UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 
 
Form 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarter ended June 30, 2015

 
Commission File Number: 001-13425
  
Ritchie Bros. Auctioneers Incorporated
 
9500 Glenlyon Parkway
Burnaby, BC, Canada
V5J 0C6
(778) 331 5500
(Address of principal executive offices)

 
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F
 
Form 20-F	¨		Form 40-F	x	
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): ¨
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ¨

 

 	

 	

DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K
 
See the Exhibit Index hereto.

 	

 	
   
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 	Ritchie Bros. Auctioneers Incorporated	
 	(Registrant)	
 	 	
Date: August 6, 2015	 	
 	By:	/s/ Darren Watt	
 	 	Darren Watt,	
 	 	Corporate Secretary	

 	

 	

EXHIBIT INDEX
 
Number	 	Description	
 	 	 	
99.1	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the quarter ended June 30, 2015
 	
99.2	 	Condensed Consolidated Interim Financial Statements for the quarter ended June 30, 2015	

 	

 
EXHIBIT 99.1
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations of
   
Ritchie Bros. Auctioneers Incorporated
   
for the quarter ended June 30, 2015

 	 	

 	

Forward-Looking Statements
 
This Management’s Discussion and Analysis of Financial Condition and Results of Operations of Ritchie Bros. Auctioneers Incorporated (“Ritchie Bros.”, the “Company”, “we” or “us”) contains forward-looking statements that involve risks and uncertainties. These statements are based on current expectations and estimates about our business and markets, and include, among others, statements relating to:
 
	·	our future performance, objectives and targets;	
	·	our ability to drive shareholder value through management structure and reorganization changes, including our ability to reinvigorate revenue and earnings growth, optimize capital allocation and structure, and improve Return on Net Assets (“RONA”) (as defined below);	
	·	our internet initiatives and the level of participation in our auctions by internet bidders, and the success of EquipmentOne and our other online marketplaces;	
	·	our ability to grow our core auction business, including our ability to increase our market share among traditional customer groups, including those in the used equipment market, and do more business with new customer groups in new markets;	
	·	the impact of our new initiatives and services on us and our customers;	
	·	our ability to add new business and information solutions, including, among others, our ability to maximize and integrate technology to enhance our auction services and support additional value-added services;	
	·	the effect of Original Equipment Manufacturer (“OEM”) production on our Gross Auction Proceeds (“GAP”) (as defined below);	
	·	the supply trend of equipment in the market and the anticipated price environment for late model equipment, as well as the resulting effect on our business and GAP;	
	·	fluctuations in our quarterly revenues and operating performance resulting from the seasonality of our business;	
	·	our ability to grow our sales force, minimize turnover, and improve Sales Force Productivity (as defined below);	
	·	our ability to implement new performance measurement metrics to gauge our effectiveness and progress;	
	·	the relative percentage of GAP represented by straight commission or underwritten (guarantee and inventory) contracts, and its impact on revenues and profitability;	
	·	our Revenue Rates (as defined below), the sustainability of those rates, the impact of our commission rate and fee changes, and the seasonality of GAP and revenues;	
	·	our future capital expenditures and returns on those expenditures;	
	·	the proportion of our revenues and Operating Expenses (as defined below) denominated in currencies other than the United States (“U.S.”) dollar or the effect of any currency exchange and interest rate fluctuations on our results of operations;	
	·	financing available to us and the sufficiency of our working capital to meet our financial needs; and	
	·	our ability to satisfy our present operating requirements and fund future growth through existing working capital and credit facilities.	

Ritchie Bros.	1 	

 	
  
Forward-looking statements are typically identified by such words as “anticipate”, “believe”, “could”, “continue”, “estimate”, “expect”, “intend”, “may”, “ongoing”, “plan”, “potential”, “predict”, “will”, “should”, “would”, “could”, “likely”, “generally”, “future”, “period to period”, “long-term”, or the negative of these terms, and similar expressions intended to identify forward-looking statements. Our forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.
 
While we have not described all potential risks related to our business and owning our common shares, the important factors listed under “Risk Factors” below are among those that we consider may affect our performance materially or could cause our actual financial and operational results to differ significantly from our expectations. Except as required by applicable securities law and regulations of relevant securities exchanges, we do not intend to update publicly any forward-looking statements, even if our expectations have been affected by new information, future events or other developments. You should consider our forward-looking statements in light of the factors listed or referenced under “Risk Factors” herein and other relevant factors.
 
About Us
 
Ritchie Bros. (NYSE & TSX: RBA) is the world leader for the exchange of used equipment. Our expertise, global reach, market insight and trusted brand provide us with a unique and leading position in the used equipment market. We primarily sell equipment for our customers through unreserved auctions held on a worldwide basis. In addition, during 2013 we launched EquipmentOne, an online used equipment marketplace, to reach a broader customer base. These two complementary exchange solutions provide different value propositions to equipment owners and allow us to meet the needs and preferences of a wide spectrum of equipment sellers.
 
Ritchie Bros. focuses on the sale of industrial machinery. Through our unreserved auctions and online marketplaces, we sell a broad range of used and unused industrial assets, including equipment and other assets used in the construction, agricultural, transportation, energy, mining, forestry, material handling and marine industries. The majority of the assets sold through our sales channels represent construction machinery.
 
We operate from 44 permanent and regional auction sites in 19 countries worldwide. Our world headquarters are located in Vancouver, Canada.
 
Overview
 
The following discussion summarizes significant factors affecting our consolidated operating results and financial condition for the three- and six-month periods ended June 30, 2015 and 2014.
 
This discussion should be read in conjunction with our unaudited condensed consolidated interim financial statements and notes thereto for the three- and six-month periods ended June 30, 2015 and 2014, and with the disclosures regarding forward-looking statements and risk factors included within this discussion. Additional information relating to us, including our audited annual consolidated financial statements and notes thereto, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2014, as well as our most recent Annual Information Form, is available on our website at www.rbauction.com , on SEDAR at www.sedar.com or on EDGAR at www.sec.gov . None of the information on SEDAR, EDGAR or our website is incorporated by reference into this document by this or any other reference. The date of this discussion is as of August 5, 2015.

Ritchie Bros.	2 	

 	
  
We prepare our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Except for GAP, the amounts discussed below are based on our unaudited condensed consolidated interim financial statements and are presented in U.S. dollars. Unless indicated otherwise, all tabular dollar amounts, including related footnotes, presented below are expressed in thousands of dollars, except share and per share amounts.
 
In the following discussion and tables, net earnings, Adjusted Net Earnings (as defined below), diluted earnings per share (“EPS”) and Diluted Adjusted EPS (as defined below) have been presented excluding non-controlling interest in Ritchie Bros. Financial Services, and represent only those amounts attributable to equity holders of the parent.
 
Consolidated Highlights
 
	·	Record second quarter and first half net earnings; 20% higher than the second quarter of 2014 and 32% higher than the first half of 2014	
	·	Second quarter 2015 diluted EPS of $0.43 per share; 21% higher than the second quarter of 2014	
	·	Record second quarter and first half revenues; 10% higher than the second quarter of 2014 and 13% higher than the first half of 2014	
	·	Second quarter 2015 Revenue Rate (as defined below) of 12.32%, achieved through strong performance of our underwritten business	
	·	91% increase in Operating Free Cash Flow (as defined below) for the 12 months ended June 30, 2015 compared to the 12 months ended June 30, 2014	
	·	Increasing quarterly cash dividend by 14% to $0.16 per share	
 
Management uses a performance scorecard, presented below, to align the Company’s operations with strategic priorities. We concentrate on a limited number of metrics to focus the organization and facilitate quarterly performance discussions. Detailed discussions of the Company’s performance are presented in “Second Quarter Update” and “Year-to-Date Performance”. In the following tables, the abbreviation “bps” stands for basis points.
 
Income statement scorecard
 
(in U.S. $ millions, except EPS)	 	Three months ended June 30,	 	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Better/
(Worse)	 	 	2015	 	 	2014	 	 	Better/
(Worse)	 	
GAP (1)	 	$	1,262.2	 	 	$	1,229.2	 	 	 	3	%	 	$	2,217.7	 	 	$	2,084.6	 	 	 	6	%	
Revenues	 	$	155.5	 	 	$	141.8	 	 	 	10	%	 	$	271.1	 	 	$	240.4	 	 	 	13	%	
Revenue Rate (2)	 	 	12.32	%	 	 	11.54	%	 	 	78 bps	 	 	 	12.22	%	 	 	11.53	%	 	 	69 bps	 	
Operating Income (3)	 	$	62.4	 	 	$	51.7	 	 	 	21	%	 	$	92.1	 	 	$	69.4	 	 	 	33	%	
Operating Income Margin (3)	 	 	40.2	%	 	 	36.5	%	 	 	370 bps	 	 	 	34.0	%	 	 	28.9	%	 	 	509 bps	 	
Diluted EPS (4)	 	$	0.43	 	 	$	0.36	 	 	 	21	%	 	$	0.65	 	 	$	0.49	 	 	 	33	%	

Ritchie Bros.	3 	

 	
  
Balance sheet scorecard
 
(in U.S. $ millions)	 	12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Better/
(Worse)	 	
Operating Free Cash Flow (5)	 	$	220.3	 	 	$	115.3	 	 	 	91	%	
Working Capital Intensity (6)	 	 	-23.9	%	 	 	-15.9	%	 	 	806 bps	 	
CAPEX Intensity (7)	 	 	3.2	%	 	 	6.9	%	 	 	369 bps	 	
RONA (4),(8)	 	 	24.9	%	 	 	17.5	%	 	 	738 bps	 	
RONA (4),(8) excluding term loan reclassification	 	 	22.5	%	 	 	17.5	%	 	 	495 bps	 	
Debt/Adjusted EBITDA (9)	 	 	0.6	x	 	 	0.9	x	 	 	0.3	x	
 
	(1)	GAP is a non-GAAP measure that represents the total proceeds from all items sold at our auctions and the Gross Transaction Value (“GTV”) sold through our online marketplaces. GTV is a non-GAAP measure that represents total proceeds from all items sold at our online marketplaces and is a component of our GAP results. In addition to the total value of the items sold in online marketplace transactions, GTV includes a buyers’ premium component applicable only to our online marketplace transactions. We believe that the most directly comparable measure to GAP and GTV is revenues as presented in our unaudited condensed consolidated interim financial statements. GAP and GTV are not measures of our financial performance, liquidity or revenue, and are not presented in our consolidated income statements. We believe that comparing GAP and GTV for different financial periods provides useful information about the growth or decline of our net earnings for the relevant financial period.	
 
	(2)	Revenue Rate is a non-GAAP measure that is reconciled to our unaudited condensed consolidated interim financial statements by dividing revenues by GAP. We believe that comparing Revenue Rate for different financial periods provides useful information about the growth or decline of our net earnings for the relevant financial period.	
 
	(3)	Operating Income and Operating Income Margin are non-GAAP measures, which are reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing Operating Income for different financial periods provides useful information about the growth or decline of net earnings for the relevant financial period, and eliminates the financial impact of items we do not consider to be part of normal operating results. We believe that comparing Operating Income Margin for different financial periods is the best indicator of how efficiently we translate revenue into pre-tax profit. We calculate Operating Income as earnings from operations excluding the pre-tax effects of significant non-recurring items such as severance, management reorganization and certain other items, which we refer to as ‘adjusting items’. We calculate Operating Income Margin as Operating Income divided by revenues.	
 
	(4)	Figures presented only include the results attributable to our 51% interest in Ritchie Bros. Financial Services to conform with the presentation adopted in our unaudited condensed consolidated interim financial statements.	
 
	(5)	Operating Free Cash Flow is a non-GAAP measure, which is reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. Due to the seasonality of our business, we believe that comparing Operating Free Cash Flow on a 12-month rolling basis provides an effective measure of the cash generated by our business and provides useful information regarding cash flows remaining for discretionary return to shareholders, mergers and acquisitions, or debt reduction. We calculate Operating Free Cash Flow as cash generated by operating activities, less cash flows used in property, plant and equipment and intangible asset additions, plus proceeds on disposition of property, plant and equipment.	
 
	(6)	Working Capital Intensity and Quick Operating Working Capital are non-GAAP measures, which are reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing Working Capital Intensity on a 12-month rolling basis is the best indicator of how efficiently we convert revenue into cash. The lower the percentage, the faster revenues are converted into cash. We calculate Working Capital Intensity as Quick Operating Working Capital divided by revenues. Quick Operating Working Capital is calculated as trade and other receivables, plus inventory and advances against auction contracts, less auction proceeds payable and trade payables.	
 
	(7)	CAPEX Intensity and Net Capital Spending are non-GAAP measures, which are reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing CAPEX Intensity on a 12-month rolling basis provides useful information as to the amount of capital expenditure that we require to generate revenues. We calculate CAPEX Intensity as Net Capital Spending divided by revenues. Net Capital Spending is calculated as cash flows used in property, plant and equipment and intangible asset additions, net of proceeds on disposition of property, plant and equipment.	
 
	(8)	RONA, Net Operating Profit After Tax and Adjusted Net Assets are non-GAAP measures, which are reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing RONA on a 12-month rolling basis is the best indicator of the after-tax return generated by net assets employed in the business. We calculate RONA as Net Operating Profit After Tax divided by Adjusted Net Assets. Net Operating Profit After Tax is calculated by adding after-tax net finance costs back to net earnings attributable to equity holders of the parent as reported in the consolidated income statements. Adjusted Net Assets are calculated as total assets less cash and cash equivalents and current liabilities as reported on the consolidated balance sheets.	

Ritchie Bros.	4 	

 	
  
	(9)	Debt/Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA and Adjusted Earnings from Operations are non-GAAP measures, which are reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing Debt/Adjusted EBIDTA on a 12-month rolling basis is a strong indicator of our leverage. Debt/Adjusted EBITDA presents debt as a multiple of Adjusted EBITDA and is calculated by dividing debt by Adjusted EBITDA. Debt consists of total current and non-current borrowings. Adjusted EBITDA is calculated by adding back depreciation and amortization expenses to Adjusted Earnings from Operations. Adjusted Earnings from Operations represent earnings from operations excluding the pre-tax effects of adjusting items.	
 
Income statement scorecard analysis 
For the three months ended June 30, 2015
 
Gross Auction Proceeds were $1.3 billion for the second quarter of 2015, a quarterly record and a 3% increase compared to the second quarter of 2014. Geographically, GAP grew in the United States and Mexico, and was partially offset by reductions in Canada, Europe and the rest of the world. GAP for the second quarter of 2015 would have been $98.7 million higher, or an additional 7.8% increase, if foreign exchange rates had remained consistent with those in the same period in 2014. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
 
Revenue grew 10% during the three months ended June 30, 2015, to a second quarter record of $155.5 million, compared to $141.8 million for the same period in 2014. The increase was a result of increased GAP combined with a strong Revenue Rate in the second quarter of 2015 compared to the second quarter of 2014. Geographically, revenues grew 19% in the United States, 6% in Canada and 13% in the rest of the world. Partially offsetting this were declines in revenues of 14% in Europe. Revenues for the second quarter of 2015 would have been $12.7 million higher, or an additional 8.2% increase, if foreign exchange rates had remained consistent with those in the same period in 2014.
 
The Revenue Rate for the second quarter of 2015 was 12.32% compared to 11.54% in the second quarter of 2014. The increase in the Revenue Rate is primarily due to the performance of our underwritten business, consistent with our strategic focus on this business. The volume of underwritten business decreased slightly to 29% during the second quarter of 2015 compared to 32% for the same period in 2014.
 
Operating Income grew 21% during the three months ended June 30, 2015 to $62.4 million, compared to $51.7 million for the same period in 2014. The increase is due to our revenue growth of 10%, compared to our selling, general and administrative (“SG&A”) expenses growth of 5% in the second quarter of 2015 compared to the second quarter of 2014. This demonstrates the leverage inherent in our business model. Operating Income for the second quarter of 2015 would have been $4.9 million higher, or an additional 7.9% increase, if foreign exchange rates had remained consistent with those in the same period of 2014.
 
Operating Income Margin was 40.2% for the three months ended June 30, 2015, 370 basis points higher than 36.5% for the same period in 2014, primarily due to revenues increasing at a rate higher than SG&A expenses, as noted above.
 
Diluted EPS for the three months ended June 30, 2015 were $0.43 per diluted share, a 21% increase compared to the same period in 2014. The increase was driven by increased revenues, partially offset by an increase in SG&A expenses during the second quarter of 2015 compared to the second quarter of 2014.

Ritchie Bros.	5 	

 	
  
Income statement scorecard analysis  
For the six months ended June 30, 2015
 
Gross Auction Proceeds were $2.2 billion for the first half of 2015, a half year record and a 6% increase compared to the first half of 2014. Geographically, GAP grew in the United States, Canada and Mexico, and was partially offset by reductions in Europe and the rest of the world. GAP for the first half of 2015 would have been $151.6 million higher, or an additional 6.8% increase, if foreign exchange rates had remained consistent with those in the same period in 2014. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
 
Revenue grew 13% during the six months ended June 30, 2015 to a half year record of $271.1 million, compared to $240.4 million for the same period in 2014. The increase was primarily a result of increased GAP combined with a strong Revenue Rate in the first half of 2015 compared to the same period in 2014. Geographically, revenues grew 23% in the United States, 9% in Canada and 5% in the rest of the world. Partially offsetting this were declines in revenues of 12% in Europe. Revenues for the first half of 2015 would have been $19.5 million higher, or an additional 7.2% increase, if foreign exchange rates had remained consistent with those in the same period in 2014.
 
The Revenue Rate for the first half of 2015 was 12.22% compared to 11.53% in the first half of 2014. The increase in the Revenue Rate is primarily due to the performance of our underwritten business, consistent with our strategic focus on this business. The volume of underwritten business increased slightly to 30% during the first half of 2015 compared to 29% for the same period in 2014.
 
Operating Income grew 33% during the six months ended June 30, 2015 to $92.1 million, compared to $69.4 million for the same period in 2014. The increase is due to our revenue growth of 13%, compared to our SG&A expenses growth of 5% in the first half of 2015 compared to the first half of 2014. Operating Income for the first half of 2015 would have been $5.6 million higher, or an additional 6.0% increase, if foreign exchange rates had remained consistent with those in the same period in 2014.
 
Operating Income Margin was 34.0% for the six months ended June 30, 2015, 509 basis points higher than 28.9% for the same period in 2014, primarily due to revenues increasing at a rate higher than SG&A expenses, as noted above.
 
Diluted EPS for the six months ended June 30, 2015 were $0.65 per diluted share, a 33% increase compared to the same period in 2014. The increase was driven by increased revenues and other income items, partially offset by an increase in SG&A expenses and a higher tax rate during the first half of 2015 compared to the same period in 2014.
 
Balance sheet scorecard analysis  
As at and for the 12 months ended June 30, 2015
 
Operating Free Cash Flow increased 91% to $220.3 million during the 12 months ended June 30, 2015 compared to $115.3 million during the 12 months ended June 30, 2014. This increase is the result of greater cash generated by operating activities and less capital spending during the 12 months ended June 30, 2015 compared to the same period ended in 2014.
We believe that Operating Free Cash Flow is a strong indicator of the cash flows remaining for discretionary return to shareholders, acquisitions or debt reduction.

Ritchie Bros.	6 	

 	
 
Working Capital Intensity , which we believe is the best indicator of how efficiently we convert revenue into cash, was -23.9% for the 12 months ended June 30, 2015, an improvement of 806 basis points from -15.9% for the 12 months ended June 30, 2014. This improvement in Working Capital Intensity is the result of increased revenues and decreased Quick Operating Working Capital during the 12 months ended and as at June 30, 2015 compared to the same period ended in 2014. The decrease in Quick Operating Working Capital is primarily the result of decreases in inventory, advances against auction contracts, and trade and other accounts receivable balances. Working Capital Intensity will fluctuate most significantly as a result of the timing and size of auctions just prior to each period end. The fact that our Working Capital Intensity is negative highlights the minimal amount of working capital required to run our business.
 
CAPEX Intensity highlights the amount of capital expenditure that we require to generate revenues. CAPEX Intensity was 3.2% for the 12 months ended June 30, 2015, a decrease of 369 basis points from 6.9% for the 12 months ended June 30, 2014. This 53% decrease is due primarily to a decrease in Net Capital Spending of $16.5 million as a result of disciplined capital spending and the timing of these expenditures.  Additionally, we realized a corresponding increase in revenues of $34.4 million, or 7%, during the 12 months ended June 30, 2015 compared to the same period ended in 2014.
 
RONA , which we believe is the best indicator of the after-tax return generated by net assets employed in the business, was 24.9% for the 12 months ended June 30, 2015, an increase of 738 basis points compared to 17.5% for the 12 months ended June 30, 2014. This increase was the result of an increase in Net Operating Profit After Tax combined with a decrease in our Adjusted Net Assets. The decrease in Adjusted Net Assets was driven by an increase in cash and cash equivalents and current liabilities, as well as the foreign exchange effects on non-U.S. dollar denominated assets. The increase in current liabilities is primarily due to the reclassification from non-current to current borrowings of a Canadian dollar 60 million term loan in the second quarter of 2015. Management intends to refinance this borrowing when it falls due in May 2016.
 
The reclassification of this borrowing had a positive effect on RONA. Excluding the effects of the reclassification, RONA for the 12 months ended June 30, 2015 would have been 22.5%, an increase of 495 basis points compared to RONA for the same period ended June 30, 2014.
 
Debt/Adjusted 1 EBITDA , which is an indicator of our leverage, decreased to 0.6x for the 12 months ended June 30, 2015 compared to 0.9x for the 12 months ended June 30, 2014. We achieved a 12% increase in Adjusted EBITDA, which is consistent with our increase in earnings from operations, and had a lower level of borrowings as at June 30, 2015 compared to June 30, 2014.

 

	1	There were no adjusting items in the first half of 2015 or the first half of 2014.	

Ritchie Bros.	7 	

 	
  
Strategy
 
Over the past several years our strategy has continued to evolve. During 2014 we updated our strategy to outline the following objectives, strategic pillars and key enablers:

 
There are three main drivers to our strategy and roadmap to generate shareholder value:
 
GROW Revenue and Earnings
We are committed to pursuing growth initiatives that will further enhance our sector reach, drive geographic depth, meet a broader set of customer needs, and add scale to our operations. EquipmentOne is a key part of a full-service offering to provide our customers with a menu of options that cater to their needs at different points of their asset disposition journey. This “ Better Together ” strategy of offering EquipmentOne alongside our core auction services is a key step in developing a truly multi-channel offering to our market. In addition, we will focus on accelerating our Strategic Accounts growth and improving the overall performance and use of our underwritten contracts.
 
GROW – second quarter update
During the first half of 2015 compared to the first half of 2014 we grew revenues in the United States by 23%, consistent with our focus on driving geographic depth in our existing markets. We also focused on improving our underwritten business, which resulted in an increase in our Revenue Rate to 12.22% in the first half of 2015 compared to 11.53% in the first half of 2014. In addition, as a part of our “Better Together” strategy, we launched a series of pilot projects aimed at integrating and growing our EquipmentOne offering.
 
DRIVE Efficiencies and Effectiveness
We plan to take advantage of opportunities to improve the overall effectiveness of our organization by enhancing sales productivity, modernizing and integrating our legacy IT systems and optimizing business processes. We are also implementing formal performance measurement metrics (such as a Performance Scorecard ) to gauge our effectiveness and progress, and will better align our executive compensation plans with our new strategy and key targets. We are also better aligning our organizational structure to help us more effectively meet the needs of our customers in each of our regions. We believe this will enhance the agility of our organization, and our decision making processes, to better serve our customers.

Ritchie Bros.	8 	

 	
  
DRIVE – second quarter update
At the end of March 2015, we completed the rollout phase of our Sales Force Automation tool, which gives greater visibility to all sales opportunities and our overall organization’s pipeline. Also, during the first half of 2015 we revised short-term and long-term incentive plans for all management levels based on formal performance measurement metrics. We believe that our long-term incentive plan metrics, which are based on RONA, net earnings growth and the performance of our common shares, better align employee incentives with our objective of increasing shareholder value. By the end of the second quarter of 2015, we also completed the selection of our President, U.S. and Latin America, Terry Dolan, and our Chief Financial Officer (“CFO”), Sharon Driscoll. On May 29, 2015, we announced that Rob McLeod was appointed Chief Business Development Officer to drive merger and acquisition initiatives.
 
OPTIMIZE our Balance Sheet
Our business model provides us with the unique ability to generate strong cash flows. Cash flow represents our ability to convert revenue into cash, and provides a meaningful indication of the strength inherent in our business. We will focus not only on profit growth but also cash flow growth. There will also be an increased emphasis on site performance — specifically on the return we are receiving for the investments we have made in each region. The majority of our sites meet these return expectations and some are significantly exceeding them.
 
OPTIMIZE – second quarter update
In March 2015, we repurchased 1.9 million of our common shares at a total cost of $47.5 million in order to address option dilution consistent with our capital allocation priorities. In addition, during the first half of 2015 we paid dividends of $31.4 million on our common shares. Additionally, we announced a dividend increase of 14%. In total we returned $78.9 million to our shareholders as we executed on our capital allocation strategy during the six months ended June 30, 2015. We also managed our Net Capital Spending such that it remains well below our target of 10% of our revenues on a rolling 12-month basis.
 
Used Equipment Market Update
During the second quarter of 2015 the used equipment market was stable. However, we did see a slight reduction in pricing from the first quarter which is typical pricing activity for the second quarter. The United States market continued to be the strongest market for us during the first half of 2015, responding most favorably to the softening of the oil and gas industries while other markets, such as Canada and Europe, remained stable but varied regionally.
 
In the second quarter of 2015 we saw a continued improvement in the overall age of equipment coming to market, a trend consistent with prior quarters and one that we believe is resulting from the increase in OEM production that began in 2010 and is generating more transactions in the current used equipment marketplace, as well as creating larger pools of used equipment for future transactions. Overall, our operations in the United States generated more GAP in the second quarter of 2015 compared to the second quarter of 2014, although that performance varied regionally.

Ritchie Bros.	9 	

 	
 
Second Quarter Update
We achieved record second quarter net earnings of $46.4 million, or $0.43 per diluted share for the three months ended June 30, 2015. This represents a 20% increase over net earnings of $38.6 million, or $0.36 per diluted share, generated during the same period in 2014.
 
Financial overview	 	Three months ended June 30,	 	
(in U.S.$000's, except EPS)	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Revenues	 	$	155,477	 	 	$	141,835	 	 	$	13,642	 	 	 	10	%	
Direct expense	 	 	17,027	 	 	 	17,616	 	 	 	(589	)	 	 	(3	)%	
SG&A expenses	 	 	76,001	 	 	 	72,492	 	 	 	3,509	 	 	 	5	%	
Excluding depreciation and amortization	 	 	65,176	 	 	 	61,513	 	 	 	3,663	 	 	 	6	%	
Earnings from operations	 	 	62,449	 	 	 	51,727	 	 	 	10,722	 	 	 	21	%	
Other income	 	 	951	 	 	 	734	 	 	 	217	 	 	 	30	%	
Finance costs	 	 	634	 	 	 	728	 	 	 	(94	)	 	 	(13	)%	
Income tax expense	 	 	15,556	 	 	 	12,598	 	 	 	2,958	 	 	 	23	%	
Net earnings (4)	 	 	46,447	 	 	 	38,607	 	 	 	7,840	 	 	 	20	%	
Diluted EPS (4)	 	$	0.43	 	 	$	0.36	 	 	$	0.08	 	 	 	21	%	
Effective tax rate	 	 	24.8	%	 	 	24.4	%	 	 	43 bps	 	 	 	2	%	
GAP (1)	 	$	1,262,168	 	 	$	1,229,204	 	 	$	32,964	 	 	 	3	%	
Revenue Rate (2)	 	 	12.32	%	 	 	11.54	%	 	 	78 bps	 	 	 	7	%	
Direct Expense Rate   (10)	 	 	1.35	%	 	 	1.43	%	 	 	-8 bps	 	 	 	(6	)%	
EBITDA Margin (11)	 	 	47.1	%	 	 	44.2	%	 	 	292 bps	 	 	 	7	%	
 
For notes (1), (2) and (4), see corresponding notes in “Consolidated Highlights”.
 
	(10)  	Direct Expense Rate is a non-GAAP measure that is reconciled to our unaudited condensed consolidated interim financial statements by dividing direct expenses by GAP. We believe that comparing Direct Expense Rate for different financial periods provides useful information about the growth or decline of our net earnings for the relevant financial period.	
 
	(11)  	EBITDA Margin is a non-GAAP measure, which is reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing EBITDA Margin for different financial periods provides useful information about the growth or decline of our net earnings for the relevant financial period. EBITDA Margin is calculated as EBITDA divided by revenues.	
 
The summary results above and the following discussion include the results of operations from EquipmentOne.
 
EquipmentOne update
Included in GAP for the three months ended June 30, 2015 is the GTV from our online marketplaces of $31.7 million, a 7% increase from the comparative GTV for the three months ended June 30, 2014 of $29.6 million.
 
The following table reflects the results of our operations from EquipmentOne:
 
(in U.S. $ millions)	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Revenues	 	$	3.8	 	 	$	3.3	 	 	$	0.5	 	 	 	15	%	
SG&A expenses excluding depreciation and amortization	 	 	3.4	 	 	 	3.9	 	 	 	(0.5	)	 	 	(13	)%	
EBITDA (1)	 	$	0.4	 	 	$	(0.6	)	 	$	1.0	 	 	 	167	%	

Ritchie Bros.	10 	

 	
 
	(1)	EBITDA is a non-GAAP measure, which is reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing EBIDTA for different financial periods provides useful information about the growth or decline of our net earnings for the relevant financial period.	
 
Through focused effort on increasing revenues and managing SG&A expenses, EquipmentOne EBITDA increased slightly in the second quarter of 2015 compared to the second quarter of 2014.
 
Gross Auction Proceeds
GAP was $1.3 billion for the second quarter of 2015, a quarterly record and a 3% increase compared to the second quarter of 2014. GAP for the second quarter of 2015 would have been higher by $98.7 million, or 7.8%, if foreign exchange rates had remained consistent with those in 2014. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
 
The increase in GAP is primarily due to the increase in the number of lots during the second quarter of 2015 as compared to the second quarter of 2014. The total number of lots at industrial and agricultural auctions grew 10%, increasing to 112,600 in the second quarter of 2015 from 102,100 in the second quarter of 2014. However, core auction GAP decreased 7% on a per-lot basis to $10,900 for the three months ended June 30, 2015, from $11,700 for the same period in 2014.
 
GAP, on a U.S. dollar basis, grew in the United States and Mexico in the second quarter of 2015 compared to the second quarter of 2014, partially offset by reductions in GAP in Canada, Europe and the rest of the world.
 
During the second quarter of 2015, we continued to actively pursue the strategic use of underwritten contracts. During the second quarter of 2015 our underwritten business represented 29% of our GAP compared to 32% during the second quarter of 2014. Straight commission contracts continue to account for the majority of our GAP.
 
Revenues and Revenue Rate
 
(in U.S. $000's)	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Change	 	 	% Change	 	
United States	 	$	64,356	 	 	$	54,199	 	 	$	10,157	 	 	 	19	%	
Canada	 	 	63,911	 	 	 	60,363	 	 	 	3,548	 	 	 	6	%	
Europe	 	 	11,761	 	 	 	13,621	 	 	 	(1,860	)	 	 	(14	)%	
Other	 	 	15,449	 	 	 	13,652	 	 	 	1,797	 	 	 	13	%	
Revenues (1)	 	$	155,477	 	 	$	141,835	 	 	$	13,642	 	 	 	10	%	
 
	(1)	Geographic information is determined with reference to the location in which the revenues are earned.	
 
Revenues consist primarily of commission income earned from equipment sellers at our auctions, including net profits on sales of inventory. Revenues also include fee income earned from equipment buyers at our auctions, as well as financing fees earned through our provision of value-added services to customers at our auctions. We also earn commissions and fees from our online marketplace sales.

Ritchie Bros.	11 	

 	
  
Revenues for the three months ended June 30, 2015 increased 10% to $155.5 million compared to $141.8 million for the three months ended June 30, 2014, primarily due to an increase in GAP combined with an improved commission rate. Revenue in the second quarter of 2015 would have been $12.7 million, or 8.2%, higher if foreign exchange rates had remained consistent with those in 2014.
 
Our Revenue Rate for the second quarter of 2015 increased to 12.32% from 11.54% for the second quarter of 2014. This increase is primarily due to the improved performance of our underwritten business in the second quarter of 2015 compared to the second quarter of 2014.
 
During the second quarter of 2015, our overall average commission rate was 9.87% compared to 9.17% in the second quarter of 2014. This increase is primarily due to the performance of our underwritten business described above.
 
Our commission rate and overall Revenue Rate is presented in the graph below:

 
	(1)	The revised administrative fee took effect on July 1, 2011.	
 
Our fee income earned in the three months ended June 30, 2015 was 2.45% of GAP, an increase compared to 2.37% in the same period of 2014. This increase was primarily due to the mix of equipment sold at our auctions and an increase in financing fees resulting from the improved performance of our value-added services.
 
During the three months ended June 30, 2015, revenue earned in the United States increased as a result of an increase in GAP and Revenue Rate in that region.

Ritchie Bros.	12 	

 	
  
Our geographic revenue distribution is presented below:
 
Revenue distribution	 	United States	 	 	Canada	 	 	Europe	 	 	Other	 	
Three months ended June 30, 2015	 	 	41	%	 	 	41	%	 	 	8	%	 	 	10	%	
Three months ended June 30, 2014	 	 	38	%	 	 	43	%	 	 	10	%	 	 	9	%	
 
Direct Expense Rate
Our Direct Expense Rate for the second quarter of 2015 of 1.35% was lower than the 1.43% for the second quarter of 2014 primarily due to a decrease in the number of offsite and agricultural auctions, which typically have higher Direct Expense Rates, as well as an increase in GAP at our auctions.
 
During the second quarter of 2015, 83% of our GAP was attributable to auctions held at our permanent and regional auction sites, including those sites located in frontier markets, compared to 79% in the second quarter of 2014.
 
Selling, general & administrative expenses
Our SG&A expenses increased to $76.0 million in the second quarter of 2015 compared to $72.5 million in the second quarter of 2014, an increase of $3.5 million or 5%. Foreign exchange rates had a positive impact on SG&A expenses for the three months ended June 30, 2015. If foreign exchange rates had remained consistent with those in the second quarter of 2014, SG&A expenses would have been $82.4 million for the second quarter of 2015, an increase of $9.9 million or 14% compared to the second quarter of 2014. This positive impact is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
 
SG&A expenses by nature are presented below:
 
(in U.S. $000's)	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Employee compensation	 	$	44,046	 	 	$	39,894	 	 	$	4,152	 	 	 	10	%	
Buildings and facilities	 	 	10,287	 	 	 	10,370	 	 	 	(83	)	 	 	(1	)%	
Travel, advertising and promotion	 	 	4,742	 	 	 	5,259	 	 	 	(517	)	 	 	(10	)%	
Other SG&A expenses	 	 	6,101	 	 	 	5,990	 	 	 	111	 	 	 	2	%	
 	 	$	65,176	 	 	$	61,513	 	 	$	3,663	 	 	 	6	%	
Depreciation and amortization	 	 	10,825	 	 	 	10,979	 	 	 	(154	)	 	 	(1	)%	
SG&A expenses	 	$	76,001	 	 	$	72,492	 	 	$	3,509	 	 	 	5	%	
 
Employee compensation expenses for the three months ended June 30, 2015 were positively impacted by foreign exchange rates by $3.8 million, offset by the following changes presented gross of foreign exchange impacts: $2.6 million higher stock option compensation and share unit expenses, $2.2 million higher incentive compensation, 4% net growth of our headcount, and annual merit increases. The net growth in our headcount included 3% growth in the number of our Revenue Producers 2 to 353 as at June 30, 2015 from 342 as at June 30, 2014.

 

	2	Revenue Producers is a term used to describe our revenue producing sales personnel. This definition is comprised of Regional Sales Managers and Territory Managers.	

Ritchie Bros.	13 	

 	
  
The increase in share-based payments for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 is primarily due to an increase in the fair value of our share units related to the recent strong performance of our stock price, increased grants related to certain new executives, and accelerated vesting of stock options and share units related to recent executive departures. The increase in incentive compensation over the same period is a direct result of the improved performance of the business and achievement of key performance metric targets.
 
Effective tax rate
Our effective tax rate is a function of the relationship between total tax expense and the amount of earnings before income taxes for the year. Our effective tax rate differs from period to period as a result of changes in the geographic source of our earnings, the treatment of adjustments for changes in tax rates and other tax legislation, variations in the estimate of tax reserves, and differences between the provision and the actual amounts recognized in tax returns.
 
For the three months ended June 30, 2015, income tax expense was $15.6 million, compared to income tax expense of $12.6 million for the three months ended June 30, 2014. Our effective tax rate of 24.8% for the second quarter of 2015 was consistent with the rate of 24.4% for the second quarter of 2014.
 
Effect of exchange rate movement on income statement components
We conduct operations around the world in a number of different currencies, but our presentation currency is the U.S. dollar.
 
Translational impact of foreign exchange rates
The main currencies other than the U.S. dollar in which our revenues and Operating Expenses 3 are denominated are the Canadian dollar and the Euro.
 
The translational impact of foreign exchange rates on our results is presented below:
 
(in U.S. $000's)	 	Three months ended June 30,	 	
 	 	2015, as	 	 	2015, using	 	 	 	 	 	%	 	
 	 	reported	 	 	2014 rates	 	 	Difference	 	 	Difference	 	
GAP	 	$	1,262,168	 	 	$	1,360,914	 	 	$	98,746	 	 	 	7.8	%	
Revenues	 	$	155,477	 	 	$	168,185	 	 	$	12,708	 	 	 	8.2	%	
Direct expense	 	 	17,027	 	 	 	18,420	 	 	 	1,393	 	 	 	8.2	%	
SG&A expenses	 	 	76,001	 	 	 	82,376	 	 	 	6,375	 	 	 	8.4	%	
Excluding depreciation and amortization	 	 	65,176	 	 	 	70,651	 	 	 	5,475	 	 	 	8.4	%	
Depreciation and amortization	 	 	10,825	 	 	 	11,725	 	 	 	900	 	 	 	8.3	%	
Earnings from operations	 	$	62,449	 	 	$	67,389	 	 	$	4,940	 	 	 	7.9	%	

 

	3	Operating Expenses is a non-GAAP measure that is reconciled to our unaudited condensed consolidated interim financial statements by adding direct expenses and SG&A excluding depreciation and amortization. We believe that comparing Operating Expenses for different financial periods provides useful information about the growth or decline of net earnings for the relevant financial period.	

Ritchie Bros.	14 	

 	
  
U.S. dollar exchange rate comparison
 
Value of one U.S. dollar	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Period-end exchange rate	 	 	 	 	 	 	 	 	 	 	 	 	
Canadian dollar	 	$	1.2495	 	 	$	1.0670	 	 	 	17	%	
Euro	 	 	0.8976	 	 	 	0.7303	 	 	 	23	%	
Average exchange rate	 	 	 	 	 	 	 	 	 	 	 	 	
Canadian dollar	 	$	1.2294	 	 	$	1.0905	 	 	 	13	%	
Euro	 	 	0.9044	 	 	 	0.7293	 	 	 	24	%	
 
Transactional impact of foreign exchange rates
We recognized $0.4 million of transactional foreign exchange losses in the second quarter of 2015, compared to losses of $0.2 million during the second quarter of 2014. Foreign exchange losses recognized during the second quarter of 2015 were primarily the result of settlement of foreign-denominated monetary assets and liabilities.
 
Net earnings
Net earnings for the three months ended June 30, 2015 were $46.4 million, or $0.43 per diluted share, compared to net earnings of $38.6 million, or $0.36 per diluted share, for the three months ended June 30, 2014. This period-over-period increase is primarily the result of an increase in revenues, slightly offset by an increase in SG&A expenses.
 
Revenue Flow-through Rate 4
We believe that the table below showing our core auction Revenue Flow-through Rate illustrates our sensitivity to the effect of changes in our revenues on our EBITDA Margin, due to our relatively fixed quarterly Operating Expenses.
 
(in U.S.$ millions)	 	Three months ended June 30, 2015	 	
 	 	Incremental
Revenues
2015 over
2014	 	 	Incremental
Operating
Expenses
2015 over 2014	 	 	Incremental
EBITDA
2015 over
2014	 	 	Revenue
flow-
through
Rate	 	
Core auction	 	$	13.1	 	 	$	3.5	 	 	$	9.6	 	 	 	73	%	
 
(in U.S.$ millions)	 	Three months ended June 30, 2014	 	
 	 	Incremental
Revenues
2014 over
2013	 	 	Incremental
Operating
Expenses
2014 over 2013	 	 	Incremental
EBITDA
2014 over
2013	 	 	Revenue
flow-
through Rate	 	
Core auction	 	$	13.9	 	 	$	3.6	 	 	$	10.3	 	 	 	74	%	

 

	4	Revenue Flow-through and Revenue Flow-through Rate are non-GAAP measures. Revenue Flow-through is reconciled to our unaudited condensed consolidated interim financial statements by subtracting incremental Operating Expenses from incremental revenues in the period, and demonstrates the impact of incremental revenues on our EBITDA. Revenue Flow-through Rate presents Revenue Flow-through as a percentage of the absolute value of incremental revenues. We believe that comparing the influence of incremental revenues on EBITDA for different financial periods provides useful information about our performance for the relevant financial period.	

Ritchie Bros.	15 	

 	
 
Core auction revenues for the three months ended June 30, 2015 increased by $13.1 million compared to the same period in 2014, combined with an increase of $3.5 million in Operating Expenses over the same period. The net result was that 73% of the increased revenues flowed directly to our core auction EBITDA, which increased our overall EBITDA Margin to 47.1% in the second quarter of 2015 compared to 44.2% in the second quarter of 2014.
 
Year-to-Date Performance
We achieved record first half net earnings of $70.0 million, or $0.65 per diluted share for the six months ended June 30, 2015. This represents a 32% increase over net earnings of $52.9 million, or $0.49 per diluted share, generated during the same period in 2014.
 
Financial overview	 	Six months ended June 30,	 	
(in U.S.$000's, except EPS)	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Revenues	 	$	271,095	 	 	$	240,423	 	 	$	30,672	 	 	 	13	%	
Direct expense	 	 	28,636	 	 	 	27,916	 	 	 	720	 	 	 	3	%	
SG&A expenses	 	 	150,373	 	 	 	143,061	 	 	 	7,312	 	 	 	5	%	
Excluding depreciation and amortization	 	 	128,932	 	 	 	121,485	 	 	 	7,447	 	 	 	6	%	
Earnings from operations	 	 	92,086	 	 	 	69,446	 	 	 	22,640	 	 	 	33	%	
Other income	 	 	5,772	 	 	 	2,903	 	 	 	2,869	 	 	 	99	%	
Finance costs	 	 	1,056	 	 	 	1,639	 	 	 	(583	)	 	 	(36	)%	
Income tax expense	 	 	25,671	 	 	 	17,057	 	 	 	8,614	 	 	 	51	%	
Net earnings (4)	 	 	70,035	 	 	 	52,864	 	 	 	17,171	 	 	 	32	%	
Diluted EPS (4)	 	$	0.65	 	 	$	0.49	 	 	$	0.16	 	 	 	33	%	
Effective tax rate	 	 	26.5	%	 	 	24.1	%	 	 	240 bps	 	 	 	10	%	
GAP (1)	 	$	2,217,729	 	 	$	2,084,581	 	 	$	133,148	 	 	 	6	%	
Revenue Rate (2)	 	 	12.22	%	 	 	11.53	%	 	 	69 bps	 	 	 	6	%	
Direct Expense Rate   (10)	 	 	1.29	%	 	 	1.34	%	 	 	-5 bps	 	 	 	(4	)%	
EBITDA Margin (11)	 	 	41.9	%	 	 	37.9	%	 	 	402 bps	 	 	 	11	%	
 
For notes (1), (2) and (4), see corresponding notes in “Consolidated Highlights”. For notes (10) and (11), see corresponding notes in “Second Quarter Update – Financial overview”.
 
The summary results above and the following discussion include the results of operations from EquipmentOne.
 
EquipmentOne update
Included in GAP for the six months ended June 30, 2015 is the GTV from our online marketplaces of $53.5 million, a 12% increase from the comparative GTV for the six months ended June 30, 2014 of $48.0 million.

Ritchie Bros.	16 	

 	
  
The following table reflects the results of our operations from EquipmentOne:
 
(in U.S. $ millions)	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Revenues	 	$	6.8	 	 	$	5.7	 	 	$	1.1	 	 	 	19	%	
SG&A expenses excluding depreciation and amortization	 	 	6.6	 	 	 	8.0	 	 	 	(1.4	)	 	 	(18	)%	
EBITDA	 	$	0.2	 	 	$	(2.3	)	 	$	2.5	 	 	 	109	%	
 
Through focused effort on increasing revenues and managing SG&A expenses, EquipmentOne EBITDA increased in the first half of 2015 compared to the first half of 2014.
 
Gross Auction Proceeds
GAP was $2.2 billion for the six months ended June 30, 2015, a half year record and a 6% increase compared to the same period in 2014. GAP for the first half of 2015 would have been higher by $151.6 million, or 6.8%, if foreign exchange rates had remained consistent with those in 2014. This adverse effect on GAP is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.
 
The increase in GAP is primarily due to the increase in the number of lots during the first half of 2015 as compared to the first half of 2014. The total number of lots at industrial and agricultural auctions grew 12%, increasing to 188,100 in the first half of 2015 from 168,200 in the first half of 2014. However, core auction GAP decreased 5% on a per-lot basis to $11,500 in the first half of 2015 from $12,100 in the first half of 2014.
 
GAP grew in the United States, Canada and Mexico in the first half of 2015 compared to the first half of 2014, partially offset by reductions in GAP in Europe and the rest of the world.
 
During the first half of 2015, we continued to actively pursue the strategic use of underwritten contracts. During the first half of 2015 our underwritten business represented 30% of our GAP compared to 29% during the first half of 2014. Straight commission contracts continue to account for the majority of our GAP.
 
Revenues and Revenue Rate
 
(in U.S. $000's)	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Change	 	 	% Change	 	
United States	 	$	137,013	 	 	$	111,332	 	 	$	25,681	 	 	 	23	%	
Canada	 	 	86,870	 	 	 	79,802	 	 	 	7,068	 	 	 	9	%	
Europe	 	 	22,809	 	 	 	25,945	 	 	 	(3,136	)	 	 	(12	)%	
Other	 	 	24,403	 	 	 	23,344	 	 	 	1,059	 	 	 	5	%	
Revenues	 	$	271,095	 	 	$	240,423	 	 	$	30,672	 	 	 	13	%	
 
Revenues for the six months ended June 30, 2015 increased 13% to $271.1 million compared to $240.4 million for the six months ended June 30, 2014, primarily due to an increase in GAP combined with an improved commission rate. Revenue in the first half of 2015 would have been $19.5 million, or 7.2%, higher if foreign exchange rates had remained consistent with those in 2014.

Ritchie Bros.	17 	

 	
  
Our Revenue Rate for the first half of 2015 increased to 12.22% from 11.53% for the first half of 2014. This increase is primarily due to the performance of our underwritten business in which commission rates and volume increased in the first half of 2015 compared to the first half of 2014.
 
During the first half of 2015, our overall average commission rate was 9.82% compared to 9.16% in the first half of 2014. This increase is primarily due to the performance of our underwritten business described above.
 
Our fee income earned in the six months ended June 30, 2015 was 2.41% of GAP, a slight increase compared to 2.37% in the same period of 2014. This increase was primarily due to the mix of equipment sold at our auctions and an increase in financing fees resulting from the improved performance of our value-added services.
 
During the six months ended June 30, 2015, revenue earned in the United States increased as a result of an increase in GAP and Revenue Rate in that region. Our geographic revenue distribution is presented below:
 
Revenue distribution	 	United States	 	 	Canada	 	 	Europe	 	 	Other	 	
Six months ended June 30, 2015	 	 	51	%	 	 	32	%	 	 	8	%	 	 	9	%	
Six months ended June 30, 2014	 	 	46	%	 	 	33	%	 	 	11	%	 	 	10	%	
 
Direct Expense Rate
Our Direct Expense Rate for the first half of 2015 of 1.29% was lower than the 1.34% for the first half of 2014. This decrease is primarily due to an increase in the number of auctions held at our permanent and regional auction sites, which typically have lower Direct Expense Rates, combined with a decrease in the number of agricultural auctions, which typically have a higher Direct Expense Rate.
 
Although the number of auctions held at our permanent and regional auction sites increased, the proportion of GAP earned at those sites decreased. During the first half of 2015, 84% of our GAP was attributable to auctions held at our permanent and regional auction sites, including frontier market sites, compared to 87% in the first half of 2014. This decrease is primarily due to the performance of our offsite auctions, and in particular, our generation of GAP in excess of $54 million at our Casper, Wyoming, offsite auction in the first quarter of 2015.
 
Selling, general & administrative expenses
Our SG&A expenses increased to $150.4 million in the first half of 2015 compared to $143.1 million in the first half of 2014, an increase of $7.3 million or 5%. Foreign exchange rates had a positive impact on SG&A expenses for the six months ended June 30, 2015. If foreign exchange rates had remained consistent with those in the first half of 2014, SG&A expenses would have been $162.2 million for the first half of 2015, an increase of $19.1 million or 13% compared to the first half of 2014. This positive impact is primarily due to the declining value of the Canadian dollar and the Euro relative to the U.S. dollar.

Ritchie Bros.	18 	

 	
 
SG&A expenses by nature are presented below:
 
(in U.S. $000's)	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Employee compensation	 	$	85,775	 	 	$	77,372	 	 	$	8,403	 	 	 	11	%	
Buildings and facilities	 	 	20,333	 	 	 	21,151	 	 	 	(818	)	 	 	(4	)%	
Travel, advertising and promotion	 	 	10,823	 	 	 	11,458	 	 	 	(635	)	 	 	(6	)%	
Other SG&A expenses	 	 	12,001	 	 	 	11,504	 	 	 	497	 	 	 	4	%	
 	 	$	128,932	 	 	$	121,485	 	 	$	7,447	 	 	 	6	%	
Depreciation and amortization	 	 	21,441	 	 	 	21,576	 	 	 	(135	)	 	 	(1	)%	
SG&A expenses	 	$	150,373	 	 	$	143,061	 	 	$	7,312	 	 	 	5	%	
 
Employee compensation expenses for the six months ended June 30, 2015 were positively impacted by foreign exchange rates by $6.7 million, offset by the following changes presented gross of foreign exchange impacts: $4.0 million higher incentive compensation, $2.3 million higher stock option compensation and share unit expenses, $2.1 million in termination benefits resulting from the Separation Agreement with our former Chief Sales Officer, 4% net growth of our headcount, and annual merit increases. The net growth in our headcount included 3% growth in the number of our Revenue Producers to 353 as at June 30, 2015 from 342 as at June 30, 2014.
 
The increase in incentive compensation for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 is a direct result of the improved performance of the business and achievement of key performance metrics targets. The increase in share-based payments over the same period is primarily due to an increase in the fair value of our share units related to the recent strong performance of our stock price, increased grants related to certain new executives, and the accelerated vesting of stock options and share units related to recent executive departures.
 
Buildings and facilities expenses were positively impacted by foreign exchange rates by $1.7 million, partially offset by increases in rent and property taxes at various auction sites primarily in the United States and Canada.
 
Travel, advertising and promotion expenses were positively impacted by foreign exchange rates by $1.0 million, partially offset by increases resulting from divisional meetings held in the first quarter of 2015.
 
Other income and expense
Other income increased $2.9 million, or 99%, to $5.8 million during the six months ended June 30, 2015 compared to $2.9 million for the six months ended June 30, 2014. This increase is primarily the result of foreign exchange gains of $2.8 million recognized in the first half of 2015 compared to $1.1 million in the first half of 2014. Foreign exchange gains during the first half of 2015 were primarily the result of revaluation and settlement of foreign-denominated monetary assets and liabilities held by subsidiaries in Canada, Europe and the United States.
 
Also contributing to the increase in other income in the first half of 2015 compared to the first half of 2014, was a $493,000 reversal of an impairment loss in the first quarter of 2015, which was originally recognized during the fourth quarter of 2012.

Ritchie Bros.	19 	

 	
 
Effective tax rate
For the six months ended June 30, 2015, income tax expense was $25.7 million, compared to income tax expense of $17.1 million for the six months ended June 30, 2014. Our effective tax rate of 26.5% for the first half of 2015 was higher than the rate of 24.1% for the first half of 2014. The increase is primarily the result of a greater proportion of income subject to tax in jurisdictions with higher tax rates.
 
Effect of exchange rate movement on income statement components
In the first half of 2015, approximately 44% of our revenues and 58% of our Operating Expenses were denominated in currencies other than the U.S. dollar, as compared to 49% and 59%, respectively, in the first half of 2014.
 
Translational impact of foreign exchange rates
Over the past six months there has been significant weakening of the Canadian dollar and the Euro relative to the U.S. dollar. This weakening will affect our reported revenues and Operating Expenses when non-U.S. dollar amounts are translated into U.S. dollars for financial statement reporting purposes.
 
The translational impact of foreign exchange rates on our results is presented below:
 
(in U.S. $000's)	 	Six months ended June 30,	 	
 	 	2015, as	 	 	2015, using	 	 	 	 	 	%	 	
 	 	reported	 	 	2014 rates	 	 	Difference	 	 	Difference	 	
GAP	 	$	2,217,729	 	 	$	2,369,367	 	 	$	151,638	 	 	 	6.8	%	
Revenues	 	$	271,095	 	 	$	290,548	 	 	$	19,453	 	 	 	7.2	%	
Direct expense	 	 	28,636	 	 	 	30,697	 	 	 	2,061	 	 	 	7.2	%	
SG&A expenses	 	 	150,373	 	 	 	162,196	 	 	 	11,823	 	 	 	7.9	%	
Excluding depreciation and amortization	 	 	128,932	 	 	 	139,055	 	 	 	10,123	 	 	 	7.9	%	
Depreciation and amortization	 	 	21,441	 	 	 	23,141	 	 	 	1,700	 	 	 	7.9	%	
Earnings from operations	 	$	92,086	 	 	$	97,655	 	 	$	5,569	 	 	 	6.0	%	
 
U.S. dollar exchange rate comparison

Value of one  U.S. dollar
 
 	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Average exchange rate	 	 	 	 	 	 	 	 	 	
Canadian dollar	 	$	1.2353	 	 	$	1.0907	 	 	 	13	%	
Euro	 	 	0.8967	 	 	 	0.7296	 	 	 	23	%	
 
Transactional impact of foreign exchange rates
We recognized $2.8 million of transactional foreign exchange gains in the first half of 2015, compared to gains of $1.1 million during the first half of 2014. Foreign exchange gains recognized during the first half of 2015 were primarily the result of settlement of foreign-denominated monetary assets and liabilities.

Ritchie Bros.	20 	

 	
 
Net earnings
Net earnings for the six months ended June 30, 2015 were $70.0 million, or $0.65 per diluted share, compared to net earnings of $52.9 million, or $0.49 per diluted share, for the six months ended June 30, 2014. This period-over-period increase is primarily the result of an increase in revenues, slightly offset by an increase in SG&A expenses and our effective tax rate.
 
Revenue Flow-through Rate
We believe that the table below showing our core auction Revenue Flow-through Rate illustrates our sensitivity to the effect of changes in our revenues on our EBITDA Margin, due to our relatively fixed quarterly Operating Expenses.
 
(in U.S.$ millions)	 	Six months ended June 30, 2015	 	
 	 	Incremental
Revenues
2015 over
2014	 	 	Incremental
Operating
Expenses
2015 over 2014	 	 	Incremental
EBITDA
2015 over
2014	 	 	Revenue
flow-
through
Rate	 	
Core auction	 	$	29.6	 	 	$	9.6	 	 	$	20.0	 	 	 	68	%	
 
(in U.S.$ millions)	 	Six months ended June 30, 2014	 	
 	 	Incremental
Revenues
2014 over
2013	 	 	Incremental
Operating
Expenses
2014 over 2013	 	 	Incremental
EBITDA
2014 over
2013	 	 	Revenue
flow-
through
Rate	 	
Core auction	 	$	11.0	 	 	$	4.3	 	 	$	6.7	 	 	 	61	%	
 
Core auction revenues for the six months ended June 30, 2015 increased by $29.6 million compared to the same period in 2014, combined with an increase of $9.6 million in Operating Expenses over the same period. The net result was that 68% of the increased revenues flowed directly to our core auction EBITDA, which increased our overall EBITDA Margin to 41.9% in the first half of 2015 compared to 37.9% in the first half of 2014.
 
Operations Update
During the six months ended June 30, 2015, we conducted 108 unreserved industrial auctions at locations in North America, Central America, Europe, the Middle East, Australia, New Zealand and Asia, as compared to 103 during the first half of 2014.
 
Our key industrial auction metrics are shown below:
 
Key industrial auction metrics (1)	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Change	 	 	% Change	 	
Bidder registrations	 	 	250,000	 	 	 	216,000	 	 	 	34,000	 	 	 	16	%	
Consignments	 	 	22,500	 	 	 	21,600	 	 	 	900	 	 	 	4	%	
Buyers	 	 	59,650	 	 	 	52,850	 	 	 	6,800	 	 	 	13	%	
Lots	 	 	168,500	 	 	 	146,000	 	 	 	22,500	 	 	 	15	%	
 
	(1)	For a breakdown of these key industrial auction metrics by month, please refer to our website at www.rbauction.com . None of the information in our website is incorporated by reference into this document by this or any other reference.	

Ritchie Bros.	21 	

 	
 
The increase in GAP in the first half of 2015 as compared to the same period in 2014 was primarily due to the increase in the number of lots. This increase was slightly offset by a decrease in the value per lots in the first half of 2015 compared to the first half of 2014.
 
Although our auctions vary in size, our average industrial auction results for the three- and 12-month periods ended June 30 are described, respectively, in the following two tables:
 
Average per industrial auction	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
GAP	 	$	16.6 million	 	 	$	16.1 million	 	 	$	0.5 million	 	 	 	3	%	
Bidder registrations	 	 	2,108	 	 	 	1,852	 	 	 	256	 	 	 	14	%	
Consignors	 	 	200	 	 	 	187	 	 	 	13	 	 	 	7	%	
Lots	 	 	1,409	 	 	 	1,230	 	 	 	179	 	 	 	15	%	
 
Our average industrial auction metrics increased in the second quarter of 2015 compared to the second quarter of 2014 due to our focused efforts on growing the business and a stable used equipment market.
 
Average per industrial auction	 	12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
GAP	 	$	16.7 million	 	 	$	15.1 million	 	 	$	1.6 million	 	 	 	11	%	
Bidder registrations	 	 	2,092	 	 	 	1,815	 	 	 	277	 	 	 	15	%	
Consignors	 	 	195	 	 	 	184	 	 	 	11	 	 	 	6	%	
Lots	 	 	1,432	 	 	 	1,248	 	 	 	184	 	 	 	15	%	
 
Average industrial auction metrics on a rolling 12-month basis increased period-over-period due to the performance of our auctions in the third quarter of 2014 and the first and second quarters of 2015 compared to the third quarter of 2013 and the first and second quarters of 2014.
 
Website metrics 5
The Ritchie Bros. website ( www.rbauction.com ) is a gateway to our online bidding system, which allows bidders to participate in our auctions over the internet and showcases upcoming auctions and equipment to be sold. This online bidding service gives our auction customers the choice of how they want to do business with us and access to both live and online auction participation. Internet bidders comprised 62% of the total bidder registrations at our industrial auctions in the first half of 2015, compared to 60% in the first half of 2014, continuing to demonstrate our ability to drive multichannel participation at our auctions.
 
Our EquipmentOne website ( www.equipmentone.com ) provides access to our online equipment marketplace.

	5	None of the information in our websites is incorporated by reference into this document by this or any other reference.	

Ritchie Bros.	22 	

 	
 
The following table provides information about the average monthly users of our websites:
 
Average monthly users	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Change	 	 	% Change	 	
www.rbauction.com	 	 	936,906	 	 	 	631,070	 	 	 	305,836	 	 	 	48	%	
www.equipmentone.com	 	 	92,046	 	 	 	77,113	 	 	 	14,933	 	 	 	19	%	
 
We saw a significant increase in the number of average monthly users of www.rbauction.com during the second quarter of 2015 compared to the second quarter of 2014. This increase is primarily due to greater search traffic, which we believe is a direct result of our search engine optimization efforts over the past 12 months that were focused on adapting our website to mobile devices.
 
We also saw an increase in the number of average monthly users of www.equipmentone.com , during the second quarter of 2015 compared to the second quarter of 2014. We believe this increase is primarily due to cross-promotional efforts, and in particular, the addition of a link to www.equipmentone.com that we built onto our www.rbauction.com website. We also believe our search engine optimization efforts over the past 12 months, and in particular, adaptation of our website to mobile devices, as well as a series of advertising and promotional efforts directed towards EquipmentOne, modifications made to improve user experience, and a greater number of equipment listings on the website contributed to the increase in average monthly users of www.equipmentone.com .
 
Online bidding and equipment marketplace purchase metrics
We continue to see an increase in the use and popularity of both our online bidding system and our online equipment marketplace. During the first half of 2015, we attracted record first half online bidder registrations and sold approximately $989.4 million of equipment, trucks and other assets to online auction bidders and EquipmentOne customers. This represents an 18% increase over the first half of 2014 and a half year online sales record.
 
Productivity
During the first quarter of 2015, we expanded our training strategy and introduced new leadership training programs for our sales management team. We believe this contributed to an increase in Sales Force Productivity to $12.0 million per Revenue Producer for the 12-month period ended June 30, 2015 compared to $11.4 million for the 12-month period ended June 30, 2014. We measure Sales Force Productivity as rolling 12-month core auction GAP per Revenue Producer. It is an operational statistic that we believe provides a gauge of the effectiveness of Revenue Producers in increasing our GAP, and ultimately our net earnings.
 
Our headcount statistics as at the end of each period are presented below:
 
 	 	Q2 2015	 	 	Q1 2015	 	 	Q4 2014	 	 	Q3 2014	 	 	Q2 2014	 	
Total full-time employees	 	 	1,515	 	 	 	1,479	 	 	 	1,468	 	 	 	1,472	 	 	 	1,455	 	
Revenue Producers	 	 	353	 	 	 	353	 	 	 	353	 	 	 	344	 	 	 	342	 	
Territory Managers	 	 	307	 	 	 	308	 	 	 	307	 	 	 	296	 	 	 	292	 	
 
During the 12 months ended June 30, 2015, we increased the number of Territory Managers by net 15, Revenue Producers by net 11 and other sales team positions by net 17.

Ritchie Bros.	23 	

 	
 
We also increased our headcount at Ritchie Bros. Financial Services by net 14, which is included in our overall headcount increase of net 60 during the 12 months ended June 30, 2015.
 
Summary of Quarterly Results (Unaudited)
The following tables present our unaudited consolidated quarterly results of operations for each of our last eight fiscal quarters. Except for GAP, this data has been derived from our unaudited condensed consolidated interim financial statements, which were prepared on the same basis as our audited annual consolidated financial statements, and in our opinion, include all normal, recurring adjustments necessary for the fair presentation of such information. These unaudited quarterly results should be read in conjunction with our audited annual consolidated financial statements for the years ended December 31, 2014 and 2013, and our discussion above about the seasonality of our business.
 
(in U.S.$000's, except EPS)	 	Q2 2015	 	 	Q1 2015	 	 	Q4 2014	 	 	Q3 2014	 	
GAP (1)	 	$	1,262,168	 	 	$	955,561	 	 	$	1,241,184	 	 	$	886,876	 	
Revenues	 	 	155,477	 	 	 	115,618	 	 	 	138,457	 	 	 	102,217	 	
Net earnings (4)	 	 	46,447	 	 	 	23,588	 	 	 	29,284	 	 	 	9,342	 	
Adjusted Net Earnings (4),(12)	 	 	46,447	 	 	 	23,588	 	 	 	33,496	 	 	 	14,480	 	
Basic EPS (4)	 	$	0.44	 	 	$	0.22	 	 	$	0.27	 	 	$	0.09	 	
Diluted EPS (4)	 	 	0.43	 	 	 	0.22	 	 	 	0.27	 	 	 	0.09	 	
Diluted Adjusted EPS (4),(12)	 	 	0.43	 	 	 	0.22	 	 	 	0.31	 	 	 	0.13	 	
 
(in U.S.$000's, except EPS)	 	Q2 2014	 	 	Q1 2014	 	 	Q4 2013	 	 	Q3 2013	 	
GAP (1)	 	$	1,229,204	 	 	$	855,377	 	 	$	1,109,834	 	 	$	789,640	 	
Revenues	 	 	141,835	 	 	 	98,588	 	 	 	131,223	 	 	 	105,800	 	
Net earnings (4)	 	 	38,607	 	 	 	14,257	 	 	 	33,745	 	 	 	16,295	 	
Adjusted Net Earnings (4),(12)	 	 	38,607	 	 	 	14,257	 	 	 	30,324	 	 	 	15,878	 	
Basic EPS (4)	 	$	0.36	 	 	$	0.13	 	 	$	0.32	 	 	$	0.15	 	
Diluted EPS (4)	 	 	0.36	 	 	 	0.13	 	 	 	0.31	 	 	 	0.15	 	
Diluted Adjusted EPS (4),(12)	 	 	0.36	 	 	 	0.13	 	 	 	0.28	 	 	 	0.15	 	
 
For notes (1) and (4), see corresponding notes in “Consolidated Highlights”.
 
	(12)	Adjusted Net Earnings and Diluted Adjusted EPS are non-GAAP measures, which, where applicable, are reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures” for the relevant financial period. We believe that comparing Adjusted Net Earnings and Diluted Adjusted EPS for different financial periods provides useful information about the growth or decline of our net earnings for the relevant financial period, and eliminates the financial impact of items we do not consider to be part of our normal operating results. Adjusted Net Earnings represent net earnings attributable to equity holders of the parent excluding the after-tax effects of adjusting items, including excess property sales and impairment losses. Diluted Adjusted EPS is calculated as Adjusted Net Earnings divided by the number of diluted weighted average shares outstanding at the end of the period.	
 
GAP and revenues are affected on a period-to-period basis by the timing of major auctions. Also, in newer markets where we are developing our business, the number and size of auctions and, as a result, our GAP and revenues, are likely to vary more dramatically from period to period compared to our established markets, where the number, size and frequency of our auctions are more consistent.
 
Because of these seasonal and period-to-period variations, we believe that our GAP, revenues and net earnings are best compared on an annual or a year-over-year basis.

Ritchie Bros.	24 	

 	
  
Outstanding Share Data
We are a public company and our common shares are listed under the symbol “RBA” on the New York and Toronto Stock Exchanges. On August 5, 2015 we had 107,108,270 common shares issued and outstanding and stock options outstanding to purchase a total of 3,349,422 common shares. No preferred shares have been issued or are outstanding. The outstanding stock options had a weighted average exercise price of $23.23 per share and a weighted average remaining term of 7.1 years.
 
Share repurchase program
On February 26, 2015, we received approval from the TSX to proceed with a Normal Course Issuer Bid. In March 2015, we executed the following share repurchases at a total cost of $47.5 million:

 	 	Issuer purchases of equity securities	 	
 	 	(a) Total number
of shares
purchased	 	 	(b) Average
price paid per
share	 	 	(c) Total number of shares
purchased as part of
publically announced
program (1)	 	 	(d) Maximum approximate
dollar value of shares that
may yet be purchased
under the program (2)	 	
March 2015 (3)	 	 	1,900,000	 	 	$	24.98	 	 	 	1,900,000	 	 	$	52.5 million	 	

	(1)	Our share repurchase program was publically announced on January 12, 2015.	
 
	(2)	On January 12, 2015, our Board of Directors authorized us to repurchase up to a maximum of $100 million worth of our common shares between the TSX approval date and December 31, 2017.	
 
	(3)	Repurchases during the month of March 2015 began on March 6, 2015 and ended on March 25, 2015.	
 
All repurchased shares were cancelled on March 26, 2015. No further share repurchases were made under this Normal Course Issuer Bid, or by any other means, during the second quarter of 2015.
 
Liquidity and Capital Resources
 
(in U.S. $000's)	 	June 30,	 	 	December 31,	 	 	 	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Cash and cash equivalents	 	$	365,245	 	 	$	233,089	 	 	 	57	%	
Current assets	 	$	556,142	 	 	$	394,573	 	 	 	41	%	
Current liabilities	 	 	428,492	 	 	 	254,221	 	 	 	69	%	
Working capital	 	$	127,650	 	 	$	140,352	 	 	 	(9	)%	
 
We believe that working capital is a more meaningful measure of our liquidity than cash alone. Our working capital decreased during the six months ended June 30, 2015 primarily as a result of the reclassification of our Canadian dollar 60 million term loan from current to non-current borrowings, as well as our repurchase of 1.9 million common shares for $47.5 million and payment of dividends of $31.4 million. Management intends to refinance the term loan when it falls due in May 2016. The decrease in working capital was partially offset by an increase in net earnings generated during the period.
 
At June 30, 2015, we had $61.8 million in current borrowings, which consisted of our Canadian dollar 60 million term loan under our uncommitted, non-revolving credit facility and borrowings under our committed, revolving credit facility.

Ritchie Bros.	25 	

 	
 
As at June 30, 2015, our current borrowings had a weighted average annual interest rate of 5.5%. As at December 31, 2014 our current borrowings were $7.8 million with a weighted average annual interest rate of 1.8%.
 
The remaining available borrowings under our credit facilities totalled $467.4 million, including $119.8 million under a three-year uncommitted, non-revolving credit facility expiring in November 2017, and $211.2 million under a five-year committed, revolving credit facility expiring May 2018.
 
We believe our existing working capital and availability under our credit facilities are sufficient to satisfy our present operating requirements, as well as to fund future growth including, but not limited to mergers and acquisitions, development of EquipmentOne and other growth opportunities.
 
Cash flows
 
(in U.S. $000's)	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Cash generated by (used in):	 	 	 	 	 	 	 	 	 	 	 	 	
Operating activities	 	$	193,607	 	 	$	105,686	 	 	 	83	%	
Investing activities	 	 	(5,239	)	 	 	(18,737	)	 	 	(72	)%	
Financing activities	 	 	(45,699	)	 	 	(40,626	)	 	 	12	%	
Effect of changes in foreign currency rates	 	 	(10,513	)	 	 	572	 	 	 	(1938	)%	
Net increase in cash and cash equivalents	 	$	132,156	 	 	$	46,895	 	 	 	182	%	
 
Cash generated by operating activities increased $87.9 million, or 83%, during the six months ended June 30, 2015 compared to the six months ended June 30, 2014, primarily due to increases in operating assets and liabilities and net earnings over the same comparative period.
 
A large portion of the increase in our operating assets and liabilities was due to a decrease in advances against auction contracts during the first half of 2015 compared to an increase in the same period in 2014, as well as a larger decrease in auctions proceeds payable during the first half of 2015 compared to the same period in 2014.
 
Our cash generated by operating activities can fluctuate significantly from period to period, due to factors such as differences in the timing, size and number of auctions during the period, the timing of the receipt of auction proceeds from buyers and the timing of the payment of net amounts due to consignors.
 
Cash used in investing activities decreased in the first six months of 2015 compared to the same period in 2014 primarily due to decreased capital expenditures related to the addition of property, plant and equipment and intangible assets, as well as proceeds on the sale of excess property in London, Canada. Our capital expenditures for the first half of 2015 totalled $9.1 million and were primarily for the development of our information systems and enhancements of our existing auction sites. This compares to capital expenditures of $19.7 million for the first half of 2014.

Ritchie Bros.	26 	

 	
 
Cash used in financing activities increased in the first half of 2015 compared to the first half of 2014. The increase was primarily due to our repurchase of 1.9 million common shares valued at $47.5 million in March 2015, an increase of $22.9 million in proceeds from the issuance shares resulting from a greater number of stock option exercises, and an increase in dividends paid during the first half of 2015 compared to the same period in 2014. The increase was partially offset by repayment of a $30 million term loan in January 2014 and a Canadian dollar 31 million revolving loan in April 2014.
 
We declared and paid regular cash dividends of $0.14 per share for the quarter ended June 30, 2014, and declared and paid regular cash dividends of $0.14 per share for the quarters ended September 30, 2014, December 31, 2014, and March 31, 2015. We have declared, but not yet paid, a dividend of $0.16 per share for the quarter ended June 30, 2015.
 
Total dividend payments during the six months ended June 30, 2015 were $30.0 million to equity holders of the parent entity, and $1.3 million to non-controlling interests. This compares to total dividend payments of $27.9 million to equity holders of the parent entity during the equivalent period in 2014. We had a Dividend Payout Ratio 6 of 52.1% during the 12 months ended June 30, 2015 compared to 56.1% during the 12 months ended June 30, 2014. All dividends we pay are “eligible dividends” for Canadian income tax purposes unless indicated otherwise.
 
Non-current borrowings and credit facilities
Our credit facilities are with financial institutions in the United States, Canada and the Netherlands. Certain of the facilities include commitment fees applicable to the unused credit amount.
 
As at June 30, 2015, we had outstanding fixed rate non-current borrowings bearing annual interest rates ranging from 3.59% to 4.225% (with a weighted average annual interest rate of 3.9%). We were in compliance with all financial and other covenants applicable to our credit facilities at June 30, 2015.
 
Future scheduled interest payments over the next five years relating to our non-current borrowings outstanding at June 30, 2015 were as follows:
 
(in U.S. $000's)	 	Scheduled interest payments	 	
 	 	In 2015	 	 	In 2016	 	 	In 2017	 	 	In 2018	 	 	In 2019	 	 	Thereafter	 	
On non-current borrowings	 	$	1,113	 	 	$	2,227	 	 	$	2,227	 	 	$	2,227	 	 	$	2,227	 	 	$	5,294	 	

 

	6	Dividend Payout Ratio is a non-GAAP measure, which is reconciled to the most directly comparable GAAP measures in our unaudited condensed consolidated interim financial statements under “Non-GAAP Measures”. We believe that comparing Dividend Payout Ratio for different financial periods is the best indicator of how well our earnings support our dividend payments. We calculate Dividend Payout Ratio as dividends paid divided by Adjusted Net Earnings.	

Ritchie Bros.	27 	

 	
 
Non-GAAP Measures
We make reference to various non-GAAP performance measures throughout this discussion and analysis. These measures do not have a standardized meaning, and are therefore unlikely to be comparable to similar measures presented by other companies. In particular, our definitions of GAP and GTV may differ from those used by other participants in our industry. GAP and GTV are important measures we use in comparing and assessing our operating performance.
 
We believe that revenues and certain other line items are best understood by considering their relationship to GAP and GTV. Our revenues are earned in the course of conducting our auctions and online marketplace transactions, and consist primarily of commissions earned on consigned equipment and net profit on the sale of equipment that we have purchased and sold in the same manner as consigned equipment.
 
The following tables provide reconciliations of non-GAAP measures to the most directly comparable GAAP measures reflected in our consolidated financial statements.
 
Operating Income and Operating Income Margin reconcile to revenues, direct expenses and SG&A expenses as follows:
 
(in U.S. $ millions)	 	Three months ended June 30,	 	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	Better/
(Worse)	 	 	2015	 	 	2014	 	 	Better/
(Worse)	 	
Revenues	 	$	155.5	 	 	$	141.8	 	 	 	10	%	 	$	271.1	 	 	$	240.4	 	 	 	13	%	
Direct expenses	 	 	(17.0	)	 	 	(17.6	)	 	 	3	%	 	 	(28.6	)	 	 	(27.9	)	 	 	(3	)%	
SG&A expenses	 	 	(76.0	)	 	 	(72.5	)	 	 	(5	)%	 	 	(150.4	)	 	 	(143.1	)	 	 	(5	)%	
Earnings from operations	 	$	62.4	 	 	$	51.7	 	 	 	21	%	 	$	92.1	 	 	$ 	69.4	 	 	 	33	%	
Adjusting items	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
Operating Income	 	$	62.4	 	 	$	51.7	 	 	 	21	%	 	$	92.1	 	 	$	69.4	 	 	 	33	%	
Operating Income Margin	 	 	40.2	%	 	 	36.5	%	 	 	370 bps		 	 	34.0	%	 	 	28.9	%	 	 	509 bps		
 
Operating Free Cash Flow reconciles to cash flows generated by or used in our operating and investing activities as follows:
 
(in U.S. $ millions)	 	12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Cash generated by operating activities	 	$	236.9	 	 	$	148.4	 	 	 	60	%	
Less: Property, plant and equipment additions	 	 	(17.3	)	 	 	(32.5	)	 	 	(47	)%	
Less: Intangible asset additions	 	 	(11.0	)	 	 	(14.6	)	 	 	(25	)%	
Add: Proceeds on disposition of property	 	 	 	 	 	 	 	 	 	 	 	 	
plant and equipment	 	 	11.7	 	 	 	14.0	 	 	 	(16	)%	
Operating Free Cash Flow	 	$	220.3	 	 	$	115.3	 	 	 	91	%	

Ritchie Bros.	28 	

 	
 
Quick Operating Working Capital and Working Capital Intensity reconcile to our current assets, current liabilities and revenues as follows:
 
(in U.S. $ millions)	 	As at and for the 12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Trade and other receivables	 	$	129.6	 	 	$	146.1	 	 	 	(11	)%	
Inventory	 	 	34.5	 	 	 	53.0	 	 	 	(35	)%	
Advances against auction contracts	 	 	9.0	 	 	 	26.2	 	 	 	(66	)%	
Auction proceeds payable	 	 	(256.8	)	 	 	(249.0	)	 	 	3	%	
Trade payables	 	 	(38.7	)	 	 	(52.0	)	 	 	(26	)%	
Quick Operating Working Capital	 	$	(122.4	)	 	$	(75.7	)	 	 	62	%	
Revenues	 	 	511.8	 	 	 	477.4	 	 	 	7	%	
Working Capital Intensity	 	 	-23.9	%	 	 	-15.9	%	 	 	(51	)%	
 
Net Capital Spending and CAPEX Intensity reconcile to cash flows used in or generated by investing activities and revenues as follows:
 
(in U.S. $ millions)	 	12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Property, plant and equipment additions	 	$	17.3	 	 	$	32.5	 	 	 	(47	)%	
Intangible asset additions	 	 	11.0	 	 	 	14.6	 	 	 	(25	)%	
Less: Proceeds on disposition of property	 	 	 	 	 	 	 	 	 	 	 	 	
plant and equipment	 	 	(11.7	)	 	 	(14.0	)	 	 	(16	)%	
Net Capital Spending	 	$	16.6	 	 	$	33.1	 	 	 	(50	)%	
Revenues	 	 	511.8	 	 	 	477.4	 	 	 	7	%	
CAPEX Intensity	 	 	3.2	%	 	 	6.9	%	 	 	(53	)%	
 
Net Operating Profit After Tax, Adjusted Net Assets and RONA reconcile to net earnings, net finance costs, total assets, cash and cash equivalents and current liabilities as follows:
 
(in U.S. $ millions)	 	As at and for the 12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Net earnings attributable to equity holders of the parent	 	$	108.7	 	 	$	102.9	 	 	 	6	%	
Add: Net finance costs	 	 	2.5	 	 	 	3.8	 	 	 	(34	)%	
Less: Income tax recovery on finance costs	 	 	(0.7	)	 	 	(1.0	)	 	 	(30	)%	
Net Operating Profit After Tax	 	$	110.5	 	 	$	105.7	 	 	 	5	%	
Total assets	 	$	1,237.7	 	 	$	1,298.5	 	 	 	(5	)%	
Less: Cash and cash equivalents	 	 	(365.2	)	 	 	(281.3	)	 	 	30	%	
Less: Current liabilities	 	 	(428.5	)	 	 	(413.6	)	 	 	4	%	
Adjusted Net Assets	 	$	444.0	 	 	$	603.6	 	 	 	(26	)%	
RONA	 	 	24.9	%	 	 	17.5	%	 	 	42	%	

Ritchie Bros.	29 	

 	
 
Adjusted Earnings from Operations, Adjusted EBITDA and Debt/Adjusted EBITDA reconcile to borrowings, earnings from operations and depreciation and amortization expenses as follows:
 
(in U.S. $ millions)	 	As at and for the 12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Current borrowings	 	$	61.8	 	 	$	46.1	 	 	 	34	%	
Non-current borrowings	 	 	57.2	 	 	 	118.0	 	 	 	(52	)%	
Debt	 	$	119.0	 	 	$	164.1	 	 	 	(27	)%	
Earnings from operations	 	$	153.1	 	 	$	132.6	 	 	 	15	%	
Adjusting items:	 	 	 	 	 	 	 	 	 	 	 	 	
Management reorganization	 	 	5.5	 	 	 	-	 	 	 	100	%	
CEO Separation Agreement	 	 	-	 	 	 	4.6	 	 	 	(100	)%	
Adjusted Earnings from Operations	 	$	158.6	 	 	$	137.2	 	 	 	16	%	
Add: Depreciation of property, plant	 	 	 	 	 	 	 	 	 	 	 	 	
and equipment	 	 	38.9	 	 	 	39.7	 	 	 	(2	)%	
Add: Amortization of intangible assets	 	 	5.5	 	 	 	4.1	 	 	 	34	%	
Adjusted EBITDA	 	$	203.0	 	 	$	181.0	 	 	 	12	%	
Debt/Adjusted EBITDA	 	 	0.6	x	 	 	0.9	x	 	 	(33	)%	
 
EBITDA and EBITDA Margin reconcile to earnings from operations as follows:
 
(in U.S.$000's)	 	Three months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Earnings from operations	 	$	62,449	 	 	$	51,727	 	 	$	10,722	 	 	 	21	%	
Add: Depreciation of property, plant	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
and equipment	 	 	9,003	 	 	 	9,897	 	 	 	(894	)	 	 	(9	)%	
Add: Amortization of intangible assets	 	 	1,822	 	 	 	1,082	 	 	 	740	 	 	 	68	%	
EBITDA	 	$	73,274	 	 	$	62,706	 	 	$	10,568	 	 	 	17	%	
Revenues	 	$	155,477	 	 	$	141,835	 	 	$	13,642	 	 	 	10	%	
EBITDA Margin	 	 	47.1	%	 	 	44.2	%	 	 	292 bps		 	 	7	%	
 
(in U.S.$000's)	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	$ Change	 	 	% Change	 	
Earnings from operations	 	$	92,086	 	 	$	69,446	 	 	$	22,640	 	 	 	33	%	
Add: Depreciation of property, plant	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
and equipment	 	 	18,283	 	 	 	19,339	 	 	 	(1,056	)	 	 	(5	)%	
Add: Amortization of intangible assets	 	 	3,158	 	 	 	2,237	 	 	 	921	 	 	 	41	%	
EBITDA	 	$	113,527	 	 	$	91,022	 	 	$	22,505	 	 	 	25	%	
Revenues	 	$	271,095	 	 	$	240,423	 	 	$	30,672	 	 	 	13	%	
EBITDA Margin	 	 	41.9	%	 	 	37.9	%	 	 	402 bps		 	 	11	%	

Ritchie Bros.	30 	

 	
 
Core auction incremental EBITDA reconciles to incremental earnings from operations as follows:
 
(in U.S.$ millions)	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Core auction incremental EBITDA	 	$	9.6	 	 	$	10.3	 	 	$	20.0	 	 	$	6.7	 	
Incremental depreciation and amortization	 	 	0.2	 	 	 	(0.3	)	 	 	0.1	 	 	 	(0.5	)	
Incremental EBITDA from EquipmentOne	 	 	1.0	 	 	 	0.1	 	 	 	2.5	 	 	 	-	 	
Incremental earnings from operations	 	$	10.7	 	 	$	10.1	 	 	$	22.6	 	 	$	6.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from operations, current period	 	$	62.4	 	 	$	51.7	 	 	$	92.1	 	 	$	69.4	 	
Less : Earnings from operations, comparative period	 	 	(51.7	)	 	 	(41.6	)	 	 	(69.4	)	 	 	(63.2	)	
Incremental earnings from operations	 	$	10.7	 	 	$	10.1	 	 	$	22.6	 	 	$	6.2	 	
 
Dividend Payout Ratio reconciles to dividends paid as follows:
 
(in U.S. $ millions)	 	12 months ended June 30,	 	
 	 	2015	 	 	2014	 	 	% Change	 	
Dividends paid	 	$	61.5	 	 	$	55.6	 	 	 	11	%	
Adjusted Net Earnings	 	 	118.0	 	 	 	99.1	 	 	 	19	%	
Dividend Payout Ratio	 	 	52.1	%	 	 	56.1	%	 	 	(7	)%	
 
Quantitative and Qualitative Disclosure about Market Risk
We conduct operations in local currencies in countries around the world, but we use the U.S. dollar as our presentation currency. As a result we are exposed to currency fluctuations and exchange rate risk. We cannot accurately predict the future effects of foreign currency fluctuations on our financial condition or results of operations, or quantify their effects on the macroeconomic environment. The proportion of revenues denominated in currencies other than the U.S. dollar in a given period will differ from the annual proportion depending on the size and location of auctions held during the period. We have not adopted a long-term hedging strategy to protect against foreign currency fluctuations associated with our operations denominated in currencies other than the U.S. dollar, but we may consider hedging specific transactions if we deem it appropriate in the future.
 
During the first half of 2015, we recorded a net decrease in our foreign currency translation adjustment balance of $23.1 million, compared to a net increase of $3.4 million in the first half of 2014. Our foreign currency translation adjustment arises from the translation of our net assets denominated in currencies other than the U.S. dollar to the U.S. dollar for reporting purposes.
 
We are not exposed to significant interest rate risk due to the fact that our non-current borrowings bear fixed rates of interest. Our current borrowings, which usually mature one to three months from inception, are available at both fixed and floating rates of interest. If we determine our exposure to short-term interest rates is too high, we may consider fixing a larger portion of our portfolio. As at June 30, 2015 we had a total of $13.8 million in revolving loans bearing floating rates of interest, as compared to $7.8 million at December 31, 2014.
 
Although we cannot accurately anticipate the future effect of inflation on our financial condition or results of operations, inflation historically has not had a material impact on our operations.

Ritchie Bros.	31 	

 	
 
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, financial performance, liquidity, capital expenditures or capital resources.
 
Legal and Other Proceedings
From time to time we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of our business. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on us or on our financial condition or results of operations or that involve a claim for damages, excluding interest and costs that could be material.
 
Related Party Transactions
During the three months ended March 31, 2015, we recognized $2.1 million in termination benefits resulting from the Separation Agreement with our former Chief Sales Officer. No similar remuneration was recognized during the three months ended June 30, 2015 or the six months ended June 30, 2014.
 
Critical Accounting Policies, Judgments, Estimates and Assumptions
Aside from the estimate discussed below, there were no significant changes in our critical accounting policies, judgments, estimates and assumptions since our Management’s Discussion and Analysis of Financial Condition and Results of Operations as at and for the year ended December 31, 2014, which is included in our 2014 Annual Report filed on SEDAR at www.sedar.com and on EDGAR at www.edgar.com .
 
The following discussion of our critical accounting estimate is intended to supplement the significant judgments, estimates and assumptions presented as Note 2 to our unaudited condensed consolidated interim financial statements, which summarizes the judgments, estimates and assumptions used in the preparation of those consolidated financial statements. The estimate discussed below is included here because it requires more significant estimate in the preparation and presentation of our consolidated financial statements than other estimates.
 
Valuation of performance share units subject to market conditions
We initially measure the cost of cash-settled transactions subject to market vesting conditions using a binomial model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model, including the expected life of the share unit, volatility and dividend yield, as well as making assumptions about them. For cash-settled share-based payment transactions, the liability needs to be re-measured at the end of each reporting period up to the date of settlement. This requires a reassessment of the estimates used at the end of each reporting period.
 
Changes in Accounting Policies
There have been no changes in our accounting policies during the six months ended June 30, 2015.

Ritchie Bros.	32 	

 	
 
Transition to United States Generally Accepted Accounting Principles
As a non-U.S. company listed on the NYSE, the United States Securities and Exchange Commission (“SEC”) requires us to perform a test on the last business day of the second quarter of each fiscal year to determine whether we continue to meet the definition of a foreign private issuer (“FPI”). Historically, we met the definition of an FPI, and as such, prepared consolidated financial statements in accordance with IFRS, reported with the SEC on FPI forms, and complied with SEC rules and regulations applicable to FPIs.
 
On June 30, 2015, we performed the test and determined that we no longer meet the definition of an FPI. As such, from January 1, 2016 we will be required to prepare consolidated financial statements in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), report with the SEC on domestic forms, and comply with SEC rules and regulations applicable to domestic issuers.
 
Consequently, our 2015 annual consolidated financial statements will be prepared in accordance with U.S. GAAP. The transition from IFRS to U.S. GAAP will include retrospective application of U.S. GAAP to all reporting periods from our inception. We have established a project team and a project plan, and we are currently evaluating the impact that our transition to U.S. GAAP will have on our consolidated financial statements.
 
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting. There has been no change in our internal control over financial reporting during the six months ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Risk Factors
Our business is subject to a number of risks and uncertainties, and our past performance is no guarantee of our performance in future periods. The risks and uncertainties described below are a partial summary of the key risks we face. Holders of our common shares should consider these risks in addition to the more extensive list of risks and uncertainties we face that is included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2014, which is included in our 2014 Annual Report, and also in our most recent Annual Information Form, both of which are filed on SEDAR at www.sedar.com and on EDGAR at www.edgar.com .
 
Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also adversely affect our financial condition or impair our business or results of operations. If any of these risks actually occur, our business, results of operations and financial condition would suffer.
 
We may have difficulties developing and managing our growth.
One of the main elements of our strategy is to grow our core auction business, primarily by increasing our presence in markets in which we already operate and by expanding into new geographic markets and market segments in which we have not had a significant presence in the past. As part of this strategy, we may from time to time acquire additional assets or businesses from third parties. We may not be successful in growing our business or in managing this growth.

Ritchie Bros.	33 	

 	
 
For us to grow our business successfully, we need to accomplish a number of objectives, including:
	·	recruiting and retaining suitable sales and managerial personnel;	
	·	developing and enhancing an appropriate sales strategy;	
	·	identifying and developing new geographic markets and market sectors;	
	·	expanding awareness of our brand, including value proposition and competitive advantages, in existing and new markets;	
	·	successfully executing the realignment of our sales and operations teams;	
	·	identifying and acquiring, on terms favourable to us, suitable land on which to build new auction facilities and, potentially, businesses that might be appropriate acquisition targets;	
	·	obtaining necessary financing on terms favourable to us, and securing the availability of our credit facilities to fund our growth initiatives;	
	·	receiving necessary authorizations and approvals from governments for proposed development or expansion;	
	·	integrating successfully new facilities and any acquired businesses into our existing operations;	
	·	achieving acceptance of the auction process in general by potential consignors, bidders and buyers;	
	·	establishing and maintaining favourable relationships with and meeting the needs of consignors, bidders and buyers in new markets and market sectors, and maintaining these relationships in our existing markets;	
	·	capturing relevant market data and utilizing it to generate insight and understanding of key company and industry drivers and market trends;	
	·	developing appropriate responses based on data collected to meet the needs of existing and potential customers to achieve customer retention targets;	
	·	succeeding against local and regional competitors in existing and new geographic markets;	
	·	capitalizing on changes in the supply of and demand for industrial assets, and understanding and responding to changing market dynamics, in our existing and new markets; and	
	·	designing and implementing business processes and operating systems that are able to support profitable growth.	
 
We will likely need to hire additional employees to manage our growth. In addition, our growth may increase the geographic scope of our operations and increase demands on both our operating and financial systems. These factors will increase our operating complexity and the level of responsibility of existing and new management personnel. It may be difficult for us to attract and retain qualified sales personnel, managers and employees, and our existing operating and financial systems and controls may not be adequate to support our growth. We may not be able to improve our systems and controls as a result of increased costs, technological challenges, or lack of qualified employees. Our past results and growth may not be indicative of our future prospects or our ability to expand into new markets, many of which may have different competitive conditions and demographic characteristics than our existing markets.

Ritchie Bros.	34 	

 	
 
We are investing in an ecommerce marketplace, EquipmentOne, with no guarantee of long-term returns.
In 2012 we acquired an ecommerce marketplace through the acquisition of AssetNation LLC and its subsidiaries. We utilized the expertise and technology of AssetNation to develop Ritchie Bros. EquipmentOne, a new marketplace that involves technology and ecommerce.
 
Success in this marketplace depends on our ability to attract, retain and engage buyers and sellers of used equipment; the volume of transactions; the volume and price of equipment listed; customer service; and brand recognition. Because this is a new business it may take us longer than expected to realize the anticipated benefits, and those benefits may ultimately be less than anticipated or may not be realized at all, which could adversely affect our business and operating results.
 
We are pursuing a long-term growth strategy that requires upfront investment, with no guarantee of long-term returns.
In our business, we continue to pursue a long-term growth strategy that contemplates investments, including (i) investments in frontier markets that may not generate profitable growth in the near term, (ii) adding new business and information solutions, and (iii) developing our people. Planning for future growth requires investments to be made now in anticipation of growth that may not materialize, and if our strategies do not successfully address the needs of current and potential customers we may not be successful in maintaining or growing our GAP and our earnings may be adversely impacted. A large component of our SG&A expenses is considered fixed costs that we will incur regardless of any GAP growth. There can be no assurances that our GAP and revenues will be maintained or grow at a more rapid rate than our fixed costs. If we proceed with an acquisition we may not be able to appropriately integrate that business into our existing business.
 
The availability and performance of our technology infrastructure is critical to our business.
The satisfactory performance, reliability and availability of our website, enterprise resource planning system, processing systems and network infrastructure are important to our reputation and our business. We will need to continue to expand and upgrade our technology, transaction processing systems and network infrastructure both to meet increased usage of our online bidding service and other services offered on our website and to implement new features and functions.
 
Our business and results of operations could be harmed if we were unable to expand and upgrade in a timely manner our systems and infrastructure to accommodate any increases in the use of our internet services, or if we were to lose access to or the functionality of our internet systems for any reason.
 
We use both internally developed and licensed systems for transaction processing and accounting, including billings and collections processing. We continually upgrade and improve these systems to accommodate growth in our business. If we are unsuccessful in continuing to upgrade our technology, transaction processing systems or network infrastructure to accommodate increased transaction volumes, it could harm our operations and interfere with our ability to expand our business.

Ritchie Bros.	35 	

 	
   
Our substantial international operations expose us to foreign exchange rate fluctuations and political and economic instability that could harm our results of operations.
We conduct business in many countries around the world and intend to continue to expand our presence in international markets, including emerging markets. Fluctuating currency exchange rates, acts of terrorism or war, and changing social, economic and political conditions and regulations, including income tax and accounting regulations, and political interference, may negatively affect our business in international markets and our related results of operations.
 
Currency exchange rate fluctuations between the different countries in which we conduct our operations impact the purchasing power of buyers, the motivation of consignors, asset values and asset flows between various countries, including those in which we do not have operations. These factors and other global economic conditions may harm our business and our results of operations.
 
Although we report our financial results in U.S. dollars, a significant portion of our revenues are generated at auctions held outside the United States, primarily in currencies other than the U.S. dollar. Currency exchange rate changes against the U.S. dollar, particularly for the Canadian dollar and the Euro, could affect the presentation of our results in our financial statements and cause our earnings to fluctuate.
 
Our business has significant operations in foreign jurisdictions.
We are exposed to risks related to operating in foreign jurisdictions. These risks and uncertainties vary from country to country and our operations may be affected in varying degrees by government regulations. Failure to comply strictly with applicable laws, regulations and local practices relating to auction regulations and other business regulations could impact our ability to operate in these jurisdictions. The occurrence of these various factors and uncertainties cannot be accurately predicted and could have a material adverse effect on our operations or profitability.
 
Our business could be harmed if we lost the services of one or more key personnel.
The growth and performance of our business depends to a significant extent on the efforts and abilities of our executive officers and senior managers. On May 20, 2015 we appointed our new President, U.S. and Latin America, and on July 6, 2015 we appointed our new CFO. With all key personnel transitions there is risk.
 
Our business could be harmed if we lost the services of any of these individuals. We do not maintain key person insurance on the lives of any of our executive officers. As a result, we would have no way to cover the financial loss if we were to lose the services of members of our senior management team.
 
Our future success largely depends on our ability to attract, develop and retain skilled employees in all areas of our business, as well as to design an appropriate organization structure and plan effectively for succession.  Although we actively manage our human resource risks, there can be no assurance that we will be successful in our efforts.

Ritchie Bros.	36 	

 	
 
Our operating results are subject to quarterly variations.
Historically, our revenues and operating results have fluctuated from quarter to quarter. We expect to continue to experience these fluctuations as a result of the following factors, among others:
	·	the size, timing and frequency of our auctions;	
	·	the seasonal nature of the auction business in general, with peak activity typically occurring in the second and fourth calendar quarters, mainly as a result of the seasonal nature of the construction and natural resources industries;	
	·	the performance of our underwritten business (guarantee and outright purchase contracts);	
	·	general economic conditions in our markets; and	
	·	the timing of acquisitions and development of auction facilities and related costs.	
 
In addition, we usually incur substantial costs when entering new markets and the profitability of operations at new locations is uncertain as a result of the increased variability in the number and size of auctions at new sites. These and other factors may cause our future results to fall short of investor expectations or not to compare favourably to our past results.

Ritchie Bros.	37 	

 
EXHIBIT 99.2
 
Condensed Consolidated Interim Financial Statements of
 
Ritchie Bros. Auctioneers Incorporated
 
for the quarter ended June 30, 2015
 
The accompanying unaudited condensed consolidated interim financial statements do not include all information and footnotes required for a complete set of annual financial statements, as prescribed by International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. However, in the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the relevant periods have been made. Results for the interim periods are not necessarily indicative of the results to be expected for the year or any other period. These financial statements should be read in conjunction with the summary of accounting policies and the notes to the audited annual consolidated financial statements included in the Company's Annual Report on Form 40-F for the fiscal year ended December 31, 2014, a copy of which has been filed with the U.S. Securities and Exchange Commission. These policies have been applied on a consistent basis.

 	

 	
 
Condensed Consolidated Interim Income Statements
(Expressed in thousands of United States dollars, except where noted)
(Unaudited)

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues (note 5)	 	$	155,477	 	 	$	141,835	 	 	$	271,095	 	 	$	240,423	 	
Direct expenses (note 6)	 	 	17,027	 	 	 	17,616	 	 	 	28,636	 	 	 	27,916	 	
 	 	 	138,450	 	 	 	124,219	 	 	 	242,459	 	 	 	212,507	 	
Selling, general and administrative expenses (note 6)	 	 	76,001	 	 	 	72,492	 	 	 	150,373	 	 	 	143,061	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from operations	 	 	62,449	 	 	 	51,727	 	 	 	92,086	 	 	 	69,446	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange gain (loss)	 	 	(438	)	 	 	(212	)	 	 	2,769	 	 	 	1,079	 	
Gain on disposition of property, plant and equipment	 	 	298	 	 	 	258	 	 	 	473	 	 	 	329	 	
Other	 	 	1,091	 	 	 	688	 	 	 	2,530	 	 	 	1,495	 	
 	 	 	951	 	 	 	734	 	 	 	5,772	 	 	 	2,903	 	
Finance income (costs):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Finance income	 	 	680	 	 	 	617	 	 	 	1,527	 	 	 	1,125	 	
Finance costs	 	 	(1,314	)	 	 	(1,345	)	 	 	(2,583	)	 	 	(2,764	)	
 	 	 	(634	)	 	 	(728	)	 	 	(1,056	)	 	 	(1,639	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income taxes	 	 	62,766	 	 	 	51,733	 	 	 	96,802	 	 	 	70,710	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense (note 7):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	13,455	 	 	 	10,774	 	 	 	22,964	 	 	 	15,483	 	
Deferred	 	 	2,101	 	 	 	1,824	 	 	 	2,707	 	 	 	1,574	 	
 	 	 	15,556	 	 	 	12,598	 	 	 	25,671	 	 	 	17,057	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	47,210	 	 	$	39,135	 	 	$	71,131	 	 	$	53,653	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings attributable to:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity holders of the parent	 	$	46,447	 	 	$	38,607	 	 	$	70,035	 	 	$	52,864	 	
Non-controlling interest	 	 	763	 	 	 	528	 	 	 	1,096	 	 	 	789	 	
 	 	$	47,210	 	 	$	39,135	 	 	$	71,131	 	 	$	53,653	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per share attributable to equity holders of the parent (note 8):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.44	 	 	$	0.36	 	 	$	0.65	 	 	$	0.49	 	
Diluted	 	$	0.43	 	 	$	0.36	 	 	$	0.65	 	 	$	0.49	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of  shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	106,506,916	 	 	 	107,225,226	 	 	 	106,993,228	 	 	 	107,136,745	 	
Diluted	 	 	106,961,753	 	 	 	107,547,720	 	 	 	107,390,848	 	 	 	107,439,092	 	
 
See accompanying notes to condensed consolidated interim financial statements.
 
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 5, 2015.
 
/s/ Robert G. Elton	 	/s/ Ravichandra K. Saligram	 	
Robert G. Elton	 	Ravichandra K. Saligram	 	
Director	 	Chief Executive Officer	 	

Ritchie Bros.	1 	

 	
 
Condensed Consolidated Interim Statements of Comprehensive Income
(Expressed in thousands of United States dollars)
(Unaudited)
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	47,210	 	 	$	39,135	 	 	$	71,131	 	 	$	53,653	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Item that may be reclassified subsequently to net earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency translation adjustment	 	 	5,210	 	 	 	4,502	 	 	 	(23,086	)	 	 	3,431	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	$	52,420	 	 	$	43,637	 	 	$	48,045	 	 	$	57,084	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income attributable to:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity holders of the parent	 	 	51,657	 	 	 	43,068	 	 	 	47,135	 	 	 	56,265	 	
Non-controlling interest	 	 	763	 	 	 	569	 	 	 	910	 	 	 	819	 	
 	 	$	52,420	 	 	$	43,637	 	 	$	48,045	 	 	$	57,084	 	
 
See accompanying notes to condensed consolidated interim financial statements.

Ritchie Bros.	2 	

 	
 
Condensed Consolidated Interim Balance Sheets
(Expressed in thousands of United States dollars)
(Unaudited)
 
 	 	June 30,	 	 	December 31,	 	
 	 	2015	 	 	2014	 	
 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	365,245	 	 	$	233,089	 	
Trade and other receivables (note 11)	 	 	129,622	 	 	 	76,062	 	
Inventory (note 12)	 	 	34,451	 	 	 	42,750	 	
Advances against auction contracts	 	 	8,960	 	 	 	26,180	 	
Prepaid expenses and deposits	 	 	9,889	 	 	 	11,587	 	
Assets held for sale (note 13)	 	 	1,563	 	 	 	1,668	 	
Income taxes receivable	 	 	6,412	 	 	 	3,237	 	
 	 	 	556,142	 	 	 	394,573	 	
 	 	 	 	 	 	 	 	 	
Property, plant and equipment (note 14)	 	 	543,342	 	 	 	577,374	 	
Investment property (note 15)	 	 	3,111	 	 	 	3,327	 	
Other non-current assets	 	 	7,609	 	 	 	8,505	 	
Intangible assets (note 16)	 	 	44,798	 	 	 	45,504	 	
Goodwill (note 17)	 	 	81,577	 	 	 	82,354	 	
Deferred tax assets	 	 	1,153	 	 	 	1,253	 	
 	 	$	1,237,732	 	 	$	1,112,890	 	
 	 	 	 	 	 	 	 	 	
Liabilities and Equity	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Auction proceeds payable	 	$	256,777	 	 	$	109,378	 	
Trade and other payables (note 18)	 	 	102,148	 	 	 	126,738	 	
Income taxes payable	 	 	7,800	 	 	 	10,266	 	
Current borrowings (note 19)	 	 	61,767	 	 	 	7,839	 	
 	 	 	428,492	 	 	 	254,221	 	
 	 	 	 	 	 	 	 	 	
Non-current borrowings (note 19)	 	 	57,210	 	 	 	110,846	 	
Share unit liabilities (note 21)	 	 	8,915	 	 	 	5,844	 	
Other non-current liabilities	 	 	7,434	 	 	 	7,436	 	
Deferred tax liabilities	 	 	26,294	 	 	 	24,452	 	
 	 	 	528,345	 	 	 	402,799	 	
 	 	 	 	 	 	 	 	 	
Equity:	 	 	 	 	 	 	 	 	
Share capital (note 20)	 	 	129,166	 	 	 	141,257	 	
Additional paid-in capital	 	 	26,190	 	 	 	31,464	 	
Retained earnings	 	 	623,950	 	 	 	583,959	 	
Foreign currency translation reserve	 	 	(71,495	)	 	 	(48,595	)	
Equity attributable to equity holders of the parent	 	 	707,811	 	 	 	708,085	 	
Non-controlling interest	 	 	1,576	 	 	 	2,006	 	
 	 	 	709,387	 	 	 	710,091	 	
 	 	$	1,237,732	 	 	$	1,112,890	 	
 
Contingencies (note 22)
See accompanying notes to condensed consolidated interim financial statements.

Ritchie Bros.	3 	

 	
 
Condensed Consolidated Interim Statements of Changes in Equity
(Expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
 	 	Attributable to the equity holders of the parent	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Foreign	 	 	 	 	 	 	 	
 	 	Share Capital	 	 	Additional	 	 	 	 	 	Currency	 	 	Non-	 	 	 	 	
 	 	Number of	 	 	 	 	 	Paid-In	 	 	Retained	 	 	Translation	 	 	Controlling	 	 	Total	 	
 	 	Shares	 	 	Amount	 	 	Capital	 	 	Earnings	 	 	Reserve	 	 	Interest	 	 	Equity	 	
Balance, December 31, 2014	 	 	107,687,935	 	 	$	141,257	 	 	$	31,464	 	 	$	583,959	 	 	$	(48,595	)	 	$	2,006	 	 	$	710,091	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	70,035	 	 	 	-	 	 	 	1,096	 	 	 	71,131	 	
Foreign currency translation adjustment	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(22,900	)	 	 	(186	)	 	 	(23,086	)	
 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	70,035	 	 	 	(22,900	)	 	 	910	 	 	 	48,045	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exercise of stock options	 	 	1,319,635	 	 	 	35,398	 	 	 	(7,452	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	27,946	 	
Stock option compensation tax adjustment	 	 	-	 	 	 	-	 	 	 	122	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	122	 	
Stock option compensation expense (note 21)	 	 	-	 	 	 	-	 	 	 	2,056	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,056	 	
Share repurchase (note 20)	 	 	(1,900,000	)	 	 	(47,489	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(47,489	)	
Cash dividends paid	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(30,044	)	 	 	-	 	 	 	(1,340	)	 	 	(31,384	)	
Balance, June 30, 2015	 	 	107,107,570	 	 	$	129,166	 	 	$	26,190	 	 	$	623,950	 	 	$	(71,495	)	 	$	1,576	 	 	$	709,387	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2013	 	 	107,024,783	 	 	$	126,350	 	 	$	30,178	 	 	$	550,398	 	 	$	(12,909	)	 	$	534	 	 	$	694,551	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	-	 	 	 	-	 	 	 	-	 	 	 	52,864	 	 	 	-	 	 	 	789	 	 	 	53,653	 	
Foreign currency translation adjustment	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,401	 	 	 	30	 	 	 	3,431	 	
 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	52,864	 	 	 	3,401	 	 	 	819	 	 	 	57,084	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exercise of stock options	 	 	295,817	 	 	 	6,066	 	 	 	(973	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	5,093	 	
Stock option compensation tax adjustment	 	 	-	 	 	 	-	 	 	 	293	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	293	 	
Stock option compensation expense (note 21)	 	 	-	 	 	 	-	 	 	 	1,581	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,581	 	
Cash dividends paid	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(27,857	)	 	 	 	 	 	 	-	 	 	 	(27,857	)	
Balance, June 30, 2014	 	 	107,320,600	 	 	$	132,416	 	 	$	31,079	 	 	$	575,405	 	 	$	(9,508	)	 	$	1,353	 	 	$	730,745	 	
 
See accompanying notes to condensed consolidated interim financial statements.

Ritchie Bros.	4 	

 	
 
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Unaudited)

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash generated by (used in):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	47,210	 	 	$	39,135	 	 	$	71,131	 	 	$	53,653	 	
Adjustments for items not affecting cash:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation	 	 	9,003	 	 	 	9,897	 	 	 	18,283	 	 	 	19,339	 	
Amortization	 	 	1,822	 	 	 	1,082	 	 	 	3,158	 	 	 	2,237	 	
Inventory write down	 	 	253	 	 	 	469	 	 	 	313	 	 	 	469	 	
Impairment loss reversal	 	 	-	 	 	 	-	 	 	 	(493	)	 	 	-	 	
Stock option compensation expense	 	 	1,333	 	 	 	631	 	 	 	2,056	 	 	 	1,581	 	
Deferred income tax expense	 	 	2,101	 	 	 	1,824	 	 	 	2,707	 	 	 	1,574	 	
Foreign exchange gain (loss)	 	 	438	 	 	 	212	 	 	 	(2,769	)	 	 	(1,079	)	
Share of profit of an associate	 	 	(173	)	 	 	(97	)	 	 	(406	)	 	 	(179	)	
Gain on disposition of property, plant and equipment	 	 	(298	)	 	 	(258	)	 	 	(473	)	 	 	(329	)	
 	 	 	14,479	 	 	 	13,760	 	 	 	22,376	 	 	 	23,613	 	
Net changes in operating assets and liabilities (note 9)	 	 	(1,828	)	 	 	(40,795	)	 	 	128,776	 	 	 	56,990	 	
Interest paid	 	 	(1,317	)	 	 	(1,017	)	 	 	(2,619	)	 	 	(2,231	)	
Income taxes paid	 	 	(10,506	)	 	 	(11,359	)	 	 	(26,057	)	 	 	(26,339	)	
Net cash generated by (used in) operating activities	 	 	48,038	 	 	 	(276	)	 	 	193,607	 	 	 	105,686	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment additions	 	 	(1,334	)	 	 	(5,718	)	 	 	(4,661	)	 	 	(12,388	)	
Intangible asset additions	 	 	(2,048	)	 	 	(3,051	)	 	 	(4,467	)	 	 	(7,356	)	
Proceeds on disposition of property,
    plant and equipment	 	 	3,116	 	 	 	867	 	 	 	3,889	 	 	 	1,547	 	
Other	 	 	 -	 	 	 	(540	)	 	 	-	 	 	 	(540	)	
Net cash used in investing activities	 	 	(266	)	 	 	(8,442	)	 	 	(5,239	)	 	 	(18,737	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuances of share capital	 	 	23,525	 	 	 	3,780	 	 	 	27,946	 	 	 	5,093	 	
Share repurchase	 	 	-	 	 	 	-	 	 	 	(47,489	)	 	 	-	 	
Dividends paid to equity holders of the parent	 	 	(14,955	)	 	 	(13,942	)	 	 	(30,044	)	 	 	(27,857	)	
Dividends paid to non-controlling interest	 	 	-	 	 	 	-	 	 	 	(1,340	)	 	 	-	 	
Proceeds from short-term borrowings	 	 	6,682	 	 	 	40,719	 	 	 	6,497	 	 	 	45,671	 	
Repayment of short-term borrowings	 	 	(416	)	 	 	(4,400	)	 	 	(416	)	 	 	(34,400	)	
Repayment of long-term borrowings	 	 	-	 	 	 	(28,055	)	 	 	-	 	 	 	(28,055	)	
Repayment of finance lease obligations	 	 	(522	)	 	 	(487	)	 	 	(1,054	)	 	 	(853	)	
Other	 	 	306	 	 	 	155	 	 	 	201	 	 	 	(225	)	
Net cash generated by (used in) financing activities	 	 	14,620	 	 	 	(2,230	)	 	 	(45,699	)	 	 	(40,626	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of changes in foreign currency rates on cash and cash equivalents	 	 	1,925	 	 	 	3,315	 	 	 	(10,513	)	 	 	572	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Increase (decrease) in cash and cash equivalents	 	 	64,317	 	 	 	(7,633	)	 	 	132,156	 	 	 	46,895	 	
Cash and cash equivalents, beginning of period	 	 	300,928	 	 	 	288,889	 	 	 	233,089	 	 	 	234,361	 	
Cash and cash equivalents, end of period	 	$	365,245	 	 	$	281,256	 	 	$	365,245	 	 	$	281,256	 	

See accompanying notes to condensed consolidated interim financial statements.

Ritchie Bros.	5 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
1. Significant accounting policies
(a) Basis of preparation
These condensed consolidated interim financial statements, including comparatives, present the condensed consolidated interim income statements, statements of comprehensive income, balance sheets, statements of changes in equity and statements of cash flows of Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”). The condensed consolidated interim financial statements have been prepared on the historical cost basis, except for those assets and liabilities that are measured at fair values at the end of each reporting period.
 
The preparation of these condensed consolidated interim financial statements is based on accounting policies consistent with those used in the preparation of the Company’s audited annual consolidated financial statements for the year ended December 31, 2014. A selection of the accounting policies that are specifically important for interim financial reporting, or for which there has been a change since the annual consolidated financial statements, are set out below. These condensed consolidated interim financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2014; a full list of the Company's significant accounting policies is included in those financial statements.
 
(b) Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting . The condensed consolidated interim financial statements do not include all of the information required for full annual consolidated financial statements.
 
(c) Basis of consolidation
Subsidiaries
The condensed consolidated interim financial statements incorporate the assets and liabilities of all subsidiaries of Ritchie Bros. Auctioneers Incorporated for all periods presented and the results of all subsidiaries for the periods then ended. Subsidiaries are all those entities that the Company controls, defined as having power over an investee and having exposure or rights to variable returns from involvement in that investee.
 
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. All intra-entity assets and liabilities, equity, income, expense and cash-flows relating to transactions between entities within the consolidated Company are eliminated. The Company’s accounting policies are applied consistently throughout the organization.
 
Ultimate parent entity
Ritchie Bros. Auctioneers Incorporated is the ultimate parent entity of the consolidated Company.
 
(d) Revenue recognition
The Company recognizes revenue when an auction sale 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.

Ritchie Bros.	6 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
1. Significant accounting policies (continued)
(d) Revenue recognition (continued)
 
Sources of revenue
Revenues are comprised mostly of commissions earned at our auctions through the Company acting as an agent for consignors of equipment and other assets. Revenue also includes net profits on the sale of inventory, as well as fees that include administrative and documentation fees on the sale of certain lots, advertising fees, and financing fees. The Company also earns commissions and fees from its online marketplace sales.
 
Commissions from sales at our auctions represent the percentage earned by the Company on the gross auction proceeds from equipment and other assets sold at auction. The majority of commissions are earned as a pre-negotiated fixed rate of the gross selling price. Other commissions are earned from underwritten contracts, when the Company guarantees a certain level of proceeds to a consignor or purchases inventory to be sold at auction.
 
Underwritten 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 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.
 
For inventory contracts, the Company acquires title to items for a short time prior to a particular auction. Revenue from inventory sales is presented net of costs within revenues on the 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 contracts.
 
(e) Share-based payments
Equity-settled share-based payments
The Company has a stock option compensation plan that provides 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. This fair value is expensed over the period until the vesting date with recognition of a corresponding increase to 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.
 
Cash-settled share-based payments
The Company has share unit compensation plans, which are described in the share-based payment note 21(b). The cost of cash-settled transactions is measured initially at fair value using a binomial model for share units subject to market vesting conditions, or using the volume weighted average price (“VWAP”) of the Company’s common shares for the twenty days prior to grant date for share units subject only to non-market vesting conditions. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is re-measured at fair value at each reporting date up to and including the settlement date, with changes in fair value recognized through share unit expense.

Ritchie Bros.	7 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
1. Significant accounting policies (continued)
(e) Share-based payments (continued)
 
Cash-settled share-based payment (continued)
For share-based payment transactions in which the terms of the arrangement provide the Company with the choice of whether to settle in cash or by issuing equity instruments, the Company accounts for such transactions as cash-settled share-based payment transactions if, and to the extent that, the Company has incurred a liability to settle in cash. If, and to the extent that, no such liability has been incurred, the Company accounts for such transactions as equity-settled share-based payment transactions. An assessment of whether the Company has incurred a liability to settle in cash is made at each reporting date. A change in the treatment of a share-based payment transaction from cash- to equity-settled is accounted for as a modification in the period in which the change is made.
 
(f) New and amended accounting standards and interpretations
Standards issued but not yet effective
At the date of authorization of these condensed consolidated interim financial statements, the following applicable new and amended standards and interpretations were issued but not yet effective:
 
	·	IFRS 15 Revenue from contracts with customers (“IFRS 15” or the “Standard”) replaces IAS 18 Revenue and is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 15 allows for the choice of either full retrospective or modified retrospective adoption. The Company has not yet determined what transition method it will pursue. IFRS 15 is applicable to all contracts with customers, unless those contracts fall under the scope of other IFRSs. It introduces a single, principles-based, five-step model that entities must apply to all contracts with customers in order to recognize revenue from those contracts. IFRS 15 provides guidance on whether a performance obligation is satisfied at a point in time or over time, as well as whether an entity is able to apply the Standard using a portfolio approach instead of on a prescribed individual contract basis. The Company is currently evaluating the impact of this Standard on its consolidated financial statements.	
 
	·	On July 24, 2014, the IASB issued IFRS 9 Financial instruments (“IFRS 9”), which replaces IAS 39 Financial instruments: recognition and measurement . IFRS 9 includes a model for classification and measurement of financial assets and liabilities, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting. IFRS 9 will come into effect on January 1, 2018. The Company is currently evaluating the impact of IFRS 9 on its consolidated financial statements.	
 
(g) Comparative figures
Certain comparative figures have been reclassified to conform with the presentation adopted in the current year.

Ritchie Bros.	8 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	2.	Critical accounting judgments, estimates and assumptions	
Aside from the estimate discussed below, there were no significant changes in our critical accounting judgments, estimates and assumptions since the annual consolidated financial statements as at and for the year ended December 31, 2014.
 
Estimates
The Company initially measures the cost of cash-settled transactions subject to market vesting conditions using a binomial model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model, including the expected life of the share unit, volatility and dividend yield. For cash-settled share-based payment transactions, the liability is re-measured at the end of each reporting period up to the date of settlement. This requires a reassessment of the estimates at the end of each reporting period. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 21.
 
	3.	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.
 
	4.	Segment 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 two reportable segments as determined by their differing service delivery model, these are:
· Core Auction segment, a network of auction locations that conduct live, unreserved auctions with both on-site and online bidding; and
· EquipmentOne segment, a secure online marketplace that facilitates private equipment transactions.
The Company evaluates each segment’s performance based on earnings from operations. The significant non-cash items included in segment earnings from operations are depreciation and amortization.

Ritchie Bros.	9 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014

	4.	Segment information (continued)	

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30, 2015	 	 	June 30, 2015	 	
 	 	Core	 	 	Equipment-	 	 	 	 	 	Core	 	 	Equipment-	 	 	 	 	
 	 	Auction	 	 	One	 	 	Combined	 	 	Auction	 	 	One	 	 	Combined	 	
Revenues	 	$	151,645	 	 	$	3,832	 	 	$	155,477	 	 	$	264,290	 	 	$	6,805	 	 	$	271,095	 	
Direct expenses	 	 	(17,027	)	 	 	-	 	 	 	(17,027	)	 	 	(28,636	)	 	 	-	 	 	 	(28,636	)	
Selling, general and administrative expenses excluding depreciation and amortization	 	 	(61,738	)	 	 	(3,438	)	 	 	(65,176	)	 	 	(122,336	)	 	 	(6,596	)	 	 	(128,932	)	
Depreciation and amortization	 	 	(10,482	)	 	 	(343	)	 	 	(10,825	)	 	 	(20,632	)	 	 	(809	)	 	 	(21,441	)	
Earnings (loss) from operations	 	$	62,398	 	 	$	51	 	 	$	62,449	 	 	$	92,686	 	 	$	(600	)	 	$	92,086	 	
Other, finance and income tax expenses	 	 	 	 	 	 	 	 	 	 	(15,239	)	 	 	 	 	 	 	 	 	 	 	(20,955	)	
Net earnings	 	 	 	 	 	 	 	 	 	$	47,210	 	 	 	 	 	 	 	 	 	 	$	71,131	 	
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30, 2014	 	 	June 30, 2014	 	
 	 	Core	 	 	Equipment-	 	 	 	 	 	Core	 	 	Equipment-	 	 	 	 	
 	 	Auction	 	 	One	 	 	Combined	 	 	Auction	 	 	One	 	 	Combined	 	
Revenues	 	$	138,554	 	 	$	3,281	 	 	$	141,835	 	 	$	234,686	 	 	$	5,737	 	 	$	240,423	 	
Direct expenses	 	 	(17,616	)	 	 	-	 	 	 	(17,616	)	 	 	(27,916	)	 	 	-	 	 	 	(27,916	)	
Selling, general and administrative expenses excluding depreciation and amortization	 	 	(57,584	)	 	 	(3,929	)	 	 	(61,513	)	 	 	(113,493	)	 	 	(7,992	)	 	 	(121,485	)	
Depreciation and amortization	 	 	(10,649	)	 	 	(330	)	 	 	(10,979	)	 	 	(20,918	)	 	 	(658	)	 	 	(21,576	)	
Earnings (loss) from operations	 	$	52,705	 	 	$	(978	)	 	$	51,727	 	 	$	72,359	 	 	$	(2,913	)	 	$	69,446	 	
Other, finance and income tax expenses	 	 	 	 	 	 	 	 	 	 	(12,592	)	 	 	 	 	 	 	 	 	 	 	(15,793	)	
Net earnings	 	 	 	 	 	 	 	 	 	$	39,135	 	 	 	 	 	 	 	 	 	 	$	53,653	 	
 
	5.	Revenues	
 
 	 	Three months ended June 30,	 	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Commissions	 	$	124,592	 	 	$	112,684	 	 	$	217,732	 	 	$	190,858	 	
Fees	 	 	30,885	 	 	 	29,151	 	 	 	53,363	 	 	 	49,565	 	
 	 	$	155,477	 	 	$	141,835	 	 	$	271,095	 	 	$	240,423	 	
 
Net profits on inventory sales included in commissions are:
 
 	 	Three months ended June 30,	 	 	Six months ended June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Revenue from inventory sales	 	$	150,147	 	 	$	191,085	 	 	$	303,428	 	 	$	342,782	 	
Cost of inventory sold	 	 	(136,255	)	 	 	(179,782	)	 	 	(274,832	)	 	 	(320,021	)	
 	 	$	13,892	 	 	$	11,303	 	 	$	28,596	 	 	$	22,761	 	

Ritchie Bros.	10 	

 	

Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	6.	Expenses by nature	
The Company classifies expenses according to function in the condensed consolidated interim income statements. The following items are listed by function into additional components by nature:
 
Direct expenses
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Employee compensation	 	$	6,278	 	 	$	6,424	 	 	$	10,876	 	 	$	10,829	 	
Buildings and facilities	 	 	1,832	 	 	 	2,333	 	 	 	3,446	 	 	 	3,436	 	
Travel, advertising and promotion	 	 	6,933	 	 	 	6,794	 	 	 	11,087	 	 	 	10,530	 	
Other direct expenses	 	 	1,984	 	 	 	2,065	 	 	 	3,227	 	 	 	3,121	 	
 	 	$	17,027	 	 	$	17,616	 	 	$	28,636	 	 	$	27,916	 	
 
Selling, general and administrative expenses
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Employee compensation	 	$	44,046	 	 	$	39,894	 	 	$	85,775	 	 	$	77,372	 	
Buildings and facilities	 	 	10,287	 	 	 	10,370	 	 	 	20,333	 	 	 	21,151	 	
Travel, advertising and promotion	 	 	4,742	 	 	 	5,259	 	 	 	10,823	 	 	 	11,458	 	
Other selling, general and administrative expenses	 	 	6,101	 	 	 	5,990	 	 	 	12,001	 	 	 	11,504	 	
 	 	$	65,176	 	 	$	61,513	 	 	$	128,932	 	 	$	121,485	 	
Depreciation of property, plant and equipment	 	 	9,003	 	 	 	9,897	 	 	 	18,283	 	 	 	19,339	 	
Amortization of intangible assets	 	 	1,822	 	 	 	1,082	 	 	 	3,158	 	 	 	2,237	 	
 	 	$	76,001	 	 	$	72,492	 	 	$	150,373	 	 	$	143,061	 	
 
	7.	Income taxes	
The Company’s consolidated effective tax rate in respect of operations for the six months ended June 30, 2015 was 26.5% (2014: 24.1%). The effective tax rate increased relative to the comparative period primarily as the result of a greater proportion of earnings subject to taxation in jurisdictions with higher tax rates.

Ritchie Bros.	11 	

 	
  
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	8.	Net earnings per share	
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30, 2015	 	 	June 30, 2015	 	
 	 	Net	 	 	 	 	 	Per share	 	 	Net	 	 	 	 	 	Per share	 	
 	 	earnings	 	 	Shares	 	 	amount	 	 	earnings	 	 	Shares	 	 	amount	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share attributable to equity holders of the parent	 	$	46,447	 	 	 	106,506,916	 	 	$	0.44	 	 	$	70,035	 	 	 	106,993,228	 	 	$	0.65	 	
Effect of dilutive securities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock options	 	 	-	 	 	 	454,837	 	 	 	(0.01	)	 	 	-	 	 	 	397,620	 	 	 	-	 	
Diluted earnings per share attributable to equity holders of the parent	 	$	46,447	 	 	 	106,961,753	 	 	$	0.43	 	 	$	70,035	 	 	 	107,390,848	 	 	$	0.65	 	
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30, 2014	 	 	June 30, 2014	 	
 	 	Net	 	 	 	 	 	Per share	 	 	Net	 	 	 	 	 	Per share	 	
 	 	earnings	 	 	Shares	 	 	amount	 	 	earnings	 	 	Shares	 	 	amount	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share attributable to equity holders of the parent	 	$	38,607	 	 	 	107,225,226	 	 	$	0.36	 	 	$	52,864	 	 	 	107,136,745	 	 	$	0.49	 	
Effect of dilutive securities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock options	 	 	-	 	 	 	322,494	 	 	 	-	 	 	 	-	 	 	 	302,347	 	 	 	-	 	
Diluted earnings per share attributable to equity holders of the parent	 	$	38,607	 	 	 	107,547,720	 	 	$	0.36	 	 	$	52,864	 	 	 	107,439,092	 	 	$	0.49	 	
 
For the six months ended June 30, 2015, stock options to purchase 72,309 common shares were outstanding but were excluded from the calculation of diluted earnings per share as they were anti-dilutive (2014: 1,358,811).
 
	9.	Net changes in operating assets and liabilities	
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Trade and other receivables	 	$	(4,093	)	 	$	(4,953	)	 	$	(55,670	)	 	$	(62,949	)	
Inventory	 	 	(6,578	)	 	 	(2,857	)	 	 	7,261	 	 	 	(813	)	
Advances against auction contracts	 	 	(1,297	)	 	 	(8,009	)	 	 	17,004	 	 	 	(14,127	)	
Prepaid expenses and deposits	 	 	2,112	 	 	 	1,667	 	 	 	1,289	 	 	 	(2,263	)	
Income taxes receivable	 	 	(2,744	)	 	 	(4,219	)	 	 	(3,175	)	 	 	(6,513	)	
Income taxes payable	 	 	14,477	 	 	 	11,736	 	 	 	23,913	 	 	 	19,590	 	
Auction proceeds payable	 	 	47	 	 	 	(38,214	)	 	 	149,860	 	 	 	121,375	 	
Trade and other payables	 	 	(6,295	)	 	 	3,814	 	 	 	(17,792	)	 	 	2,732	 	
Share unit liabilities	 	 	2,693	 	 	 	1,205	 	 	 	3,444	 	 	 	2,340	 	
Other	 	 	(150	)	 	 	(965	)	 	 	2,642	 	 	 	(2,382	)	
Net changes in operating assets and liabilities	 	$	(1,828	)	 	$	(40,795	)	 	$	128,776	 	 	$	56,990	 	

Ritchie Bros.	12 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014

	10.	Fair value measurement	
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement or disclosure, as explained in the Company’s audited annual financial statements.
 
Fair value measurements	 	Category	 	June 30, 2015	 	 	December 31, 2014	 	
 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	 	 	
Other non-current assets:	 	 	 	 	 	 	 	 	 	 	
Available-for-sale investments:	 	 	 	 	 	 	 	 	 	 	
Unquoted preference shares	 	Level 3	 	$	2,025	 	 	$	2,028	 	
Total assets	 	 	 	$	2,025	 	 	$	2,028	 	
 
Fair values disclosed	 	Category	 	June 30, 2015	 	 	December 31, 2014	 	
 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment:	 	 	 	 	 	 	 	 	 	 	
Land and improvements	 	Level 3	 	$	14,552	 	 	$	16,150	 	
Auction building	 	Level 3	 	 	4,306	 	 	 	4,779	 	
Investment property	 	Level 2	 	 	16,167	 	 	 	17,289	 	
Total assets	 	 	 	$	35,025	 	 	$	38,218	 	
 	 	 	 	 	 	 	 	 	 	 	
Liabilities	 	 	 	 	 	 	 	 	 	 	
Current borrowings	 	Level 2	 	$	61,767	 	 	$	7,839	 	
Non-current borrowings	 	Level 2	 	 	59,444	 	 	 	114,532	 	
Total liabilities	 	 	 	$	121,211	 	 	$	122,371	 	
 
No fair value measurement change was recognized in the period.
 
	11.	Trade and other receivables	
 
 	 	June 30,	 	 	December 31,	 	
 	 	2015	 	 	2014	 	
 	 	 	 	 	 	 	
Trade receivables	 	$	123,187	 	 	$	60,642	 	
Consumption taxes receivable	 	 	5,259	 	 	 	13,872	 	
Other receivables	 	 	1,176	 	 	 	1,548	 	
 	 	$	129,622	 	 	$	76,062	 	

Ritchie Bros.	13 	

 	
  
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	12.	Inventory	
Every period end inventory is reviewed to ensure that it is recorded at the lower of cost and net realizable value. During the three months ended June 30, 2015, the Company recorded an inventory write down of $253,000 (June 30, 2014: $469,000).
 
Of inventory held at June 30, 2015, 100% is expected to be sold prior to the end of October 2015 (December 31, 2014: 100% sold by the end of June 2015).
 
	13.	Assets held for sale	
At June 30, 2015, the Company held land for sale in Edmonton, Canada. Property held in London, Canada was sold during the three months ended June 30, 2015.
 
Balance, December 31, 2014	 	$	1,668	 	
Reclassified from property, plant and equipment	 	 	2,092	 	
Disposal	 	 	(2,146	)	
Other	 	 	(51	)	
Balance, June 30, 2015	 	$	1,563	 	

Ritchie Bros.	14 	

 	
  
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	14.	Property, plant and equipment	
 
 	 	Land and
improvements	 	 	Buildings	 	 	Yard and
automotive 
equipment	 	 	Computer
software
and
equipment	 	 	Office
equipment	 	 	Leasehold
improvements	 	 	Assets under
development	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2014	 	$	354,469	 	 	$	269,912	 	 	$	67,226	 	 	$	81,739	 	 	$	23,639	 	 	$	21,131	 	 	$	18,773	 	 	$	836,889	 	
Additions	 	 	22	 	 	 	-	 	 	 	3,488	 	 	 	43	 	 	 	30	 	 	 	158	 	 	 	1,716	 	 	 	5,457	 	
Disposals	 	 	-	 	 	 	(900	)	 	 	(3,700	)	 	 	(157	)	 	 	(3	)	 	 	-	 	 	 	-	 	 	 	(4,760	)	
Transfers from assets under development to completed assets	 	 	1,063	 	 	 	568	 	 	 	190	 	 	 	957	 	 	 	233	 	 	 	156	 	 	 	(3,167	)	 	 	-	 	
Reclassified as held for sale	 	 	(1,940	)	 	 	(164	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(2,104	)	
Impairment loss reversal	 	 	387	 	 	 	106	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	493	 	
Foreign exchange movement	 	 	(11,265	)	 	 	(7,957	)	 	 	(2,146	)	 	 	(5,363	)	 	 	(924	)	 	 	(559	)	 	 	(119	)	 	 	(28,333	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, June 30, 2015	 	$	342,736	 	 	$	261,565	 	 	$	65,058	 	 	$	77,219	 	 	$	22,975	 	 	$	20,886	 	 	$	17,203	 	 	$	807,642	 	

Ritchie Bros.	15 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	14.	Property, plant and equipment (continued)	

 	 	Land and
improvements	 	 	Buildings	 	 	Yard and
automotive
equipment	 	 	Computer
software
and
equipment	 	 	Office
equipment	 	 	Leasehold
improvements	 	 	Assets under
development	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accumulated depreciation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2014	 	$	(50,235	)	 	$	(78,370	)	 	$	(39,284	)	 	$	(65,778	)	 	$	(15,539	)	 	$	(10,309	)	 	$	-	 	 	$	(259,515	)	
Depreciation for the period	 	 	(3,207	)	 	 	(4,657	)	 	 	(3,610	)	 	 	(4,832	)	 	 	(819	)	 	 	(1,158	)	 	 	-	 	 	 	(18,283	)	
Disposals	 	 	-	 	 	 	900	 	 	 	2,434	 	 	 	156	 	 	 	1	 	 	 	-	 	 	 	-	 	 	 	3,491	 	
Reclassified as held for sale	 	 	-	 	 	 	12	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	12	 	
Foreign exchange movement	 	 	1,204	 	 	 	2,271	 	 	 	1,244	 	 	 	4,371	 	 	 	612	 	 	 	293	 	 	 	-	 	 	 	9,995	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, June 30, 2015	 	$	(52,238	)	 	$	(79,844	)	 	$	(39,216	)	 	$	(66,083	)	 	$	(15,745	)	 	$	(11,174	)	 	$	-	 	 	$	(264,300	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net carrying amount:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2014	 	$	304,234	 	 	$	191,542	 	 	$	27,942	 	 	$	15,961	 	 	$	8,100	 	 	$	10,822	 	 	$	18,773	 	 	$	577,374	 	
As at June 30, 2015	 	$	290,498	 	 	$	181,721	 	 	$	25,842	 	 	$	11,136	 	 	$	7,230	 	 	$	9,712	 	 	$	17,203	 	 	$	543,342	 	

Ritchie Bros.	16 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	15.	Investment property	
Investment property held at June 30, 2015 is comprised of land and site improvements located in Edmonton, Canada and Polotitlan, Mexico.
 
Balance, December 31, 2014	 	$	3,327	 	
Foreign exchange movement	 	 	(216	)	
Balance, June 30, 2015	 	$	3,111	 	
 
	16.	Intangible assets	
  
 	 	Trade names	 	 	Customer	 	 	 	 	 	Software under	 	 	 	 	
 	 	& trademarks	 	 	relationships	 	 	Software	 	 	development	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2014	 	$	800	 	 	$	19,500	 	 	$	11,955	 	 	$	23,254	 	 	$	55,509	 	
Transfers from software under development	 	 	-	 	 	 	-	 	 	 	12,753	 	 	 	(12,753	)	 	 	-	 	
Additions	 	 	-	 	 	 	-	 	 	 	232	 	 	 	4,235	 	 	 	4,467	 	
Disposals	 	 	-	 	 	 	-	 	 	 	(3,194	)	 	 	-	 	 	 	(3,194	)	
Foreign exchange movement	 	 	-	 	 	 	-	 	 	 	(577	)	 	 	(1,512	)	 	 	(2,089	)	
Balance, June 30, 2015	 	$	800	 	 	$	19,500	 	 	$	21,169	 	 	$	13,224	 	 	$	54,693	 	
 
 	 	Trade names	 	 	Customer	 	 	 	 	 	Software under	 	 	 	 	
 	 	& trademarks	 	 	relationships	 	 	Software	 	 	development	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accumulated amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2014	 	$	-	 	 	$	(5,119	)	 	$	(4,886	)	 	$	-	 	 	$	(10,005	)	
Amortization for the period	 	 	-	 	 	 	(975	)	 	 	(2,183	)	 	 	-	 	 	 	(3,158	)	
Disposals	 	 	-	 	 	 	-	 	 	 	3,194	 	 	 	-	 	 	 	3,194	 	
Foreign exchange movement	 	 	-	 	 	 	-	 	 	 	74	 	 	 	-	 	 	 	74	 	
Balance, June 30, 2015	 	$	-	 	 	$	(6,094	)	 	$	(3,801	)	 	$	-	 	 	$	(9,895	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net carrying amount:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2014	 	$	800	 	 	$	14,381	 	 	$	7,069	 	 	$	23,254	 	 	$	45,504	 	
As at June 30, 2015	 	$	800	 	 	$	13,406	 	 	$	17,368	 	 	$	13,224	 	 	$	44,798	 	
 
During the six months ended June 30, 2015, interest of $513,000 (2014: $606,000) was capitalized to the cost of software under development. These interest costs relating to qualifying assets are capitalized at a weighted average rate of 6.4% (2014: 6.4%).

Ritchie Bros.	17 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	17.	Goodwill	
 
Balance, December 31, 2014	 	$	82,354	 	
Foreign exchange movement	 	 	(777	)	
Balance, June 30, 2015	 	$	81,577	 	
 
Goodwill is subject to annual impairment reviews.
 
	18.	Trade and other payables	
 
 	 	June 30,	 	 	December 31,	 	
 	 	2015	 	 	2014	 	
 	 	 	 	 	 	 	
Trade payables	 	$	38,725	 	 	$	46,757	 	
Accrued liabilities	 	 	34,804	 	 	 	45,863	 	
Social security and sales taxes payable	 	 	16,126	 	 	 	18,870	 	
Net consumption taxes payable	 	 	8,890	 	 	 	10,862	 	
Other payables	 	 	3,603	 	 	 	4,386	 	
 	 	$	102,148	 	 	$	126,738	 	
 
	19.	Borrowings	
 
 	 	Carrying value	 	
 	 	June 30,	 	 	December 31,	 	
 	 	2015	 	 	2014	 	
Current Borrowings	 	$	61,767	 	 	$	7,839	 	
 	 	 	 	 	 	 	 	 	
Non-current Borrowings	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Term loan, denominated in Canadian dollars, unsecured, bearing interest at 4.225%, due in quarterly installments of interest only, with the full amount of the principal due in May 2022.	 	$	27,210	 	 	$	29,257	 	
 	 	 	 	 	 	 	 	 	
Term loan, denominated in United States dollars, unsecured, bearing interest at 3.59%, due in quarterly installments of interest only, with the full amount of the principal due in May 2022.	 	 	30,000	 	 	 	30,000	 	
 	 	 	 	 	 	 	 	 	
Term loan, denominated in Canadian dollars, unsecured, bearing interest at 6.385%, due in quarterly installments of interest only, with the full amount of the principal due in May 2016.	 	 	-	 	 	 	51,589	 	
 	 	 	 	 	 	 	 	 	
 	 	$	57,210	 	 	$	110,846	 	
Total Borrowings	 	$	118,977	 	 	$	118,685	 	
 
At June 30, 2015, current borrowings consisted of a Canadian dollar 60 million term loan under the Company’s uncommitted, non-revolving credit facility and borrowings under the Company’s committed, revolving credit facility.
 
As at June 30, 2015, current borrowings had a weighted average annual interest rate of 5.5% (December 31, 2014: 1.83%)

Ritchie Bros.	18 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	20.	Share capital	
(a) Authorized
Unlimited number of common shares, without par value.
Unlimited number of senior preferred shares, without par value, issuable in series.
Unlimited number of junior preferred shares, without par value, issuable in series.
 
(b) Issued
All issued shares are fully paid. No preferred shares have been issued.
 
(c) Share repurchase
During March 2015, 1,900,000 common shares were repurchased at a weighted average share price of $24.98 per share. The repurchased shares were cancelled on March 26, 2015.
 
	21.	Share-based payments	
Share-based payments consisted of the following compensation costs recognized in selling, general and administrative expenses:
 
 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2015	 	 	2014	 	 	2015	 	 	2014	 	
Stock option compensation expense	 	$	1,333	 	 	$	631	 	 	$	2,056	 	 	$	1,581	 	
Share unit expense	 	 	2,902	 	 	 	1,258	 	 	 	3,919	 	 	 	2,522	 	
Employee share purchase plan - employer contributions	 	 	323	 	 	 	320	 	 	 	631	 	 	 	630	 	
 	 	$	4,558	 	 	$	2,209	 	 	$	6,606	 	 	$	4,733	 	
 
(a) Stock option plan
Stock option activity for the six months ended June 30, 2015 and the year ended December 31, 2014 is presented below:

 	 	June 30, 2015	 	 	December 31, 2014	 	
 	 	Common shares	 	 	WA exercise	 	 	Common shares	 	 	WA exercise	 	
 	 	under option	 	 	price	 	 	under option	 	 	price	 	
Outstanding, beginning of period	 	 	3,897,791	 	 	$	22.09	 	 	 	3,749,574	 	 	$	21.09	 	
Granted	 	 	839,942	 	 	 	25.28	 	 	 	837,364	 	 	 	23.60	 	
Exercised	 	 	(1,319,634	)	 	 	21.18	 	 	 	(663,152	)	 	 	18.28	 	
Forfeited	 	 	(63,719	)	 	 	22.87	 	 	 	(25,995	)	 	 	23.26	 	
Outstanding, end of period	 	 	3,354,380	 	 	$	23.23	 	 	 	3,897,791	 	 	$	22.09	 	
Exercisable, end of period	 	 	1,802,863	 	 	$	22.23	 	 	 	2,483,530	 	 	$	21.65	 	
 
The options outstanding at June 30, 2015 expire on dates ranging to June 8, 2025. The weighted average (“WA”) share price of options exercised during the six months ended June 30, 2015 was $27.76 per option (2014: $23.92).

Ritchie Bros.	19 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	21.	Share-based payments (continued)	
(a) Stock option plan (continued)
The following is a summary of stock options outstanding and exercisable at June 30, 2015:

 	 	 	Options outstanding	 	 	Options exercisable	 	
 	 	 	 	 	 	WA remaining	 	 	WA exercise	 	 	 	 	 	WA exercise	 	
Range of exercise prices	 	 	Number	 	 	life (years)	 	 	price	 	 	Number	 	 	price	 	
$	14.50	 	 	-	 	$	14.70	 	 	 	196,750	 	 	 	3.3	 	 	$	14.52	 	 	 	196,750	 	 	$	14.52	 	
$	18.67	 	 	-	 	$	19.95	 	 	 	69,028	 	 	 	1.9	 	 	 	18.71	 	 	 	69,028	 	 	 	18.71	 	
$	21.34	 	 	-	 	$	23.44	 	 	 	1,302,722	 	 	 	7.1	 	 	 	22.27	 	 	 	997,005	 	 	 	22.37	 	
$	24.39	 	 	-	 	$	25.91	 	 	 	1,713,571	 	 	 	8.0	 	 	 	24.87	 	 	 	540,080	 	 	 	25.24	 	
$	29.93	 	 	 	 	 	 	 	 	 	72,309	 	 	 	9.9	 	 	 	29.93	 	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	3,354,380	 	 	 	7.3	 	 	$	23.23	 	 	 	1,802,863	 	 	$	22.23	 	

The fair value of the stock option grants was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:
 
 	 	2015	 	 	2014	 	
Risk free interest rate	 	 	1.8	%	 	 	1.7	%	
Expected dividend yield	 	 	2.18	%	 	 	2.31	%	
Expected lives of the stock options	 	 	5 years	 	 	 	5 years	 	
Expected volatility	 	 	26.3	%	 	 	29.2	%	
 
The WA grant date fair value of options granted during the six months ended June 30, 2015 was $5.36 per option (2014: $5.09). The compensation expense arising from option grants is amortized over the relevant vesting periods of the underlying options.
 
(b) Share unit plans
During the six months ended June 30, 2015, the Company granted share units under two new performance share unit (“PSU”) plans, a senior executive PSU plan and an employee PSU plan. The two new plans have identical terms and conditions, with the exception of clauses under the senior executive PSU plan that address the treatment of recipients’ PSUs in the event of a change of control of the Company.
 
Under the plans, the number of PSUs that vest is conditional upon specified market and non-market vesting conditions being met. The market vesting condition is based on the relative performance of the Company’s share price in comparison to the performance of a pre-determined portfolio of other companies’ share prices. The non-market vesting conditions are based on the achievement of specific performance measures and can result in participants earning between 0% and 200% of the target number of PSUs granted.
 
Both new plans entitle the grant recipient to a payment equal to the dividend-adjusted number of PSUs vested multiplied by the VWAP of the Company’s common shares reported by the New York Stock Exchange for the twenty days prior to vest date. Unlike the Company’s other share unit plans, the two new PSU plans give the Company the option of settling in either cash or equity, with equity-settlement subject to shareholder approval. Shareholder approval had not been sought out or obtained as at June 30, 2015. The Company has determined that there is a present obligation to settle in cash, and has accounted for the two new PSU plans as cash-settled share-based payment transactions.

Ritchie Bros.	20 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	21.	Share-based payments (continued)	
	(b)	Share unit plans (continued)	
The WA grant date fair value of the 199,938 PSUs granted under the new plans during the six months ended June 30, 2015, excluding the effect of dividend adjustments, was $24.33 per share unit. These PSUs are subject to market vesting conditions and their fair value at grant date was estimated using a binomial model with the following assumptions:
 
 	 	2015	 	
Risk free interest rate	 	 	1.3	%	
Expected dividend yield	 	 	2.17	%	
Expected lives of the PSUs	 	 	3 years	 	
Expected volatility	 	 	29.4	%	
Average expected volatility of comparable companies	 	 	32.8	%	
 
The WA grant date fair value of the 18,743 deferred share units (“DSUs”) granted under the DSU plan to members of the Board of Directors during the six months ended June 30, 2015, excluding the effect of dividend adjustments, was $25.77 per share unit (2014: $22.61). These DSUs are not subject to market vesting conditions and their fair value was estimated using the 20-day volume weighted average price of the Company’s common shares listed on the New York Stock Exchange.
 
The compensation expense arising from share unit grants is amortized over the relevant vesting periods of the underlying units.
 
	22.	Contingencies	
(a) Legal and other claims
The Company is subject to legal and other claims that arise in the ordinary course of its business. The Company does not believe that the results of these claims will have a material effect on the Company’s balance sheet or income statement.
 
(b) Guarantee contracts
In the normal course of business, the Company will in certain situations guarantee to a consignor a minimum level of proceeds in connection with the sale at auction of that consignor’s equipment.
 
At June 30, 2015 there was $29,949,000 of industrial assets guaranteed under contract, of which 100% is expected to be sold prior to the end of October 2015 (December 31, 2014: $85,967,000 of which 100% sold prior to the end of May 2015).
 
At June 30, 2015 there was $17,718,000 of agricultural assets guaranteed under contract, of which 90% is expected to be sold prior to the end of September 2015, with the remainder to be sold prior to the end of November 2015 (December 31, 2014: $15,793,000 of which 100% sold prior to the end of June 2015).
 
The outstanding guarantee amounts are undiscounted and before estimated proceeds from sale at auction.
 
	23.	Related party transactions	
Selling, general and administrative expenses include $2.1 million in termination benefits recognized in relation to key management personnel during the six months ended June 30, 2015.

Ritchie Bros.	21 	

 	
 
Notes to the Condensed Consolidated Interim Financial Statements
(Tabular amounts expressed in thousands of United States dollars, except where noted)
(Unaudited)
 
Three and six months ended June 30, 2015 and 2014
 
	24.	Transition to United States Generally Accepted Accounting Principles	
As a non-U.S. company listed on the NYSE, the United States Securities and Exchange Commission (“SEC”) requires the Company to perform a test on the last business day of the second quarter of each fiscal year to determine whether it continues to meet the definition of a foreign private issuer (“FPI”). Historically, the Company met the definition of an FPI, and as such, prepared consolidated financial statements in accordance with IFRS, reported with the SEC on FPI forms, and complied with SEC rules and regulations applicable to FPIs.
 
On June 30, 2015, the Company performed the test and determined that it no longer meets the definition of an FPI. As such, from January 1, 2016 the Company will be required to prepare consolidated financial statements in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), report with the SEC on domestic forms, and comply with SEC rules and regulations applicable to domestic issuers.
 
Consequently, the Company’s 2015 annual consolidated financial statements will be prepared in accordance with U.S. GAAP. The transition from IFRS to U.S. GAAP will include retrospective application of U.S. GAAP to all reporting periods from our inception. The Company is currently evaluating the impact that our transition to U.S. GAAP will have on its consolidated financial statements.

Ritchie Bros.	22