RITCHIE BROS AUCTIONEERS INC, 10-Q filed on 8/8/2017
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2017
Aug. 4, 2017
Document And Entity Information [Abstract]
 
 
Entity Registrant Name
Ritchie Bros Auctioneers Inc 
 
Entity Central Index Key
0001046102 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q2 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
107,101,433 
Condensed Consolidated Income Statements (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Condensed Consolidated Income Statements [Abstract]
 
 
 
 
Revenues (note 6)
$ 166,186 
$ 158,805 
$ 290,685 
$ 290,750 
Costs of services, excluding depreciation and amortization (note 7)
21,591 
19,758 
34,404 
35,071 
Gross revenue, net of expenses
144,595 
139,047 
256,281 
255,679 
Selling, general and administrative expenses (note 7)
74,377 
73,992 
144,952 
141,102 
Acquisition-related costs (note 7)
22,948 
603 
31,575 
1,800 
Depreciation and amortization expenses (note 7)
11,872 
10,284 
22,210 
20,364 
Gain on disposition of property, plant and equipment
(308)
(201)
(1,029)
(447)
Impairment loss (note 7)
8,911 
 
8,911 
 
Foreign exchange loss (gain)
(93)
734 
(823)
51 
Operating income
26,888 
53,635 
50,485 
92,809 
Other income (expense):
 
 
 
 
Interest income
987 
487 
1,942 
985 
Interest expense
(8,620)
(1,060)
(16,753)
(2,423)
Equity income (loss) (note 17)
477 
(49)
996 
Other, net
2,479 
269 
3,861 
967 
Other income (expense)
(5,150)
173 
(10,999)
525 
Income before income taxes
21,738 
53,808 
39,486 
93,334 
Income tax expense (recovery) (note 8):
 
 
 
 
Current
8,675 
16,106 
16,163 
26,115 
Deferred
(4,650)
(2,889)
(4,823)
(3,366)
Income tax expense
4,025 
13,217 
11,340 
22,749 
Net income
17,713 
40,591 
28,146 
70,585 
Net income attributable to:
 
 
 
 
Stockholders
17,635 
39,710 
28,012 
69,116 
Non-controlling interests
$ 78 
$ 881 
$ 134 
$ 1,469 
Earnings per share attributable to stockholders (note 9):
 
 
 
 
Basic
$ 0.16 
$ 0.37 
$ 0.26 
$ 0.65 
Diluted
$ 0.16 
$ 0.37 
$ 0.26 
$ 0.65 
Weighted average number of shares outstanding (note 9):
 
 
 
 
Basic
107,004,902 
106,245,307 
106,928,672 
106,581,294 
Diluted
108,238,660 
106,979,810 
108,014,228 
107,069,410 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Condensed Consolidated Statements of Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 17,713 
$ 40,591 
$ 28,146 
$ 70,585 
Other comprehensive income (loss), net of income tax:
 
 
 
 
Foreign currency translation adjustment
9,373 
(4,795)
16,813 
7,400 
Total comprehensive income
27,086 
35,796 
44,959 
77,985 
Total comprehensive income attributable to:
 
 
 
 
Stockholders
26,976 
34,914 
44,789 
76,348 
Non-controlling interests
$ 110 
$ 882 
$ 170 
$ 1,637 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Current Assets:
 
 
Cash and cash equivalents
$ 254,103 
$ 207,867 
Restricted cash
113,391 
50,222 
Trade and other receivables
135,395 
52,979 
Inventory (note 12)
28,297 
28,491 
Advances against auction contracts
11,534 
5,621 
Prepaid expenses and deposits
14,971 
19,005 
Assets held for sale (note 13)
245 
632 
Income taxes receivable
16,576 
13,181 
Total Current Assets
574,512 
377,998 
Property, plant and equipment (note 14)
524,212 
515,030 
Equity-accounted investments (note 17)
7,289 
7,326 
Restricted cash (note 10)
 
500,000 
Deferred debt issue costs (note 18)
4,168 
6,182 
Other non-current assets
7,054 
4,027 
Intangible assets (note 15)
255,500 
72,304 
Goodwill (note 16)
667,573 
97,537 
Deferred tax assets
27,824 
19,129 
Total Assets
2,068,132 
1,599,533 
Current liabilities:
 
 
Auction proceeds payable
303,712 
98,873 
Trade and other payables
127,738 
124,694 
Income taxes payable
876 
5,355 
Short-term debt (note 18)
14,110 
23,912 
Current portion of long-term debt (note 18)
16,618 
 
Total Current Liabilities
463,054 
252,834 
Long-term debt (note 18)
797,695 
595,706 
Share unit liabilities
1,867 
4,243 
Other non-current liabilities
16,091 
14,583 
Deferred tax liabilities
65,170 
36,387 
Total Liabilities
1,343,877 
903,753 
Contingencies (note 21)
   
   
Contingently redeemable performance share units (note 20)
7,706 
3,950 
Share capital:
 
 
Common stock; no par value, unlimited shares authorized, issued and outstanding shares: 107,078,512 (December 31, 2016: 106,822,001)
132,864 
125,474 
Additional paid-in capital
36,963 
27,638 
Retained earnings
592,169 
601,071 
Accumulated other comprehensive loss
(50,349)
(67,126)
Stockholders' equity
711,647 
687,057 
Non-controlling interest
4,902 
4,773 
Total Equity
716,549 
691,830 
Total Liabilities and Equity
$ 2,068,132 
$ 1,599,533 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Condensed Consolidated Balance Sheets [Abstract]
 
 
Common stock, no par value
   
   
Common stock, Shares Authorized, Unlimited
Unlimited 
Unlimited 
Common stock, issued shares
107,078,512 
106,822,001 
Common stock, outstanding shares
107,078,512 
106,822,001 
Condensed Consolidated Statements of Changes in Equity (USD $)
In Thousands, except Share data
Common stock [Member]
Additional paid-in capital ("APIC") [Member]
Retained earnings [Member]
Accumulated other comprehensive income (loss) [Member]
Non-controlling interest ("NCI") [Member]
Performance Share Units [Member]
Total
Balance at Dec. 31, 2016
$ 125,474 
$ 27,638 
$ 601,071 
$ (67,126)
$ 4,773 
 
$ 691,830 
Balance, shares at Dec. 31, 2016
106,822,001 
 
 
 
 
 
 
Contingently redeemable Performance share units, Balance at Dec. 31, 2016
 
 
 
 
 
3,950 
3,950 
Net income
 
 
28,012 
 
134 
 
28,146 
Other comprehensive income
 
 
 
16,777 
36 
 
16,813 
Comprehensive income
 
 
28,012 
16,777 
170 
 
44,959 
Stock option exercises
7,390 
(1,357)
 
 
 
 
6,033 
Stock option exercises, shares
256,511 
 
 
 
 
 
 
Stock option compensation expense (note 20)
 
8,076 
 
 
 
 
8,076 
Assumption of stock options on acquisition of IronPlanet (note 22)
 
2,330 
 
 
 
 
2,330 
Modification of PSUs (note 20)
 
 
(382)
 
 
1,803 
(382)
Equity-classified PSU expense (note 20)
 
260 
 
 
 
1,785 
260 
Equity-classified PSU dividend equivalents
 
16 
(108)
 
 
92 
(92)
Change in value of contingently redeemable equity-classified PSUs
 
 
(76)
 
 
76 
(76)
Cash dividends paid (note 19)
 
 
(36,348)
 
(41)
 
(36,389)
Balance at Jun. 30, 2017
132,864 
36,963 
592,169 
(50,349)
4,902 
 
716,549 
Balance, shares at Jun. 30, 2017
107,078,512 
 
 
 
 
 
 
Contingently redeemable Performance share units, Balance at Jun. 30, 2017
 
 
 
 
 
$ 7,706 
$ 7,706 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2016
Mascus International Holdings BV [Member]
Operating activities:
 
 
 
Net income
$ 28,146 
$ 70,585 
 
Adjustments for items not affecting cash:
 
 
 
Depreciation and amortization expenses (note 7)
22,210 
20,364 
 
Inventory write down (note 12)
656 
1,402 
 
Impairment loss (note 7)
8,911 
 
 
Stock option compensation expense (note 20)
8,076 
2,470 
 
Equity-classified PSU expense (note 20)
2,045 
486 
 
Deferred income tax recovery
(4,823)
(3,366)
 
Equity loss (income) less dividends received
49 
(996)
 
Unrealized foreign exchange gain
(1,487)
(12)
 
Change in fair value of contingent consideration
(1,624)
 
 
Gain on disposition of property, plant and equipment
(1,029)
(447)
 
Debt issue cost amortization
1,057 
 
 
Other, net
128 
 
 
Net changes in operating assets and liabilities (note 10)
52,390 
57,626 
 
Net cash provided by operating activities
114,705 
148,112 
 
Investing activities:
 
 
 
Acquisition (note 22)
 
 
(28,123)
Acquisition of NCI (note 22)
 
(226)
 
Property, plant and equipment additions
(4,274)
(4,997)
 
Intangible asset additions
(10,124)
(6,693)
 
Proceeds on disposition of property, plant and equipment
2,451 
1,428 
 
Net cash used in investing activities
(686,027)
(38,611)
 
Financing activities:
 
 
 
Issuances of share capital
6,033 
18,057 
 
Share repurchase (note 19)
 
(36,726)
 
Dividends paid to stockholders (note 19)
(36,348)
(34,176)
 
Dividends paid to NCI
(41)
(2,368)
 
Proceeds from short-term debt
6,850 
31,336 
 
Repayment of short-term debt
(17,208)
(24,156)
 
Proceeds from long-term debt
325,000 
46,572 
 
Repayment of long-term debt
(100,575)
(46,568)
 
Debt issue costs
(12,388)
 
 
Repayment of finance lease obligations
(858)
(907)
 
Other, net
(48)
268 
 
Net cash provided by (used in) financing activities
170,417 
(48,668)
 
Effect of changes in foreign currency rates on cash and cash equivalents
10,310 
8,593 
 
Cash, cash equivalents, and restricted cash:
 
 
 
Increase (decrease)
(390,595)
69,426 
 
Beginning of period
758,089 
293,246 
 
Cash, cash equivalents, and restricted cash, end of period (note 10)
$ 367,494 
$ 362,672 
 
General Information
General Information

1.  General information

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 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”).



Significant Accounting Policies
Significant Accounting Policies

2.  Significant accounting policies

(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, 2016, included in the Company’s Annual Report on Form 10-K, filed with the Securities 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.



(b)

Revenue recognition

Revenues are comprised of:

·

commissions earned at the Company’s auctions through the Company acting as an agent for consignors of equipment and other assets, as well as commissions on online marketplace sales, and

·

fees earned in the process of conducting auctions, including online marketplace listing and inspection fees, fees from value-added services and make-ready activities, as well as fees paid by buyers on online marketplace sales.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.  For auction or online marketplace sales, revenue is recognized when the auction or online marketplace 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. 



Commissions from sales at the Company’s auctions represent the percentage earned by the Company on the gross auction 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 or purchases inventory to be sold at auction.  Commissions also include those earned on online marketplace sales.

2.  Significant accounting policies (continued)

(b)  Revenue recognition (continued)

Commission and fee revenues from sales at auction

The Company accepts equipment and other assets on consignment or takes title for a short period of time prior to auction, stimulates buyer interest through professional marketing techniques, and matches sellers (also known as consignors) to buyers through the auction or private sale process.



In its role as auctioneer, the Company matches buyers to sellers of equipment on consignment, as well as to inventory held by the Company, through the auction process. Following the auction, the Company invoices the buyer for the purchase price of the property, collects payment from the buyer, and where applicable, remits to the consignor the net sale proceeds after deducting its commissions, expenses, and applicable taxes. Commissions are calculated as a percentage of the hammer price of the property sold at auction.  Fees 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 is recognized on the date of the auction sale upon the fall of the auctioneer’s hammer, which is the point in time when the Company has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. Subsequent to the date of the auction sale, the Company’s remaining obligations for its auction services relate only to the collection of the purchase price from the buyer and the remittance of the net sale proceeds to the seller. These remaining service obligations are not an essential part of the auction services provided by the Company. 



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. In the rare event where a buyer refuses to take title of the property, 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 auction. Historically, cancelled sales have not been material in relation to the aggregate hammer price of property sold at auction. 



Commission revenues are recorded net of commissions owed to third parties, which are principally the result of situations when the commission is shared with a consignor or with the counterparty in an auction guarantee risk and reward sharing arrangement. Additionally, in certain situations, commissions are shared with third parties who introduce the Company to consignors who sell property at auction.



Underwritten commission contracts can take the form of guarantee or inventory 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 (note 21). 



Revenues related to inventory contracts are 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, including, but not limited to, delivery of the property. Revenue from inventory sales is presented net of costs within revenues on the consolidated income statement, as the Company takes title only for a short period of time and the risks and rewards of ownership are not substantially different than the Company’s other underwritten commission contracts. 

2.  Significant accounting policies (continued)

(b)  Revenue recognition (continued)

Commissions and fees on online marketplace sales

Through its online marketplaces, the Company typically sells equipment or other assets on consignment from sellers and stimulates buyer interest through sales and marketing techniques in order to match online marketplace sellers with buyers. Prior to offering an item for sale on its online marketplaces, the Company performs required inspections, title and lien searches, and make-ready activities to prepare the item for sale. 



Online marketplace revenues are primarily driven by seller commissions, fees charged to sellers for listing and inspecting equipment, and amounts paid by buyers, including buyer transaction fees and buyer’s premiums. The Company also generates revenue from related online marketplace services including make-ready activities, logistics coordination, storage, private auction hosting, and asset appraisals. Online marketplace sale commission and fee revenues are recognized when the sale is complete, which is generally at the conclusion of the marketplace transaction between the seller and buyer. This occurs when a buyer has become legally obligated to pay the purchase price and buyer transaction fee for an asset that the seller is obligated to relinquish in exchange for the sales price less seller commissions and listing fees. At that time, the Company has substantially performed what it must do to be entitled to receive the benefits represented by its commissions and fees.



Following the sale of the item, the Company invoices the buyer for the purchase price of the asset, taxes, and the buyer transaction fee or buyer’s premium, collects payment from the buyer, and remits the proceedsnet of the seller commissions, listing fees, and applicable taxesto the seller. The Company notifies the seller when the buyer payment has been received in order to clear release of the equipment or other asset to the seller. These remaining service obligations are not viewed to be an essential part of the services provided by the Company.



Under the Company’s standard terms and conditions, it is not obligated to pay the seller for items in an online marketplace sale in which the buyer has not paid for the purchased item. If the buyer defaults on its payment obligation, the equipment or other assets may be returned to the seller or moved into a subsequent online marketplace event.



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.  



For guarantee contracts, if actual online marketplace sale proceeds are less than the guaranteed amount, the commission earned is reduced; if proceeds are sufficiently lower, the Company may incur a loss on the sale. If such consigned equipment sells above the minimum price, the Company may be entitled to a share of the excess proceeds as negotiated with the seller. The Company’s share of the excess, if any, is recorded in revenue together with the related online marketplace sale commission. Losses, if any, resulting from guarantee contracts are recorded in revenue in the period in which the relevant online marketplace sale was 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 (note 21). 

2.  Significant accounting policies (continued)

(b)  Revenue recognition (continued)

Commissions and fees on online marketplace sales (continued)

For inventory contracts related to online marketplace sales, revenue from the sale of inventory through the Company’s online marketplaces are recorded net of acquisition costs because the acquisition of equipment in advance of an online marketplace sale is an ancillary component of the Company’s business and, in general, the risks and rewards of ownership are not substantially different than the Company’s other guarantee contracts. Since the online marketplace sale business is a net business, gross sales proceeds are not reported as revenue in the consolidated income statement. Rather, the net commission earned from online marketplace sales is reported as revenue, which reflects the Company’s agency relationship between buyers and sellers of equipment.



Other fees

Fees from value-added services include financing and technology service fees. Fees are recognized in the period in which the service is provided to the customer.   



(c)

 Costs of services, excluding depreciation and amortization expenses

Costs of services are comprised of expenses incurred in direct relation to conducting auctions (“direct expenses”), earning online marketplace revenues, and earning other fee revenues. Direct expenses include direct labour, buildings and facilities charges, and travel, advertising and promotion costs.



Costs of services incurred to earn online marketplace revenues include inspection costs, facilities costs, inventory management, referral, sampling, and appraisal fees.  Inspections are generally performed at the seller’s physical location. The cost of inspections include 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 revenues also include costs for the Company’s customer support, online marketplace operations, logistics, title and lien investigation functions,  and lease and operations costs related to the Company’s third-party data centers at which its websites are hosted.



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

 

(d)

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

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 Company also has a senior executive performance share unit (“PSU”) plan that provides for the award of PSUs to selected senior executives of the Company. The Company has the option to settle executive PSU 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 using a binomial model.



2.  Significant accounting policies (continued)

(d)   Share-based payments (continued)

Equity-classified share-based payments (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.



Any consideration paid on exercise of the stock options is credited to the common shares.  Dividend equivalents on the senior executive plan PSUs are recognized as a reduction to retained earnings over the service period.



PSUs awarded under the senior executive and employee PSU plans (described in note 20) are contingently redeemable in cash in the event of death of the participant. The contingently redeemable portion of the senior executive PSU awards, which represents the amount that would be redeemable based on the conditions at the date of grant, to the extent attributable to prior service, is recognized as temporary equity. The balance reported in temporary equity increases on the same basis as the related compensation expense over the service period of the award, with any excess of the temporary equity value over the amount recognized in compensation expense charged against retained earnings.  In the event it becomes probable an award is going to become eligible for redemption by the holder, the award would be reclassified to a liability award.



Liability-classified share-based payments

The Company maintains other share unit compensation plans that vest over a period of up to five 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 using the volume weighted average price of the Company’s common shares for the twenty days 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 20. 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 non-current liabilities.



(e)

Restricted cash

In certain jurisdictions, local laws require the Company to hold cash in segregated bank accounts, which are used to settle auction proceeds payable resulting from auctions and online marketplace sales conducted in those regions. In addition, the Company also holds cash generated from its EquipmentOne online marketplace sales in separate escrow accounts, for settlement of the respective online marketplace transactions as a part of its secured escrow service. Restricted cash balances also include funds held in accounts owned by the Company in support of short-term stand-by letters of credit to provide seller security.



2.  Significant accounting policies (continued)

(e)   Restricted cash (continued)

During the period from December 21, 2016 through May 31, 2017, non-current restricted cash consisted of funds held in escrow pursuant to the offering of senior unsecured notes (note 18), which were only available when the Company received approval to acquire IronPlanet Holdings, Inc. (“IronPlanet”) and whose use was restricted to the funding of the IronPlanet acquisition (note 22).



(f)

Inventories

Inventory consists of equipment and other assets purchased for resale in an upcoming Company auction or online marketplace event. 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. 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. The specific identification method is used to determine amounts removed from inventory. Write-downs to the carrying value of inventory are recorded in revenue in the consolidated income statement.



(g)

Intangible assets

Intangible assets are measured at cost less accumulated amortization and accumulated impairment losses. Cost includes all expenditures that are directly attributable to the acquisition or development of the asset, net of any amounts received in relation to those assets, including scientific research and experimental development tax credits. Costs of internally developed software are amortized on a straight-line basis over the remaining estimated economic life of the software product. Costs related to software incurred prior to establishing technological feasibility or the beginning of the application development stage of software are charged to operations as such costs are incurred.  Once technological feasibility is established or the application development stage has begun, directly attributable costs are capitalized until the software is available for use.



Amortization is recognized in net earnings on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives are:



 

 

 

 



 

 

 

 

Asset

Basis

 

Rate / term

 

Trade names and trademarks

Straight-line

 

3 - 15 years or indefinite-lived

 

Customer relationships

Straight-line

 

6 - 20 years

 

Software assets

Straight-line

 

3 - 7 years

 



Customer relationships includes relationships with buyers and sellers.



(h)

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 allocated to the Core Auction, IronPlanet, EquipmentOne, or Mascus reporting unit.



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.



2.  Significant accounting policies (continued)

(h)   Goodwill (continued)

Where 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.



(i)

Early adoption of new accounting pronouncements

(i)

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. Entities still have the option of performing a qualitative assessment of a reporting unit to first determine whether the quantitative impairment test is necessary. Where an annual or interim quantitative impairment test is necessary, there is only one step, which is to compare the fair value of a reporting unit with its carrying value. An impairment loss is recognized as the difference between the reporting unit’s carrying amount and its fair value to the extent the difference does not exceed the total amount of goodwill allocated to the reporting unit.



ASU 2017-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments are applied on a prospective basis. Because the amendments reduce the cost and complexity of goodwill impairment testing, the Company has early adopted ASU 2017-04 in the first quarter of 2017.



(ii)

Effective this quarter, the Company adopted ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies that the effects of a modification should be accounted for unless all the following criteria are met:

1.

The fair value (or calculated or intrinsic value, as appropriate) of the modified award is the same as the fair value (or calculated or intrinsic value, as appropriate) of the original award immediately before the modification. The value immediately before and after the modification does not have to be estimated if the modification does affect any of the inputs to the valuation technique used to value the award.

2.

The modified award’s vesting conditions are the same as those of the original award immediately before the modification.

3.

The classification of the modified award as an equity or liability instrument is the same as the original award’s classification immediately before the modification.

Adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.



2.  Significant accounting policies (continued)

(j)

 New and amended accounting standards

(i)

Effective January 1, 2017, the Company adopted ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, which impacts entities that are issuers of or investors in debt instruments – or hybrid financial instruments determined to have a debt host – with embedded call (put) options. One of the criteria for bifurcating an embedded derivative is assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to those of their debt hosts. The amendments of ASU 2016-06 clarify the steps required in making this assessment for contingent call (put) options that can accelerate the payment of principal on debt instruments. Specifically, ASU 2016-06 requires the call (or put) options to be assessed solely in accordance with a four-step decision sequence. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the triggering event is related to interest rates or credit risks. The standard was applied on a modified retrospective basis to existing debt instruments as of January 1, 2017. Adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.



(ii)

Effective January 1, 2017, the Company adopted ASU 2016-09,  Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires an entity to recognize share-based payment (“SBP”) award income tax effects in the consolidated income statement when the awards vest or are settled. Consequently, the requirement for entities to track additional paid-in capital (“APIC”) pools is eliminated. Other amendments include:

·

All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the consolidated income statement. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. Excess tax benefits are recognized regardless of whether the benefit reduces taxes payable in the current period. These amendments were applied prospectively.

·

Because excess taxes no longer flow through APIC, when applying the treasury stock method in calculating diluted earnings per share (“EPS”), the assumed proceeds will no longer include any estimated excess taxes. Excess tax benefits increase assumed proceeds, which results in more hypothetical shares being reacquired. The incremental number of dilutive shares for diluted EPS is calculated as the number of shares from the assumed exercise of the stock less the hypothetical shares reacquired. Therefore, removing excess tax benefits

from the equation results in fewer hypothetical shares being reacquired, increasing the incremental number of dilutive shares.

·

Excess tax benefits are classified along with other income tax cash flows as an operating activity in the statement of cash flows. The Company elected to apply this amendment prospectively.

·

An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. Since forfeiture rates of the Company’s stock awards have historically been nominal and represent an insignificant assumption used in management’s estimate of the fair value of those awards, the Company has elected to account for forfeitures as they occur. This accounting policy change was applied on a modified retrospective basis and did not have an impact on the Company’s consolidated financial statements.

·

The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. This amendment was applied on a modified retrospective basis.

·

Cash paid by an employer when directly withholding shares for tax-withholding purposes is classified as a financing activity in the statement of cash flows. This amendment was applied prospectively.

Adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

2.  Significant accounting policies (continued)

(k)

   Recent accounting standards not yet adopted

(i)

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In particular, it moves away from the current industry and transaction specific requirements. ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include: 

1.

Identifying the contract(s) with the customer,

2.

Identifying the separate performance obligations in the contract,

3.

Determining the transaction price,

4.

Allocating the transaction price to the separate performance obligations, and

5.

Recognizing revenue as each performance obligation is satisfied.

The amendments also contain extensive disclosure requirements designed to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB delayed the effective date of ASU 2014-09 by one year so that ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. ASU 2014-09 permits the use of either the retrospective or modified retrospective (cumulative effect) transition method.



In 2015, the Company established a global new revenue accounting standard adoption team, consisting of financial reporting and accounting advisory representatives from across all geographical regions and business operations (the “Team”). The Team developed an adoption framework that continues to be used as guidance in identifying the Company’s significant contracts with customers. In 2016, the Team commenced its analysis, with the initial focus being on the impact of the amendments on accounting for the Company’s straight commission contracts, underwritten (inventory and guarantee) commission contracts, and ancillary service contracts. The Team is currently in the process of identifying the appropriate changes to our business processes, systems, and controls required to adopt the amendments based on preliminary findings.



Since its inception, the Team has regularly reported the findings and progress of the adoption project to management and the Audit Committee. Based on these findings and analysis, management has determined that the Company will not early adopt ASU 2014-09. The Company will adopt ASU 2014-09 on its effective date of January 1, 2018 using a modified retrospective (cumulative-effect) method of adoption. The primary reason for not early adopting and for electing to use a modified retrospective method is that the Company completed its significant acquisition in IronPlanet Holdings, Inc. (note 22) on May 31, 2017.  The Team will require the remaining time before ASU 2014-09 takes effect to assess the impact of the new standard on IronPlanet’s significant contracts with customers. The IronPlanet acquisition adds complexity to applying the amendments retrospectively, and as such, the modified retrospective method of adoption was chosen. The Company also continues to evaluate recently issued guidance on practical expedients as part of the adoption method decision.

















2.  Significant accounting policies (continued)

(k)   Recent accounting standards not yet adopted (continued)

During the current quarter, the Team concluded that one of the most significant impacts of the adoption of ASU 2014-09 on pre-acquisition contracts (that is, excluding similar IronPlanet contracts, which are still in the discovery phase) will be a change in the presentation of revenue from inventory and ancillary service contracts as gross as a principal versus net as an agent.  The Team’s analysis of these significant pre-acquisition contracts with customers was aided by the FASB issuing ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations, focusing on whether an entity controls a specified good or service before that good or service is transferred to a customer.



SEC Regulation S-X Rule 5-03.1 requires revenue from the sale of tangible products to be presented as a separate line item of the face of the consolidated income statement from revenues from services where income from one or both of those classes is more than 10 percent the sum of total revenues. Similarly, SEC Regulation Rule 5-03.2 requires the costs related to those revenue classes to be presented in the same manner. Based on historical information, the Team expects revenue from inventory contracts that are recognized gross as a principal selling tangible products to exceed 10 percent of total revenues. Presenting inventory contract revenues gross as a principal selling a tangible product versus net as an agent providing a service will significantly change the face of the Company’s consolidated income statement. The difference between the current and expected presentation that, under the modified retrospective method of adopting ASU 2014-09, would have a prospective impact on the Company’s consolidated income statement from January 1, 2018, is illustrated in the following table:





Current presentation

 

Expected presentation after adoption of ASU 2014-09



Revenues

 

Revenue from inventory sales



Cost of services, excluding depreciation and amortization

   

Service revenues



 

 

Total revenues



 

 

Cost of inventory sold



 

 

 



 

 

Cost of services, excluding depreciation and amortization



Selling, general and administrative expenses

 

Selling, general and administrative expenses



Acquisition-related costs

 

Acquisition-related costs



Depreciation and amortization expenses

 

Depreciation and amortization expenses



Gain (loss) on disposition of property, plant and equipment

 

Gain (loss) on disposition of property, plant and equipment



Foreign exchange loss (gain)

 

Foreign exchange loss (gain)



Operating Income

 

Operating Income



Under the expected presentation after adoption, service revenues will exclude the revenue from inventory sales and the cost of inventory sold for inventory contracts recorded on a gross basis. Those amounts would instead be presented gross on separate line items on the face of the consolidated income statement in accordance with SEC Regulation S-X Rules 5-03.1 and 5-03.2. Ancillary service revenues would be captured within service revenues, but on a gross basis, with ancillary service costs presented separately within costs of services. The Team is currently working with management to determine the impact of the change in presentation on the key performance metrics used by the Company to evaluate operational performance of the Company.

2.  Significant accounting policies (continued)

(k)   Recent accounting standards not yet adopted (continued)

The Team together with oversight from the Audit Committee will continue to closely monitor FASB activity related to ASU 2014-09 to conclude on specific interpretative issues. Over the remaining term until ASU 2014-09 takes effect, the Team will also focus on evaluating the impact of adoption on IronPlanet’s significant contracts with customers, and in particular, the impact of adoption on the accounting for contract fulfillment costs as it pertains to IronPlanet’s inspection services provided under the equipment condition certification program.

(i)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize almost all leases, including operating leases, on the balance sheet through a right-of-use asset and a corresponding lease liability. For short-term leases, defined as those with a term of 12 months or less, the lessee is permitted to make an accounting policy election not to recognize the lease assets and liabilities, and instead recognize the lease expense generally on a straight-line basis over the lease term. The accounting treatment under this election is consistent with current operating lease accounting. No extensive amendments were made to lessor accounting, but amendments of note include changes to the definition of initial direct costs and accounting for collectability uncertainties in a lease.



ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. Both lessees and lessors must apply ASU 2016-02 using a “modified retrospective transition”, which reflects the new guidance from the beginning of the earliest period presented in the financial statements. However, lessees and lessors can elect to apply certain practical expedients on transition. 



Management continues to perform a detailed inventory and analysis of all the Company’s leases, of which there are approximately 360 operating and 65 finance leases for which the Company is a lessee at the reporting date. The most significant operating leases in terms of the amount of rental charges and duration of the contract are for various auction sites and offices located in North America, Europe, the Middle East, and Asia. However, in terms of the number of leases, the majority consist of leases for computer, automotive, and yard equipment. The Company continues to evaluate the new guidance to determine the impact it will have on its consolidated financial statements. Under the expectation that the majority, if not all, of the operating leases will be brought onto the Company’s balance sheet on adoption of ASU 2016-02, management is also investigating the functionality within the Company’s systems to automate the lease accounting process.



The adoption of ASU 2016-02 is expected to add complexity to the accounting for leases, as well as require extensive system and process changes to manage the large number of operating leases that the Company anticipates will be brought onto its balance sheet. As a result, management has determined that the Company will not early adopt ASU 2016-02, and will continue to evaluate the elections available to the Company involving the application of practical expedients on transition.



(ii)

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in ASU 2016-08 clarify the implementation guidance on principal versus agent considerations, focusing on whether an entity controls a specified good or service before that good or service is transferred to a customer. Where such control exists – i.e. where the entity is required to provide the specified good or service itself – the entity is a ‘principal’. Where the entity is required to arrange for another party to provide the good or service, it is an agent.







2.  Significant accounting policies (continued)

(k)   Recent accounting standards not yet adopted (continued)

The effective date and transition requirements of ASU 2016-08 are the same as for ASU 2014-09, which is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The impact of adoption of ASU 2016-08 on the Company’s consolidated financial statements has been considered as part of the ASU 2014-09 adoption project discussed above.



(iii)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which 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.” ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is only permitted for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is evaluating the new guidance to determine the impact it will have on its consolidated financial statements.



(iv)

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, whose amendments provide a screen to determine when an integrated set of assets and activities does not constitute a business as defined by Topic 805. Specifically, the amendments require that a set is not a business when substantially all the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets. This screen reduces the number of transactions that need to be further evaluated and as such, it is anticipated that more acquisitions will be accounted for as asset acquisitions rather than business combinations. If the screen is not met, the amendments:

1)

Require that the set must, at a minimum, include an input and a substantive process that together significantly contribute to the ability to create an output in order to be considered a business; and

2)

Remove the evaluation of whether a market participant could replace missing elements.

The amendments also provide a framework to assist in evaluating whether both an input and a substantive process are present, and this framework includes two sets of criteria to consider that depend on whether a set has outputs. Finally, the amendments narrow the definition of the term “output” so the term is consistent with how outputs are described in Topic 606 Revenue from Contracts with Customers.  



ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The amendments are applied prospectively on or after the effective date. No disclosures are required at transition. The Company is evaluating the new guidance to determine the impact it will have on its consolidated financial statements.



(v)

In February 2017, the FASB issued ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of Subtopic 610-20 and adds clarity around accounting for partial sales of nonfinancial assets and the identification of, allocation of consideration to, and derecognition of distinct nonfinancial assets. The amendments also define ‘in substance nonfinancial assets’, which are within the scope of Subtopic 610-20, and clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty.



2.  Significant accounting policies (continued)

(k)   Recent accounting standards not yet adopted (continued)

ASU 2017-05 is effective at the same time as ASU 2014-09, which is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The amendments in ASU 2017-05 must be applied at the same time as the amendments in ASU 2014-09. Entities may elect to apply these amendments retrospectively to each period presented in the financial statements or using a modified retrospective basis as of the beginning of the fiscal year of adoption. The Company is evaluating the new guidance to determine the impact it will have on its consolidated financial statements.



Significant Judgments, Estimates and Assumptions
Significant Judgments, Estimates and Assumptions

3.  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. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstance and such changes are reflected in the assumptions when they occur. Significant estimates include the estimated useful lives of long-lived assets, as well as valuation of deferred tax assets, intangible assets, goodwill, underwritten commission contracts, and share-based compensation.



Seasonality of Operations
Seasonality of Operations

4.  Seasonality of operations

The Company's operations are both seasonal and event driven. Revenues tend to be highest during the second and fourth calendar quarters.  The Company generally conducts more 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.



Segmented Information
Segmented Information

5.  Segmented information

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

·

Core Auction segment, a network of auction locations that conduct live, unreserved auctions with both on-site and online bidding; and

·

Other includes the results of the Company’s IronPlanet, EquipmentOne, and Mascus online services. On May 31, 2017, the Company acquired IronPlanet (note 22) and updated its segment reporting such that the results of IronPlanet, EquipmentOne and Mascus are reported as “Other”.  The Company is currently considering changes to the structure of its organization that may cause future changes to its reportable segments.













5.  Segmented information (continued)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three months ended

 

 

Six months ended



 

June 30, 2017

 

 

June 30, 2017



Core

 

 

 

 

 

 

Core

 

 

 

 

 

 



Auction

 

Other

 

 

Consolidated

 

Auction

 

Other

 

 

Consolidated

 

Revenues

$

148,028 

 

$

18,158 

 

$

166,186 

 

$

265,800 

 

$

24,885 

 

$

290,685 

 

Costs of services, excluding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization

 

(17,981)

 

 

(3,610)

 

 

(21,591)

 

 

(30,019)

 

 

(4,385)

 

 

(34,404)

 

Selling, general, and administrative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

("SG&A") expenses

 

(64,763)

 

 

(9,614)

 

 

(74,377)

 

 

(130,333)

 

 

(14,619)

 

 

(144,952)

 

Depreciation and amortization expenses

 

(9,440)

 

 

(2,432)

 

 

(11,872)

 

 

(18,894)

 

 

(3,316)

 

 

(22,210)

 

Impairment loss

 

(3,444)

 

 

(5,467)

 

 

(8,911)

 

 

(3,444)

 

 

(5,467)

 

 

(8,911)

 



$

52,400 

 

$

(2,965)

 

$

49,435 

 

$

83,110 

 

$

(2,902)

 

$

80,208 

 

Acquisition-related costs

 

 

 

 

 

 

 

(22,948)

 

 

 

 

 

 

 

 

(31,575)

 

Gain on disposition of property,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

plant and equipment

 

 

 

 

 

 

 

308 

 

 

 

 

 

 

 

 

1,029 

 

Foreign exchange gain

 

 

 

 

 

 

 

93 

 

 

 

 

 

 

 

 

823 

 

Operating income

 

 

 

 

 

 

$

26,888 

 

 

 

 

 

 

 

$

50,485 

 

Equity income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49)

 

Other and income tax expenses

 

 

 

 

 

 

 

(9,179)

 

 

 

 

 

 

 

 

(22,290)

 

Net income

 

 

 

 

 

 

$

17,713 

 

 

 

 

 

 

 

$

28,146 

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three months ended

 

 

Six months ended



June 30, 2016

 

 

June 30, 2016



 

Core

 

 

 

 

 

 

 

Core

 

 

 

 

 

 

 



Auction

 

Other

 

 

Consolidated

 

Auction

 

Other

 

 

Consolidated

 

Revenues

$

152,542 

 

$

6,263 

 

$

158,805 

 

$

279,882 

 

$

10,868 

 

$

290,750 

 

Costs of services, excluding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization

 

(19,438)

 

 

(320)

 

 

(19,758)

 

 

(34,223)

 

 

(848)

 

 

(35,071)

 

SG&A expenses

 

(68,848)

 

 

(5,144)

 

 

(73,992)

 

 

(133,362)

 

 

(7,740)

 

 

(141,102)

 

Depreciation and amortization expenses

 

(9,397)

 

 

(887)

 

 

(10,284)

 

 

(18,701)

 

 

(1,663)

 

 

(20,364)

 



$

54,859 

 

$

(88)

 

$

54,771 

 

$

93,596 

 

$

617 

 

$

94,213 

 

Acquisition-related costs

 

 

 

 

 

 

 

(603)

 

 

 

 

 

 

 

 

(1,800)

 

Gain on disposition of property,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

plant and equipment

 

 

 

 

 

 

 

201 

 

 

 

 

 

 

 

 

447 

 

Foreign exchange loss

 

 

 

 

 

 

 

(734)

 

 

 

 

 

 

 

 

(51)

 

Operating income

 

 

 

 

 

 

$

53,635 

 

 

 

 

 

 

 

$

92,809 

 

Equity income

 

 

 

 

 

 

 

477 

 

 

 

 

 

 

 

 

996 

 

Other and income tax expenses

 

 

 

 

 

 

 

(13,521)

 

 

 

 

 

 

 

 

(23,220)

 

Net income

 

 

 

 

 

 

$

40,591 

 

 

 

 

 

 

 

$

70,585 

 







a

Revenues
Revenues

6Revenues

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



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three months ended

 

Six months ended



June 30,

 

June 30,

Six months ended June 30,

 

2017 

 

 

2016 

 

 

2017 

 

 

2016 

 

Commissions

$

120,380 

 

$

118,180 

 

$

212,324 

 

$

217,973 

 

Fees

 

45,806 

 

 

40,625 

 

 

78,361 

 

 

72,777 

 



$

166,186 

 

$

158,805 

 

$

290,685 

 

$

290,750 

 



Net profits on inventory sales included in commissions are:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three months ended

 

Six months ended



June 30,

 

June 30,

Six months ended June 30,

 

2017 

 

 

2016 

 

 

2017 

 

 

2016 

 

Revenue from inventory sales

$

85,833 

 

$

111,032 

 

$

161,881 

 

$

235,589 

 

Cost of inventory sold

 

(76,822)

 

 

(104,978)

 

 

(140,223)

 

 

(216,514)

 



$

9,011 

 

$

6,054 

 

$

21,658 

 

$

19,075 

 



Operating Expenses
Operating Expenses

7Operating expenses

Certain prior period operating expenses have been reclassified to conform with current year presentation.



Costs of services, excluding depreciation and amortization



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three months ended

 

Six months ended



June 30,

 

June 30,

Six months ended June 30,

 

2017 

 

 

2016 

 

 

2017 

 

 

2016 

 

Employee compensation expenses

$

8,813 

 

$

8,880 

 

$

14,289 

 

$

15,138 

 

Buildings, facilities and technology expenses

 

2,401 

 

 

2,011 

 

 

3,947 

 

 

4,306 

 

Travel, advertising and promotion expenses

 

7,426 

 

 

7,359 

 

 

12,082 

 

 

13,296 

 

Other costs of services

 

2,951 

 

 

1,508 

 

 

4,086 

 

 

2,331 

 



$

21,591 

 

$

19,758 

 

$

34,404 

 

$

35,071 

 



SG&A expenses



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three months ended

 

Six months ended



June 30,

 

June 30,

Six months ended June 30,

 

2017 

 

 

2016 

 

 

2017 

 

 

2016 

 

Employee compensation expenses

$

47,405 

 

 

46,989 

 

$

91,860 

 

$

91,000 

 

Buildings, facilities and technology expenses

 

13,319 

 

 

12,969 

 

 

25,594 

 

 

24,205 

 

Travel, advertising and promotion expenses

 

6,201 

 

 

6,792 

 

 

12,781 

 

 

12,322 

 

Professional fees

 

3,224 

 

 

3,083 

 

 

6,324 

 

 

5,849 

 

Other SG&A expenses

 

4,228 

 

 

4,159 

 

 

8,393 

 

 

7,726 

 



$

74,377 

 

$

73,992 

 

$

144,952 

 

$

141,102 

 





7.  Operating expenses (continued)

Acquisition-related costs



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three months ended

 

Six months ended



June 30,

 

June 30,

Six months ended June 30,

 

2017 

 

 

2016 

 

 

2017 

 

 

2016 

 

IronPlanet: (note 22)

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

 

 

 

 

 

 

 

 

 

 

expense (note 20)

$

4,752 

 

$

 -

 

$

4,752 

 

$

 -

 

Legal costs

 

3,480 

 

 

 -

 

 

8,596 

 

 

 -

 

Other acquisition-related costs

 

13,955 

 

 

 -

 

 

16,530 

 

 

 -

 

Mascus: (note 22)

 

 

 

 

 

 

 

 

 

 

 

 

Continuing employment costs

 

121 

 

 

266 

 

 

277 

 

 

439 

 

Other acquisition-related costs

 

23 

 

 

32 

 

 

23 

 

 

750 

 

Xcira:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing employment costs

 

284 

 

 

305 

 

 

666 

 

 

611 

 

Petrowsky: (note 22)

 

 

 

 

 

 

 

 

 

 

 

 

Continuing employment costs

 

208 

 

 

 -

 

 

420 

 

 

 -

 

Other acquisition-related costs

 

 

 

 -

 

 

 

 

 -

 

Kramer: (note 22)

 

 

 

 

 

 

 

 

 

 

 

 

Continuing employment costs

 

114 

 

 

 -

 

 

228 

 

 

 -

 

Other acquisition-related costs

 

 

 

 -

 

 

79 

 

 

 -

 



$

22,948 

 

$

603 

 

$

31,575 

 

$

1,800 

 



Depreciation and amortization expenses