NEW YORK, NY.- Sothebys
(NYSE: BID) today announced results for the fourth quarter and year ended December 31, 2009.
Despite a 7% decrease in net auction sales, Sothebys reported a substantial improvement in fourth quarter 2009 earnings over the prior year fourth quarter. Net income for the fourth quarter of 2009 is the second highest in Company history at $73.6 million, or $1.09 per share, compared to a net loss of ($9.3) million, or ($0.14) per share, for the prior period. This significant improvement in profitability is especially attributable to a $52.1 million, or 31%, increase in operating revenues from the prior period. This increase is largely due to a 440 basis point, or 28%, improvement in auction commission margin, from 16.0% in the fourth quarter of 2008 to 20.4% in the fourth quarter of 2009, resulting from managements revenue enhancement strategies. Also positively impacting revenues is a $19.9 million reduction in principal activities losses over the period due to the substantial levels of prior year auction guarantee losses and inventory writedowns. The Company continues to significantly limit its use of auction guarantees. Fourth quarter results also reflect a $47.5 million, or 28%, reduction in expenses, driven by the Companys cost reduction initiatives.
For the full year 2009, consolidated sales (sum of aggregate auction sales, private sales and dealer revenues) were $2.8 billion and revenues totaled $485.0 million, a $206.6 million, or 30%, decline from the prior year. This deterioration is primarily due to the 54% decrease in net auction sales during the year, attributable to the downturn in the international art market and global economy that began in September 2008. Offsetting this sales decline is a 37% increase in auction commission margin, to 20.7% in 2009 from 15.1% in 2008 as well as a $77.0 million reduction in principal activities losses, due to the substantial prior year guarantee losses. Also significantly mitigating the impact of this sales decline is a $185.3 million reduction in operating expenses, due to the Companys cost reduction initiatives as well as a lower level of net auction sales. Net loss for the full year 2009 was ($6.5) million, or ($0.10) per share compared to net income of $26.5 million, or $0.38 per share, in the prior year. Excluding restructuring charges of $12.2 million and a gain on the extinguishment of debt of $1.0 million, there would have been net income of $3.1 million*, or $0.04 per share*, in 2009.
It should be noted that 2009 had an unusual effective tax rate due to the combination of the relative impact of permanent differences on a much lower pre-tax earnings amount, the recording of a valuation allowance against certain state, local and foreign deferred tax assets including loss carryforwards as well as the mix of our earnings and losses amongst Sothebys domestic and overseas operations. We would anticipate the effective tax rate to be less volatile in future years as earnings return to more normalized levels.
We are delighted and encouraged by our outstanding fourth quarter, which has produced our second highest fourth quarter net income, said Bill Ruprecht, President and Chief Executive of Sothebys. This remarkable achievement could not have been possible without two driving factors: the strong improvement in auction commission margins and our vigilant focus on costs, which has allowed us to deliver a decrease in operating expenses of $185.3 million in 2009 compared to 2008. We are well poised to capitalize on an economic upturn and art market rebound as it occurs.
Our worldwide sales last autumn were a significant improvement over their spring equivalents, continued Mr. Ruprecht. Sell through rates improved virtually across the board and our November sales of Impressionist, Modern and Contemporary Art both exceeded their pre-sale high estimates. More bidders participated in our Impressionist and Modern Art sales than ever before, confirming that buyers will always be active when there is wonderful property that is fresh to the market and attractively estimated.
The momentum has continued into 2010. We have just held Impressionist, Modern and Contemporary Art sales in London which have been among our best ever, with both sales surpassing their high estimates by wide margins. And, memorably, we have just made history at Sothebys with the sale of Alberto Giacomettis Lhomme qui Marche 1, which sold for $104.3 million in our Impressionist and Modern Art evening sale, setting the world record price for a work of art at auction. Sothebys is the only auction house to have sold works at auction above $100 million and the top three works of art sold at auction have now been sold at Sothebys. (Picassos Garçon a la Pipe (Boy with a Pipe) sold in 2004 for $104.2 million and Picassos Dora Maar au Chat sold in 2006 for $95.2 million.)
Year to Date 2010 Sales
In January in New York, our Old Master Paintings sale led the market and brought $61.6 million, near the high end of the pre-sale estimate of $44/63 million. Twelve works sold for over $1 million led by Van Dycks Two Studies of a Bearded Man which brought $7.3 million and Hendrick Goltzius Jupiter and Antiope which brought $6.8 million. Also in New York in January, our Americana sale led the market with a total of $13.3 million and was highlighted by what is likely the largest piece of early eighteenth century American silver, a punch bowl by Cornelius Kierstede, which was sold for $5.9 million, achieving many multiples of the $400,000/800,000 pre-sale estimate and establishing the record at auction for American silver.
Our Impressionist and Modern Art sales in London last month led the market and brought a remarkable $263.6 million (pre-sale estimate of $129/189 million) with the evening sale total of $235.7 million achieving the highest total for any sale ever held in London. Besides the Giacometti sculpture where ten bidders were fiercely competing, another huge success was Gustav Klimts beautiful landscape Kirche in Cassone which sold for $43.2 million, well over the pre-sale estimate and setting a record at auction for a landscape painting by the artist. 22 works, or over two thirds of those sold in the evening sale, sold for $1 million or more.
Last months London Contemporary Art sales also led the market and brought $103.1 million, well above the presale estimate of $63/88 million. The evening sale included property from Sammlung Lenz Schönberg, a collection of ZERO movement Art assembled by Gerhard and Anna Lenz over a period of 50 years and brought $36.4 million. The top lot of the evening sale was Willem de Koonings Untitled XIV which brought $6.2 million. An outstanding 21 new artist records were set in the evening sale.
Beginning on April 3rd, Sothebys Hong Kong will be holding its spring series of sales which are estimated to bring $161/221 million, combined. Highlighting the sales is a spectacular 5.16 carat Pear-shaped Internally Flawless Fancy Vivid Blue Diamond Ring one of the De Beers Millennium Jewels as well as a beautiful Jadeite Bead Necklace (estimate of $5/6 million each). Also included in the series are important paintings from the Robert Chang Collection which is highlighted by Qi Bashis Tiger and estimated at $3.5 million.
Sothebys announced that it will hold an auction of fine and decorative arts from the contents of Albemarle House, the magnificent home of vintner and philanthropist, Patricia Kluge. The two-day auction, which will take place on June 8th and 9th, will be held on the premises, located outside of Charlottesville, Virginia. Albemarle House, a 45-room English country manor, was conceived by Mrs. Kluge and renowned designer David Easton and is regarded as one of the most important residences created in America since the Golden Age. Among its neighbors are Thomas Jeffersons Monticello and James Monroes Ash Lawn Highland. Mrs. Kluges collection of several hundred works of outstanding Georgian furniture, decorative objects and paintings is estimated in excess of $13.5 million.
In New York on June 21st and 22nd, Sothebys is pleased to offer Photographs from the Polaroid Collection. The collection of more than 1,200 works provides unique insight into the influence of Polaroids revolutionary technology which all but eliminated the distance between inspiration and realization on the history of photography. The collection was begun by Edwin Land, the inventor and founder of Polaroid and works by many of the leading photographers of the second half of the 20th century will be offered. Among them are Peter Beard, Chuck Close, William Wegman, David Levinthal, Robert Frank, David Hockney, Robert Mapplethorpe and, perhaps most significantly, Ansel Adams, who is represented by over 400 photographs. The collection is estimated to bring $7.5/11.5 million.