By Alex Godspeed. 03 March. 2010. Art Knowledge News.
NEW YORK, NY.- Sotheby’s (NYSE: BID) today announced results for the fourth quarter and year ended December 31, 2009. Despite a 7% decrease in net auction sales, Sotheby’s 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 management’s 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 write-downs. 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 Company’s 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 Company’s 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 Sotheby’s domestic and oversseas operations. We would anticipate the effective tax rate to be less volatile in future years as earnings return to more normalized levels.