Sotheby's 2008 Financial Highlights ~ Sales of $5.3 Billion in a Down Year

Written by rubin Friday, 27 February 2009 01:44

New York, NY - “The global economic crisis which erupted in the autumn of 2008 had a major impact on our business in the fourth quarter,” said Bill Ruprecht, President and Chief Executive Officer of Sotheby’s. “For the first nine months of 2008, our aggregate auction sales were at record levels. But from October onwards, virtually every auction around the world experienced declines. As a result, we immediately took steps to strengthen our business. We began a worldwide restructuring, initiated global cost-cutting measures and dramatically curtailed the use of guarantees. And to date in 2009, auction commission margins are 17.3%, up 27% from the 13.6% in the first quarter of 2008.”

“As we begin 2009 our financial condition remains healthy. We are well-positioned to operate in this very challenging economic environment. And, very importantly, as we saw in our recent London sales, demand remains positive for great works which are well estimated and fresh to the market. In a turbulent world, art continues to represent both value and relevance.”

• Consolidated * sales of $5.3 billion
• Sotheby’s sold the top lot of the year, Francis Bacon’s Triptych 1976 ($86.3 million).
• The world record price for Contemporary Art, Francis Bacon’s Triptych 1976, was set at Sotheby’s in 2008
• Sotheby’s sold the top lot of the autumn season, Kazimir Malevich’s Suprematist Composition ($60 million)
• Sotheby’s sold the top Contemporary lot of the autumn season, Yves Klein’s Archisponge ($21.4 million)
• Sotheby’s sold six out of the top ten lots in 2008.
• Sotheby’s sold 726 lots for over $1 million
• Sotheby’s sold 114 lots for over $5 million
• Sotheby’s sold 41 lots for over $10 million
• Sotheby’s sold 14 lots for over $20 million.

*Consolidated sales include auction sales, private sales and dealer revenue.

SOTHEBY’S ANNOUNCES 2008 FOURTH / QUARTER AND FULL YEAR RESULTS

• Full Year Revenues of $691.6 million and Net Income of $28.3 million February 26, 2009, New York -- Sotheby’s (NYSE: BID) today announced results for the fourth quarter and twelve months ended December 31, 2008.

For the quarter ended December 31, 2008, the Company reported operating revenues of $166.2 million, a $179.6 million, or 52%, decrease from the fourth quarter of 2007. This deterioration is primarily due to a 46% decline in net auction sales from $1.9 billion to $1.0 billion, significant auction guarantee losses and inventory writedowns, all attributable to a downturn in the international art market that began in September 2008, and which resulted from a weakening global economy, as well as turbulence in the global financial and credit markets. For the fourth quarter ended December 31, 2008, the Company reported an operating loss of ($0.7) million and a net loss of ($8.5) million, or ($0.13) per share compared to operating income of $141.6 million and net income of $102.4 million, or $1.55 per diluted share for the fourth quarter of 2007.

This decline is largely due to the aforementioned revenue decreases as well as a $13.2 million impairment loss in the Company’s Dealer segment related to goodwill and intangible assets and $4.3 million in restructuring charges. Partially offsetting the impact of these factors is a $44.4 million, or 45%, decrease in salaries and related costs over the period primarily due to a $26.7 million, or 75% decline in accrued incentive bonus costs as a result of the much lower profitability of the quarter as compared to the prior period. Fourth quarter adjusted operating income*, which excludes the $13.2 million impairment loss as well as the $4.3 million in restructuring charges, is $16.8 million*.

For the full year 2008, consolidated sales (aggregate auction sales, private sales and dealer revenues) were $5.3 billion and operating revenues were $691.6 million, representing decreases from the prior year of 14% and 25%, respectively, primarily due to the previously mentioned sales decline, auction guarantee losses and inventory write-downs experienced in the fourth quarter of 2008. Net income for the full year 2008 was $28.3 million, a $184.9 million, or 87%, decrease from the prior year largely due to the fourth quarter revenue shortfalls. Also contributing to the decreased profitability is a lower level of private sale commissions, higher borrowing costs and a higher effective tax rate, partially offset by lower salaries and related costs.

Sotheby’s sold the top lot of the year, Francis Bacon’s Triptych, 1976, ($86.3 million), the top lot of the autumn auction season, Kazimir Malevich’s Suprematist Composition ($60.0 million) and the top Contemporary lot of the autumn season, Yves Klein’s Archisponge ($21.4 million) while continuing to reduce lot volume in 2008.

Upcoming Sales

On March 18th and 19th, Sotheby’s will hold its inaugural series of sales in Doha, Qatar. The four sales of Contemporary Art, Orientalist Art, Islamic Art and Watches are estimated to realize a total of $25/34 million over the two-day period. Highlighting the sales is the Pearl Carpet of Baroda which was commissioned by the Maharaja of Baroda. Bidding on this exceptional piece will start around $5 million but is expected to rise considerably higher. Leading the Contemporary Art sale is Andy Warhol’s Round Jackie, a poignant image of Jackie Kennedy based on a news photograph taken of her while she was still in the White House (pre-sale estimate of $2.5/3.5 million).

Beginning on April 4th, Sotheby’s will be holding its spring series of sales in Hong Kong. This sales series will mark the inauguration of wine auctions at Sotheby’s Hong Kong, in addition to the existing sales of Modern and Contemporary Chinese and Southeast Asian Art, Chinese classical paintings and works of art, jewelry and watches. Highlighting the sales is one of the most precious and rarest Tang dynasty artifacts that has ever come on the market, a Magnificent Large Tortoiseshell Octagonal Box and Cover Inlaid with Mother-of-Pearl that has a pre-sale estimate in excess of $5 million. Close to 1,200 lots with a total pre-sale low estimate of $82 million will be on offer.

Earlier this month, the finest private library of Hebrew books and manuscripts in the world, the Valmadonna Trust Library, was on view in Sotheby’s galleries. 10,000 visitors came to Sotheby’s New York to view the remarkable collection which stirred such excitement that on the final day of the exhibition there were lines around the block. The collection includes the only surviving manuscript written in England before the expulsion of the Jews in 1290; arguably the finest copy of the Babylonian Talmud produced between 1519 and 1523 by famed printer Daniel Bomberg, which was previously in the collection of Westminster Abbey; as well as the preeminent group of Hebrew books in existence from the dawn of printing (15th century). Sotheby’s has been asked to sell the entire library privately to a single buyer, with an estimated price at more than $40 million.

Spring 2009 Highlights – Upcoming Sales

Sotheby’s 2009 sales are already off to a strong start. In January, the sale of Important Old Master Paintings and Sculpture in New York achieved a total of $63,888,875, with 11 works commanding prices above $1 million. The sale was highlighted by one of the most important oil paintings by Joseph Mallord William Turner remaining in private hands, The Temple of Jupiter Panellenius, which sold for $12,962,500, the second highest price ever achieved for the artist at auction. A new auction record was established for Hendrick ter Brugghen when his 1624 canvas, Bagpipe Player in Profile, soared past a pre-sale estimate of $4/6 million to sell for $10,162,500.

Sotheby’s week of Impressionist & Modern and Contemporary Art sales in London this February realised a combined total of £69,010,575 ($98,884,169). The Impressionist & Modern Art sales on 3 and 4 February realised a combined total of £43,857,125 ($62,417,280). Two works commanded prices in excess of £5 million, and six for more than £1 million. The top price of the series was for Edgar Degas’s Petite danseuse de quatorze ans, which was sought-after by three bidders before selling to a private Asian collector for £13,257,250 ($18,823,969). The Contemporary Art Evening Sale on 5 February saw 25 of the 27 works offered sell, realising a total of £17,879,250 ($25,785,250). The top-selling lot was the rediscovered painting Concetto Spaziale of 1961 by Italy’s foremost Contemporary artist Lucio Fontana. The painting, which had never before appeared at auction and had remained hidden from public view for almost 50 years, sold for £4,409,250 ($6,359,020).

From 9-19 February, Sotheby’s New York exhibited in its entirety, for the first time ever, The Valmadonna Trust Library, the finest private library of Hebrew books and manuscripts in the world. Nearly 10,000 visitors came to Sotheby’s to view the extensive group of over 11,000 works, which is monumental in its significance as a primary source on both world history and Jewish life and culture. The collection boasts rarities dating from the 10th century to the early 20th century from Italy, Holland, England, Greece, Eastern Europe, the Ottoman Empire, North Africa, India, and China, documenting the spread of the Hebrew press and the dissemination of Jewish culture around the globe. Among the treasures in the collection are: the only surviving manuscript written in England before the expulsion of the Jews in 1290; arguably the finest copy of the Babylonian Talmud produced between 1519 and 1523 by famed printer Daniel Bomberg, which was previously in the collection of Westminster Abbey; as well as the preeminent group of Hebrew books in existence from the dawn of printing (15th century). Sotheby’s has been asked to sell the entire library privately to a single buyer, with an estimated price at more than $40 million.

Sotheby’s first-ever major international auction series in the Middle East will take place on 18 and 19 March at the Ritz Carlton Hotel in Doha, Qatar. The Pearl Carpet of Baroda, one of the most extraordinary masterpieces of its kind ever to come on the market, will form the centrepiece of these sales and be sold alongside other objects in the Arts of the Islamic World auction on 19 March. The carpet is traditionally believed to have been created as a gift for the tomb of the Prophet Mohammad in Medina and was commissioned by “Gaekwar” Kande Rao, the Maharaja of Baroda. The intended gift was clearly never delivered as the Maharaja died before he made the donation and the carpet therefore remained in his family. Bidding on this lot will start around $5 million but is expected to rise considerably higher.

Sotheby’s annual sale of Russian Art in New York on 21 April will include Columbus Sailing from Palos by Ivan Konstantinovich Aivazovsky (est. $1.5/2 million). Aivazovsky journeyed to America to represent Russian artists at the World’s Fair in 1893. When selecting which pictures to include, he considered the fact that the four hundred year anniversary of Columbus.

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