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, 2009

Ritchie Bros. Auctioneers Incorporated

6500 River Road
Richmond, BC, Canada
V6X 4G5
(604) 273 7564
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F o           Form 40-F þ

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): o

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): o

Indicate by check mark whether by furnishing information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o            No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule   12g3-2(b): 82-                 

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements do not include all information and footnotes required by Canadian or United States generally accepted accounting principles for a complete set of annual financial statements. However, in the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the relevant periods have been made. Results for the interim periods are not necessarily indicative of the results to be expected for the year or any other period. These financial statements should be read in conjunction with the summary of accounting policies and the notes to the consolidated financial statements included in the Company’s Annual Report on Form 40-F for the fiscal year ended December 31, 2008, a copy of which has been filed with the U.S. Securities and Exchange Commission. These policies have been applied on a consistent basis.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Operations and Retained Earnings

(Expressed in thousands of United States dollars, except per share amounts)
(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2009				2008				2009				2008
Auction revenues		$	120,459			$	115,822			$	204,134			$	197,216
Direct expenses			16,113				16,381				24,966				26,496
			104,346				99,441				179,168				170,720
Expenses:
Depreciation and amortization			7,607				5,983				14,596				11,587
General and administrative			41,384				42,778				81,202				84,927
			48,991				48,761				95,798				96,514
Earnings from operations			55,355				50,680				83,370				74,206
Other income (expense):
Interest expense			(64	)			(144	)			(226	)			(514	)
Interest income			601				1,061				1,220				2,346
Foreign exchange gain (loss)			(167	)			1,887				530				2,445
Gain (loss) on disposition of capital assets			(52	)			7,217				(97	)			7,310
Other			400				434				698				677
			718				10,455				2,125				12,264
Earnings before income taxes			56,073				61,135				85,495				86,470
Income tax expense (recovery):
Current			16,051				16,904				24,223				25,239
Future			1,175				(1,688	)			2,546				(1,095	)
			17,226				15,216				26,769				24,144
Net earnings		$	38,847			$	45,919			$	58,726			$	62,326
Net earnings per share (note 6 (d)):
Basic		$	0.37			$	0.44			$	0.56			$	0.60
Diluted		$	0.37			$	0.43			$	0.56			$	0.59
Retained earnings, beginning of period		$	368,285			$	300,092			$	357,845			$	292,046
Net earnings			38,847				45,919				58,726				62,326
Cash dividends paid			(9,467	)			(8,377	)			(18,906	)			(16,738	)
Retained earnings, end of period		$	397,665			$	337,634			$	397,665			$	337,634

See accompanying notes to consolidated financial statements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Balance Sheets

(Expressed in thousands of United States dollars)

		June 30,				December 31,
		2009				2008
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	272,137			$	107,275
Accounts receivable			115,103				60,375
Inventory			6,363				9,711
Advances against auction contracts			712				285
Prepaid expenses and deposits			7,615				12,088
Other assets			601				752
Income taxes receivable			1,874				2,674
Future income tax asset			1,077				780
			405,482				193,940
Capital assets (note 3)			520,479				453,642
Other assets (note 4)			12,594				1,164
Goodwill			40,721				40,233
Future income tax asset			678				509
		$	979,954			$	689,488
Liabilities and Shareholders’ Equity
Current liabilities:
Auction proceeds payable		$	235,505			$	62,717
Accounts payable and accrued liabilities			96,144				84,114
			331,649				146,831
Long-term debt (note 5)			120,637				67,411
Other liabilities			60				60
Future income tax liability			12,745				10,024
			465,091				224,326
Shareholders’ equity:
Share capital (note 6)			98,412				94,366
Additional paid-in capital			14,852				14,355
Retained earnings			397,665				357,845
Accumulated other comprehensive income			3,934				(1,404	)
			514,863				465,162
		$	979,954			$	689,488

Commitments and contingencies (note 7)

See accompanying notes to consolidated financial statements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Shareholders’ Equity

(Expressed in thousands of United States dollars)
(Unaudited)

														Accumulated
						Additional								Other				Total
		Share				Paid-In				Retained				Comprehensive				Shareholders’
		Capital				Capital				Earnings				Income				Equity
Balance, December 31, 2008		$	94,366			$	14,355			$	357,845			$	(1,404	)		$	465,162
Exercise of stock options			86				(6	)			—				—				80
Stock compensation tax adjustment			—				15				—				—				15
Stock compensation expense			—				532				—				—				532
Cash dividends paid			—				—				(9,439	)			—				(9,439	)
Net earnings			—				—				19,879				—				19,879
Foreign currency translation adjustment			—				—				—				(10,970	)			(10,970	)
Balance, March 31, 2009			94,452				14,896				368,285				(12,374	)			465,259
Exercise of stock options			3,960				(677	)			—				—				3,283
Stock compensation tax adjustment			—				104				—				—				104
Stock compensation expense			—				529				—				—				529
Cash dividends paid			—				—				(9,467	)			—				(9,467	)
Net earnings			—				—				38,847				—				38,847
Foreign currency translation adjustment			—				—				—				16,308				16,308
Balance, June 30, 2009		$	98,412			$	14,852			$	397,665			$	3,934			$	514,863

Consolidated Statements of Comprehensive Income

(Expressed in thousands of United States dollars)
(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2009				2008				2009				2008
Net earnings		$	38,847			$	45,919			$	58,726			$	62,326
Other comprehensive income:
Foreign currency translation adjustment			16,308				381				5,338				5,743
Reclassification to net earnings of foreign currency translation gains			—				—				—				(2,153	)
Comprehensive income		$	55,155			$	46,300			$	64,064			$	65,916

See accompanying notes to consolidated financial statements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Cash Flows

(Expressed in thousands of United States dollars)
(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2009				2008				2009				2008
Cash provided by (used in):
Operating activities:
Net earnings		$	38,847			$	45,919			$	58,726			$	62,326
Items not involving cash:
Depreciation and amortization			7,607				5,983				14,596				11,587
Stock compensation expense			529				592				1,061				1,155
Future income taxes			1,175				(1,688	)			2,546				(1,095	)
Foreign exchange loss (gain)			167				(1,887	)			(530	)			(2,445	)
Net loss (gain) on disposition of capital assets			52				(7,217	)			97				(7,310	)
Changes in non-cash working capital:
Accounts receivable			29,983				(69,018	)			(51,466	)			(138,383	)
Inventory			(736	)			13,796				3,654				1,630
Advances against auction contracts			6,979				(4,520	)			56				(4,518	)
Prepaid expenses and deposits			382				(328	)			1,166				(6,253	)
Income taxes receivable			(2,108	)			(773	)			699				4,434
Income taxes payable			(1,503	)			—				—				—
Auction proceeds payable			(19,705	)			54,219				162,626				221,187
Accounts payable and accrued liabilities			3,534				(9,558	)			10,670				(14,198	)
Other			643				1,082				247				(691	)
Net cash flows from operating activities			65,846				26,602				204,148				127,426
Investing activities:
Capital asset additions			(43,763	)			(26,068	)			(79,203	)			(52,710	)
Proceeds on disposition of capital assets			843				19,161				1,408				19,686
Decrease (increase) in other assets			119				—				(5,181	)			—
Net cash flows from investing activities			(42,801	)			(6,907	)			(82,976	)			(33,024	)
Financing activities:
Issuance of share capital			3,283				298				3,363				2,093
Dividends on common shares			(9,467	)			(8,377	)			(18,906	)			(16,738	)
Repayment of short-term debt			(300	)			(24,362	)			(300	)			(24,362	)
Issuance of short-term debt			—				33,541				281				34,477
Issuance of long-term debt			51,408				—				66,408				—
Repayment of long-term debt			(15,000	)			(71	)			(15,000	)			(139	)
Other			(83	)			13				(68	)			143
Net cash flows from financing activities			29,841				1,042				35,778				(4,526	)
Effect of changes in foreign currency rates on cash and cash equivalents			9,365				1,633				7,912				2,961
Increase in cash and cash equivalents			62,251				22,370				164,862				92,837
Cash and cash equivalents, beginning of period			209,886				220,782				107,275				150,315
Cash and cash equivalents, end of period		$	272,137			$	243,152			$	272,137			$	243,152
Supplemental information:
Interest paid		$	1,236			$	1,060			$	2,141			$	2,031
Income taxes paid		$	19,630			$	16,370			$	23,448			$	19,428

See accompanying notes to consolidated financial statements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

1.

Significant accounting policies:

	(a)		Basis of presentation:
			These unaudited consolidated financial statements present the financial position, results of operations, comprehensive income, changes in shareholders’ equity and cash flows of Ritchie Bros. Auctioneers Incorporated (the “Company’’) and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
			These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP’’) applicable to interim financial information and are based on accounting principles and practices consistent with those used in the preparation of the annual consolidated financial statements. These consolidated financial statements are not materially different from those that would be presented in accordance with United States GAAP, except as disclosed in note 9. The interim consolidated financial statements should be read in conjunction with the December 31, 2008 audited consolidated financial statements.
	(b)		Revenue recognition:
			Auction revenues are comprised mostly of auction commissions, which are earned by the Company acting as an agent for consignors of equipment and other assets, but also include net profits on the sale of inventory, internet and proxy purchase fees, administrative and documentation fees on the sale of certain lots, and auction advertising fees. All revenue is recognized when the auction sale is complete and the Company has determined that the auction proceeds are collectible.
			Auction commissions represent the percentage earned by the Company on the gross proceeds from equipment and other assets sold at auction. The majority of auction commissions is earned as a pre-negotiated fixed rate of the gross selling price. Other commissions are earned when the Company guarantees a certain level of proceeds to a consignor. This type of commission typically includes a pre-negotiated percentage of the guaranteed gross proceeds plus a percentage of proceeds in excess of the guaranteed amount. If actual auction proceeds are less than the guaranteed amount, commission is reduced; if proceeds are sufficiently lower, the Company can incur a loss on the sale. Losses, if any, resulting from guarantee contracts are recorded in the period in which the relevant auction is completed. If a loss relating to a guarantee contract to be sold after a period end is known 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 (see note 7).

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

1.

Significant accounting policies (continued):

	(b)		Revenue recognition (continued):
			Auction revenues also include net profit on the sale of inventory items. In some cases, incidental to its regular commission business, the Company temporarily acquires title to items for a short time prior to a particular auction sale. The auction revenue recorded is the net gain or loss on the sale of the items.
	(c)		Comparative figures:
			Certain comparative figures have been reclassified to conform with the presentation adopted in the current period.

2.		Seasonality of operations:
		The Company’s operations are both seasonal and event driven. Auction 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. Mid-December through mid-February and July through August are traditionally less active periods.
		In addition, the Company’s revenue is dependent upon the timing of such events as fleet upgrades and realignments, contractor retirements, and the completion of major projects, among other things. These events are not predictable and are usually unrelated to fiscal quarters, making quarter-to-quarter comparability difficult.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

3.

Capital assets:

						Accumulated				Net book
June 30, 2009		Cost				depreciation				value
Land and improvements		$	201,746			$	16,150			$	185,596
Buildings			178,850				36,143				142,707
Land and buildings under development			128,882				—				128,882
Computer software			31,926				11,224				20,702
Yard equipment			25,277				11,817				13,460
Automotive equipment			18,850				7,164				11,686
Computer equipment			15,630				7,101				8,529
Office equipment			13,629				6,023				7,606
Leasehold improvements			3,738				2,427				1,311
		$	618,528			$	98,049			$	520,479

						Accumulated				Net book
December 31, 2008		Cost				depreciation				value
Land and improvements		$	173,901			$	13,649			$	160,252
Buildings			163,044				35,153				127,891
Land and buildings under development			112,807				—				112,807
Computer software			25,214				8,000				17,214
Yard equipment			21,831				10,424				11,407
Automotive equipment			17,811				6,868				10,943
Computer equipment			11,629				5,418				6,211
Office equipment			11,138				5,519				5,619
Leasehold improvements			3,436				2,138				1,298
		$	540,811			$	87,169			$	453,642

During the six months ended June 30, 2009, the Company capitalized interest of $1,978,000 (six months ended June 30, 2008 — $1,205,000) to the cost of land and buildings under development.

RITCHIE BROS. AUCTIONEERS INCORPORATED Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008 (Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts) (Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

4.

Other non-current assets:

		June 30,				December 31,
		2009				2008
Note receivable		$	5,189			$	—
Long-term prepaids			3,144				133
Assets held for sale			4,261				1,031
		$	12,594			$	1,164

The note receivable is secured by a property the Company is leasing and a neighbouring property. The note is repayable in monthly installments of principal plus interest, with final payment due in 2013.

5.

Long-term debt:

		June 30,				December 31,
		2009				2008
Term loan, denominated in Canadian dollars, unsecured, bearing interest at 6.385%, due in quarterly installments of interest only, with full amount of the principal due in 2016.		$	51,437			$	—
Term loan, unsecured, bearing interest at 5.610%, due in quarterly installments of interest only, with full amount of the principal due in 2011.			29,949				29,933
Revolving loan, denominated in Canadian dollars, unsecured, bearing interest at Canadian prime rate, due in monthly installments of interest only. The revolving credit facility is available until January 2014.			26,398				25,220
Term loan, denominated in Canadian dollars, secured by a general security agreement, bearing interest at 4.429%, due in monthly installments of interest only, with the full amount of the principal due in 2010.			12,853				12,258
		$	120,637			$	67,411

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

5.

Long-term debt (continued):

The following credit facilities are available to the Company:

		June 30,				December 31,
		2009				2008
Committed revolving credit facilities:
Total available		$	188,349			$	189,524
Expires January 2014			168,349				169,524
Uncommitted credit facilities:
Total available		$	300,937			$	322,792
Expires November 2011			198,418				250,000

6.

Share capital:

	(a)		Shares issued:
			Common shares issued and outstanding are as follows:

Issued and outstanding, December 31, 2008			104,887,720
Issued for cash, pursuant to stock options exercised			316,100
Issued and outstanding, June 30, 2009			105,203,820

The Company’s common shares were subdivided on a three-for-one basis effective April 24, 2008. Shareholders of record at the close of business on April 24, 2008 received two additional common shares for each common share held at that date. The stock split effectively tripled the number of common shares and stock options outstanding on that date. All share, stock option and per share information in these consolidated financial statements have been restated to reflect the stock split on a retroactive basis.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

6.

Share capital (continued):

	(b)		Stock option plan:
			Stock option activity for the six months ended June 30, 2009 is as follows:

		Common Shares				Weighted Average
		Under Option				Exercise Price
Outstanding, December 31, 2008			2,473,634			$	14.23
Granted			932,000				14.50
Exercised			(316,100	)			10.64
Outstanding, June 30, 2009			3,089,534			$	14.68
Exercisable, June 30, 2009			2,137,524			$	14.71

The options outstanding at June 30, 2009 expire on dates ranging to March 5, 2019.

The following is a summary of stock options outstanding and exercisable at June 30, 2009:

						Options Outstanding								Options Exercisable
						Weighted				Weighted								Weighted
						Average				Average								Average
Range of		Number				Remaining				Exercise				Number				Exercise
Exercise Prices		Outstanding				Life (years)				Price				Exercisable				Price
$3.89 - $4.35			161,900				2.1			$	4.13				161,900			$	4.13
$4.44 - $5.18			211,324				3.5				5.14				211,324				5.14
$8.82 - $10.80			425,800				5.0				9.68				425,800				9.68
$14.23 - $14.70			1,416,100				8.6				14.56				475,100				14.67
$18.67			431,100				7.7				18.67				431,100				18.67
$24.39 - $25.76			443,310				8.7				24.41				432,300				24.39
			3,089,534												2,137,524

	(c)		Stock-based compensation:
			The Company uses the fair value based method to account for employee stock-based compensation awards. During the six months ended June 30, 2009, the Company recognized compensation cost of $1,061,000 (six months ended June 30, 2008 — $1,155,000) in respect of options granted in 2009 and 2008 under its stock option plan.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

6.

Share capital (continued):

	(c)		Stock-based compensation (continued):
			For the purposes described above, 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:

		2009				2008
Risk free interest rate			2.5	%			2.7	%
Dividend yield			2.48	%			1.31	%
Expected lives		5 years				5 years
Volatility			31.8	%			23.0	%

The weighted average grant date fair value of options granted during the six months ended June 30, 2009 was $3.74 per option (six months ended June 30, 2008 — $5.27). The fair value method requires that this amount be amortized over the relevant vesting periods of the underlying options.

	(d)		Net earnings per share:
			The computations for basic and diluted earnings per share are as follows:

		Three months ended June 30, 2009												Six months ended June 30, 2009
		Net								Per share				Net								Per share
		earnings				Shares				amount				earnings				Shares				amount
Basic net earnings per share		$	38,847				105,066,310			$	0.37			$	58,726				104,981,514			$	0.56
Effect of dilutive securities:
Stock options			—				968,310				—				—				609,407				—
Diluted net earnings per share		$	38,847				106,034,620			$	0.37			$	58,726				105,590,921			$	0.56

		Three months ended June 30, 2008												Six months ended June 30, 2008
		Net								Per share				Net								Per share
		earnings				Shares				amount				earnings				Shares				amount
Basic net earnings per share		$	45,919				104,714,893			$	0.44			$	62,326				104,635,006			$	0.60
Effect of dilutive securities:
Stock options			—				1,057,824				(0.01	)			—				1,095,806				(0.01	)
Diluted net earnings per share		$	45,919				105,772,717			$	0.43			$	62,326				105,730,812			$	0.59

For the six months ended June 30, 2009, stock options to purchase 443,310 common shares (six months ended June 30, 2008 — nil) were outstanding but were excluded from the calculation of diluted earnings per share as they were anti-dilutive.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

7.		Commitments and contingencies:
		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 its financial position or results of operations.
		In the normal course of its 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, 2009, outstanding guarantees under contract for industrial equipment to be sold prior to the end of the third quarter of 2009 totaled $20,695,000 (December 31, 2008 — $5,829,000 to be sold prior to the end of the first quarter of 2009). The Company also had guarantees under contract totaling $4,566,000 relating to agricultural auctions to be held prior to the end of the second quarter of 2010 (December 31, 2008 - $12,094,000 to be sold prior to the end of the second quarter of 2009). All amounts are undiscounted and do not reflect estimated proceeds from sale at auction. No liability has been recorded with respect to these guarantee contracts.
8.		Financial instruments:

	(a)		Fair value
			Carrying amounts of certain of the Company’s financial instruments, including accounts receivable, auction proceeds payable, and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity. Based on lending rates currently available to the issuer of the note receivable for notes with similar terms, the fair value of its note receivable as at June 30, 2009 was approximately $5,626,000. Based on borrowing rates currently available to the Company for loans with similar terms, the fair value of its long-term debt as at June 30, 2009 was approximately $122,569,000 (December 31, 2008 — $69,756,000).
	(b)		Financial risk management
			The Company is exposed to a variety of financial risks by virtue of its activities, including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Board of Directors has overall responsibility for the oversight of the Company’s risk management.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

8.

Financial instruments (continued):

	(b)		Financial risk management (continued):
			Foreign exchange risk
			The Company operates internationally and is exposed to currency risk, primarily relating to the Canadian and U.S. dollars, and the Euro, arising from sales, purchases and loans that are denominated in currencies other than the respective functional currencies of the Company’s international operations. The Company also has various investments in non-U.S. dollar self-sustaining operations, whose net assets are exposed to foreign currency translation risk. The Company has elected not to actively manage this exposure at this time. Refer to further discussion in the section entitled Quantitative and Qualitative Disclosure about Market Risk contained in the Company’s Management Discussion and Analysis.
			For the six months ended June 30, 2009, the currently quantifiable effect, with other variables unchanged, of a 1% strengthening (weakening) of the U.S. dollar against the Canadian dollar and Euro on the Company’s financial statements is as follows:

•

decrease (increase) net earnings by approximately $115,000 due to the translation of the foreign operations’ statements of operations into the Company’s reporting currency, the U.S. dollar;

•

increase (decrease) net earnings by approximately $110,000 due to the revaluation of significant foreign currency denominated monetary items; and

•

decrease (increase) other comprehensive income by approximately $2,300,000.

Interest rate risk

The Company’s interest rate risk mainly arises from the interest rate impact on the Company’s cash and cash equivalents and floating rate debt. Cash and cash equivalents earn interest based on market interest rates. As at June 30, 2009, the Company is not exposed to significant interest rate risk on its cash and cash equivalents.

The Company’s interest rate management policy is generally to borrow at fixed rates. However, floating rate funding has been used if the terms of borrowings are favorable. The Company will consider utilizing derivative instruments such as interest rate swaps to minimize its exposure to interest rate risk. As at June 30, 2009, approximately 22% of the Company’s borrowings are at floating rates of interest. The weighted average interest rate paid by the Company on its outstanding floating rate borrowings during the six months ended June 30, 2009 was 2.59%.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

8.

Financial instruments (continued):

	(b)		Financial risk management (continued):
			Interest rate risk (continued)
			During the six months ended June 30, 2009, the majority of the Company’s interest was capitalized as it relates to the development of various new auction sites. As a result, changes in interest rates on these borrowings will not materially affect the Company’s net earnings or other comprehensive income until such time as these developments are put into use. For the six months ended June 30, 2009, with other variables unchanged, a 100 basis points or 1% increase or decrease in interest rates would have no significant impact on the Company’s financial statements.
			Credit risk
			Credit risk is the risk of financial loss to the Company arising from the non-performance by counterparties of contractual financial obligations. The Company is not exposed to significant credit risk on accounts receivable because it does not extend credit to buyers at its auctions, and it has a large diversified customer base. In addition, assets purchased at the Company’s auctions are not normally released to the buyers until the Company receives payment in full. The Company’s maximum exposure to credit risk on accounts receivable at the reporting date is the carrying value of its accounts receivable, less those receivables relating to assets that have not been released to the buyers.
			The Company’s credit risk exposure on liquid financial assets, being cash and cash equivalents, is limited since it maintains its cash and cash equivalents in a range of large financial institutions around the world.
			The Company limits its credit risk on its note receivable by performing credit verification procedures prior to the issuance of the note receivable. In addition, the note receivable is secured by a property the Company is leasing and a neighbouring property, and is monitored on an ongoing basis. To date, the counterparty has not failed to meet its financial obligations to the Company.
			Liquidity risk
			Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages its liquidity risk by maintaining adequate cash and cash equivalent balances, generally by releasing payments to consignors only after receivables from buyers have been collected. The Company also utilizes its established lines of credit (note 5) for short-term borrowings on an as-needed basis. The Company continuously monitors and reviews both actual and forecast cash flows to ensure there is sufficient working capital to satisfy its operating requirements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

9.		United States generally accepted accounting principles:
		The consolidated financial statements are prepared in accordance with Canadian GAAP, which differ, in certain respects, from accounting practices generally accepted in the United States and from requirements promulgated by the Securities and Exchange Commission.
		The amounts in the consolidated statements of operations and comprehensive income that differ from those reported under Canadian GAAP are as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2009				2008				2009				2008
Net earnings under Canadian GAAP		$	38,847			$	45,919			$	58,726			$	62,326
Cumulative translation adjustment on settlement intercompany loans (a)			—				—				—				(2,153	)
Net earnings under US GAAP		$	38,847			$	45,919			$	58,726			$	60,173
Other comprehensive income (loss) under Canadian GAAP		$	16,308			$	381			$	5,338			$	3,590
Cumulative translation adjustment (a)			—				—				—				2,153
Other comprehensive income (loss) under US GAAP			16,308				381				5,338				5,743
Comprehensive income under US GAAP		$	55,155			$	46,300			$	64,064			$	65,916
Net earnings per share in accordance with US GAAP:
Basic		$	0.37			$	0.44			$	0.56			$	0.58
Diluted			0.37				0.43				0.56				0.57

The amounts in the consolidated balance sheets that differ from those reported under Canadian GAAP are as follows:

		June 30, 2009								December 31, 2008
		Canadian								Canadian
		GAAP				US GAAP				GAAP				US GAAP
Capital assets (b)		$	520,479			$	559,866			$	453,642			$	474,720
Accounts payable and accrued liabilities (b)			96,144				135,531				84,114				105,192
Retained earnings (a)			397,665				383,214				357,845				342,961
Accumulated other comprehensive income (loss) (a)			3,934				18,385				(1,404	)			13,480

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Six months ended June 30, 2009 and 2008
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at June 30, 2009 and for the six-month periods ended June 30, 2009 and 2008 is unaudited)

9.

United States generally accepted accounting principles (continued):

	(a)		The Company had a number of outstanding intercompany loan balances where settlement was not planned or anticipated in the foreseeable future, which were considered part of net investments in foreign operations. As such, foreign exchange gains or losses arising from these intercompany loans were reported in the cumulative translation adjustment account. During the six months ended June 30, 2008, a number of the intercompany loans were settled or planned to be settled, which resulted in the reclassification to net earnings of foreign currency translation gains of $2,153,000, inclusive of tax of $68,000. During the year ended December 31, 2008, foreign currency translation gains of $14,884,000, net of tax of $139,000, were reclassified to net earnings. Under US GAAP, the reclassification of the pro rata portion of foreign exchange gains or losses in accumulated other comprehensive income to net earnings only occurs when the reduction in the net investment is the result of a complete sale, or complete or substantially complete liquidation, which has not occurred in this case.
	(b)		The Company sold its new headquarters building under construction and will lease the property from the purchaser upon construction completion. Under US GAAP, the Company is required to record an asset under construction as prescribed by the Emerging Issue Task Force (“EITF”) 97-10, The Effect of Lessee Involvement in Asset Construction, as the Company is deemed the owner of the construction project during the construction period. Reimbursements from the lessor to the Company during the construction period are recorded as accounts payable and accrued liabilities, as construction is expected to be completed within one year. Upon the completion of construction, a sale-leaseback transaction will occur and the Company will lease the headquarters facility from the lessor. Amounts recorded under asset under construction and accounts payable and accrued liabilities will be derecognized upon completion of construction.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion summarizes significant factors affecting the consolidated operating results and financial condition of Ritchie Bros. Auctioneers Incorporated (“Ritchie Bros.”, the “Company”, “we” or “us”) for the three- and six-month periods ended June 30, 2009 compared to the three- and six-month periods ended June 30, 2008. This discussion should be read in conjunction with our unaudited interim consolidated financial statements and notes thereto for the period ended June 30, 2009, and with the disclosures below regarding forward-looking statements and risk factors. You should also consider our audited 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, 2008, which are included in our 2008 Annual Report on Form 40-F.

The date of this discussion is as of August 4, 2009. Additional information relating to our company, including our Annual Information Form, is available by accessing the SEDAR website at www.sedar.com. Our Annual Report on Form 40-F is available on the SEC’s EDGAR system at www.sec.gov. None of the information on the SEDAR or EDGAR websites is incorporated by reference into this document by this or any other reference.

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in Canada, or Canadian GAAP. There are no material measurement differences between those financial statements and the financial position and results of operations that would be reported under generally accepted accounting principles in the United States, or U.S. GAAP, except as described in note 9 to the interim consolidated financial statements. Amounts discussed below are based on our interim consolidated financial statements prepared in accordance with Canadian GAAP and are presented in United States dollars. Unless indicated otherwise, all tabular dollar amounts, including related footnotes, presented below are expressed in thousands of dollars, except per share amounts.

Ritchie Bros. is the world’s largest auctioneer of industrial equipment, selling more equipment to on-site and online bidders than any other company in the world. Our world headquarters are located in Richmond, British Columbia, Canada, and as of the date of this discussion, we operated from over 110 locations in more than 25 countries, including 39 auction sites worldwide. We sell, through unreserved public auctions, a broad range of industrial assets, including equipment, trucks and other assets used in the construction, transportation, agricultural, material handling, mining, forestry, petroleum and marine industries. Our purpose is to use unreserved auctions to create a global marketplace for our customers.

We operate mainly in the auction segment of the global industrial equipment marketplace. Our primary target markets within that marketplace are the used truck and equipment sectors, which are large and fragmented. The world market for used trucks and equipment continues to grow, primarily as a result of the increasing, cumulative supply of used trucks and equipment, which is driven by the ongoing production of new trucks and equipment. Industry analysts estimate that the world-wide value of used truck and equipment transactions, of the type of equipment we sell at our auctions, is greater than $100 billion per year. Although we sell more used equipment than any other company in the world, our share of this fragmented market is in the range of 3%.

In recent periods, approximately 80% of the value of the items sold at our auctions was purchased by end users of trucks and equipment (retail buyers), such as contractors, with the remainder being purchased primarily by truck and equipment dealers and brokers (wholesale buyers). Consignors to our auctions represent a broad mix of equipment owners, the majority being end users of equipment, with the balance being finance companies, truck and equipment dealers and equipment rental companies, among others. Consignment volumes at our auctions are affected by a number of factors, including regular fleet upgrades and reconfigurations, financial pressure, retirements, and inventory reductions, as well as by the timing of the completion of major construction and other projects.

We compete directly for potential purchasers of industrial assets with other auction companies. Our indirect competitors include truck and equipment manufacturers, distributors and dealers that sell new or used industrial assets, and equipment rental companies that offer an alternative to purchasing. When sourcing equipment to sell at our auctions, we compete with other auction companies, truck and equipment dealers and brokers, and equipment owners that have traditionally disposed of equipment through private sales.

We have several key strengths that we believe provide distinct competitive advantages and will enable us to grow and make our auctions more appealing to both buyers and sellers of industrial assets. Some of our principal strengths include:

•

Our reputation for conducting only unreserved auctions and our widely recognized commitment to honesty and fair dealing.

•

Our ability to transcend local market conditions and create a global marketplace for industrial assets by attracting diverse audiences of mainly end-user bidders from around the world to our auctions.

•

Our size, financial strength and access to capital, the international scope of our operations, our extensive network of auction sites, and our unparalleled marketing skills.

•

Our ability to enhance our live auctions with technology using our online bidding service, and our Virtual Ramp, which projects equipment photos onto a large screen to allow bidders to view each item as they bid.

•

Our in-depth experience in the marketplace, including our equipment valuation expertise and proprietary customer and equipment databases.

•

Our dedicated and experienced workforce, which allows us to, among other things, enter new geographic markets, structure deals to meet our customers’ needs and provide high quality and consistent service to consignors and bidders.

Strict adherence to the unreserved auction process is one of our founding principles and, we believe, one of our most significant competitive advantages. When we say “unreserved” we mean that there are no minimum or reserve prices on anything sold at a Ritchie Bros. auction — each item sells to the highest bidder on sale day, regardless of the price. In addition, consignors (or their agents) are not allowed to bid on, buy back or in any way influence the selling price of their own equipment. We maintain this commitment to the unreserved auction process because we believe that an unreserved auction is a fair auction.

We attract a broad base of bidders from around the world to our auctions. Our worldwide marketing efforts help to attract bidders, and they are willing to travel long distances or participate online in part because of our reputation for conducting fair auctions. These multinational bidding audiences provide a global marketplace that allows our auctions to transcend local market conditions, which we believe is a significant competitive advantage. Evidence of this is the fact that in recent periods an average of approximately 60% of the value of equipment sold at our auctions left the region of the sale.

We believe that our ability to consistently draw significant numbers of local and international bidders to our auctions, most of whom are end users rather than resellers, is appealing to sellers of used trucks and equipment and helps us to attract consignments to our auctions. Higher consignment volumes attract more bidders, which in turn attract more consignments, and so on in a self-reinforcing process that has helped us to achieve substantial momentum in our business. During the six months ended June 30, 2009, we had over 177,000 bidder registrations at our industrial auctions, compared to almost 140,000 in the first half of 2008. We received over 18,000 industrial asset consignments (typically comprised of multiple lots) in the six months ended June 30, 2009, compared to over 18,000 during the same period in 2008.

In spite of the difficulties being faced by many companies as a result of the current economic environment, we believe our business remains strong. Financial and economic uncertainty acts as an incentive for equipment owners to turn their surplus assets into cash quickly, efficiently and for fair market value, which we believe benefits our business. In addition, at our auctions during the first half of 2009, we experienced a 26% increase in the number of bidder registrations. Our strategy, which is discussed further below, is designed in part to increase our share of the large and highly fragmented used equipment market, and market share gains tend not to be affected by economic uncertainty. Also, there is still a significant amount of infrastructure and other construction projects being undertaken around the world, which we believe benefits our business by generating equipment buying and selling activity at our auctions.

In our experience over the last 50 years, when cash flow or credit is tight and there is uncertainty in the market, traditional buyers of new equipment are more likely to look for good quality, late model used equipment, resulting in steady demand for equipment at our auctions. That being said, our customers so far do not appear to be having material difficulty accessing credit to fund their auction purchases.

Although equipment prices generally trended down in the latter half of 2008, the decreases were not dramatic in our opinion, and prices appear to have remained relatively stable to date in 2009. In past downward cycles we have generally seen price decreases more than offset by increased consignment volumes and a changing mix of equipment sold at our auctions. We have re-examined our growth strategy, including operating and capital plans, and overall we continue to believe our business model is well suited to current economic conditions. We also believe that designing and executing our strategy will continue to be a more significant determinant of our ability to grow our earnings than the macro economic environment, in part because our share of the world market for used trucks and equipment is so small — our growth is only partly dependent on, or impacted by, growth or contraction in the broader used truck and equipment market.

Growth Strategies

Our long-term mission is to be the world’s largest marketplace for commercial and industrial assets. Our principal goals are to grow our earnings per share at a manageable pace over the long term while maintaining a reasonable return on invested capital, and to maintain and enhance the Ritchie Bros. culture. Our preference is to pursue sustainable growth with a consistently high level of customer service, rather than targeting aggressive growth and risking erosion of the strong customer relationships and high level of customer service that we believe differentiate us from our competitors.

To grow our business, we are focusing simultaneously on three different fronts, and we believe these three key components of our strategy work in unison.

1.

Our People

People are a key driver of our growth, and one of our key strategies is to build the team that will help us achieve our goals. This includes recruiting, training and developing the right people, as well as enhancing the productivity of our sales force and our administrative support teams by giving them the tools and training they need to be effective. This component of our strategy also includes active succession planning and leadership development, with a focus on developing employees from within our company.

Our ability to recruit, train and retain capable new members for our sales team has a significant influence on our rate of growth. Ours is a relationship business and our Territory Managers are the main point of contact with our customers. We look for bright, hard-working individuals with positive attitudes, and we are committed to providing our people with a great workplace and opportunities to grow with the company and become future leaders of our global team.

2.

Our Places

We intend to continue to expand our presence in existing markets and enter new markets, and to expand our international auction site network to handle expected growth in our business. When we talk about markets, we are referring to geographic markets and industry sectors.

Although we expect that most of our growth in the near future will come from expanding our business and increasing our penetration in regions where we already have a presence, such as the United States and Western Europe, we anticipate that emerging markets in developing countries will be important in the longer term. Our sales offices in many of these emerging markets have been established to position us to take advantage of these future growth opportunities, and we anticipate continued investment in frontier markets in the future.

We plan to expand our worldwide network of auction sites, adding an average of at least two new permanent auction sites or regional auction units to our network per year. In addition, we will be expanding or replacing existing sites as necessary to facilitate increased sales volumes. Our shorter-term focus for this expansion is the United States, Western Europe and Asia. In addition, we intend to continue to hold offsite auctions in new regions to expand the scope of our operations.

We also aim to increase our market share in our core markets of construction, transportation and agricultural equipment, and to sell more assets in categories that are complementary to these core markets. Examples of these complementary categories include mining, forestry and petroleum assets.

3.

Our Processes

We are committed to developing and continually refining the processes and systems that we use to conduct our business. We believe that this continuous improvement focus will allow us to grow our revenues faster than our operating costs in the future. We also intend to use technology to facilitate our growth and enhance the quality and service level of our auctions.

Over the past few years, we have made significant progress in developing business processes and systems that are efficient, consistent and scalable, including the successful implementation of a new enterprise resource planning system.

We believe that these three components work together because our people help us to achieve our growth objectives, our places give us focus areas for and the capacity to handle growth, and our processes help us to achieve that growth with efficiency and consistency while continuing to deliver value to our customers.

Operations

The majority of our industrial auctions are held at our permanent auction sites, where we own the land and facilities, or at regional auction units, where we usually lease the land and typically have more modest facilities. We also hold off-site auctions at temporary locations, often on land owned by one of the main consignors to the particular auction. Most of our agricultural auctions are off-site auctions that take place on the consignor’s farm. During the first six months of 2009, 90% of our gross auction proceeds was attributable to auctions held at our permanent auction sites and regional auction units (first half of 2008 — 90%). Gross auction proceeds represent the total proceeds from all items sold at our auctions (please see “Sources of Revenue and Revenue Recognition” below).

During the first half of 2009, we conducted 92 unreserved industrial auctions at locations in North America, Europe, the Middle East, and Australia (first half of 2008 — 92). We also held 98 unreserved agricultural auctions during the first half of 2009 in Canada (first half of 2008 — 110). Although our auctions have varied in size over the last 12 months, our average industrial auction during the 12-month period ended June 30, 2009 attracted almost 1,700 bidder registrations (12 months ended June 30, 2008 — over 1,400) and featured over 1,400 lots (12 months ended June 30, 2008 — over 1,300) consigned by 185 consignors (12 months ended June 30, 2008 — 193), generating average gross auction proceeds of approximately $17.6 million per auction (12 months ended June 30, 2008 — $17.8 million).

We sold almost $425 million of trucks, equipment, and other assets to online bidders during the first half of 2009, representing a 15% increase compared to the first half of 2008 (first half of 2008 — almost $370 million).

Approximately 55% of our auction revenues in the first half of 2009 was earned from operations in the United States (first half of 2008 — 57%), 23% was generated from auctions in Canada (first half of 2008 — 21%) and the remaining 22% was earned from auctions in countries other than the United States and Canada, primarily in Europe, the Middle East, Australia, and Mexico (first half of 2008 — 22%). We had 1,111 full-time employees at June 30, 2009, including 293 sales representatives and 19 trainee territory managers, compared to 1,037 and 261 and 20, respectively, at June 30, 2008.

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 4, 2009, we had 105,203,820 common shares issued and outstanding and stock options outstanding to purchase a total of 3,089,540 common shares. On April 24, 2008, our issued and outstanding common shares were split on a three-for-one basis. All share and per share amounts in this document reflect the stock split on a retroactive basis.

Sources of Revenue and Revenue Recognition

Gross auction proceeds represent the total proceeds from all items sold at our auctions. Our definition of gross auction proceeds may differ from those used by other participants in our industry. Gross auction proceeds is an important measure we use in comparing and assessing our operating performance. It is not a measure of our financial performance, liquidity or revenue and is not presented in our consolidated financial statements. We believe that auction revenues, which is the most directly comparable measure in our Statement of Operations, and certain other line items, are best understood by considering their relationship to gross auction proceeds. Auction revenues represent the revenues we earn in the course of conducting our auctions. The portion of our gross auction proceeds that we do not retain is remitted to our customers who consign the items we sell at our auctions.

Auction revenues are comprised of auction commissions earned from consignors through straight commission and guarantee contracts, net profits or losses on the sale of inventory items, administrative and documentation fees on the sale of certain lots, auction advertising fees, and the fees applicable to purchases made through our internet and proxy bidding systems. All revenue is recognized when the auction sale is complete and we have determined that the auction proceeds are collectible.

Straight commissions are our most common type of auction revenues and are generated by us when we act as agent for consignors and earn a pre-negotiated, fixed commission rate on the gross sales price of the consigned equipment at auction. In the last 5 years, straight commission sales have represented approximately 75% of our gross auction proceeds volume on an annual basis.

In the normal course of business, we sometimes guarantee minimum sales proceeds to the consignor and earn a commission based on the actual results of the auction, typically including a pre-negotiated percentage of any sales proceeds in excess of the guaranteed amount. The consigned equipment is sold on an unreserved basis in the same manner as other consignments. If the actual auction proceeds are less than the guaranteed amount, our commission is reduced, and if the proceeds are sufficiently less, we can incur a loss on the sale. We factor in a higher rate of commission on these sales to compensate for the increased risk we assume.

Our financial exposure from guarantee contracts fluctuates over time, but in recent periods, industrial and agricultural auction guarantees have had an average period of exposure (days remaining until date of auction as at quarter-end) of approximately 30 days and 80 days, respectively. At June 30, 2009, our outstanding industrial and agricultural guarantees totaled approximately $25 million, of which approximately $19 million had already been sold at our auctions as of the date of this discussion. The combined financial exposure from guarantee contracts at any period end can fluctuate significantly depending on the timing of auctions; however, the quarter-end balances averaged approximately $52 million over the last 12 months. Losses, if any, resulting from guarantee contracts are recorded in the period in which the relevant auction is completed, unless the loss is incurred after the period end but before the financial reporting date, in which case the loss is accrued in the financial statements for the period end. In recent periods, guarantee contracts have represented approximately 15% of gross auction proceeds on an annual basis.

Auction revenues also include the net profit or loss on the sale of inventory in cases where we acquire ownership of equipment for a short time prior to an auction sale. We purchase equipment for specific auctions and sell it at those auctions in the same manner as consigned equipment. During the period that we retain ownership, the cost of the equipment is recorded as inventory on our balance sheet. The net gain or loss on the sale is recorded as auction revenues. In recent periods, inventory contracts have represented approximately 10% of gross auction proceeds on an annual basis. We generally refer to our guarantee and outright purchase business as our underwritten or at-risk business.

The choice by consignors between straight commission, guarantee, or outright purchase arrangements depends on many factors, including the consignor’s risk tolerance and sale objectives. In addition, we do not have a target for the relative mix of contracts. As a result, the mix of contracts in a particular quarter or year fluctuates and is not necessarily indicative of the mix in future periods. The composition of our auction revenues and our auction revenue rate (i.e. auction revenues as a percentage of gross auction proceeds) are affected by the mix and performance of contracts entered into with consignors in the particular period and fluctuate from period to period. Our auction revenue rate performance is presented in the table below.

Prior to 2008, our expected average annual auction revenue rate was in the range of 9.50% to 10.00%. At the beginning of 2008, we made changes to certain of our existing fees charged to our customers, including the minimum commission rate applicable to low value lots and the consignor document administration fee. These fees were increased slightly to reflect increased costs of conducting auctions. In addition, effective January 2008, we made certain reclassifications in our Statement of Operations that affected our auction revenue rate, including the reclassifications of interest income from auction revenues to other income and auction advertising fees and documentation fees from direct expenses to auction revenues. These changes were made to improve the presentation in our financial statements and had no impact on our reported net earnings. As a result of the changes to our existing fees and the reclassifications, we increased our expected annual average auction revenue rate to be in the range of 9.75% to 10.25%. However, our past experience has shown that our auction revenue rate is difficult to estimate precisely, meaning our actual auction revenue rate in future periods may be above or below our expected range. For the first half of 2009, we achieved an auction revenue rate of 10.70% (first half of 2008 — 10.14%). The increase compared to our experience in the first half of 2008 related primarily to the performance of our underwritten business, which performed better in 2009 than in 2008. We continue to expect our annual average auction revenue rate to be in the range of 9.75% to 10.25%.

The largest contributor to the variability of our auction revenue rate is the performance, rather than the amount, of our underwritten business. In a period when our underwritten business performs better than average, our auction revenue rate typically exceeds the expected average rate. Conversely, if our underwritten business performs below average, our auction revenue rate will typically be below the expected average rate.

Our gross auction proceeds and auction revenues are influenced by the seasonal nature of the auction business, which is determined mainly by the seasonal nature of the construction and natural resources industries. Gross auction proceeds and auction revenues tend to be higher during the second and fourth calendar quarters, during which time we generally conduct more business than in the first and third calendar quarters. This seasonality contributes to quarterly variability in our net earnings because a significant portion of our operating costs is relatively fixed.

Gross auction proceeds and auction revenues are also affected on a period-to-period basis by the timing of major auctions. In newer markets where we are developing operations, the number and size of auctions and, as a result, the level of gross auction proceeds and auction revenues, are likely to vary more dramatically from period to period than in our established markets where the number, size and frequency of our auctions are more consistent. In addition, economies of scale are achieved as our operations in a region evolve from conducting intermittent auctions, to establishing a regional auction unit, and ultimately to developing a permanent auction site. Economies of scale are also achieved when our auctions increase in size.

Because of these seasonal and period-to-period variations, we believe that our gross auction proceeds and auction revenues are best compared on an annual basis, rather than on a quarterly basis.

Developments in 2009

Highlights of the first half of 2009 included:

•

Our sales force increased by 11% during the first half of 2009, demonstrating our success in executing our people strategy.

•

We broke regional gross auction proceeds records in Denver, Colorado; Houston, Texas; Dubai, UAE; Moncofa, Spain; Paris, France; Edmonton, Alberta; and Montreal, Quebec.

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We held our first auctions at our replacement permanent auction sites in Houston, Texas; Minneapolis, Minnesota; and our new permanent auction site in London, Ontario.

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We completed the purchase of approximately 62 acres of land in Caorso, Italy, on which we intend to build a new permanent auction site to replace our existing regional auction unit in that region.

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We completed the purchase of approximately 74 acres of land in Madrid, Spain, on which we intend to build a new permanent auction site to complement our existing regional auction unit in Moncofa, Spain.

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We completed the purchase of approximately 67 acres of land near St. Louis, Missouri, on which we intend to build a new permanent auction site.

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We conducted our first auction at our new regional auction unit in Geelong, Australia, which replaced our regional auction unit in Melbourne, Australia.

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We conducted our first auction at our new property near Mexico City, Mexico. We are in the process of building a permanent auction facility on that property, which is expected to open in the latter half of 2009.

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We extended the term of the lease on our regional auction unit in Las Vegas, Nevada to 25 years.

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We entered into an arrangement with uShip.com, the world’s largest online shipping marketplace, to provide online shipping solutions to our customers participating in our U.S. and Canadian auctions.

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We added new functionality to our online bidding service, which allows bidders to participate remotely in more than one auction at a time.

Overall Performance

During the first half of 2009, we recorded auction revenues of $204.1 million and net earnings of $58.7 million, or $0.56 per diluted common share. This performance compares to auction revenues of $197.2 million and net earnings of $62.3 million, or $0.59 per diluted share, during the first half of 2008. We ended the first half of 2009 with working capital of $73.8 million, compared to $47.1 million at December 31, 2008.

Adjusted net earnings for the six months ended June 30, 2009 were $58.1 million, or $0.55 per diluted share, which compares to adjusted net earnings of $53.2 million, or $0.50 per diluted share for the six months ended June 30, 2008. We define adjusted net earnings as financial statement net earnings excluding the after-tax effects of sales of excess properties and significant foreign exchange gains or losses resulting from financing activities that we do not expect to recur in the future (please see our reconciliation below).

Adjusted net earnings is a non-GAAP measure that does not have a standardized meaning, and is therefore unlikely to be comparable to similar measures presented by other companies. We believe that comparing adjusted net earnings as defined above for different financial periods provides more useful information about the growth or decline of our net earnings for the relevant financial period, and identifies the impact of items which we do not consider to be part of our normal operating results.

Our adjusted net earnings for the first half of 2009 grew by approximately 9% compared to the first half of 2008 as a result of a stronger auction revenue rate combined with lower operating costs.

A reconciliation of our net earnings under Canadian GAAP to adjusted net earnings is as follows:

		Six months ended
		June 30,
		2009				2008
Net earnings under Canadian GAAP		$	58,726			$	62,326
Gain on sale of excess property(1)			—				(8,304	)
Net foreign exchange impact on financing transactions(2)			(759	)			(1,988	)
Tax relating to reconciling items			95				1,198
Adjusted net earnings		$	58,062			$	53,232

Results of Operations

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

We conduct operations around the world in a number of different currencies, but our reporting currency is the United States dollar. In the first half of 2009, approximately 40% of our revenues and approximately 50% of our operating costs were denominated in currencies other than the United States dollar. The proportion of revenues denominated in currencies other than the United States dollar in a given period will differ from the annual proportion depending on the size and location of auctions held during the period.

The main currencies other than the United States dollar in which our revenues and operating costs are denominated are the Canadian dollar and the Euro. In recent periods there have been significant fluctuations in the value of the Canadian dollar and Euro relative to the United States dollar. These fluctuations affect our reported auction revenues and operating expenses when non-United States dollar amounts are converted into United States dollars for financial statement reporting purposes. It is difficult, if not impossible, to quantify how foreign exchange rate movements affect such variables as supply and demand for the assets we sell. However, excluding these impacts, the effect of foreign exchange fluctuations on our translated auction revenues and operating expenses in our consolidated financial statements has largely offset, making the impact of the currency fluctuation on our net earnings insignificant. Excluding the foreign exchange impacts on financing transactions discussed in “Overall Performance” above, our adjusted net earnings for the six months ended June 30, 2009 included a $0.2 million pre-tax loss (first half of 2008 — $0.5 million pre-tax gain) resulting from the revaluation and settlement of our foreign currency denominated monetary assets and liabilities.

United States Dollar Exchange Rate Comparison

										% Change
Six months ended June 30,		2009				2008				in U.S. $
Average value of one U.S. dollar:
Canadian dollar		$	1.2062			$	1.0070				20	%
Euro		€	0.7512			€	0.6536				15	%

Auction Revenues

Six months ended June 30,		2009				2008				% Change
Auction revenues		$	204,134			$	197,216				4	%
Gross auction proceeds		$	1,907,622			$	1,945,515				-2	%
Auction revenue rate			10.70	%			10.14	%

Our auction revenues increased in the first half of 2009 compared to the equivalent period in 2008 primarily as a result of a higher auction revenue rate, partially offset by slightly lower gross auction proceeds and the impact of currency fluctuations. Our underwritten business (guarantee and inventory contracts) represented 19% of our total gross auction proceeds in the first six months of 2009 (first six months of 2008 — 27%). As discussed above under “Sources of Revenue and Revenue Recognition,” we do not have a target for the relative mix of contracts. The mix of contracts experienced in the first half of 2009 was driven by our consignor’s risk tolerance and sale objectives, and is not necessarily indicative of the mix in future periods or a trend. Our 2009 first half gross auction proceeds in local currency, being the United States, Canadian and Australian dollar and the Euro, increased by 6% compared to the first half of 2008.

Our auction revenue rate for the first half of 2009 was 10.70%, which was higher than our expected range of 9.75% to 10.25%. The increase compared to our experience in the first half of 2008 related primarily to the performance of our underwritten business, which performed better in 2009 than in 2008. We continue to believe our sustainable average auction revenue rate will be in the range of 9.75% to 10.25%, although our experience has shown that our auction revenue rate is difficult to estimate precisely. Our actual auction revenue rate in future periods may be above or below our expected range.

Our auction revenues and our net earnings are influenced to a great extent by small changes in our auction revenue rate. For example, a 10 basis point (0.1%) increase or decrease in our auction revenue rate during the first six months of 2009 would have impacted auction revenues by approximately $1.9 million, of which approximately $1.3 million or $0.01 per common share would have flowed through to net earnings after tax in our statement of operations, assuming no other changes. This factor is important to consider when evaluating our current and past performance, as well as when assessing future prospects.

Direct Expenses

Six months ended June 30,		2009				2008				% Change
Direct expenses		$	24,966			$	26,496				-6	%
Direct expenses as a percentage of gross auction proceeds			1.31	%			1.36	%

Direct expenses are the costs we incur specifically to conduct an auction. Direct expenses include the costs of hiring temporary personnel to work at the auction, advertising costs directly related to the auction, travel costs for employees to attend and work at the auction, security hired to safeguard equipment at the auction site and rental expenses for temporary auction sites. At each quarter end, we estimate the direct expenses incurred with respect to auctions completed near the end of the period. In the subsequent quarter, these accruals are adjusted, to the extent necessary, to reflect actual costs incurred.

Our direct expense rate, which represents direct expenses as a percentage of gross auction proceeds, fluctuates from period to period based in part on the size and location of the auctions we hold during a particular period. The direct expense rate generally decreases as the average size of our auctions increases. In addition, we usually experience lower direct expense rates for auctions held at our permanent auction sites compared to auctions held at offsite locations, mainly as a result of the economies of scale and other efficiencies that we typically experience at permanent auction sites. Our direct expense rate for the first half of 2009 is comparable to the rate for the first half of 2008.

Depreciation and Amortization Expense

Six months ended June 30,		2009				2008				% Change
Depreciation and amortization expense		$	14,596			$	11,587				26	%

Depreciation is calculated on either a straight line or a declining balance basis on capital assets employed in our business, including buildings, computer hardware and software, automobiles and yard equipment. Depreciation increased in the first half of 2009 compared to the first half of 2008 as a result of depreciation relating to new assets that we have put into service in recent periods, such as our new permanent auction sites in London, Ontario; Kansas City, Missouri; Paris, France; Houston, Texas; and Minneapolis, Minnesota; and new computer hardware and software. We expect our depreciation in future periods to increase in line with our on-going capital expenditures.

General and Administrative Expenses

Six months ended June 30,		2009				2008				% Change
General and administrative expenses		$	81,202			$	84,927				-4	%

General and administrative expenses, or G&A, include such expenditures as personnel (salaries, wages, bonuses and benefits), information technology, non-auction related travel, repairs and maintenance, leases and rentals and utilities. G&A expenses exclude foreign exchange gains or losses resulting from the revaluation and settlement of monetary assets and liabilities which was reclassified to other income at the end of 2008. Our G&A for the period ended June 30, 2008 has been reclassified to conform with the presentation adopted in 2008.

Foreign currency fluctuations resulted in a decrease in our G&A of approximately $8.4 million in the first half of 2009 compared to the first half of 2008 in connection with the translation into United States dollars for reporting purposes of our foreign operations’ G&A expenses.

Our ongoing investments in our people, places and processes continued to contribute to the growth in our gross auction proceeds in local currency and adjusted earnings during the first half of 2009. Our future success is dependent upon adding people to grow our business, building the places required to handle our anticipated future growth, and developing and implementing processes to help gain efficiencies and ensure consistency. Our sales force and administrative support teams are instrumental in carrying out these building and development programs and are necessary to facilitate and accommodate that growth. Personnel costs are the largest component of our G&A, and our workforce increased 7% between June 30, 2009 and June 30, 2008. Our ongoing expansion will continue to influence future levels of G&A.

Interest expense

Six months ended June 30,		2009				2008				% Change
Interest expense		$	226			$	514				-56	%

Interest expense is comprised mainly of interest paid on long-term debt and revolving credit facilities. Interest expense decreased in the first half of 2009 compared to the same period in 2008 primarily due to an increase in the amount of interest we capitalized to property under development.

Interest income

Six months ended June 30,		2009				2008				% Change
Interest income		$	1,220			$	2,346				-48	%

Interest income, which is earned on our excess cash balances invested in conservative and liquid investments, is significantly affected by market interest rates. In recent periods, market interest rates in Canada and the United States have decreased dramatically, which resulted in a decrease in our interest income. In addition, our interest income can fluctuate from period to period depending on our cash position, which is affected by the timing, size and number of auctions held during the period, as well as the timing of the receipt of auction proceeds from buyers and payments to consignors.

Foreign exchange gain

Six months ended June 30,		2009				2008				% Change
Foreign exchange gain		$	530			$	2,445				-78	%

Foreign exchange gains or losses arise when foreign currency denominated monetary items are revalued to the exchange rates in effect at the end of the period. The gain or loss recognized in any given period is affected by changes in foreign exchange rates as well as the composition of our foreign currency denominated assets and liabilities. In the first half of 2008, the foreign exchange gain included the reclassification of foreign exchange translation gains of $2.8 million previously recorded in the cumulative translation adjustment account as a result of the settlement of a number of foreign currency denominated intercompany loans that had been considered long-term (see discussion under “Overall Performance”). We did not settle any intercompany loans in 2009 that resulted in a significant foreign exchange adjustment.

Gain (loss) on Disposition of Capital Assets

Six months ended June 30,		2009				2008				% Change
Gain (loss) on disposition of capital assets		$	(97	)		$	7,310				N/A

The gain on disposition of capital assets in the first half of 2008 included a $8.3 million gain recorded on the sale of our headquarters property located in Richmond, British Columbia, partially offset by the write off of costs incurred on a property development project that was no longer considered viable. There were no significant asset dispositions in 2009.

Income Taxes

Six months ended June 30,		2009				2008				% Change
Income taxes		$	26,769			$	24,144				11	%
Effective income tax rate			31.3	%			27.9	%

Income taxes have been estimated using the tax rates in effect in each of the tax jurisdictions in which we earn our income. The effective tax rate for the six months ended June 30, 2009 was higher than the rate we experienced in the first half of 2008 as a result of adjustments recorded in 2008 to reflect our actual cash tax expenses arising from our 2007 tax filings, and a higher proportion of our earnings being taxed in higher tax rate jurisdictions in 2009 compared to 2008. Income tax rates in future periods will fluctuate depending upon the impact of unusual items and the level of earnings in the different tax jurisdictions in which we earn our income.

Net Earnings

Six months ended June 30,		2009				2008				% Change
Net earnings		$	58,726			$	62,326				-6	%
Net earnings per share — basic			0.56				0.60				-7	%
Net earnings per share — diluted			0.56				0.59				-5	%

Our net earnings in the first half of 2009 decreased compared to the equivalent period in 2008 due to the gains on sale of the headquarters property in 2008, offset by a higher auction revenue rate and lower operating costs achieved in 2009. Adjusted net earnings (see discussion above under “Overall Performance”) for the first half of 2009 were $58.1 million, or $0.55 per diluted share, compared to adjusted net earnings of $53.2 million, or $0.50 per diluted share in the first half of 2008, representing a 9% increase in 2009. Adjusted net earnings in the first half of 2009 were higher compared to the first half of 2008 due to an increase in our auction revenue rate, and lower operating costs.