Sotheby’s (NYSE:BID) today reported its financial results for the
fourth quarter and full year ended 31 December 2016.
“Our fourth quarter 2016 results came in better than expected
largely due to a number of strong fourth quarter sales,” said Tad
Smith, Sotheby’s CEO. “These results reflect growing confidence in
the market as collectors responded enthusiastically to the great
collections and works we secured for sale. Even more importantly,
the quarter demonstrated that when the market stabilizes, let alone
when it returns to its secular growth trajectory, our company is
poised to capitalize on the upturn and do very well for our
shareholders.”
For the year ended 31 December 2016, Sotheby’s reported net
income of $74.1 million, or $1.27 per diluted share, a 69% increase
from $43.7 million, or $0.63 per diluted share in the prior year,
largely due to a $65.7 million non-cash income tax charge in 2015
related to the planned repatriation of foreign earnings. Excluding
this and other charges, 2016 Adjusted Net Income* is $99.6 million
and Adjusted Diluted Earnings Per Share* is $1.71, as compared to
$143.1 million and $2.07 per share in 2015.
The comparison between 2015 and 2016 results is significantly
influenced by a number of factors:
First, Consolidated Sales** decreased 27% to $4.9 billion in
2016, primarily attributable to a softening art market in the first
half of 2016 as well as $433 million in Aggregate Auction Sales
relating to the Taubman Collection that was largely sold in the
fourth quarter of 2015.
Partially offsetting these factors is an improvement in Auction
Commission Margin to 17.1% in 2016 from 14.3% in 2015 and a lower
level of variable compensation expense. The Company also benefitted
from a lower effective tax rate and a significantly lower number of
shares outstanding due to share repurchases made throughout
2016.
For the fourth quarter of 2016, net income is $65.5 million, or
$1.20 per diluted share, as compared to a net loss of ($11.2)
million and diluted loss per share of ($0.17) in the prior period.
These improvements are primarily due to the aforementioned non-cash
income tax and voluntary separation incentive program charges. When
compared the prior year, fourth quarter 2016 Adjusted Net Income*
decreased 8% to $73.8 million, but Adjusted Diluted Earnings Per
Share* increased 13% to $1.35, reflecting the reduced share count
resulting from our share repurchase program.
Non-GAAP Financial Measures
*Adjusted Net Income and Adjusted Diluted Earnings Per Share are
non-GAAP financial measures. See Appendix B for a description of
these non-GAAP financial measures and reconciliations to the most
comparable GAAP amounts.
**Consolidated Sales represents the sum of Aggregate Auction
Sales (the total hammer (sale) price of property sold at auction
plus buyer's premium), Private Sales, and Inventory Sales. For the
purposes of this calculation, when applicable, amounts that are
associated with the sale of Sotheby's inventory at auction and
included in Aggregate Auction Sales are eliminated.
Forward-Looking Statements
This release contains certain “forward-looking statements” (as
such term is defined in Section 21E of the Securities and Exchange
Act of 1934, as amended) relating to future events and the
financial performance of Sotheby’s. 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 Sotheby’s
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 global economy
and financial markets, political conditions in various countries,
competition with other auction houses and art dealers, the amount
and quality of property available for consignment and the
marketability at auction of such property. Please refer to
our most recently filed Form 10-K for a complete list of Risk
Factors.
Investor Relations
Information
All Sotheby’s Press Releases and SEC filings are available on
our web site at www.sothebys.com. An outline of the
conference call as well, as an accompanying presentation detailing
our rolling six month results, can be found here:
http://investor.shareholder.com/bid/events.cfm.
Sotheby’s will host a conference call at 9:00 AM EST on 27
February 2017, to discuss its third quarter 2016 financial
results. Please dial 888-371-8897 and for callers outside the
United States, Puerto Rico and Canada, please dial 1-970-315-0479,
approximately 15 minutes before the scheduled start of the call.
The call reservation number is 49881690. 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’sSotheby’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), India (1992) and France (2001), and the first
international fine art auction house in China (2012). Today,
Sotheby’s presents auctions in 10 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 the collection
advisory services of its subsidiary, Art Agency, Partners.
Sotheby’s presents private sale opportunities in more than 70
categories, including S|2, the gallery arm of Sotheby's Global Fine
Art Division, and two retail businesses, Sotheby’s Diamonds and
Sotheby’s Wine. Sotheby’s has a global network of 80 offices in 40
countries and is the oldest company listed on the New York Stock
Exchange (BID).
For More News from Sotheby’s News & Video:
http://www.sothebys.com/en/news-video.html Twitter:
www.twitter.com/sothebys Instagram:
www.instagram.com/sothebys Facebook:
www.facebook.com/sothebys Snapchat ID: sothebysYouTube:
www.youtube.com/SothebysTV Weibo:
www.weibo.com/sothebyshongkong WeChat ID: sothebyshongkong
Browse sale catalogues, view original content, stream live
auctions and more at www.sothebys.com, and through Sotheby’s apps
for iPhone, iPad, Android, Apple TV and Amazon Fire
Appendix A
SOTHEBY’S |
CONSOLIDATED INCOME STATEMENTS |
(Thousands of dollars, except per share
data) |
|
|
|
UNAUDITED |
|
AUDITED |
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, 2016 |
|
December 31, 2015 |
|
December 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
Agency
commissions and fees |
|
$ |
265,719 |
|
|
$ |
284,439 |
|
|
$ |
671,833 |
|
|
$ |
791,920 |
|
Inventory
sales |
|
26,429 |
|
|
35,485 |
|
|
62,863 |
|
|
108,699 |
|
Finance |
|
12,073 |
|
|
12,899 |
|
|
52,716 |
|
|
50,489 |
|
Other |
|
4,468 |
|
|
2,998 |
|
|
17,965 |
|
|
10,386 |
|
Total
revenues |
|
308,689 |
|
|
335,821 |
|
|
805,377 |
|
|
961,494 |
|
Expenses: |
|
|
|
|
|
|
|
|
Agency
direct costs |
|
27,400 |
|
|
39,194 |
|
|
73,324 |
|
|
91,919 |
|
Cost of
inventory sales |
|
34,047 |
|
|
38,710 |
|
|
81,782 |
|
|
111,090 |
|
Cost of
finance revenues |
|
4,758 |
|
|
4,236 |
|
|
17,738 |
|
|
15,780 |
|
Marketing |
|
6,175 |
|
|
6,757 |
|
|
19,695 |
|
|
19,332 |
|
Salaries
and related |
|
93,790 |
|
|
74,816 |
|
|
307,659 |
|
|
302,825 |
|
General
and administrative |
|
45,416 |
|
|
41,564 |
|
|
161,356 |
|
|
159,148 |
|
Depreciation and amortization |
|
5,603 |
|
|
5,037 |
|
|
21,817 |
|
|
19,481 |
|
Voluntary
separation incentive programs (net) |
|
104 |
|
|
36,938 |
|
|
(610 |
) |
|
36,938 |
|
CEO
separation and transition costs |
|
— |
|
|
— |
|
|
— |
|
|
4,232 |
|
Restructuring charges (net) |
|
— |
|
|
3 |
|
|
— |
|
|
(972 |
) |
Total
expenses |
|
217,293 |
|
|
247,255 |
|
|
682,761 |
|
|
759,773 |
|
Operating
income |
|
91,396 |
|
|
88,566 |
|
|
122,616 |
|
|
201,721 |
|
Interest income |
|
328 |
|
|
538 |
|
|
1,294 |
|
|
1,776 |
|
Interest expense |
|
(7,577 |
) |
|
(7,572 |
) |
|
(30,310 |
) |
|
(32,745 |
) |
Other income
(expense) |
|
2,080 |
|
|
2,377 |
|
|
3,134 |
|
|
(1,453 |
) |
Income
before taxes |
|
86,227 |
|
|
83,909 |
|
|
96,734 |
|
|
169,299 |
|
Income tax expense |
|
22,163 |
|
|
94,510 |
|
|
25,957 |
|
|
131,145 |
|
Equity in earnings
(losses) of investees |
|
1,455 |
|
|
(626 |
) |
|
3,262 |
|
|
5,327 |
|
Net income (loss) |
|
65,519 |
|
|
(11,227 |
) |
|
74,039 |
|
|
43,481 |
|
Less: Net
income (loss) attributable to noncontrolling interest |
|
17 |
|
|
(74 |
) |
|
(73 |
) |
|
(246 |
) |
Net income (loss)
attributable to Sotheby's |
|
$ |
65,502 |
|
|
$ |
(11,153 |
) |
|
$ |
74,112 |
|
|
$ |
43,727 |
|
Basic earnings (loss)
per share - Sotheby’s common shareholders |
|
$ |
1.22 |
|
|
$ |
(0.17 |
) |
|
$ |
1.28 |
|
|
$ |
0.64 |
|
Diluted earnings (loss)
per share - Sotheby's common shareholders |
|
$ |
1.20 |
|
|
$ |
(0.17 |
) |
|
$ |
1.27 |
|
|
$ |
0.63 |
|
Cash dividends declared
per common share |
|
$ |
— |
|
|
$ |
0.10 |
|
|
$ |
— |
|
|
$ |
0.40 |
|
Appendix B
NON-GAAP FINANCIAL MEASURES
GAAP refers to generally accepted accounting principles in the
United States of America. Included in this earnings release are
financial measures presented in accordance with GAAP and also on a
non-GAAP basis. The non-GAAP financial measures presented in this
earnings release are:
|
(i) |
Adjusted
Net Income |
|
(ii) |
Adjusted
Diluted Earnings Per Share |
Management cautions users of Sotheby's financial statements that
amounts presented in accordance with its definitions of these
non-GAAP financial measures as provided below may not be comparable
to similar measures disclosed by other companies because not all
companies and analysts calculate such measures in the same manner.
Sotheby's defines the non-GAAP financial measures presented in this
earnings release as follows:
|
(i) |
Adjusted
Net Income is defined as net income (loss) attributable to
Sotheby's, excluding the after-tax impact of earn-out compensation
expense related to the acquisition of AAP, charges related to
certain contractual severance agreements (net, recorded within
salaries and related costs), leadership transition severance costs
(recorded within salaries and related costs), charges related to
Sotheby's voluntary separation incentive programs (net), CEO
separation and transition costs, restructuring charges (net), and
income tax charges associated with the repatriation of pre-2014
foreign earnings. |
|
(ii) |
Adjusted
Diluted Earnings Per Share is defined as diluted earnings per share
excluding the after-tax per share impact of earn-out compensation
expense related to the acquisition of AAP, charges related to
certain contractual severance agreements (net, recorded within
salaries and related costs), leadership transition severance costs
(recorded within salaries and related costs), charges related to
Sotheby's voluntary separation incentive programs (net), CEO
separation and transition costs, restructuring charges (net), and
income tax charges associated with the repatriation of pre-2014
foreign earnings. |
Adjusted Net Income and Adjusted Diluted Earnings Per Share are
important supplemental measures used by the Board of Directors and
management in their financial and operational decision making
processes, for internal reporting, and as part of Sotheby's
forecasting and budgeting processes, as they provide helpful
measures of Sotheby's core operations. These measures allow the
Board of Directors and management to view operating trends, perform
analytical comparisons, and benchmark performance between periods.
Management also believes that these measures may be used by
securities analysts, investors, financial institutions, and other
interested parties in their evaluation of Sotheby's.
Appendix B
A reconciliation of net income (loss) attributable
to Sotheby's to Adjusted Net Income is presented in the following
table (in thousands of dollars):
|
|
Three Months Ended December 31, |
|
Year EndedDecember
31, |
|
|
2016 |
|
2015 |
|
|
2016 |
|
|
2015 |
Net income (loss)
attributable to Sotheby's |
|
$ |
65,502 |
|
|
$ |
(11,153 |
) |
|
$ |
74,112 |
|
|
$ |
43,727 |
|
Add: Acquisition
earn-out compensation expense, net of tax of ($5,213), $0,
($13,615), and $0 |
|
8,187 |
|
|
— |
|
|
|
21,385 |
|
|
— |
|
Add: Contractual
severance agreement charges (net), net of tax of $0, $0, ($2,852),
and $0 |
|
— |
|
|
— |
|
|
|
4,502 |
|
|
— |
|
Add: Leadership
transition severance costs, net of tax of $0, ($1,424), $0, and
($5,167) |
|
— |
|
|
2,326 |
|
|
|
— |
|
|
8,084 |
|
Add: Voluntary
separation incentive programs charges (net), net of tax of ($37),
($13,298), $227, and ($13,298) |
|
67 |
|
|
23,640 |
|
|
|
(383 |
) |
|
23,640 |
|
Add: CEO separation and
transition costs, net of tax of $0, $17, $0, and ($1,651) |
|
— |
|
|
17 |
|
|
|
— |
|
|
2,581 |
|
Add: Restructuring
charges (net), net of tax of $0, $25, $0, and $339 |
|
— |
|
|
28 |
|
|
|
— |
|
|
(633 |
) |
Add: Income tax
expense related to repatriation of pre-2014 foreign earnings |
|
— |
|
|
65,732 |
|
|
|
— |
|
|
65,732 |
|
Adjusted
Net Income |
|
$ |
73,756 |
|
|
$ |
80,590 |
|
|
$ |
99,616 |
|
|
$ |
143,131 |
|
Variance
versus prior period - $ |
|
$ |
(6,834 |
) |
|
|
|
$ |
(43,515 |
) |
|
|
Variance
versus prior period - % |
|
(8 |
)% |
|
|
|
|
(30 |
%) |
|
|
The income tax effect of each line item in the reconciliation of
Net Loss Attributable to Sotheby's to Adjusted Net Loss is computed
using the relevant jurisdictional tax rates for each item.
A reconciliation of diluted earnings (loss) per share to
Adjusted Diluted Earnings Per Share is presented in the following
table:
|
|
Three Months Ended December 31, |
|
Year EndedDecember
31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Diluted earnings (loss)
per share |
|
$ |
1.20 |
|
|
$ |
(0.17 |
) |
|
$ |
1.27 |
|
|
$ |
0.63 |
|
Add: Acquisition
earn-out compensation expense, per share |
|
0.15 |
|
|
— |
|
|
0.37 |
|
|
— |
|
Add: Contractual
severance agreement charges (net), per share |
|
— |
|
|
— |
|
|
0.08 |
|
|
— |
|
Add: Leadership
transition severance costs, per share |
|
— |
|
|
0.03 |
|
|
— |
|
|
0.11 |
|
Add: Voluntary
separation incentive program charges (net), per share |
|
— |
|
|
0.35 |
|
|
(0.01 |
) |
|
0.34 |
|
Add: CEO separation and
transition costs, per share |
|
— |
|
|
— |
|
|
— |
|
|
0.04 |
|
Add: Restructuring
charges (net), per share |
|
— |
|
|
— |
|
|
— |
|
|
(0.01 |
) |
Add: Income tax
expense related to repatriation of pre-2014 foreign earnings, per
share |
|
— |
|
|
0.98 |
|
|
— |
|
|
0.96 |
|
Adjusted
Diluted Earnings Per Share |
|
$ |
1.35 |
|
|
$ |
1.19 |
|
|
$ |
1.71 |
|
|
$ |
2.07 |
|
Variance
versus prior period - $ |
|
$ |
0.16 |
|
|
|
|
$ |
(0.36 |
) |
|
|
Variance
versus prior period - % |
|
13 |
% |
|
|
|
(17 |
%) |
|
|
Lauren Gioia | Jennifer Park | Lauren.Gioia@Sothebys.com | Jennifer.Park@Sothebys.com | +1 212 606 7176
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