- Generates Net Income of $91.7 Million in the Second Quarter
- Board Declares Third Quarter Dividend of $0.10 Per Share
"Our business and the market for quality art at the high end continue to be strong," said Bill Ruprecht, Chairman, President and Chief Executive Officer. "We saw significant sales growth in Impressionist, Modern and Contemporary Art and posted the best results in the market in the vast majority of key sales this Spring. We continue to see fierce competition for high-end consignments and as a result, lower auction commission margins."We're very pleased to see impressive participation from emerging market clients as we continue to pursue a number of initiatives, particularly in China and the Middle East, as well as in our digital space, that we believe will better serve our clients and enhance the long-term value of the franchise," Ruprecht continued. "Sotheby's has become so much more than an auction house. Today, we are a pioneering global art business that offers our clients expertise and opportunities to transact through multiple channels year-round – an enhanced digital platform that serves clients at any time, any place and on any device, our global S|2 Contemporary galleries, retail wine and diamonds, unique Financial Services offerings, and real estate and educational opportunities through our partners," he added. "Underpinning that transformation are the prudent financial management steps and strategic investments we have been making to provide unrivalled service to our clients and enhance shareholder value, both near and longer-term." The Company announced earlier today that its Board declared a third quarter dividend of $0.10 per share. Other key recent financial and operational initiatives include:
- Sotheby's retired its 2013 Convertible Notes ($182 million) in June and, taking advantage of historically low interest rates, lowered the cost of Company debt with a $300 million, 5.25% Senior Notes issuance, last September. As a result, Sotheby's will now realize an annual interest expense savings of nearly $5 million. Going forward, a strong balance sheet will afford the Company the flexibility to invest in growth initiatives for the future.
- Sotheby's extended the maturity of its credit facility and amended the facility to increase borrowing capacity from $200 million to $300 million last December. The facility is currently undrawn. The credit facility was further amended in June 2013 to allow for an increase to $300 million of net outstanding guarantee exposure. This will provide enhanced flexibility to negotiate major deal opportunities and may provide Sotheby's with an opportunity to improve margins and profitability by taking prudent balance sheet risk. The Company will also continue to use irrevocable bids to reduce the risk associated with auction guarantees.
- Sotheby's Financial Services is both a unique specialty service to clients and an increasingly valuable pipeline for profitable auction consignments. The Financial Services loan portfolio has increased by almost 30% over the last twelve months to a total of $430 million at June 30th. As this business has grown, the Company has assessed the possibility of alternative financing structures, but has concluded that Sotheby's would be sacrificing agility to respond to opportunities as well as profit margins under the alternatives reviewed to-date.
- Sotheby's continues to explore options for its New York headquarters. This Spring, real estate professionals were engaged to assist in assessing the value of the premises and evaluating available alternatives within New York City. While Sotheby's has no current plans to relocate its York Avenue operations, this is an ongoing, complex process. Management is currently considering a variety of options. Any transaction has to deliver substantial post-mortgage value, while any sale must afford Sotheby's funds for attractive purpose-built new space, which meets the Company's unique facility requirements. Any future action relative to Sotheby's premises will be taken only after fully assessing all financial and tax costs as well as operational challenges and concluding that the incremental value created for shareholders will be meaningful and lasting. Similarly, Sotheby's is planning to assess the value of its London New Bond Street premises in the future, using a similar approach.
- Private sales and private selling exhibitions are an increasingly important part of Sotheby's business as the Company leverages experts' expertise and experience with a low level of associated expenses. Sotheby's is opening a Contemporary private sales gallery - S|2 - in London this autumn, joining S|2 galleries in Hong Kong and New York.
- Sotheby's continues to invest in China and other emerging markets and expects those investments to greatly benefit future results as interest from new markets continues to grow. Two statistics offer context for these investments: 22% of the first-time buyers in Sotheby's worldwide 2013 Spring sales were from Asia. Further, just five years ago, 21% of Sotheby's sold lots were purchased by buyers from 'new markets'; today that figure is 39% – nearly double.
- Sotheby's has launched innovations on its web platform, allowing clients to transact at any time, from anywhere, on any device. A refreshed web presence with responsive design better reflects the Sotheby's of today – an innovative global art business encompassing auction, but also a great deal more – and with better reach to clients. More than 30% of all clients participating in Sotheby's global salesrooms in 2013 registered for paddles on the website.
The conference call will also be accessible via webcast on the Investor Relations section of the Sotheby's web site at http://investor.shareholder.com/bid/events.cfm.About Sotheby's Sotheby's has been uniting collectors with world-class works of art since 1744. Sotheby's became the first international auction house when it expanded from London to New York (1955), the first to conduct sales in Hong Kong (1973) and France (2001), and the first international fine art auction house in China (2012). Today, Sotheby's presents auctions in eight different salesrooms, including New York, London, Hong Kong and Paris, and Sotheby's BIDnow program allows visitors to view all auctions live online and place bids from anywhere in the world. Sotheby's offers collectors the resources of Sotheby's Financial Services, the world's only full-service art financing company, as well as private sale opportunities in more than 70 categories, including S|2, the gallery arm of Sotheby's Contemporary Art department, and two retail businesses, Sotheby's Diamonds and Sotheby's Wine. Sotheby's has a global network of 90 offices in 40 countries and is the oldest company listed on the New York Stock Exchange (BID). Forward-looking Statements This release contains certain "forward-looking statements" (as such term is defined in the Securities and Exchange Act of 1934, as amended) relating to future events and the financial performance of the Company. Such statements are only predictions and involve risks and uncertainties, resulting in the possibility that the actual events or performances will differ materially from such predictions. Major factors, which the Company believes could cause the actual results to differ materially from the predicted results in the "forward-looking statements" include, but are not limited to, the overall strength of the international economy and financial markets, political conditions in various nations, competition with other auctioneers and art dealers, the success of our risk reduction and margin improvement efforts, the amount of quality property being consigned to art auction houses and the marketability at auction of such property. Please refer to our most recently filed Form 10-Q (and/or 10-K) for a complete list of Risk Factors. Financial Table Follows
|CONDENSED CONSOLIDATED INCOME STATEMENTS|
|(Thousands of dollars, except per share data)|
|Three Months Ended||Six Months Ended|
|June 30, 2013||June 30, 2012||June 30, 2013||June 30, 2012|
|Auction and related revenues||$ 294,943||$ 290,151||$ 389,118||$ 387,561|
|License fee revenues||2,090||1,592||3,276||2,493|
|Direct costs of services||31,260||27,308||39,709||34,699|
|Dealer cost of sales||3,998||6,559||4,698||9,071|
|Salaries and related costs||81,265||84,876||141,960||141,102|
|General and administrative expenses||44,371||39,863||88,382||78,773|
|Depreciation and amortization expense||4,801||4,334||9,317||8,554|
|Restructuring charges, net||--||13||--||22|
|Other (loss) income||(168)||(947)||1,531||795|
|Income before taxes||122,450||125,467||90,707||109,004|
|Equity in (losses) earnings of investees, net of taxes||(14)||(44)||(12)||177|
|Income tax expense||30,707||39,993||21,311||34,415|
|Net income||$ 91,729||$ 85,430||$ 69,384||$ 74,766|
|Basic earnings per share - Sotheby's common shareholders||$ 1.34||$ 1.26||$ 1.02||$ 1.10|
|Diluted earnings per share - Sotheby's common shareholders||$ 1.33||$ 1.24||$ 1.00||$ 1.09|
|Weighted average basic shares outstanding||68,306||67,753||68,129||67,605|
|Weighted average diluted shares outstanding||68,889||68,416||68,990||68,526|
|Cash dividends paid per common share||$ --||$ 0.08||$ --||$ 0.16|
CONTACT: Press Department 212 606 7176 Andrew Gully Andrew.Gully@Sothebys.com Press Department +44 (0)20 7293 5168 Matthew Weigman Matthew.Weigman@Sothebys.com Investor Relations 212 894 1023 Jennifer Park Jennifer.Park@Sothebys.com