UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

Form 6-K

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 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, 2009, 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								Nine months ended
		September 30,								September 30,
		2010				2009				2010				2009
Auction revenues		$	82,229			$	75,934			$	269,073			$	280,068
Direct expenses			9,680				10,515				34,833				35,481
			72,549				65,419				234,240				244,587
Expenses:
Depreciation and amortization (note 3)			11,277				7,823				26,824				22,419
General and administrative			43,228				42,106				134,219				123,308
			54,505				49,929				161,043				145,727
Earnings from operations			18,044				15,490				73,197				98,860
Other income (expense):
Interest expense			(1,396	)			(139	)			(3,696	)			(365	)
Interest income			222				550				1,451				1,770
Foreign exchange gain (loss)			161				(1,267	)			299				(737	)
Gain (loss) on disposition of capital assets			(140	)			(41	)			1,091				(138	)
Other			590				773				903				1,471
			(563	)			(124	)			48				2,001
Earnings before income taxes			17,481				15,366				73,245				100,861
Income tax expense (recovery):
Current			4,058				4,207				19,315				28,430
Future			(55	)			(1,733	)			1,534				813
			4,003				2,474				20,849				29,243
Net earnings		$	13,478			$	12,892			$	52,396			$	71,618
Net earnings per share (note 7 (d)):
Basic		$	0.13			$	0.12			$	0.50			$	0.68
Diluted		$	0.13			$	0.12			$	0.49			$	0.68
Retained earnings, beginning of period		$	429,151			$	397,665			$	411,326			$	357,845
Net earnings			13,478				12,892				52,396				71,618
Cash dividends paid			(11,085	)			(10,529	)			(32,178	)			(29,435	)
Retained earnings, end of period		$	431,544			$	400,028			$	431,544			$	400,028

See accompanying notes to consolidated financial statements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Balance Sheets

(Expressed in thousands of United States dollars)

		September 30,				December 31,
		2010				2009
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	191,394			$	122,596
Accounts receivable			175,998				52,228
Inventory			21,257				6,640
Advances against auction contracts			3,889				4,574
Prepaid expenses and deposits			10,288				8,131
Income taxes receivable			9,173				3,824
Future income tax asset			110				714
			412,109				198,707
Capital assets (note 3)			619,604				597,945
Other assets (note 4)			11,770				14,472
Goodwill			45,862				45,593
Future income tax asset			2,803				1,104
		$	1,092,148			$	857,821
Liabilities and Shareholders’ Equity
Current liabilities:
Auction proceeds payable		$	257,224			$	74,726
Accounts payable and accrued liabilities			80,374				88,402
Income taxes payable			2,639				—
Short-term debt (note 5)			29,269				5,069
			369,506				168,197
Long-term debt (note 6)			133,102				130,394
Other liabilities			1,877				1,254
Future income tax liability			16,069				13,565
			520,554				313,410
Shareholders’ equity:
Share capital (note 7)			103,008				99,980
Additional paid-in capital			18,028				16,146
Retained earnings			431,544				411,326
Accumulated other comprehensive income			19,014				16,959
			571,594				544,411
		$	1,092,148			$	857,821

Commitments and contingencies (note 8)

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				(Loss) Income				Equity
Balance, December 31, 2009		$	99,980			$	16,146			$	411,326			$	16,959			$	544,411
Exercise of stock options			1,232				(217	)			—				—				1,015
Stock compensation tax adjustment			—				51				—				—				51
Stock compensation expense			—				541				—				—				541
Net earnings			—				—				12,800				—				12,800
Cash dividends paid			—				—				(10,540	)			—				(10,540	)
Foreign currency translation adjustment			—				—				—				(4,029	)			(4,029	)
Balance, March 31, 2010			101,212				16,521				413,586				12,930				544,249
Exercise of stock options			1,316				(256	)			—				—				1,060
Stock compensation tax adjustment			—				61				—				—				61
Stock compensation expense			—				767				—				—				767
Net earnings			—				—				26,118				—				26,118
Cash dividends paid			—				—				(10,553	)			—				(10,553	)
Foreign currency translation adjustment			—				—				—				(15,958	)			(15,958	)
Balance, June 30, 2010			102,528				17,093				429,151				(3,028	)			545,744
Exercise of stock options			480				(63	)			—				—				417
Stock compensation tax adjustment			—				220				—				—				220
Stock compensation expense			—				778				—				—				778
Net earnings			—				—				13,478				—				13,478
Cash dividends paid			—				—				(11,085	)			—				(11,085	)
Foreign currency translation adjustment			—				—				—				22,042				22,042
Balance, September 30, 2010		$	103,008			$	18,028			$	431,544			$	19,014			$	571,594

Consolidated Statements of Comprehensive Income

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

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2009				2010				2009
Net earnings		$	13,478			$	12,892			$	52,396			$	71,618
Other comprehensive income:
Foreign currency translation adjustment			22,042				15,530				2,055				20,868
Comprehensive income		$	35,520			$	28,422			$	54,451			$	92,486

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 September 30,								Nine months ended September 30,
		2010				2009				2010				2009
Cash provided by (used in):
Operating activities:
Net earnings		$	13,478			$	12,892			$	52,396			$	71,618
Items not involving cash:
Depreciation and amortization			11,277				7,823				26,824				22,419
Stock compensation expense			778				532				2,086				1,593
Future income taxes			(55	)			(1,733	)			1,534				813
Foreign exchange (gain) loss			(161	)			1,267				(299	)			737
Net loss (gain) on disposition of capital assets			140				41				(1,091	)			138
Changes in non-cash working capital:
Accounts receivable			(89,355	)			(29,133	)			(123,571	)			(80,599	)
Inventory			(10,754	)			(52	)			(14,182	)			3,602
Advances against auction contracts			3,923				(2,536	)			761				(2,480	)
Prepaid expenses and deposits			76				(2,201	)			(2,035	)			(1,035	)
Income taxes receivable			1,224				(1,793	)			(5,282	)			(1,094	)
Income taxes payable			(487	)			—				2,697				—
Auction proceeds payable			72,823				28,648				178,757				191,274
Accounts payable and accrued liabilities			12,794				17,733				(7,878	)			28,403
Other			(81	)			(161	)			(365	)			86
Net cash flows from operating activities			15,620				31,327				110,352				235,475
Investing activities:
Capital asset additions			(10,284	)			(38,132	)			(46,185	)			(117,335	)
Proceeds on disposition of capital assets			1,626				539				7,594				1,947
Decrease (increase) in other assets			(87	)			137				(872	)			(5,045	)
Net cash flows from investing activities			(8,745	)			(37,456	)			(39,463	)			(120,433	)
Financing activities:
Issuance of share capital			417				860				2,492				4,223
Dividends on common shares			(11,085	)			(10,529	)			(32,178	)			(29,435	)
Issuance of short-term debt			28,912				729				30,765				1,010
Repayment of short-term debt			(1,810	)			—				(6,707	)			(300	)
Issuance of long-term debt			15,000				—				15,000				66,408
Repayment of long-term debt			(14,436	)			—				(14,436	)			(14,999	)
Other			220				437				326				369
Net cash flows from financing activities			17,218				(8,503	)			(4,738	)			27,276
Effect of changes in foreign currency rates on cash and cash equivalents			9,620				9,565				2,647				17,477
Increase (decrease) in cash and cash equivalents			33,713				(5,067	)			68,798				159,795
Cash and cash equivalents, beginning of period			157,681				272,137				122,596				107,275
Cash and cash equivalents, end of period		$	191,394			$	267,070			$	191,394			$	267,070
Supplemental information:
Interest paid		$	1,952			$	1,708			$	5,642			$	3,849
Income taxes paid		$	3,685			$	5,579			$	19,152			$	29,027

See accompanying notes to consolidated financial statements.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 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 10. The interim consolidated financial statements should be read in conjunction with the December 31, 2009 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 8).

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 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

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

3.

Capital assets:

						Accumulated				Net book
September 30, 2010		Cost				depreciation				value
Land and improvements		$	344,482			$	22,562			$	321,920
Buildings			254,974				46,410				208,564
Land and buildings under development			3,792				—				3,792
Yard equipment			32,657				15,992				16,665
Computer software and equipment under development			6,604				—				6,604
Computer software			40,895				22,433				18,462
Automotive equipment			20,588				9,239				11,349
Office equipment			20,409				8,529				11,880
Computer equipment			19,258				10,462				8,796
Leasehold improvements under development			459				—				459
Leasehold improvements			14,437				3,324				11,113
		$	758,555			$	138,951			$	619,604

						Accumulated				Net book
December 31, 2009		Cost				depreciation				value
Land and improvements		$	294,134			$	19,684			$	274,450
Buildings			232,160				40,882				191,278
Land and buildings under development			57,057				—				57,057
Yard equipment			28,945				13,533				15,412
Computer software and equipment under development			14,084				—				14,084
Computer software			29,477				15,749				13,728
Automotive equipment			20,124				8,223				11,901
Office equipment			17,275				6,998				10,277
Computer equipment			14,707				7,104				7,603
Leasehold improvements under development			1,738				—				1,738
Leasehold improvements			2,968				2,551				417
		$	712,669			$	114,724			$	597,945

During the nine months ended September 30, 2010, the Company determined that certain assets on which depreciation was charged had an indefinite life and therefore should not have been depreciated. The accumulated depreciation on these assets was $2,668,000, which was reversed in the period as an immaterial adjustment, resulting in a $2,668,000 decrease to depreciation expense.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

3.

Capital assets (continued):

During the nine months ended September 30, 2010, the Company capitalized interest of $1,767,000 (2009 — $3,515,000) to the cost of land, buildings, software, equipment, and leasehold improvements under development.

4.

Other non-current assets:

		September 30,				December 31,
		2010				2009
Note receivable		$	5,053			$	5,131
Assets held for sale			—				3,675
Long-term prepaids			5,154				2,946
Other receivables			1,563				2,720
		$	11,770			$	14,472

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 2014.

5.

Short-term debt:

Short-term debt at September 30, 2010 consisted of draws on the Company’s revolving credit facilities with a weighted average interest rate of 0.99% per annum.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

6.

Long-term debt:

		September 30,				December 31,
		2010				2009
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.		$	58,151			$	56,889
Term loan, unsecured, bearing interest at 5.61%, due in quarterly installments of interest only, with full amount of the principal due in 2011, which the Company intends to refinance on a long-term basis by drawing on its available credit facilities.			29,990				29,966
Revolving loan, denominated in Canadian dollars, unsecured, bearing interest at Canadian bankers’ acceptance rate plus a margin between 0.65% and 1.00%, due in monthly installments of interest only. The revolving credit facility is available until January 2014.			29,961				29,282
Term loan, denominated in United States dollars, unsecured, bearing interest at 2.30%, due in quarterly installments of interest only, with the full amount of the principal due in 2013, drawn to refinance the Canadian dollar term loan that fell due in 2010.			15,000				—
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, which the Company refinanced on a long-term basis by borrowing term debt under its committed, revolving credit facility.			—				14,257
		$	133,102			$	130,394

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

6.

Long-term debt (continued):

The following credit facilities are available to the Company:

		September 30,				December 31,
		2010				2009
Committed revolving credit facilities:
Total unused		$	124,424			$	180,513
Expires January 2014			119,424				165,513
Uncommitted credit facilities:
Total unused		$	284,688			$	280,426
Expires November 2011			191,680				192,928

7.

Share capital:

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

Issued and outstanding, December 31, 2009			105,378,620
Issued for cash, pursuant to stock options exercised			210,116
Issued and outstanding, September 30, 2010			105,588,736

	(b)		Stock option plan:
			Stock option activity for the nine months ended September 30, 2010 is as follows:

		Common Shares				Weighted Average
		Under Option				Exercise Price
Outstanding, December 31, 2009			2,922,587			$	15.13
Granted			591,704				21.79
Cancelled			(3,000	)			24.39
Exercised			(210,116	)			11.87
Outstanding, September 30, 2010			3,301,175			$	16.53
Exercisable, September 30, 2010			2,308,577			$	15.47

The options outstanding at September 30, 2010 expire on dates ranging to September 8, 2020.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

7.

Share capital (continued):

	(b)		Stock option plan (continued):
			The following is a summary of stock options outstanding and exercisable at September 30, 2010:

						Options Outstanding								Options Exercisable
						Weighted				Weighted								Weighted
						Average				Average								Average
Range of		Number				Remaining Life				Exercise				Number				Exercise
Exercise Prices		Outstanding				(years)				Price				Exercisable				Price
$3.89 – $4.35			51,500				1.4			$	4.34				51,500			$	4.34
$5.18			172,124				2.3				5.18				172,124				5.18
$8.82 – $10.80			339,700				3.9				9.82				339,700				9.82
$14.23 – $14.70			1,320,184				7.4				14.55				933,843				14.57
$18.67 – $19.23			383,104				6.5				18.68				376,200				18.67
$21.82			584,800				9.5				21.82				—				—
$24.39 – $25.76			449,763				7.5				24.41				435,210				24.41
			3,301,175												2,308,577

	(c)		Stock-based compensation:
			The Company uses the fair value based method to account for employee stock-based compensation awards. During the nine months ended September 30, 2010, the Company recognized compensation cost of $2,086,000 (2009 — $1,593,000) in respect of options granted in 2010 and 2009 under its stock option plan.
			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:

		2010				2009
Risk free interest rate			2.7%				2.5%
Dividend yield			1.84%				2.47%
Expected lives			5 years				5 years
Volatility			34.4%				31.8%

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

7.

Share capital (continued):

	(c)		Stock-based compensation (continued):
			The weighted average grant date fair value of options granted during the nine months ended September 30, 2010 was $6.40 per option (2009 — $3.77). 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 September 30, 2010												Nine months ended September 30, 2010
		Net								Per share				Net								Per share
		earnings				Shares				amount				earnings				Shares				amount
Basic net earnings per share		$	13,478				105,485,763			$	0.13			$	52,396				105,492,613			$	0.50
Effect of dilutive securities:
Stock options			—				429,385				—				—				633,141				(0.01	)
Diluted net earnings per share		$	13,478				105,915,148			$	0.13			$	52,396				106,125,754			$	0.49

		Three months ended September 30, 2009												Nine months ended September 30, 2009
		Net								Per share				Net								Per share
		earnings				Shares				amount				earnings				Shares				amount
Basic net earnings per share		$	12,892				105,228,846			$	0.12			$	71,618				105,064,864			$	0.68
Effect of dilutive securities:
Stock options			—				954,454				—				—				616,208				—
Diluted net earnings per share		$	12,892				106,183,300			$	0.12			$	71,618				105,681,072			$	0.68

For the nine months ended September 30, 2010, stock options to purchase 1,034,563 common shares (2009 — 452,763) 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

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

8.

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 September 30, 2010, outstanding guarantees under contract for industrial equipment to be sold prior to the end of the fourth quarter of 2010 totaled $39,043,000 (December 31, 2009 — $13,553,000 to be sold prior to the end of the second quarter of 2010). The Company also had guarantees under contract totaling $13,023,000 relating to agricultural auctions to be held prior to the end of the second quarter of 2011 (December 31, 2009 — $8,070,000 to be sold prior to the end of the third quarter of 2010). The outstanding guarantee amounts are undiscounted and before estimated proceeds from sale at auction. No liability has been recorded with respect to these guarantee contracts.

9.

Financial instruments:

	(a)		Fair value
			Carrying amounts of certain of the Company’s financial instruments, including accounts receivable, auction proceeds payable, accounts payable and accrued liabilities, and short-term debt, 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 carrying amount of the Company’s note receivable approximates its fair value as at September 30, 2010 and December 31, 2009. The carrying amounts of the Company’s other non-current receivables approximate their fair values. Based on borrowing rates currently available to the Company for loans with similar terms, the fair value of its long-term debt as at September 30, 2010 was approximately $138,122,000 (December 31, 2009 — $138,429,000).
	(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

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

9.

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. Upon translation of those operations’ net assets into U.S. dollars, the Company is exposed to foreign exchange risk. The Company has elected not to actively manage this exposure at this time.
			For the nine months ended September 30, 2010, 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:

	•		increase (decrease) net earnings by approximately $105,000 (2009 — decrease (increase) $100,000) due to the translation of the foreign operations’ statements of operations into the Company’s reporting currency, the U.S. dollar;
	•		decrease (increase) net earnings by approximately $35,000 (2009 — $115,000) due to the revaluation of significant foreign currency denominated monetary items; and
	•		decrease (increase) other comprehensive income by approximately $2,900,000 (2009 — $1,900,000).

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 September 30, 2010 and December 31, 2009, the Company was 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 September 30, 2010, approximately 23% (December 31, 2009 — 22%) of the Company’s borrowings are at floating rates of interest.

RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

9.

Financial instruments (continued):

	(b)		Financial risk management (continued):
			Interest rate risk (continued)
			The weighted average interest rate paid by the Company on its outstanding floating rate borrowings during the nine months ended September 30, 2010 was 1.29% (2009 — 2.43%). For the nine-month periods ended September 30, 2010 and 2009, with other variables unchanged, a 100 basis points or 1% increase (decrease) in interest rates would decrease (increase) net earnings by approximately $105,000 (2009 — $125,000).
			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 (notes 5 and 6) 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

Nine months ended September 30, 2010 and 2009
(Tabular dollar amounts expressed in thousands of United States dollars, except share and per share amounts)
(Information as at September 30, 2010 and for the nine-month periods ended September 30, 2010 and 2009 is unaudited)

10.

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 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 are reported in the cumulative translation adjustment account under Canadian GAAP. 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.

As a result, the amounts in the consolidated balance sheets that differ from those reported under Canadian GAAP are as follows:

		September 30, 2010								December 31, 2009
		Canadian								Canadian
		GAAP				US GAAP				GAAP				US GAAP
Retained earnings			431,544				416,660				411,326				396,442
Accumulated other comprehensive income			19,014				33,898				16,959				31,843

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 nine-month periods ended September 30, 2010 compared to the three- and nine-month periods ended September 30, 2009. This discussion should be read in conjunction with our unaudited interim consolidated financial statements and notes thereto for the period ended September 30, 2010, 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, 2009, which are included in our 2009 Annual Report on Form 40-F.

The date of this discussion is as of October 28, 2010. 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 10 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 U.S. 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 Vancouver, British Columbia, Canada, and as of the date of this discussion, we operated from over 110 locations in more than 25 countries, including 42 auction sites worldwide. We sell, through unreserved public auctions, a broad range of used and unused 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 to easily and confidently exchange their equipment.

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 equipment and trucks is driven by the ongoing production of new equipment and trucks and the motivation of equipment owners to realign their fleets. Industry analysts estimate that the world-wide value of used equipment and truck transactions, of the type of equipment we sell at our auctions, is greater than $100 billion per year on average. Although we sell more used equipment than any other company in the world, we estimate that our share of this fragmented market is in the range of 3-4%.

In recent periods, approximately 80% of the value of the items sold at our auctions was purchased by end users of equipment and trucks (retail buyers), such as contractors, with the remainder being purchased primarily by equipment and truck dealers, rental companies 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, other third party methods, and equipment rental companies that offer an alternative to purchasing. When sourcing equipment to sell at our auctions, we compete with other auction companies, other third party methods, and equipment owners that have traditionally disposed of equipment through private sales. Private sales between equipment owners are the dominant form of transaction in the used truck and equipment sectors.

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 marketing skills.

•

Our ability to enhance our live auctions with technology such as our online bidding service, our proprietary Virtual Ramp, our Timed Auction system, as well as our 21 language website.

•

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 bids 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, or 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 an efficient and effective way to exchange equipment.

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 diverse multinational, mainly end user 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 from many different end markets to our auctions, most of whom are end users rather than resellers, is appealing to sellers of used equipment and trucks, 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 significant growth in our business.

In our 50 years of experience, past recessions have typically acted as a catalyst for equipment owners to turn their surplus assets into cash quickly, efficiently and for fair market value, which we believe has benefited our business. When cash flows and credit markets tighten and there is uncertainty in the market, traditional buyers of new equipment have been more likely to look for good quality, late-model used equipment, resulting in enhanced demand for equipment at our auctions. However, the recent economic environment is unlike prior recessions, particularly in the United States, and as a result it is difficult to predict the timing of the various events that will cause an equipment owner to make the decision to sell his equipment. There remains 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.

We believe that as a result of equipment market uncertainty and the recent economic environment, predominantly in the U.S., financial institutions have been less likely to force equipment owners to sell idle assets. This, combined with dramatically lower production of new equipment over the last several years, has likely resulted in a decrease in the volume of used equipment transactions in the marketplace over the past two years. Although our long-term strategy is designed in part to increase our share of the large and highly fragmented used equipment market, and market share gains have tended not to have been directly impacted by economic uncertainty, recent market conditions and the contraction of the used equipment market have likely impacted our ability to grow our business.

We continue to believe our business model is generally well suited for all economic conditions and our strategy is sound. We also believe that, over the long term, designing and executing our strategy will continue to be a significant determinant of our ability to grow our earnings, in part because our share of the world market for used equipment and trucks is so small.

Growth Strategies

Our long-term mission is to be the world’s largest marketplace for commercial and industrial assets that allows our customers to easily and confidently exchange equipment. 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. Our long-term target is to increase our sales force by an average of 5-10% per year.

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, Canada 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 one new permanent auction site or regional auction unit to our network every year. In addition, we intend to expand or replace existing auction sites as necessary to provide capacity for increased sales volumes. Our auction site network supports our long-term growth, and is a critical strategic advantage and helps us to sustain efficient and scalable growth. We also 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 focus on improvement will allow us to grow our revenues faster than our operating costs over the long term. 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

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.

Strategy Execution in 2010

Highlights of the first nine months of 2010 included:

People

Our sales team has increased to 316 people, a 5% increase compared to the end of 2009. Because our business depends on trusting relationships with our customers to generate consignments to our auctions, it can often take two to three years for a sales person to achieve a suitable level of productivity. However, we expect that investing in our sales force will help us to achieve our longer-term growth strategies.

Places

In addition to the new sites added to our network in the first half of 2010 (Narita, Japan; Tipton, California; St Louis, Missouri; Madrid, Spain; and Salt Lake City, Utah) we plan to add one regional auction unit to our network during the fourth quarter of 2010 in Meppen, Germany.

Processes

We introduced our new Timed Auction system to an additional eight auction sites around the world in the third quarter of 2010, bringing the total number of sites offering this service to eighteen. This new technology is used to sell smaller items, such as consumer goods and equipment attachments, in an online Timed Auction, without an auctioneer and therefore with more flexibility and convenience for our bidders. In addition to offering greater convenience and choice for our customers, this system enables us to sell lower-value lots more efficiently and at lower cost. We intend to roll out our Timed Auction system to a further four auction sites during the remainder of 2010.

Strategy Update

We are currently finalizing our annual strategy update process, identifying strategic initiatives to be undertaken over the next few years that build off of our focus on people, places and processes. Our strategic update process keeps our customer’s viewpoint at the forefront and as a result, we intend to launch a number of new services starting in 2011. We believe that these services will enhance our customers’ ability to easily and confidently exchange equipment.

One of the most significant initiatives we intend to launch during 2011 is a bundle of value-added buyer services that we expect will help Ritchie Bros. customers feel more confident and make their experience at our auctions as compelling and easy as possible. The bundle of services is being developed in response to customer feedback and will include such features as a customer finance program, enhanced equipment information and other features. The introduction of these and other new services will continue our efforts to extend the appeal of our auctions and enhance our ability to attract new and existing customers to our auctions.

We also intend to revise and simplify our fee structure effective July 1, 2011. Certain fees will be eliminated, including the 2% fee charged on internet and proxy bid purchases, and we will amend the administrative fee currently charged to buyers to address the cost of providing the new and enhanced services, as well as other buyer-focused initiatives launched in recent years. The current 10% administrative fee will continue to be charged on all lots that sell for $2,500 or less; lots that sell for more than $2,500 will attract a 2.5% administrative fee, with a maximum fee of $950 per lot (or the near equivalent amount in the currency of the auction).

These new services and revised fee structure will allow us to increase the value we provide to buyers and sellers, which we believe will make their experience easier and give them a higher level of confidence in our auctions. We expect that these changes will increase both our auction revenues and our operating expenses, and will have a net positive effect on earnings in 2011 and future years.

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 nine months of 2010, 94% of our gross auction proceeds were attributable to auctions held at our permanent auction sites and regional auction units (first nine months of 2009 — 91%). 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 nine months of 2010, we had approximately 247,000 bidder registrations at our industrial auctions, which is consistent with the same period in 2009. Throughout our history, consignors to our auctions have often developed their relationship with us starting as bidders at our auctions.

We received nearly 31,000 industrial asset consignments (typically comprised of multiple lots) during the nine months ended September 30, 2010, compared to approximately 27,000 in the same period in 2009. We handled approximately 213,000 lots, which is an increase from 209,000 lots in the same period in 2009.

During the first nine months of 2010, we conducted 157 unreserved industrial auctions at locations in North and Central America, Europe, the Middle East, Australia, and Asia (first nine months of 2009 — 138). We also held 90 unreserved agricultural auctions during the first nine months of 2010 in Canada (first nine months of 2009 — 108). Although our auctions vary in size, our average industrial auction during the 12-month period ended September 30, 2010 attracted over 1,500 bidder registrations (12 months ended September 30, 2009 — over 1,600) and featured over 1,300 lots (12 months ended September 30, 2009 — over 1,400) consigned by 189 consignors (12 months ended September 30, 2009 — 185), generating average gross auction proceeds of approximately $14.9 million per auction (12 months ended September 30, 2009 — $16.9 million). Our agricultural auctions during the same period averaged approximately $1.3 million in size (12 months ended September 30, 2009 — $0.8 million).

We sold over $620 million of equipment, trucks, and other assets to online bidders during the first nine months of 2010 compared to over $600 million in the first nine months of 2009. Our online sales in 2010 continue to demonstrate our position as the world’s largest seller of industrial equipment to online buyers.

Approximately 54% of our auction revenues in the first nine months of 2010 were earned from operations in the United States (first nine months of 2009 — 55%), 22% from auctions in Canada (first nine months of 2009 — 23%) and the remaining 24% from auctions in countries other than the United States and Canada, primarily in Europe, the Middle East, Australia, and Mexico (first nine months of 2009 — 22%). We had 1,176 full-time employees at September 30, 2010, including 316 sales representatives and 12 trainee territory managers, compared to 1,140, 300 and 20 respectively, at September 30, 2009.

We are a public company and our common shares are listed under the symbol “RBA” on the New York and Toronto Stock Exchanges. On October 28, 2010, we had 105,602,136 common shares issued and outstanding and stock options outstanding to purchase a total of 3,301,175 common shares.

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 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 recent periods, straight commission sales have represented approximately 75-80% 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 70 days, respectively. At September 30, 2010, our outstanding industrial and agricultural guarantees totalled approximately $52.1 million, of which approximately $30.8 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 $42 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.

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.

We generally refer to our guarantee and outright purchase business as our at risk, or underwritten, business. In recent periods, our at risk business represented approximately 20-25% of gross auction proceeds on an annual basis.

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 nine months of 2010, we achieved an auction revenue rate of 10.85% (first nine months of 2009 — 10.77%).

In general, the largest contributor to the variability of our auction revenue rate is the performance, rather than the amount, of our at risk business (guarantee and inventory contracts). In a period when our at risk business performs better than average, our auction revenue rate typically exceeds the expected average rate. Conversely, if our at risk 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.

Overall Performance

Our gross auction proceeds were $2.5 billion for the nine months ended September 30, 2010 compared to $2.6 billion for the nine months ended September 30, 2009. This slight decrease continues the trend from 2009 where equipment owners (particularly in the United States) are reacting to the unusual situation of low interest rates and generally more accommodating lenders.

During the first nine months of 2010, we recorded auction revenues of $269.1 million and net earnings of $52.4 million, or $0.49 per diluted share. This performance compares to auction revenues of $280.1 million and net earnings of $71.6 million, or $0.68 per diluted share, during the first nine months of 2009. Our earnings decreased mainly as a result of higher depreciation and general and administrative expenses. We ended the first nine months of 2010 with working capital of $42.6 million, compared to $30.5 million at December 31, 2009.

Adjusted net earnings for the nine months ended September 30, 2010 were $51.6 million, or $0.49 per diluted share, which compares to adjusted net earnings of $71.0 million, or $0.67 per diluted share, for the nine months ended September 30, 2009. We define adjusted net earnings as financial statement net earnings excluding the after-tax effects of sales of excess property 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.

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

		Nine months ended September 30,
		2010				2009
Net earnings under Canadian GAAP		$	52,396			$	71,618
Net foreign exchange impact on financing transactions, net of tax(1)			—				(759	)
Gain on sale of excess property(2)			(1,230	)			—
Tax relating to reconciling items			474				95
Adjusted net earnings		$	51,640			$	70,954

Results of Operations

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

We conduct operations around the world in a number of different currencies, but our reporting currency is the U.S. dollar. In the first nine months of 2010, approximately 40% of our revenues and approximately 60% of our operating costs were denominated in currencies other than the U.S. dollar. 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.

The main currencies other than the U.S. 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 U.S. dollar. These fluctuations affect our reported auction revenues and operating expenses when non-U.S. dollar amounts are converted into U.S. dollars for financial statement reporting purposes. It is difficult, if not impossible, to quantify how foreign exchange rate movements affect such variables as supply of 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 minimal.

United States Dollar Exchange Rate Comparison

										% Change
Nine months ended September 30,		2010				2009				in U.S. $
Average value of one U.S. dollar:
Canadian dollar		$	1.0359			$	1.1700				-11	%
Euro		€	0.7611			€	0.7339				4	%

Auction Revenues

Nine months ended September 30,		2010				2009				% Change
Auction revenues		$	269,072			$	280,068				-4	%
Gross auction proceeds		$	2,479,205			$	2,600,910				-5	%
Auction revenue rate			10.85	%			10.77	%

Our auction revenues decreased in the first nine months of 2010 compared to the equivalent period in 2009 primarily as a result of a lower gross auction proceeds, partially offset by higher auction revenue rates. Our at risk business represented 22% of our total gross auction proceeds in the first nine months of 2010 (first nine months of 2009 — 18%). The mix of contracts in the first nine months of 2010 was roughly consistent with our experience in recent periods. During the first nine months of 2010 our gross auction proceeds in local currency, being the U.S., Canadian and Australian dollars and the Euro, decreased by 9% compared to the first nine months of 2009.

Our auction revenue rate for the first nine months of 2010 was 10.85%, which was higher than our expected range of 9.75% to 10.25% mainly as a result of the performance of our at risk business. The increase compared to our experience in the first nine months of 2009 related primarily to the improved performance of our straight commission business, which performed better in the first nine months of 2010 than in the first nine months of 2009. Our experience has shown that our auction revenue rate is difficult to estimate precisely and 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 nine months of 2010 would have impacted auction revenues by approximately $2.5 million, of which approximately $1.8 million or $0.02 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

Nine months ended September 30,		2010				2009				% Change
Direct expenses		$	34,833			$	35,481				-2	%
Direct expenses as a percentage of gross auction proceeds			1.41	%			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 nine months of 2010 was higher than the rate for the first nine months of 2009 in part because of a decrease in the average size of auctions conducted at our permanent auction sites in the first nine of 2010. In addition, we held a number of auctions in new markets, such as Turkey, Poland, India and Japan, which further contributed to the increased rate.

Depreciation and Amortization Expense

Nine months ended September 30,		2010				2009				% Change
Depreciation and amortization expense		$	26,824			$	22,419				20	%

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.

During the first nine months of 2010, we determined that certain assets on which depreciation was charged had an indefinite life and therefore should not have been depreciated. The accumulated depreciation on these assets was $2.7 million which was reversed in the first quarter of 2010 as an immaterial adjustment, decreasing depreciation expense.

Offsetting this reduction in depreciation expense was an increase relating to new assets that we have put into service in recent periods, such as our new permanent auction sites in Vancouver, British Columbia; Narita, Japan; Mexico City, Mexico; Caorso, Italy; Madrid, Spain; and St Louis, Missouri, 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

Nine months ended September 30,		2010				2009				% Change
General and administrative expenses		$	134,219			$	123,308				9	%

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 and the resulting effects of foreign currency fluctuations.

The increase in our G&A for the first nine months of 2010 compared to the first nine months of 2009 was primarily a result of currency fluctuations and higher costs relating to leases entered into during the 12 months ended September 30, 2010.

Foreign currency fluctuations resulted in an increase in our G&A of approximately $6.1 million in the first nine months of 2010 compared to the first nine months of 2009 in connection with the translation into U.S. dollars of our foreign operations’ G&A expenses.

Expenses relating to facilities increased by $4.0 million over the same period in 2009 due to new and renewed leases and property taxes.

Interest Expense

Nine months ended September 30,		2010				2009				% Change
Interest expense		$	3,696			$	365				913	%

Interest expense is comprised mainly of interest paid on long-term debt and revolving credit facilities. Interest expense increased in the first nine months of 2010 compared to the same period in 2009 due primarily to additional debt taken on in the second and third quarters of 2009, combined with a lower amount of interest capitalized to projects under development in 2010.

Interest expense varies depending on the amount of interest capitalized to auction site development projects, which is driven by the number and size of projects that the Company has in progress during a given period.

Interest Income

Nine months ended September 30,		2010				2009				% Change
Interest income		$	1,451			$	1,770				-18	%

Interest income is earned on our excess cash and receivable balances interest. 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

Nine months ended September 30,		2010				2009				% Change
Foreign exchange gain		$	299			$	(737	)			N/A

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.

Gain (Loss) on Disposition of Capital Assets

Nine months ended September 30,		2010				2009				% Change
Gain (loss) on disposition of capital assets		$	1,091			$	(138	)			N/A

The gain recognized during the nine months ended September 30, 2010 was primarily on the sale of our former Houston, Texas, permanent auction site, partially offset by losses on other assets.

Income Taxes

Nine months ended September 30,		2010				2009				% Change
Income taxes		$	20,849			$	29,243				-29	%
Effective income tax rate			28	%			29	%

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 nine months ended September 30, 2010 was consistent with the rate we experienced in the first nine months of 2009. 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

Nine months ended September 30,		2010				2009				% Change
Net earnings		$	52,396			$	71,618				-27	%
Net earnings per share — basic			0.50				0.68				-26	%
Net earnings per share — diluted			0.49				0.68				-28	%

Our net earnings in the first nine months of 2010 decreased compared to the equivalent period in 2009 primarily due to the lower gross auction proceeds, increased general and administrative expenses and depreciation in the first nine months of 2010, offset in part by a slightly increased auction revenue rate. Adjusted net earnings (see discussion above under “Overall Performance”) for the first nine months of 2010 were $51.6 million, or $0.49 per diluted share, which represents a 27% decrease over the adjusted net earnings of $71.0 million, or $0.67 per diluted share in the first nine months of 2009.

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

The proportion of revenues and expenses denominated in currencies other than the U.S. dollars in a given period will differ from the annual proportion depending on the size and location of auctions held during the period, but is usually roughly consistent with the rates we expect to experience on a full year basis.

United States Dollar Exchange Rate Comparison

										% Change
Three months ended September 30,		2010				2009				in U.S. $
Average value of one U.S. dollar:
Canadian dollar		$	1.0391			$	1.0974				-5	%
Euro		€	0.7733			€	0.6992				11	%

Auction Revenues

Three months ended September 30,		2010				2009				% Change
Auction revenues		$	82,229			$	75,934				8	%
Gross auction proceeds		$	750,912			$	693,288				8	%
Auction revenue rate			10.95	%			10.95	%

Our auction revenues increased in the third quarter of 2010 compared to the equivalent period in 2009 as a result of higher gross auction proceeds. Our at risk business represented 23% of our total gross auction proceeds in the third quarter of 2010 (third quarter of 2009 — 15%).

Direct Expenses

Three months ended September 30,		2010				2009				% Change
Direct expenses		$	9,680			$	10,515				-8	%
Direct expenses as a percentage of gross auction proceeds			1.29	%			1.52	%