Sotheby's Beats EPS Estimates (BID)

Sotheby's BID today announced results for the fourth quarter and year ended December 31, 2010. 2010 brought the best financial results for Sotheby's in its 267-year history, apart from 2007. Consolidated Sales* were $2.0 billion in the fourth quarter and $4.8 billion in the year, an increase of 57% and 74%, respectively. For the three and twelve months ended December 31, 2010, total revenues were $318.0 million and $774.3 million, respectively, an increase of 46% and 60%, when compared to the same periods in the prior year. This is almost entirely due to an increase in auction commission revenues stemming from strong sales around the world during the periods. In 2010, there was a 105% increase in the number of works sold over $1 million, the point at which the buyer's premium rate decreases from 20% to 12%. As a result, offsetting the increase in auction commission revenues is a decline in auction commission margin from 20.4% to 18.0% in the fourth quarter and from 20.7% to 18.3% in the full year, largely attributable to this change in sales mix towards higher valued items in both periods. Operating income for the fourth quarter of 2010 was $155.5 million, a $56.6 million, or 57%, growth from the prior period. For the full year, operating income was $274.0 million, a $220.9 million, or 416% increase from the prior year. These increases are largely due to the aforementioned growth in revenues and are offset by higher incentive compensation costs stemming from the strong results of the periods as well as an increase in direct costs of services that is consistent with the level and composition of our auction offerings during these periods. Net income for the fourth quarter was up 31% on prior year to $96.2 million, or $1.38 per diluted share and $161.0 million, or $2.34 per diluted share for the full year (compared to net income of $73.6 million, or $1.09 per share in the fourth quarter of 2009 and a net loss of ($6.5) million, or ($0.10) per share for the full year of 2009). "The net income of $161.0 million that we have been able to deliver in 2010 is our best yearly result ever, apart from 2007. It is a remarkable accomplishment," said Bill Ruprecht, President and Chief Executive Officer of Sotheby's. "The recovery of the global art market which was aided in part by the increased buying activity of clients from new markets certainly contributed to these results, as did the difficult decisions we had to make beginning in the autumn of 2008 -- the headcount reduction, tightening of our cost structure and steadfast focus on auction commission margins -- which have paid off considerably and translated to an EBITDA margin** of 37.2% which is 200 basis points higher than in 2007. The leverage in our business model is clear and consistent, and reflects our focused approach to cost discipline and margin management in 2010.