2020 is presented below:

WA

Common

WA

remaining

Aggregate

shares under

exercise

contractual

intrinsic

    

option

    

price

    

life (in years)

    

value

Outstanding, December 31, 2019

 

2,797,189

$

29.05

 

7.1

$

38,874

Granted

 

642,380

 

40.64

 

  

 

  

Exercised

 

(247,446)

 

28.51

3,536

Forfeited

 

(22,016)

 

30.11

 

  

 

  

Expired

 

(1,201)

 

21.82

 

  

 

  

Outstanding, March 31, 2020

 

3,168,906

31.44

 

7.6

13,039

Exercisable, March 31, 2020

 

1,790,002

$

27.68

 

6.5

$

11,638

The significant assumptions used to estimate the fair value of stock options granted during the three months ended March 31, 2020 and 2019 are presented in the following table on a weighted average basis:

Three months ended March 31, 

    

2020

    

2019

    

Risk free interest rate

 

0.75

%  

2.5

%

Expected dividend yield

 

2.02

%  

2.06

%

Expected lives of the stock options

 

5

years

5

years

Expected volatility

 

27.3

%  

26.8

%

17.    Share-based payments (continued)

Stock option plans (continued)

As at March 31, 2020, the unrecognized stock-based compensation cost related to the non-vested stock options was $7,472,000, which is expected to be recognized over a weighted average period of 2.6 years.

Share unit plans

Share unit activity for the three months ended March 31, 2020 is presented below:

Equity-classified awards

Liability-classified awards

PSUs

RSUs

DSUs

WA grant

WA grant

WA grant

date fair

date fair

date fair

    

Number

    

value

    

Number

    

value

    

Number

    

value

Outstanding, December 31, 2019

 

428,724

$

32.89

 

237,420

$

29.72

 

$

118,368

$

29.64

Granted

 

181,883

 

41.60

 

23,163

 

41.11

 

5,407

 

40.43

Vested and settled

 

(156,238)

 

31.94

 

(7,539)

 

36.29

 

 

Forfeited

 

(2,644)

 

33.29

 

(311)

 

32.82

 

 

Outstanding, March 31, 2020

 

451,725

$

36.73

 

252,733

$

30.57

 

$

123,775

$

30.11

PSUs

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, 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 in 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.

As at March 31, 2020 the unrecognized share unit expense related to equity-classified PSUs was $11,247,000, which is expected to be recognized over a weighted average period of 2.5 years.

RSUs

The Company has RSU plans that are equity-settled and not subject to market vesting conditions.

As at March 31, 2020, the unrecognized share unit expense related to equity-classified RSUs was $2,734,000, which is expected to be recognized over a weighted average period of 1.3 years.

DSUs

The Company has DSU plans that are cash-settled and not subject to market vesting conditions.

Fair values of DSUs are estimated on grant date and at each reporting date. 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.

As at March 31, 2020, the Company had a total share unit liability of $4,176,000 (December 31, 2019: $5,130,000) in respect of share units under the DSU plans.

Employee share 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.

v3.20.1
Leases
3 Months Ended
Mar. 31, 2020
Leases  
Leases

18.    Leases

The Company’s breakdown of lease expense is as follows:

Three months ended March 31,