Sotheby’s (NYSE: BID) today reported its financial results for the
second quarter and six months ended June 30, 2019.
For the three months ended June 30, 2019, Sotheby’s reported net
income of $57.0 million, or $1.20 per diluted share as compared to
$57.3 million, or $1.08 per share in the second quarter of
2018. Excluding certain items, Adjusted Net Income* was $70.0
million, or $1.47 per diluted share in the second quarter of 2019
as compared to Adjusted Net Income* of $58.1 million, or $1.09 per
diluted share in the second quarter of 2018 – increases of 21% and
35%, respectively, from the second quarter of 2018.
For the six months ended June 30, 2019, Sotheby’s reported net
income of $49.9 million, or $1.05 per diluted share, a 2% decrease
from net income in the first half of 2018, but an 11% increase in
diluted earnings per share, reflecting the impact of the common
stock repurchases of the previous nine months. Excluding
certain items, Adjusted Net Income* for the first half of 2019 was
$63.1 million, or Adjusted Diluted Earnings per Share* of
$1.33. As compared to the first half of 2018, Adjusted Net
Income* was flat and Adjusted Diluted Earnings per Share* improved
13% from $1.18.
“We are very pleased with our second quarter and first half
performance,” said Tad Smith, President and CEO, adding, “The
proposed acquisition of our company is on track, and we remain
focused on serving our global clients.”
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.
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.
Given the announcement made on June 16, 2019
regarding Sotheby’s entry into a definitive agreement to be
acquired by BidFair USA LLC and BidFair MergeRight Inc., Sotheby’s
does not intend to hold a conference call to discuss its financial
results for the second quarter and six months ended June 30,
2019.
For detailed information regarding the merger
and the Company’s financial results, please consult the preliminary
proxy statement filed on July 12, 2019 and the Form 10-Q for the
second quarter of 2019, which will be filed on July 30, 2019.
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), 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,
artist, estate & foundation 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 three retail
businesses: Sotheby’s Wine, Sotheby’s Diamonds, and Sotheby’s Home,
the online marketplace for interior design. 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).
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Youku | Medium
Browse sale catalogues, view original content,
stream live auctions and more at sothebys.com, and through
Sotheby’s apps for iPhone, iPad, Android, Apple TV and Amazon
Fire
|
|
|
APPENDIX A |
|
SOTHEBY’SCONDENSED CONSOLIDATED INCOME
STATEMENTS(UNAUDITED)(Thousands
of dollars, except per share data) |
| |
|
|
|
| |
Three Months Ended |
|
Six Months Ended |
| |
June 30, 2019 |
|
June 30, 2018 |
|
June 30, 2019 |
|
June 30, 2018 |
| Revenues: |
|
|
|
|
|
|
|
|
Agency commissions and fees |
$ |
322,144 |
|
|
$ |
290,879 |
|
|
$ |
469,811 |
|
|
$ |
456,405 |
|
|
Inventory sales |
18,259 |
|
|
40,106 |
|
|
27,025 |
|
|
56,342 |
|
|
Finance |
15,848 |
|
|
9,641 |
|
|
29,114 |
|
|
19,522 |
|
|
Other |
5,527 |
|
|
5,010 |
|
|
9,293 |
|
|
9,163 |
|
|
Total revenues |
361,778 |
|
|
345,636 |
|
|
535,243 |
|
|
541,432 |
|
| Expenses: |
|
|
|
|
|
|
|
|
Agency direct costs |
73,834 |
|
|
59,449 |
|
|
105,637 |
|
|
94,722 |
|
|
Cost of inventory sales |
15,335 |
|
|
42,414 |
|
|
22,501 |
|
|
58,409 |
|
|
Cost of finance revenues |
— |
|
|
1,793 |
|
|
— |
|
|
4,056 |
|
|
Marketing |
6,546 |
|
|
6,276 |
|
|
12,454 |
|
|
11,998 |
|
|
Salaries and related |
110,601 |
|
|
96,718 |
|
|
187,246 |
|
|
175,437 |
|
|
General and administrative |
47,267 |
|
|
45,671 |
|
|
95,109 |
|
|
89,484 |
|
|
Depreciation and amortization |
7,929 |
|
|
7,343 |
|
|
15,620 |
|
|
14,443 |
|
|
Merger-related expenses |
5,710 |
|
|
— |
|
|
5,710 |
|
|
— |
|
|
Restructuring charges, net |
(31 |
) |
|
2,146 |
|
|
(50 |
) |
|
2,146 |
|
|
Total expenses |
267,191 |
|
|
261,810 |
|
|
444,227 |
|
|
450,695 |
|
|
Operating income |
94,587 |
|
|
83,826 |
|
|
91,016 |
|
|
90,737 |
|
| Interest income |
286 |
|
|
482 |
|
|
571 |
|
|
847 |
|
| Interest expense |
(13,604 |
) |
|
(8,894 |
) |
|
(26,755 |
) |
|
(18,207 |
) |
| Write-off of credit facility
fees |
— |
|
|
(3,982 |
) |
|
— |
|
|
(3,982 |
) |
| Extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
(10,855 |
) |
| Non-operating income |
1,687 |
|
|
2,449 |
|
|
3,535 |
|
|
3,873 |
|
|
Income before taxes |
82,956 |
|
|
73,881 |
|
|
68,367 |
|
|
62,413 |
|
| Income tax expense |
26,808 |
|
|
17,838 |
|
|
20,822 |
|
|
13,702 |
|
| Equity in earnings of
investees |
853 |
|
|
1,234 |
|
|
2,381 |
|
|
2,040 |
|
| Net income |
57,001 |
|
|
57,277 |
|
|
49,926 |
|
|
50,751 |
|
|
Less: Net loss attributable to noncontrolling interest |
(5 |
) |
|
(5 |
) |
|
(9 |
) |
|
(9 |
) |
| Net income attributable to
Sotheby's |
$ |
57,006 |
|
|
$ |
57,282 |
|
|
$ |
49,935 |
|
|
$ |
50,760 |
|
| Basic earnings per share -
Sotheby's common shareholders |
$ |
1.21 |
|
|
$ |
1.09 |
|
|
$ |
1.06 |
|
|
$ |
0.96 |
|
| Diluted earnings per share -
Sotheby's common shareholders |
$ |
1.20 |
|
|
$ |
1.08 |
|
|
$ |
1.05 |
|
|
$ |
0.95 |
|
| |
|
| |
|
| |
|
| NON-GAAP FINANCIAL MEASURES
|
APPENDIX B |
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. Non-GAAP financial measures are important
supplemental measures used in our financial and operational
decision making processes, for internal reporting, and as part of
our forecasting and budgeting processes, as they provide helpful
measures of our core operations. These measures allow us to view
operating trends, perform analytical comparisons, and benchmark
performance between periods. We also believe that these measures
may be used by securities analysts, investors, financial
institutions, and other interested parties in their evaluation of
our performance. The non-GAAP financial measures presented in this
earnings release are:
|
(i) |
Adjusted Net Income |
|
(ii) |
Adjusted Diluted Earnings Per
Share |
To the extent applicable, these non-GAAP financial measures
exclude the effect of the following items, as detailed in the
accompanying reconciliation tables below:
|
(i) |
Charges
(credits) related to contractual severance agreements with certain
former employees; |
| (ii) |
Accelerated depreciation charges related to certain fixed
assets that have been removed from service in connection with the
York Property enhancement project; |
| (iii) |
Costs related to our pending Merger with Bidfair USA LLC and
BidFair MergeRight Inc.; |
| (iv) |
Restructuring (credits) and charges; |
| (v) |
The loss incurred in connection with the extinguishment of the
2022 Senior Notes; |
| (vi) |
The write-off of unamortized credit facility fees related to
our previous credit agreement, which was refinanced in the second
quarter of 2018; |
| (vii) |
Adjustments made to our estimate of the net cost related to the
effective settlement of an income tax audit; and |
|
(viii) |
The net income tax benefit resulting associated with the
enactment of the U.S. Tax Cuts and Jobs Act. |
We caution readers of this earnings release that amounts
presented in accordance with these non-GAAP financial measures may
not be comparable to similar measures disclosed by other companies
because not all companies and analysts calculate such measures in
the same manner.
The following is a reconciliation of net income attributable to
Sotheby's to Adjusted Net Income for the three and six months ended
June 30, 2019 and 2018 (in thousands):
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net income attributable to Sotheby's |
$ |
57,006 |
|
|
$ |
57,282 |
|
|
$ |
49,935 |
|
|
$ |
50,760 |
|
| Add: Contractual severance
agreement charges (credits), net of tax of ($1,689), $49, ($1,689)
and ($627) |
7,352 |
|
|
(148 |
) |
|
7,352 |
|
|
1,998 |
|
| Add: Accelerated depreciation
charges, net of tax of ($117), ($390), ($293) and ($775) |
356 |
|
|
1,180 |
|
|
890 |
|
|
2,348 |
|
| Add: Merger-related costs, net
of tax of $0, $0, $0, and $0 |
5,710 |
|
|
— |
|
|
5,710 |
|
|
— |
|
| Add: Restructuring charges
(net), net of tax of $8, ($532), ($1) and ($532) |
(23 |
) |
|
1,614 |
|
|
(51 |
) |
|
1,614 |
|
| Add: Extinguishment of debt,
net of tax of $0, $0, $0 and ($2,692) |
— |
|
|
— |
|
|
— |
|
|
8,163 |
|
| Add: Write-off of credit
facility fees, net of tax of $0, ($922), $0 and ($922) |
— |
|
|
3,060 |
|
|
— |
|
|
3,060 |
|
| Add: Net credit associated
with the effective settlement of an income tax audit |
(375 |
) |
|
— |
|
|
(712 |
) |
|
— |
|
| Add: Net income tax benefit
related to the U.S Tax Cuts and Jobs Act |
— |
|
|
(4,930 |
) |
|
— |
|
|
(4,930 |
) |
|
Adjusted Net Income |
$ |
70,026 |
|
|
$ |
58,058 |
|
|
$ |
63,124 |
|
|
$ |
63,013 |
|
|
Variance versus prior period - $ |
$ |
11,968 |
|
|
|
|
$ |
111 |
|
|
|
|
Variance versus prior period - % |
21 |
% |
|
|
|
- |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax effect of each line item in the reconciliation of
net income attributable to Sotheby's to Adjusted Net Income is
computed using the relevant jurisdictional tax rate for that
item.
The following is a reconciliation of diluted earnings per share
to Adjusted Diluted Earnings Per Share for the three and six months
ended June 30, 2019 and 2018:
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Diluted earnings per share |
$ |
1.20 |
|
|
$ |
1.08 |
|
|
$ |
1.05 |
|
|
$ |
0.95 |
|
| Add: Contractual severance
agreement charges (credits), per share |
0.15 |
|
|
— |
|
|
0.15 |
|
|
0.04 |
|
| Add: Accelerated depreciation
charges, per share |
0.01 |
|
|
0.02 |
|
|
0.02 |
|
|
0.04 |
|
| Add: Merger-related costs, per
share |
0.12 |
|
|
— |
|
|
0.12 |
|
|
— |
|
| Add: Restructuring charges
(net), per share |
— |
|
|
0.03 |
|
|
— |
|
|
|
0.03 |
|
| Add: Extinguishment of debt,
per share |
— |
|
|
— |
|
|
— |
|
|
0.15 |
|
| Add: Write-off of credit
facility fees, per share |
— |
|
|
0.06 |
|
|
— |
|
|
0.06 |
|
| Add: Net credit associated
with the effective settlement of an income tax audit, per
share |
(0.01 |
) |
|
— |
|
|
(0.01 |
) |
|
— |
|
| Add: Net income tax benefit
related to the U.S Tax Cuts and Jobs Act, per share |
— |
|
|
(0.10 |
) |
|
— |
|
|
(0.09 |
) |
|
Adjusted Diluted Earnings Per Share |
$ |
1.47 |
|
|
$ |
1.09 |
|
|
$ |
1.33 |
|
|
$ |
1.18 |
|
|
Variance versus prior period - $ |
$ |
0.38 |
|
|
|
|
$ |
0.15 |
|
|
|
|
Variance versus prior period - % |
35 |
% |
|
|
|
13 |
% |
|
|
Lauren Gioia | Jennifer Park | Dan Abernethy | Lauren.Gioia@Sothebys.com | Jennifer.Park@Sothebys.com | Dan.Abernethy@Sothebys.com +1 212 606 7176
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