Sotheby’s had great success last year

Sotheby’s (NYSE: BID) today reported financial results for the fourth quarter and full year ended December 31, 2011. In 2011, Sotheby’s generated the best financial results in its 268-year history, apart from its record year in 2007.

Sotheby’s strong financial performance was driven by a $57.5 million, or 7%, increase in revenues attributable to growth in both auction and private sale commission revenues. Offsetting the growth in revenues was a higher level of operating expenses due in part to increased staff levels and their associated compensation costs, a higher level of direct costs of services consistent with the volume and composition of auction sales and the cost of investments in Sotheby’s strategic initiatives, principally related to the growth of its business in China and enhancing its information technology and online offerings.

Full year results were favorably impacted by a tax benefit of $13.6 million, or $0.20 per share, recognized in 2011 associated with the reversal of a valuation allowance against certain of Sotheby’s deferred tax assets, and a pre-tax $7.6 million decrease in net interest expense. Including these factors, net income for 2011 is $171.4 million, a $10.5 million, or 7%, increase from the prior year; diluted earnings per share is $2.46, a $0.12, or 5%, increase from 2010.

Net income for the fourth quarter is $71.5 million, compared to $96.2 million in the prior period. This decrease is largely attributable to a decline in auction and related revenues which totaled $274.9 million, $35.6 million, or 11%, lower than the prior period. This is primarily due to an $85.2 million, or 5%, decline in net auction sales over the period resulting from a $171.0 million, or 46%, decrease in single-owner sales during the quarter, as well as a significant decrease in auction commission margin. The decline in auction revenues is partially offset by a decrease in salaries and related costs, attributable to a lower level of incentive compensation expense in the quarter.

“Sotheby’s had great success last year, handling masterpieces, innovating in new markets and building trust based relationships with clients globally and our 2011 financial results reflected those efforts. They are near the best we have ever delivered,” said Bill Ruprecht, President and Chief Executive Officer.

Mr. Ruprecht continued: “Consolidated sales1 in 2011 were an excellent $5.8 billion, as healthy bidding continued around the world for great works of art. Private sales, an increasingly important part of Sotheby’s business, totaled a record $814.6 million, a 65% increase. We ended the year with a very strong balance sheet and we are continuing to invest in our business, including bolstering our information technology and online offerings in order to enhance our service to clients.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.