EXHIBIT 13
GRAPHIC APPENDIX:
Description of illustrations:
Front cover:
1.) A Six-fold Japanese Gold Screen Depicting Kabuki Dancers
sold in London for $1.6 million, setting a record for a
single Japanese screen.
2.) A double magnum of Chateau Petrus 1961 sold in London
for $13,930.
3.) Edouard Manet's Un Bar aux Folies-Bergere sold in London
for $6.8 million.
4.) A Fine and Rare Early Chippendale Carved and Figured
Mahogany Scroll-Top Highboy from the Estate of Wilbur Ross
Hubbard sold in New York for $151,000.
5.) The Autographed Manuscript of Schumann's Second Symphony
sold in London for $2.3 million, setting a record for a
manuscript of a single musical work.
6.) Childe Hassam's Poppies sold in New York for $2.6
million.
7.) Aelbert Cuyp's Orpheus Charming the Animals sold in
London for $6.5 million, setting an auction record for the
artist and a record for a Dutch Old Master landscape.
8.) A Rare and Magnificent Emerald-Cut Blue Diamond (20.17
carats) sold in New York for $9.9 million, the highest price
ever paid for a blue diamond at auction.
9.) Pablo Picasso's La Minotauromachie sold in London for
$784,150, an auction record for a Picasso print.
Inside front cover:
Sotheby's London headquarters.
Page 2:
1.) Above left: Diana D. Brooks, President and Chief
Executive Officer
A. Alfred Taubman, Chairman
2.) Below left: John L. Marion, Honorary Chairman, Sotheby's
North and South America
Page 3:
Sotheby's Holdings, Inc. Board of Directors:
Diana D. Brooks,
A. Alfred Taubman,
Max M. Fisher,
Lord Camoys,
Ambassador Walter P. Curley,
The Marquess of Hartington,
The Rt. Hon. the Earl of Gowrie.
Page 4:
1.) Above left: Pie chart of geographic distribution of
auction sales in 1994.
2.) Center left: Pie chart of 1994 pre-tax income of
business segments.
3.) Lower left: Pie chart of departmental distribution of
auction sales in 1994.
4.) Upper right: Map of Sotheby's worldwide locations.
Page 5:
1.) Above: Table of selected financial highlights.
2.) Center left: Bar chart of net income over five years
($20.3 million for 1994).
3.) Center middle: Bar chart of cash dividends declared per
share over five years (.24 in 1994).
4.) Center right: Bar chart of auction revenues as percent
of auction sales (18.0% in 1994).
5.) Below: Line graph of Sotheby's twenty year auction sale
annual growth rate of 10%.
Page 6:
John Singer Sargent's Spanish Dancer from the Estate of
Wendell Cherry, established a record price for the artist at
our New York auction of American Paintings in May.
Page 7:
1.) Left: A portrait of John Sotheby, the nephew of
Sotheby's founder, Samuel Baker.
2.) Right: Claude Monet's Peupliers au Bord, de l Epte,
Effet du Soir brought $7.5 million in London in June.
Page 8:
1.) Center: Aelbert Cuyp's Orpheus Charming the Animals sold
in London in July for the record price of $6.5 million.
2.) A Standard Grip Testing Machine from the Smith
Collection of Antique Penny Arcade Machines and Related
Memorabilia sold in New York in September for $107,000.
Page 9:
Sotheby's team of auctioneers:
Simon de Pury,
Melanie Clore,
William W. Stahl, Jr.,
William F. Ruprecht,
Robert C. Woolley,
Julian de la M. Thompson.
Page 10:
1.) Above: George Wachter, Head of Old Master Paintings in
New York
Warren P. Weitman, Jr., Worldwide Head of Sotheby's Business
Development.
2.) Left: Sotheby's senior Americana specialists:
Leslie Keno,
Nancy Druckman,
William Stahl,
Wendell Garrett.
3.) Right: An 18th Century K'ang-Hsi Porcelain Vase from the
Collection of Baron Guy de Rothschild sold in Monaco.
Page 11:
1.) Above center: View of drawing room from Stokesay Court.
2.) Above right: Henry Wyndham, Chairman of Sotheby's United
Kingdom
3.) Lower right: View of Palazzo Corsini in Florence, Italy.
Page 12:
1.) Above: Gustav Klimt's Dame Mit Facher sold for $11.7
million, a record for the artist.
2.) Left: Dunwalke East, the Somerset County Estate of C.
Douglas Dillon sold by Sotheby's International Realty.
Page 13:
1.) Above: A pair of lavishly crafted soup tureens (one
shown) made for the First Baron Montfort of Cambridgeshire
established a world auction record with their sale in
November in London for $1.6 million.
2.) Lower left: An Attic Red-figure Amphora of Panathenaic
Form was sold in December to the Louvre for $541,500.
3.) Lower right: A detail of the Attic Red-figure Amphora.
Page 14:
1.) Above right: Joseph Shoemaker Russell's View of Union
or Main Street New Bedford from the Little Collection
estimated at $6/8,000 sold in New York for $123,500.
2.) Lower right: A double magnum of Chateau Petrus 1961 sold
in London for $13,930.
3.) Left: A group of photographs illustrating several
marketing initiatives.
Page 15:
1.) Above: Zhang Daqian's Dawning Light in Autumn Gorges
sold in Hong Kong in March for $1.1 million.
2.) Center: A Six-fold Japanese Gold Screen Depicting Kabuki
Dancers sold in London for $1.6 million, setting a record
for a single Japanese screen.
Page 16:
1.) Above right: John D. Block, Head of Jewelry in New York
Dede Brooks.
2.) Lower left: Thomas Gainsborough's Portrait of Georgiana,
Duchess of Devonshire from the Estate of Mabel Satterlee
Ingalls was purchased by the Chatsworth House Trust.
Page 17:
1.) Diamond necklace by Harry Winston sold for $4.4 million
in New York, setting a world record for a necklace.
2.) Inset: David Bennett, Head of Jewelry in Europe.
Page 18:
1.) Above (clockwise):
Annibale Carracci's Boy Drinking which brought $2.2 million.
Diego Rivera's Couteau et Fruit devant la Fenetre brought
$2.2 million
Childe Hassam's Poppies sold for $2.6 million
The Nicholas Biddle Family Chippendale Carved Mahogany
Lowboy sold for $387,500
2.) Lower Left: The Autographed Manuscript of Robert
Schumann's Second Symphony, Opus 61 sold in London in
December for $2.3 million.
Inside back cover:
Sotheby's New York headquarters.
Back cover:
1.) A Standard Grip Testing Machine by the Beverly Machine
Company from the Smith Collection of Antique Penny Arcade
Machines and Related Memorabilia sold in New York for
$107,000.
2.) John Orne Johnson Frost's The March into Boston from
Marblehead April from the Little Collection sold in New York
for $486,500, setting an auction record for the artist.
3.) Edward Steichen's A Bee on a Sunflower sold in New York
for $112,500, an auction record for the artist.
4.) An Attic Red-figure Amphora of Panathenaic Form
attributed to the Berlin Painter sold in New York for
$541,500.
5.) The sale of the contents of Stokesay Court in Shropshire
brought $6.7 million.
6.) The Koloman Moser Cabinet sold in London for $540,690,
setting an auction record for any piece of Vienna 1900
furniture.
7.) John Singer Sargent's Spanish Dancer sold in New York
for $7.6 million, setting an auction record for the artist.
8.) Joseph Shoemaker Russell's View of Union or Main Street
New Bedford from the Little Collection sold in New York for
$123,500.
9.) A Pair of Lavishly Crafted Silver Soup Tureens (one
shown) belonging to Henry Bromley, First Baron Montfort of
Horseheath Hall Cambridgeshire, sold in London for $1.6
million.
10.) David Smith's Cubi V sold in New York for $4.1 million,
setting an auction record for the artist.
Sotheby's Holdings, Inc.1994 ANNUAL REPORT
Table of contents
2 Letter to Shareholders
4 Sotheby's Worldwide Information
7 Sotheby's Franchise
14 Sotheby's Franchise in
the Future
40 Sotheby's Holdings, Inc. Officers and
Worldwide Auction Locations
41 Sotheby's Worldwide Management
42 Shareholder Information
Financials
19 Selected Financial Data
20 Management's Discussion and Analysis
of Results of Operations and Financial
Condition
25 Consolidated Balance Sheets
26 Consolidated Statements of Income
27 Consolidated Statement of Changes in
Shareholders' Equity
28 Consolidated Statements of Cash Flows
29 Notes to Consolidated Financial
Statements
39 Independent Auditors' Report
39 Report of Management
39 Audit and Compensation Committee Chairman's
Letter
A Standard Grip Testing Machine by the Beverly Machine Company
from the Smith Collection of Antique Penny Arcade Machines and
Related Memorabilia sold in New York for $107,000.
John Orne Johnson Frost's The March into Boston from Marblehead
April from the Little Collection sold in New York for $486,500,
setting an auction record for the artist.
Edward Steichen's A Bee on a Sunflower sold in New York for
$112,500, an auction record for the artist.
An Attic Red-figure Amphora of Panathenaic Form attributed to the
Berlin Painter sold in New York for $541,500.
The sale of the contents of Stokesay Court in Shropshire brought
$6.7 million
The Koloman Moser Cabinet sold in London for $540,690,
setting an auction record for any piece of Vienna 1900 furniture.
Edward Steichen's A Bee on a Sunflower sold in New York for
$112,500, an auction record for the artist.
An Attic Red-figure Amphora of Panathenaic Form attributed to the
Berlin Painter sold in New York for $541,500.
1
The sale of the contents of Stokesay Court in Shropshire brought
$6.7 million
The Koloman Moser Cabinet sold in London for $540,690,
setting an auction record for any piece of Vienna 1900 furniture.
David Smith's Cubi V sold in New York for $4.1 million, setting
an auction record for the artist.
A Six-Fold Japanese Gold Screen depicting Kabuki Dancers sold in
London for $1.6 million, setting a record for a single Japanese
screen.
A Double Magnum of Chateau Petrus 1961 sold in London for
$13,930.
Edouard Manet's Un Bar Aux Folies-Bergere sold in London for
$6.8 million.
A Fine and Rare Early Chippendale Carved and Figured Mahogany
Scroll-Top Highboy from the Estate of Wilbur Ross Hubbard sold in
New York for $151,000.
The Autographed Manuscript of Schumann's Second Symphony sold in
London for $2.3 million, setting a record for a manuscript of a
single musical work.
Childe Hassam's Poppies sold in New York for $2.6 million..
Aelbert Cuyp's Orpheus Charming the animals sold in London for
$6.5 million, setting an auction record for the artist and a
record for a Dutch Old Master landscape.
A Rare and Magnificent Emerald-Cut Blue Diamond (20.17 carats)
sold in New York for $9.9 million, the highest price ever paid
for a blue diamond at auction.
Pablo Picasso's La Minotauromachie sold in London for $784,150,
an auction record for a picasso print .
2
To Our Shareholders
This year marked our 250th Anniversary in the auction
business. While this important milestone gave us an opportunity
to reflect on the history of the Company, it also enabled us to
focus on the future of Sotheby's. Our first auction in 1744, a
sale of books, was conducted by our founder Samuel Baker, and
since those modest beginnings Sotheby's has developed into a
company which now conducts auctions in over 70 collecting
categories with $1.3 billion in annual auction sales. Today we
are a world-class franchise with global name recognition that
extends beyond the 40 countries in North and South America,
Africa, Asia, Europe and the Middle East in which we have a
presence. While our extensive worldwide network allows us to
participate in many markets, our success is really made possible
through our international expertise, strong and creative
management and commitment to quality client service. 1994 also
marked a year of new beginnings for the leadership of the
Company. Our new management team, under the direction of Diana
D. Brooks, who became President and Chief Executive Officer in
April 1994, has developed over the last two years into an
integrated multi-national team whose broad experience and strong
leadership will direct our company into the 21st century.
Our clients are crucial to our success and it is essential
that we maintain the same standard of excellence in client
service throughout the world. Sotheby's goal is to have an
international approach to client services so that a client can go
into our office in Tokyo or Los Angeles or Paris and receive a
consistently high level of professionalism and service that draws
on our internationalism, yet remains sensitive and responsive to
local customs and needs.
This year also marked another major milestone in Sotheby's
history. In December, John L. Marion announced his decision to
retire as Chairman of Sotheby's North and South America. John
enjoyed a celebrated 35-year career with the Company holding a
number of key positions, most notably as our American Chairman
and principal auctioneer. Throughout his career, John managed
many important client relationships and was committed to making
the auction business more accessible and understandable to the
general public. We extend our gratitude to John for his many
years of service and contributions to the Company and we are
pleased that he will continue as Honorary Chairman of Sotheby's
North and South America and as a member of our international
Advisory Board. We look forward to many future years of
association with him, and we are grateful that his high standards
of both professionalism and auctioneering are an inspiration to
the talented next generation of Sotheby's staff around the world.
We were pleased to welcome the Marquess of Hartington to our
Board of Directors in September 1994. With his experience in
business and knowledge and appreciation of art we believe that he
will be an invaluable addition to Sotheby's.
3
We are happy to report that we increased our profitability
in 1994 given that our auction sales increased by a modest $5
million for the year. Net income was $20.3 million ($33.8
million pre-tax) and earnings per share were $0.36, compared to
$19.3 million, or $0.35 per share in 1993. The Board of
Directors declared four quarterly dividends of $0.06 per share,
totaling $0.24 per share for the year compared to $0.33 per share
declared with respect to 1993.
Growth in auction sales in 1994 throughout a wide variety of
collecting categories in the fine and decorative arts confirmed
signs of continued recovery in the international art auction
market. Sotheby's combined sales in all categories, excluding
Impressionist and Modern art and Jewelry, grew by over 13% this
year. This, despite a combined decrease of 22% in sales of these
two major categories, enabled us to maintain the same level of
auction sales in 1994. Strength in auction sales in two
geographic areas also contributed to growth, with sales in the
United Kingdom up 11% and Asian auction sales improving by 30%.
Successful single-owner collections made a significant
contribution to 1994 auction sales, among them the Wendell Cherry
Collection ($39.2 million), the Bertram K. and Nina Fletcher
Little Collection ($12.3 million), the Estate of Mr. and Mrs. H.
Gates Lloyd ($21.7 million), the House Sale at Stokesay Court
($6.7 million) and the Peter Jay Sharp Collection ($19.3
million).
We are optimistic about prospects for the 1995 spring
season. The year has begun well, with strong sales that include
Property from The New-York Historical Society. In May we will
sell American art, Latin American art, Contemporary art and 19th
Century European paintings from the IBM Foundation.
Additionally, we have secured important Impressionist, Modern and
American art for our spring sales, including outstanding
paintings from the Stralem Collection and the Estate of Mrs. John
Barry Ryan, which we hope will inject renewed strength into the
Impressionist and Modern art market. We are encouraged by the
level of commitments we have already received at this early stage
of 1995 for other exciting auctions that we will hold throughout
the year.
As we begin this new and exciting era of Sotheby's history
we are committed to providing excellent service to our clients
throughout the world, creating a stimulating and rewarding
environment for our employees and to increasing shareholder
value. We are grateful to all of them and to you, our
shareholders, for your continued support.
A. Alfred Taubman Diana D. Brooks
Chairman, Sotheby's Holdings, Inc. President and Chief Executive
Officer,
Sotheby's Holdings, Inc.
4
Sotheby's Worldwide Information
Since its establishment in 1744, Sotheby's has become a world
renowned franchise with global name recognition in a unique
industry. In addition to becoming a preeminent
auctioneer of art and objects, Sotheby's is engaged in
art-related financing and the marketing and brokering of luxury
real estate. The following pages provide selected information
about the Sotheby's franchise, 1994 financial facts, and a
summary of Sotheby's Holdings, Inc. five-year financial history.
Sotheby's Reach
Today, our reach extends to 43 countries worldwide and we have 17
auction locations.
Auction Information
In 1994 we held over 530 auctions worldwide in 76 collecting
categories. We sold 163,000 lots with an average lot price of
$8,200 and 82% of the total lots sold were below $5,000. Over the
last ten years our sales have exceeded $15 billion and we have
sold 1.5 million lots.
Sotheby's Specialists
Our specialist staff numbers approximately 400 of our total
staff. Our specialist department heads have an average of nearly
20 years of experience at Sotheby's.
Year ended December 31, 1994 1993 1992 1991 1990
(Thousands of dollars,
except per share data)
Results of Operations:
Auction sales $1,330,001 $1,325,334 $1,131,601 $1,104,391 $2,446,453
Auction revenues $238,770 $234,972 $200,883 $193,905 $347,216
Auction income before
taxes 34,043 34,233 4,021 18,896 154,351
Consolidated revenues
259,565 252,330 224,970 222,358 378,424
Consolidated income
before taxes 33,765 32,157 6,491 21,498 154,561
Net income $20,259 $19,294 $3,960 $13,114 $94,682
Earnings per share $0.36 $0.35 $0.07 $0.25 $1.66
Balance sheet:
Net debt $1,416 $(53,257) $5,157 $54,400 $3,675
Shareholders' equity
211,052 194,632 198,195 246,328 278,199
Sotheby's Franchise
Tradition, Strength and Service. . .
Since our founding in London as a bookseller in 1744,
Sotheby's has steadily grown, diversified and strengthened to
5
become the world's preeminent auction company. Today we conduct
more than 500 auctions annually throughout the world in over 70
collecting areas. Yet our role in the art world extends far
beyond that of international auctioneer into such complementary
fields as real estate, financial services, restoration, museum
services, educational studies, appraisals, and trust and estate
services.
The international art market is complex and highly
sophisticated, blending together very different cultural,
aesthetic and professional sensibilities. As a company with an
international presence, we understand these very different
perspectives and are responsive to changes. Our goal is to
operate the Company with a multinational approach, providing our
clients with consistent service throughout the world, while
retaining an appreciation for and responding to local needs.
As we reflect upon our 250-year history we remain committed
to the same high level of integrity, depth of knowledge and
client service that inspired us back in the eighteenth century.
With our new worldwide management team working together as an
integrated unit to provide the highest quality services to our
clients throughout the world, we are confident of continuing this
long tradition, thus ensuring our preeminence in the global art
market of the future.
Auction Performance. . .
Over the last ten years Sotheby's has sold property at
auction worth more than $15 billion, with the total number of
lots sold in excess of 1.5 million and an average annual sales
growth of 9%. We have established the records for the
highest-ever sales in such important fields as Impressionist and
Modern art, Contemporary art and Jewelry, and in 1994 we
established the highest sale totals in the fields of Latin
American art and Americana. We hold a long list of diverse
auction records for such renowned artists as Pierre-Auguste
Renoir, Paul Cezanne, Willem DeKooning, Claude Monet and Jasper
Johns as well as the highest price ever paid for an American
painting. Sotheby's holds the world auction records for a
diamond, ruby, sapphire, emerald and pearls and in 1994 set
records for a blue diamond and a necklace.
Diversity. . .
Our diversity enables us to offer clients, both buyers and
sellers alike, the widest range of collecting categories and
supporting auction-related services to fully serve their most
demanding needs. For the buyer, we can offer auctions throughout
the world of property as varied as Old Master paintings and Penny
Arcade machines. For the seller, we can provide a complete
appraisal of their property, perform restoration work as needed
and then offer their works for sale at the most appropriate
specialized Sotheby's auction. We can also arrange financing for
6
the seller as well as the services of our International Realty
Company.
The international art market is made up of many individual
markets which operate independently within the larger overall art
market. A variety of economic and other factors affects each of
these markets, creating an environment in which specific markets
may fluctuate at different times. Our diversification across so
many collecting categories allows us to maintain financial
stability despite these changes within individual sectors of the
overall art market. An excellent example of this stability was
provided during the past year. While sales in the Impressionist
and Modern art and Jewelry categories declined by a combined 22%,
other areas such as Old Master paintings, American paintings,
19th Century paintings and Latin American art increased by more
than enough to offset this decline.
-Auctioneering. . .
Auctioneering has a noble tradition at Sotheby's. The long
history of our firm is written in memorable sales and great
auctioneers. We have built a strong international team of
auctioneers, many of whom are senior specialists with extensive
knowledge of the clients as well as the property. This senior
team has a combined total of over 250 years of service at
Sotheby's, and their skill and professionalism in the rostrum are
often cited as key factors to the success of our sales. Because
of their outstanding skills, we are able to provide excellent
auctioneers for our many sales throughout the world.
-Expertise. . .
Knowledge and expertise are the core of our business. Our
specialist staff throughout the world numbers in excess of 400
and our worldwide department heads have been with Sotheby's on
average nearly twenty years. Many hold doctorates and are
renowned authors and lecturers. Their relationships with clients
as well as other professionals in the art world are an invaluable
part of our success and franchise value.
The quality and variety of great works of art which pass
through our galleries every season rival most museums. The vast
numbers of objects seen by our specialists over time enable them
to constantly develop their area of expertise and provide an
excellent training ground for future specialists. The importance
of professionally illustrating and footnoting works of art in the
sale catalogue is increased by the fact that some of these works
may never be seen in public again. For collectors, dealers and
museums alike, our catalogues provide an absorbing and vital
source of information and reference.
Single-owner collections, which often represent a lifetime
of acquiring artwork in a particular field, have tremendous
appeal in the marketplace and can define the character and
7
success of a particular auction season. Sotheby's has an
outstanding record in selling single-owner collections. We have
conducted seven of the ten largest single-owner sales in auction
history, including the record-setting Dorrance Collection in
1989, which brought $135.3 million.
In 1994 single-owner collections again made a significant
contribution to our sales. Among the many outstanding
collections offered during the year, in a wide range of
collecting areas, were the Wendell Cherry Collection (French and
English furniture and decorations), the Collection of Mr. and
Mrs. H. Gates Lloyd (Modern and Contemporary art), the Collection
of Madame Helene Beaumont (Jewelry), the Peter Jay Sharp
Collection (Old Master paintings), the Property of Baron Guy de
Rothschild (furniture and decorations), the Bertram K. and Nina
Fletcher Little Collection (Americana) and the Dr. Otto Schafer
Collection (Italian books). Some of these sales, like the Little
Collection, represented the finest collections of their kind ever
to appear at auction.
Looking forward to 1995, we have already secured a number of
major collections which we believe will help us continue our
tradition in this important area. Among the major highlights of
our spring season, for example, will be the auctions of property
from the IBM Foundation, which will be sold in May in four
important collecting categories: American art, Latin American
art, Contemporary art and 19th Century European paintings.
Featured in our Impressionist and Modern art auction this spring
is the Estate of Mrs. John Barry Ryan and the Stralem Collection
of Impressionist, early Modern and American art, one of the most
important and attractive groups of Impressionist and Modern
paintings to appear on the market in the last five years. Through
innovative marketing and promotion, the kind that can
dramatically transform a sale into an exciting auction event, we
hope to continue building and broadening our presence in the
world art market by offering the finest collections.
-House Sales . .
Sotheby's inaugurated country house sales in 1929, when we
sold the contents of Kinmel Park, a baronial mansion in Wales
with no fewer than fifty-seven bedrooms. Through the years we
have continued this tradition with many other landmark house
sales that have provided not only an important source of revenue
but have attracted considerable publicity, sometimes
internationally, thus bringing new clients to the firm. In
Europe these sales have included the contents of Baron Lionel
Nathan de Rothschild's London residence in 1937 as well as the
contents of Mentmore Towers, the spectacular Buckinghamshire
home of the Earl of Rosebery, which took place over ten days in
1977 and brought $10.9 million, by far the highest figure for a
house sale at the time. Memorable house sales in America have
included Mrs. Geraldine Rockefeller Dodge's estate in New Jersey
8
and the Estate of Colonel and Mrs. Garbisch in Maryland, Pokety
Farms.
Following the tremendous success of the nine-day von Thurn
und Taxis house sale in Bavaria which brought $19.3 million in
1993, Sotheby's continued its tradition of house sales in 1994
with an important auction of more than 5,000 objects from
Stokesay Court, one of Britain's grandest 19th century mansions.
In preparing for the sale, Sotheby's reassembled the rooms of
Stokesay Court as closely as possible to their original
furnishing and decoration, with the help of old photographs as
well as an 1898 inventory. Another major house sale of 1994
involved property that had been stored for many years at the
Palazzo Corsini in Florence. Conducted on the instructions of
the Prince and Princess Corsini, with the proceeds earmarked for
restoration, the sale achieved $4.4 million, more than double its
high estimate of $1.6 million. We are now planning additional
house sales for 1995. One of these, the Deyerle Collection of
Americana, will be conducted in Charlottesville, Virginia, and
promises to be one of the most important house sales ever held in
America.
-Broader Reach Through Realty Services. . .
By their very nature, the collectors who visit Sotheby's
salerooms are often the same people who are searching for
beautiful homes in which to house their works of art. Sotheby's
International Realty was founded in 1976 to meet this
requirement, specializing in properties of distinction across a
broad price range. Today, Sotheby's Realty operates in 17
countries, with 8 regional or representative offices, and
maintains a network of 192 affiliates around the globe, making it
one of the largest and most prominent realty firms in the world.
Sotheby's Realty's sales for the last five years totaled $2.2
billion, and the average sale price in 1994 was $1.25 million,
the highest average since 1990. Sotheby's International Realty
had a very profitable year in 1994, with pre-tax income of $3.0
million.
With the addition in 1995 of a direct brokerage office in
Beverly Hills, California, we believe that this segment of our
business will continue to grow. The new office, which will share
our new and enlarged auction company premises, will represent a
significant expansion of our realty operations in the United
States, strengthening our commitment to the Los Angeles area. In
1995, Sotheby's Realty will also open an office in Hong Kong, our
first in Asia, which will operate mainly as a referral office.
We believe that this new realty office will provide another
important means of broadening our client base in that region of
the world.
-Flexibility in Financial Services.
Sotheby's Financial Services continues to be an important
and profitable adjunct to our main activity of fine art
auctioneering. Through it we are able to enhance our client
9
services and gain important consignments by offering advance
funding for works of art to be sold at Sotheby's. We will also
provide loans for collectors, museums and dealers secured by
works of art not intended for sale. We pioneered this service in
the auction business and continue to operate it in a very
conservative and careful manner. As the art market continues to
grow we believe that demand for financing will also increase,
making this area one of future growth potential for Sotheby's.
-Sotheby's Franchise In the Future
Growth Opportunities
In the United States...
The United States represents an extraordinary opportunity
for growth in the art auction market, and Sotheby's continues to
seek ways of strengthening our presence in this region. The
United States has a large population of wealthy individuals with
no experience in buying works of art at auction. Additionally,
more than 80% of our lots sell for less than $5,000, an amount
which we believe is within the reach of many individuals.
We believe that we can make the auction business more
accessible to a much larger number of individuals in the United
States. In the United Kingdom, by comparison, there is a more
established tradition of collecting and of participating at
auction, and hence broader and deeper support of the auction
market. We believe the same could become true of the U.S.
market. Through creative marketing programs we believe we can
stimulate broader participation in the auction process, thus
creating a large growth opportunity in this market. Such special
marketing initiatives as our Young Collectors Group,
Conversations at Sotheby's, as well as numerous educational
programs and field trips, help us to build this market. This
year we began accepting the American Express Card for payment at
our auctions throughout the world and have launched a number of
marketing initiatives with American Express. Sotheby's has long
been a marketing innovator in the auction world, and we feel
certain of our success in this venture over time. We have
recently appointed a new worldwide marketing director, Suzanne
McMillan, who has a strong background in specialized retail
marketing, to strengthen our position in this area.
In Continental Europe...
In Continental Europe, where over many centuries great
collections have been formed and dispersed, there is a tradition
of collecting through auctions. We believe there remains ample
opportunity for growth across all countries and in all fields of
collecting. Sotheby's is increasingly recognized throughout
Europe as a franchise synonymous with excellence. The continued
strengthening of our franchise in Europe will enable us to expand
on our successes in this region and to develop new initiatives by
holding more house sales, similar to those held in England,
Germany and Italy in the last few years, and by building on the
strong sales we have held in Switzerland, notably our
10
record-breaking $68.5 million Jewelry auction. In France, where
current restrictions on non-French companies prohibit us from
holding sales, the potential market for Sotheby's is vast. In
1994, for example, the Paris auction market generated in excess
of $600 million in sales. We look forward to participating in
this important market once these restrictions have been lifted.
Throughout Asia. . .
Sotheby's was the first major auction house to enter the
Asian market twenty years ago, and we have taken several steps to
increase our name recognition in this region. Our Asian
philosophy is to build a strong leadership team in the Far East
who can manage the local needs and respond to opportunities in
the region while preparing for the future by configuring
operations in key locations in the most cost-efficient manner.
Asia is extremely important as a source of new buyers in the
art market. In 1994, we took several strategic marketing
initiatives to broaden our opportunities in this region. These
included teleconferencing our Hong Kong auctions to Singapore and
expanding the knowledge of and exposure to Western Jewelry
auctions through jewelry exhibitions in Malaysia. We also
appointed new representatives in Malaysia and Shanghai in 1994 as
well as a new associate in Seoul, thus strengthening our
representation in Asia.
In Japan...
Japan has a large economy with a population of individuals
who have demonstrated an affinity toward collecting Western art,
but who are not currently participating in the market. Japanese
buying in the 1980s represented an important component of our
sales, both in the number of lots purchased and in the number of
individual purchasers. While the Japanese have withdrawn from
the auction market at the 1980's level, most notably in the area
of Impressionist and Modern art, we expect that Japanese
participation will grow as Japan recovers from economic
recession.
We have recently named a new Managing Director of our
Japanese operations, Tetsuji Shibayama, who comes to Sotheby's
with an impressive range of business experience both in Japan and
the United States. With this addition to the strong team we
already have in place in Japan, we believe that we are well
positioned for future growth in this market. Additionally, in
1994, we opened new and larger premises in Tokyo which will
enable us to host more frequent exhibitions and special events.
Jewelry...
We believe that Jewelry, a field in which we have a long and
successful tradition, represents a vital opportunity sector for
Sotheby's. Our Jewelry sales reached record-breaking levels in
1993 - more than $200 million. While Jewelry sales results for
11
1994 were not quite as high as 1993, totaling more than $180
million, the market remained strong, especially in New York.
Jewelry has been an important market for Sotheby's
historically and our record-breaking performances in recent
years, combined with our ability to successfully offer
collections such as that of Helene Beaumont in Geneva and Mrs.
Harry Winston in New York, have enabled us to develop
considerable name recognition in this field. With its steady,
often spectacular growth in sales over the years, Jewelry has now
become the second-highest collecting category at Sotheby's.
Fine Arts...
Historically, overall art market sales growth has been
driven by an expansion in the paintings categories, and the fine
arts continue to make significant contributions to our sales
growth. In 1994, paintings categories comprised $595 million of
our total sales, greatly surpassing their performance in the
previous year. In several cases, our various-owners sales were
much enhanced by our ability to simultaneously attract a major
single-owner collection, such as the property of Mr. and Mrs. H.
Gates Lloyd in the field of Modern and Contemporary art, thus
greatly adding to the bidding environment.
The breadth and diversity of our paintings categories
enables us to maintain balanced overall results. For example, in
1993, the Impressionist and Modern art sector grew 71% to $258.0
million, while all of the other fine art categories remained
unchanged. By contrast, our sales in Impressionist and Modern
art declined by 27% in 1994, while several other paintings
categories grew at impressive rates, thus offsetting the decline
in Impressionist sales.
Decorative Arts...
Sotheby's has always been committed to maintaining the
highest level of expertise in the decorative arts, a sector of
the art market that includes such diverse property as
Antiquities, Furniture, Art Nouveau and Art Deco, Asian art,
Porcelain, Rugs, Silver and Tribal art. Our sales in these
categories have traditionally provided underlying stability to
our overall auction sales, and this continued to be true in 1994
when the decorative arts increased by 7% over 1993.
During the year several categories had a significant
increase over the prior year, notably Chinese works of art (up
22%) and all of the furniture categories (up 19%). Single-owner
collections, such as the French and English furniture and
decorations from the Estate of Wendell Cherry and French
furniture, Renaissance bronzes and books from the Estate of Peter
Jay Sharp, were extremely successful. Most notable was our
performance in Americana, where we offered the Bertram K. and
Nina Fletcher Little Collection. To build excitement in this
12
historic sale, Sotheby's presented an extensive educational
studies program on the Little Collection, and the lavishly
illustrated catalogue was hailed as a landmark in Americana
scholarship. As an example of Sotheby's marketing expertise, the
Little sale drew together Sotheby's resources and strengths in a
manner that not only paid fitting tribute to a great collection
but also helped yield the greatest financial return.
-Building For the Future. . .
Drawing on the experience of our long tradition, Sotheby's
is ideally positioned for growth throughout the world. We
believe that the strength of the Sotheby's franchise in the
present will be enhanced in the future by our talented management
team, by creative and innovative initiatives and by our extensive
global reach. As we enter our 251st year of business, we are
enthusiastic about the future of our firm and feel confident that
the programs we have put into place will strengthen the Sotheby's
franchise in years to come.
13
Year ended December 31, 1994 1993 1992 1991 1990
(Thousands of dollars,
except per share data)
Results of Operations:
Auction
Auction sales $1,330,001 $1,325,334 $1,131,601 $1,104,391 $2,446,453
Revenues 238,770 $234,972 $200,883 $193,905 $347,216
Restructuring charge (4,855)
Operating income (loss) 30,208 31,466 (1,993) 12,079 139,077
Income before taxes 34,043 34,233 4,021 18,896 154,351
Financial Services
Revenues 9,246 7,600 14,462 20,620 23,085
Income before taxes 3,676 2,803 5,211 7,807 8,053
Real Estate
Revenues 11,549 9,758 9,625 7,833 8,123
Income before taxes 3,002 2,071 2,091 312 52
Corporate operating
expenses (6,792) (7,370) (6,177) (5,545) (7,204)
Other non-operating
income (expense) (164) 420 1,345 28 (691)
Consolidated
Revenues 259,565 252,330 224,970 222,358 378,424
Operating income
(loss) 30,094 28,970 (868) 14,653 139,978
Income before taxes 33,765 32,157 6,491 21,498 154,561
Net Income $20,259 $19,294 $3,960 $13,114 $94,682
Earnings Per Share $0.36 $0.35 $0.07 $0.25 $1.66
Cash dividends
declared per share $0.24 $0.42 $0.60 $0.95 $1.45
December 31, 1994 1993 1992 1991 1990
(Thousands of dollars)
Balance Sheet:
Working capital1 $104,961 $94,616 $148,947 $186,932 $144,357
Total assets1 557,084 559,356 577,657 650,286 826,051
Commercial paper 27,500 34,000 86,400 82,670 40,000
Shareholders' equity 211,052 194,632 198,195 246,328 278,199
Auction sales represent sales at the hammer price plus buyer's premium.
1 Prior year amounts have been restated to conform to current year's
presentation.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Years Ended December 31, 1994 and 1993
Auction Sotheby's Holdings, Inc. (together with its subsidiaries, the
"Company") is the world's leading fine art auctioneer, specializing in
paintings, jewelry, decorative art, collectibles and a wide range
of other property. Auction sales for the Company totaled $1,330.0 million
during 1994, an increase of $4.7 million over the prior year. Decreases in
sales of Impressionist and Modern art as well as Jewelry were offset by
combined growth of 13% from other collecting categories. Auction sales
recorded by the Company's foreign operations were positively affected by
translation to U.S. dollars which increased auction sales by $21.9 million,
or 2%.
Following is a geographical breakdown of the Company's auction sales for
1994 and 1993 (in thousands):
1994 1993
North America $ 666,301 $ 654,984
Europe 608,291 627,475
Asia 55,409 42,875
Total $ 1,330,001 $ 1,325,334
Sales in the United Kingdom ("U.K.") and North America improved modestly
during 1994, with sales growth of $41.7 million (11%) and $11.3 million
(2%), respectively. Auction sales totaled $430.4 million in the U.K. for
1994 compared to $388.7 million in the prior year. Excluding the impact of
foreign currency movements, sales in the U.K. increased by $28.8 million,
or 7%. Sales growth in the U.K. resulted largely from sales of Old Master
paintings in London. The modest increase in North American auction
sales was principally due to improvements in a broad range of collecting
categories as well as single-owner sales offset, in part, by a decline in
the sale of Impressionist and Modern art. Sales in Asia grew by $12.5
million, or 29%, as a result of increased sales in Hong Kong and Taiwan.
Sales in continental Europe (the "Continent") declined $60.9 million, or
26%, during 1994. Excluding the favorable impact of currency movements,
sales on the Continent declined $69.2 million, or 29%, due mostly to
lower Jewelry sales in Switzerland.
Worldwide revenues from auction operations ("Auction") increased $3.8
million, or 2%, compared to the prior year. Auction revenues were positively
affected by increased commissions (which are principally buyer's premium,
vendor's commission and expense recoveries). The increase in commissions is
largely due to a change in the relative mix of sales toward property with
lower average values which yield higher average commission rates. Reductions
in other non-commission revenue categories partially offset the impact of
increased commissions. Excluding the impact of translating revenues outside
North America into U.S. dollars, Auction revenues were essentially flat
when compared to the prior year.
15
Direct costs of services, consisting largely of catalogue production,
distribution and mailing costs, increased by $1.3 million during 1994, or
3%, when compared to 1993. Most of this increase was due to movements in
currency. Direct costs of services as a percentage of sales was 3.7% in 1994
compared to 3.6% in 1993.
Salaries and related costs increased $6.9 million, or 9%, in 1994. Excluding
the impact of foreign currency movements, salaries and related costs increased
$5.8 million, or 7%. This increase is largely due to salary increases
following several years of very restrained compensation growth and, to a
lesser extent, to modest increases in staff.
General and administrative expenses decreased $1.0 million during 1994, or
approximately 1% when compared to the prior year. Excluding the impact of
foreign currency movements, general and administrative costs actually
declined 3% year to year. This decrease reflects lower levels of various
provisions for reserves in 1994 when compared to 1993 as well as continued
cost control efforts.
Inventory and other auction-related activities generated pre-tax income of
$1.4 million in 1994, compared to a pre-tax loss of $0.9 million in the
prior year. These activities include: net gains on sales of inventory
(including gains on sales of inventory obtained as a result of the auction
process); the Company's share of earnings from its investment in the
Acquavella Modern Art Partnership ("AMA"); net revenue earned from
guarantees; and provisions for write-downs of inventory to estimated
realizable value. The year-to-year increase is mostly due to lower levels
of inventory provisions for write-downs to estimated realizable value.
Auction recorded operating income of $30.2 million in 1994, a decrease of
$1.3 million compared to operating income of $31.5 million for 1993.
Excluding the favorable impact of currency movements, Auction operating
income declined $2.1 million when compared to 1993. The decrease is
principally due to increased operating expenses, most notably salaries and
related costs, as discussed above.
Auction's interest income, which is earned on short-term investments of
surplus cash, declined by $0.2 million in 1994 compared to 1993 due
primarily to a lower level of invested funds when compared to the
prior year. Interest expense is incurred on borrowings to fund short-term
cash requirements, including the client loan portfolio of the Company's
subsidiary, Sotheby's Financial Services, Inc. ("Financial Services"). The
decrease of $0.3 million in the current year is largely due to a lower
average level of commercial paper borrowings compared to 1993, offset, in
part, by higher average interest rates.
16
As noted above, Auction funds a portion of the client loan portfolio of
Financial Services. Net interest charged to Financial Services on borrowings
from Auction totaled $2.9 million and $2.0 million in 1994 and 1993,
respectively (see Note C to the Consolidated Financial Statements). The 1994
amount of $2.9 million represents interest income of $4.0 million on
borrowings by Financial Services from Auction, net of interest expense on
special financing programs of $1.1 million charged by Financial Services to
Auction. The increase during 1994 is largely due to a higher level of
auction funding required for the Financial Services loan portfolio, and,
to a lesser extent, higher interest rates in 1994. These factors
were partly offset by an increase in loans under special financing programs
provided by Financial Services to Auction.
Financial Services Revenues from Financial Services increased to $9.2
million in 1994 from $7.6 million in 1993 due to an increase in the average
outstanding loan portfolio as well as higher rates of interest earned on
outstanding loans. Average month-end portfolio balances for the years ended
December 31, 1994 and 1993 were approximately $125.9 million and $112.2
million, respectively.
Income before taxes increased $0.9 million, or 31%, in 1994 due to the
higher level of revenues discussed above as well as lower levels of various
general and administrative expenses.
Real Estate Revenues from Real Estate increased to $11.5 million in 1994
from $9.8 million in 1993. The increase reflects a higher level of property
sales when compared to the prior year. Operating expenses also increased
during the current year, from $7.7 million in 1993 to $8.5 million in 1994,
due mostly to increased marketing costs as well as salaries and related
costs. Income before taxes increased $0.9 million to $3.0 million in
1994.
Corporate Corporate operating expenses of $6.8 million during 1994 were
$0.6 million lower than 1993. This decrease is largely due to costs
associated with severance in 1993 which did not recur in the current year
as well as a reduction in professional fees, which include audit, tax,
legal, consulting and other professional fees.
Income Taxes The Company's income taxes for the year ended December 31, 1994
increased $0.6 million due to the slightly higher level of earnings in 1994
when compared to 1993. Higher earnings during 1994 in certain jurisdictions
were offset by lower earnings in others (see Note I to the Consolidated
Financial Statements).
Net Income and Earnings Per Share Net income for 1994 was $20.3 million, a
5% increase when compared to net income of $19.3 million for 1993. Excluding
favorable movements in foreign currencies, net income increased less than
1%. Earnings per share increased from $0.35 per share in 1993 to $0.36 per
17
share in 1994. The percentage increase in earnings per share was slightly
less than the 5% increase in net income due to an increase in the number
of weighted average shares in 1994 when compared to 1993.
Results of Operations
Years Ended December 31, 1993 and 1992
Auction Auction sales for the Company totaled $1,325.3 million during 1993,
an increase of $193.7 million, or 17%, over the previous year. Higher sales
volume was responsible for $148.0 million of the increase, while the
remaining $45.7 million of growth resulted from the increase in the rate of
buyer's premium. Prior to 1993, in most locations the buyer's premium had
been 10% of the hammer price on any lot sold. Effective January 1, 1993,
the buyer's premium increased to 15% on lots sold for $50,000 or less in
North America. On lots of higher value, 15% is charged on the first $50,000
and 10% thereafter. Generally, similar structures were simultaneously
implemented throughout most of the rest of Sotheby's auction operations.
The increase in 1993 auction sales was driven by increased sales of
Impressionist and Modern art and unusually strong sales of Jewelry, which
increased by approximately $107.4 million and $80.4 million, respectively,
compared to 1992.
Following is a geographical breakdown of the Company's auction sales for
1993 and 1992 (in thousands):
1993 1992
North America $ 654,984 $ 551,075
Europe 627,475 531,072
Asia 42,875 49,454
Total $ 1,325,334 $ 1,131,601
Market improvements were seen during 1993 in both North America and Europe
with sales growth of $103.9 million (19%) and $96.4 million (18%),
respectively, while Asian sales declined $6.6 million, or 13%. Auction
sales for Europe and Asia were negatively affected by translation to U.S.
dollars, which reduced total auction sales by $56.1 million. The increase
in North American auction sales was due primarily to the higher level of
sales of Impressionist and Modern art in New York. The growth in European
auction sales resulted largely from Jewelry sales in Geneva and sales of
Impressionist and Modern art in London. In addition, European sales
benefited from the sale of art and precious objects from the von Thurn und
Taxis collection held in Germany. The decline in Asian sales was due to a
reduction in the number of sales held in Asia compared to the prior year
due to the elimination of auctions in Japan and India and the cancellation
of a sale in Taiwan.
Worldwide revenues from auction operations increased $34.1 million, or 17%,
to $235.0 million. The unfavorable impact of translating revenues outside
18
North America into U.S. dollars reduced 1993 auction revenues by $12.6
million. The increase in Auction revenues was primarily attributable to
increased commissions. The growth in commissions resulted from the increase
in the rate of buyer's premium, as discussed above, and, to a lesser extent,
from the greater volume of auction sales. The increase in commissions was
mitigated, in part, by declines in the realized rate of vendor's commission
and other commission revenue areas. The lower vendor's commission rate
resulted from pressures to price competitively as well as from a change
in the relative mix of auction sales. During 1993, an increasing proportion
of the Company's sales were by departments that have historically generated
lower than average vendor's commissions. During 1993, the Company continued
to review its worldwide business structure, with particular emphasis
on operations in Europe and Asia. As a result of this review, the Company
recorded non-recurring reorganization charges of over $2.4 million during
1993 (of which $2.0 million related to Auction). These charges were
principally for costs associated with changes in personnel.
Direct costs of services decreased by $3.2 million, or 6%, from 1992 in
spite of the greater volume of sales. Translating these expenses into U.S.
dollars accounted for $1.9 million of the decrease. Direct costs of
services as a percentage of sales, excluding the impact of foreign currency
movements, was 3.6% in 1993 compared to 4.5% in 1992.
Salaries and related costs increased by $4.3 million, or 6%, in 1993. This
increase reflects incentive compensation, merit adjustments and increased
overtime resulting from the higher level of sales activity, as well as a
majority of the reorganization charges discussed above. These factors were
partially offset by the impact of foreign currency translation, which
reduced salaries and related costs by $4.5 million.
General and administrative expenses increased by $1.6 million, or 2%, in
1993. After eliminating the impact of foreign currency translation, general
and administrative expenses increased by $7.8 million over 1992. This
increase reflects balance sheet strengthening and increases in various other
expenses associated with the higher level of sales, as well as modest
reorganization costs associated with the realignment of certain overseas
locations.
Inventory and other auction-related activities generated a pre-tax loss of
$0.9 million in 1993, compared to pre-tax income of $1.8 million in 1992.
In 1993, earnings continued to be generated from AMA and other sales of
inventory, but at very modest levels which were lower than the prior year.
A provision for the write-down to estimated realizable value of inventory
relating to a single isolated transaction more than offset these earnings
in 1993.
During 1992, the Company recorded a $4.9 million restructuring charge to
provide for staff termination and other reorganization costs relating to
a full-scale restructuring to streamline operations, with
19
particular emphasis on the European auction operation.
Auction recorded operating income of $31.5 million in 1993, an increase of
$33.5 million compared to an operating loss of $2.0 million in 1992. The
increase in operating income is due to the increase in the rate of the
buyer's premium and greater sales volume, offset by reductions in vendor's
commissions, expense recoveries and various other revenues.
Auction's interest income declined by $1.7 million in 1993 compared to 1992
largely due to lower average rates of interest earned on invested funds.
The decrease of $1.9 million in interest expense is largely due to a lower
average level of borrowed funds in Europe.
Net interest charged to Financial Services on borrowings from Auction
totaled $2.0 million and $5.4 million in 1993 and 1992, respectively
(see Note C to the Consolidated Financial Statements). The 1993 amount
represents interest income of $2.5 million on borrowings by Financial
Services from Auction, net of interest expense on special financing
programs of $0.5 million charged by Financial Services to Auction. The
$3.4 million decrease in net interest income from financial services
results from the lower level of Auction funding required for the smaller
Financial Services loan portfolio and, to a lesser extent, lower interest
rates in 1993.
Financial Services Revenues from Financial Services decreased to $7.6
million in 1993 from $14.5 million in 1992 due to a decrease in the
average outstanding loan portfolio and, to a lesser extent, to lower
rates of interest earned on outstanding loans. Average month-end portfolio
balances for the years ended December 31, 1993 and 1992 were approximately
$112.2 million and $163.2 million, respectively. The average interest rate
charged to borrowers decreased to 6.8% in 1993 from 9.2% in 1992.
Income before taxes declined $2.4 million, or 46%, compared to the prior
year. The decrease is principally a result of the smaller client loan
portfolio, partially offset by reduced provisions for loan losses.
Real Estate Revenues from Real Estate increased to $9.8 million in 1993
from $9.6 million in 1992, while operating expenses increased slightly.
The increase in revenues reflects a higher level of property sales
partially offset by lower commission rates. Income before taxes of $2.1
million was unchanged compared to the prior year.
Corporate Corporate expenses of $7.4 million in 1993 were $1.2 million
higher than 1992. This increase is largely due to an increase in costs
associated with severance and worldwide marketing and promotion.
Income Taxes The consolidated effective tax rate increased to 40% for the
year ended December 31, 1993 from 39% during 1992. The increased tax rate
20
reflects the net impact on the Company of the Omnibus Budget Reconciliation
Act of 1993 which was enacted during the third quarter of 1993.
Net Income and Earnings Per Share Net income for 1993 was $19.3 million, an
increase of $15.3 million over 1992. Earnings per share increased $0.28
per share to $0.35 per share in 1993. These increases were driven by the
growth in 1993 auction revenue which resulted principally from the increase
in the rate of buyer's premium and auction sales compared to 1992. The
effect of foreign currency translation on net income and earnings per
share was not material.
Liquidity and Capital Resources
The Company's net debt position (total debt, which includes short-term
borrowings and commercial paper, less cash and cash equivalents) totaled
$1.4 million at December 31, 1994, compared to a net cash position of
$53.3 million at December 31, 1993 and a net debt position of $5.2 million
at December 31, 1992. Working capital (current assets less current
liabilities) at December 31, 1994 was $105.0 million, compared to $94.6
million and $148.9 million at December 31, 1993 and 1992, respectively.
The Company's client loan portfolio, consisting of loans which generally
have a maturity of one year or less, increased to $131.3 million at
December 31, 1994 from $98.4 million and $117.6 million at December
31, 1993 and 1992, respectively.
The Company relies on internally generated funds and borrowings to meet
its financing requirements. The Company may issue up to $200 million of
short-term notes pursuant to its U.S. commercial paper program,
of which $27.5 million was issued and outstanding at December 31, 1994.
The Company supports any short-term notes issued under its U.S. commercial
paper program with committed credit facilities. Prior to August 3, 1994,
the Company had $175 million available under committed revolving credit
facilities; these arrangements were discontinued effective August 3, 1994,
at which date the Company entered into a new Bank Credit Agreement which
provides $300 million of committed available financing to January 31,
1998 (see Note H to the Consolidated Financial Statements).
During 1994, the Company's primary sources of liquidity were derived from
available cash balances supplemented by short-term borrowings and
operations. The most significant cash uses during 1994 were net funding of
the client loan portfolio ($48.1 million) and shareholder dividends. The
Company paid dividends to shareholders of $13.4 million in 1994 (of which
$3.3 million was declared and paid in 1994 with respect to 1993). In the
first quarter of 1995, the Company declared and paid dividends of $3.4
million in respect of the fourth quarter of 1994. During 1993, in addition
to $70.3 million generated from operations, a major source of liquidity was
21
net collections on the client loan portfolio which totaled $16.7 million.
The most significant uses of cash in 1993 were net repayments of commercial
paper borrowings, which totaled $52.4 million, and shareholder dividends.
In 1993, the Company paid dividends to shareholders of $23.2 million
(of which $8.3 million was declared and paid in 1993 with respect to
1992). During the third quarter of 1993, the Company announced a reduction
in the quarterly dividend on common shares to $0.06 per share. In 1992, net
collections on the client loan portfolio of $62.8 million and cash
generated from operations of $35.3 million were key sources of liquidity
for the Company; the most significant uses were shareholder dividends and
net reductions in short-term borrowings. The Company paid $31.8 million in
dividends during 1992 (of which $7.7 million was declared and paid in 1992
with respect to 1991).
Capital expenditures, consisting primarily of office and auction facility
refurbishment and the acquisition of computer equipment, totaled $7.9
million for 1994, $8.3 million for 1993 and $9.9 million for 1992.
In certain instances, consignor advances are made with recourse limited
only to the works of art consigned for sale and pledged as security for
the loan, or with recourse limited to the consigned works and to other
works of art owned by the consignor but not pledged as security. As of
December 31, 1994, $3.0 million of these advances were outstanding.
From time to time, the Company has off-balance sheet commitments which
include short-term commitments to consignors that property will sell at a
minimum price and legally binding lending commitments in conjunction with
the client loan program (see Note O to the Consolidated Financial
Statements). The Company does not believe that material liquidity risk
exists relating to these commitments.
The Company believes that the working capital requirements of AMA will
be adequately satisfied by sales of its inventory. In spite of the
slowdown in the volume of sales, the Company expects that the sale of
the remaining inventory will provide a source of cash over the next
several years as the art market continues to recover.
Outlook
Although overall auction sales remained relatively unchanged during 1994
when compared to 1993, combined sales of all categories, excluding
Impressionist and Modern art and Jewelry, rose 13%. The Company is
encouraged by this growth and is optimistic about the prospects for the
1995 auction season. On an ongoing basis, the Company reviews opportunities
in the marketplace and, in the first quarter of 1995, purchased inventory.
22
The Company believes that operating cash flows will be adequate to meet
normal working capital requirements and that the commercial paper program
and credit facilities will continue to be adequate to fund the Company's
client loan program, peak working capital requirements and other short-term
commitments to consignors.
The Company evaluates, on an ongoing basis, the adequacy of its premises for
the requirements of the present and future conduct of its business. Any
significant alteration to its principal auction premises may require use of
additional capital which the Company believes is adequately available.
Seasonality
The worldwide art auction market has two principal selling seasons, spring
and fall. During the summer and winter, sales are considerably lower. The
table below demonstrates that at least 80% of the Company's auction sales
are derived from the second and fourth quarters of the year (see Note Q to
the Consolidated Financial Statements).
Percentage of Annual
Auction Sales
1994 1993 1992
January-March 12% 10% 12%
April-June 40 38 38
July-September 8 6 8
October-December 40 46 42
100% 100% 100%
Future Impact of Recently Issued
Accounting Standards
In November of 1992, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers" Accounting for Postemployment Benefits, which was
adopted by the Company in the first quarter of 1994. Adoption of this
standard did not have a material impact on the Company's financial
statements.
In May of 1993, the FASB issued SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," which must be adopted by the Company by 1995.
The impact of implementing the new standard, which the Company will
adopt effective January 1, 1995, is not expected to materially affect
the financial statements.
In October of 1994, the FASB issued SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments".
The Company's policy is to enter into derivative financial contracts
for the purpose of hedging its foreign exchange or interest rate risk
exposures related to conducting its worldwide auction, financial services
and real estate brokerage business. As of December 31, 1994, there were no
outstanding derivative financial instruments. The impact on net earnings
23
related to the settlement of derivative contracts for the years ended
December 31, 1994, 1993, and 1992 was not material.
24
December 31, 1994 1993
(Thousands of dollars)
Assets
Current Assets
Cash and cash equivalents $ 34,987 $ 91,840
Accounts and notes receivable, net of allowance
for doubtful accounts of $10,165 and $10,596 - Note D
Auction operations 180,521 166,962
Finance operations 131,294 98,419
Other 13,442 12,670
Total Accounts and Notes Receivable, Net 325,257 278,051
Inventory, net - Note E 20,330 17,417
Deferred income taxes - Note I 12,053 8,675
Prepaid expenses - Note M 12,053 11,880
Total Current Assets 404,680 407,863
Properties, less allowance for depreciation
and amortization of $53,464 and $51,100 - Notes G and J 66,825 65,078
Intangible assets, less allowance for
amortization of $28,051 and $25,866 29,054 29,633
Investment in partnership - Note F 44,281 45,657
Other assets - Note N 12,244 11,125
Total Assets $ 557,084 $ 559,356
Liabilities and Shareholders' Equity
Current Liabilities
Due to consignors - Notes D and N $ 199,758 $ 205,873
Short-term borrowings - Note H 8,903 4,583
Accounts payable and accrued liabilities 60,428 63,271
Deferred revenues 6,173 6,165
Accrued income taxes - Note I 24,457 33,355
Total Current Liabilities 299,719 313,247
Long-term Liabilities
Commercial paper - Note H 27,500 34,000
Deferred income taxes - Note I 18,423 17,256
Other long-term obligations 390 221
Total Liabilities 346,032 364,724
Shareholders' Equity - Note K:
Common stock, $.10 par value:
Authorized shares - 125,000,000 of Class A and 75,000,000 of Class B
Issued and outstanding shares 36,730,771 and 35,399,497 of Class A,
and 19,093,071 and 20,096,469 of Class B at December 31, 1994
and 1993, respectively 5,582 5,550
Additional paid-in capital 83,538 80,509
Retained earnings 136,517 129,637
Foreign currency translation adjustments (14,585) (21,064)
Total Shareholders' Equity 211,052 194,632
Total Liabilities and Shareholders' Equity $ 557,084 $ 559,356
See accompanying Notes to Consolidated Financial Statements
25
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, 1994 1993 1992
(Thousands of dollars, except per share data)
Auction
Revenues $ 238,770 $ 234,972 $ 200,883
Direct costs of services (48,659) (47,352) (50,556)
Salaries and related costs - Note M (85,941) (79,030) (74,763)
General and administrative expenses - Note J (67,391) (68,391) (66,742)
Depreciation and amortization (7,986) (7,846) (7,731)
Income (loss) from inventory and other auction-
related activities - Notes B, E, and F 1,415 (887) 1,771
Restructuring charge - Note L (4,855)
Operating income (loss) - Auction 30,208 31,466 (1,993)
Interest income 4,900 5,082 6,786
Interest expense - Note H (4,013) (4,281) (6,156)
Net interest charged to Financial Services - Note C 2,948 1,966 5,384
Income before taxes - Auction 34,043 34,233 4,021
Financial Services
Revenues 9,246 7,600 14,462
General and administrative expenses (2,622) (2,831) (3,867)
Net interest expense from Auction - Note C (2,948) (1,966) (5,384)
Income before taxes - Financial Services 3,676 2,803 5,211
Real Estate
Revenues 11,549 9,758 9,625
Operating expenses (8,547) (7,687) (7,534)
Income before taxes - Real Estate 3,002 2,071 2,091
Corporate operating expenses (6,792) (7,370) (6,177)
Other non-operating income (expense) (164) 420 1,345
Consolidated
Revenues 259,565 252,330 224,970
Operating income (loss) 30,094 28,970 (868)
Net interest income 3,835 2,767 6,014
Other non-operating income (expense) (164) 420 1,345
Income before taxes 33,765 32,157 6,491
Income taxes - Note I (13,506) (12,863) (2,531)
Net Income $ 20,259 $
19,294 $ 3,960
Earnings Per Share $ 0.36 $ 0.35 $ 0.07
See accompanying Notes to Consolidated Financial Statements
26
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Foreign
Additional Currency
Common Paid-in Retained Translation
Stock Capital Earnings Adjustment
(Thousands of dollars)
Balance at December 31, 1991 $ 5,151 $ 64,292 $ 161,342 $ 15,543
Stock options exercised 332 4,748
Tax benefit associated with exercise
of stock options 8,554
Foreign currency translation (33,967)
Net income 3,960
Dividends (31,760)
Balance at December 31, 1992 $ 5,483 $ 77,594 $ 133,542 $ (18,424)
Stock options exercised 67 1,985
Tax benefit associated with exercise
of stock options 930
Foreign currency translation (2,640)
Net income 19,294
Dividends (23,199)
Balance at December 31, 1993 $ 5,550 $ 80,509 $ 129,637 $ (21,064)
Stock options exercised 32 2,224
Tax benefit associated with exercise
of stock options 805
Foreign currency translation 6,479
Net income 20,259
Dividends (13,379)
Balance at December 31, 1994 $ 5,582 $ 83,538 $ 136,517 $ (14,585)
See accompanying Notes to
Consolidated Financial Statements
27
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
Operating Activities:
Net income $ 20,259 $ 19,294 $ 3,960
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 8,444 8,294 8,172
Deferred income taxes (2,211) 1,227 (1,662)
Tax benefit of stock option exercises 805 930 8,554
Asset provisions 6,117 9,554 6,147
Other 263 (428) (557)
Change in assets and liabilities,
net of effects from business acquired:
Decrease (increase) in prepaid expenses (173) 1,805 1,904
Decrease (increase) in accounts receivable (8,035) (9,079) 29,742
Decrease in inventory 2,202 1,206 7,264
Increase (decrease) in due to consignors (6,115) 34,538 (8,781)
Decrease in accrued income taxes (8,898) (4,345) (10,978)
Increase (decrease) in other current liabilities (2,835) 7,263 (8,464)
----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,823 70,259 35,301
Investing Activities:
Finance operation loans (128,523) (119,915) (49,965)
Collections on finance operation loans 80,383 136,581 112,794
Capital expenditures (7,897) (8,344) (9,924)
Payment for business acquired, net of cash acquired - Note P 1,146
Increase in investment in affiliate (1,394)
Decrease in investment in partnership 1,376 1,264 2,425
----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (54,661) 9,586 55,082
Financial Activities:
Increase (decrease) in commercial paper (6,500) (52,400) 3,730
Increase (decrease) in short-term borrowings 4,320 114 (10,615)
Proceeds from exercise of stock options 2,256 2,052 5,080
Dividends paid (13,379) (23,199) (31,760)
----------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (13,303) (73,433) (33,565)
Effect of exchange rate changes on cash 1,288 (275) (14,383)
----------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (56,853) 6,137 42,435
Cash and Cash Equivalents at Beginning of Year 91,840 85,703 43,268
----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 34,987 $ 91,840 $ 85,703
----------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A--Organization and Business
The primary line of business of Sotheby's Holdings, Inc. (together with its
subsidiaries, the "Company") is conducting auctions and private sales of fine
art, jewelry and decorative art. Auction activities occur primarily in New
York and London, but are also conducted elsewhere in North America, Europe
and Asia. In addition, the Company is engaged in art-related financing and
in marketing and brokering luxury real estate.
Note B--Summary of Significant Accounting Policies
Principles of Consolidation The Consolidated Financial Statements include
the accounts of Sotheby's Holdings, Inc. and its wholly-owned subsidiaries.
The Company's investment in the Acquavella Modern Art Partnership ("AMA") is
accounted for under the equity method.
Revenue Recognition Auction commission revenue is generally recognized at
the date of the related sale. Financial Services interest income is
recognized using the interest method. Commissions on real estate
transactions are recognized when received. Catalogue subscription revenue
is recognized over the twelve-month period of the subscription from the
date of receipt of the proceeds. Other revenue is recognized at the time
service is rendered by the Company.
Properties Properties, consisting primarily of buildings and improvements,
furniture and fixtures and equipment, are stated on the cost basis.
Depreciation is computed principally on the straight-line method over
estimated useful lives for financial reporting purposes and by accelerated
methods for income tax purposes. Leaseholds and leasehold improvements are
amortized over the lesser of the life of the lease or the estimated useful
life of the improvement. Amortization of leased assets is included in
depreciation and amortization expense.
General and administrative expenses include repairs and maintenance and the
cost of computer software in the year of purchase.
Direct Costs of Services Direct costs of services primarily include the
costs of obtaining and marketing property for auctions.
Income (Loss) from Inventory and Other Auction-Related Activities These
activities include net gains on sales of inventories, including the
Company's share of earnings from its investment in AMA, income earned from
guarantees, and provisions for write-downs of inventories to estimated
realizable value.
Cash Equivalents Cash equivalents are liquid investments, comprised
primarily of bank and time deposits with an original maturity of less than
three months. These investments are carried at cost, which approximates
market value.
Financial Instruments The carrying amounts of cash and cash equivalents,
accounts receivable, short-term borrowings, due to consignors, accounts
payable and accrued liabilities, and commercial paper are a reasonable
estimate of their fair value. The fair value of notes receivable from
finance operations is estimated using the current rates at which similar
loans would be made to borrowers for the same remaining maturities.
Inventory Inventory consists principally of objects obtained as a result
of the auction process and is valued at the lower of cost or management's
estimate or realizable value.
Intangible Assets Intangible assets include goodwill, lease rights and
subscriber lists. Goodwill is being amortized over forty years. The
amounts assigned to the other intangible assets are amortized on a
straight-line basis over periods not to exceed twenty-five years.
Earnings Per Share Earnings per share is based on the weighted average
number of outstanding shares of common stock and common stock equivalents
(stock options). Weighted average number of shares for the earnings per
29
share computation were as follows: 1994-56,158,933; 1993-55,861,424; and
1992-54,387,412. Fully diluted earnings per share, assuming the maximum
dilutive effect of stock options, has not been presented because the
effects are not material. Weighted average number of shares for the fully
diluted earnings per share computation were as follows: 1994-56,158,933;
1993-55,909,007; and 1992-54,393,960.
Foreign Currency Translation Assets and liabilities of foreign subsidiaries
are translated at year-end rates of exchange. Income statement amounts are
translated using monthly average exchange rates for the year. Gains and
losses resulting from translating foreign currency financial statements are
accumulated in a separate component of shareholders' equity until the
subsidiary is sold or substantially liquidated.
Reclassifications Certain amounts in the 1993 and 1992 financial
statements have been reclassified to conform with the 1994 presentation.
Note C--Business Segment and Geographic Data
The Company operates in three business segments -- Auction, Financial
Services and Real Estate. Through its Auction segment, the Company
conducts auctions and private sales of fine art, jewelry and decorative
art. Through its Financial Services segment, the Company makes loans on a
regular basis to consignors, dealers and collectors. Through its Real
Estate segment, the Company is engaged in marketing and brokering luxury
real estate.
Certain industry segment information relating to operating revenues and
profitability required to be included pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 14 is included in the Consolidated
Statements of Income. In the Consolidated Statements of Income, income
before taxes for Financial Services and Real Estate is also operating
income as defined by the Statement.
Financial Services recognizes revenue at the contractual rates for loans
and advances. For special financing arrangements with below market
interest rates, Auction is charged the differential and Financial Services
realizes rates approximating market. Financial Services reports interest
expense at a rate of interest approximating the Company's actual short-term
borrowing rates. Amounts borrowed from Auction are based on the average
loan portfolio balance less an assumed level of capital in Financial
Services.
In the Consolidated Financial Statements, the captions identifying
intersegment transactions represent interest on borrowings by Financial
Services from Auction and interest on special financing programs charged by
Financial Services to Auction.
A summary of information about the Company's operations by business segment
and by geographic area follows:
Business Segment Data
December 31 1994 1993 1992
--------------------------------------------------------------------------------
(Thousands of dollars)
Indentifiable Assets
Auction $408,717 $444,604 $443,411
Financial Services 131,294 98,419 117,600
Real Estate 2,480 1,513 2,483
Corporate 14,593 14,820 14,163
--------------------------------------------------------------------------------
Total $557,084 $559,356 $557,657
--------------------------------------------------------------------------------
Depreciation and Amortization
Auction $ 7,986 $ 7,846 $ 7,731
Real Estate 196 186 179
Corporate 262 262 262
--------------------------------------------------------------------------------
Total $ 8,444 $ 8,294 $ 8,172
--------------------------------------------------------------------------------
Capital Expenditures
Auction $ 7,820 $ 8,099 $ 9,596
Real Estate 77 245 328
--------------------------------------------------------------------------------
Total $ 7,897 $ 8,344 $ 9,924
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
30
Geographic Data In the following table (which includes Auction, Financial
Services, Real Estate and Corporate), North America includes the United
States and Canada; Europe includes the United Kingdom, Ireland and
continental Europe; and Asia primarily includes operations in Hong Kong,
Taiwan, Japan and Australia.
Year ended December 31, 1994 1993 1992
--------------------------------------------------------------------------------
(Thousands of dollars)
Revenues
North America $133,080 $127,813 $108,722
Europe 116,214 116,396 107,647
Asia 10,271 8,121 8,601
--------------------------------------------------------------------------------
Total $259,565 $252,330 $224,970
--------------------------------------------------------------------------------
Operating Income (Loss)
North America $ 28,677 $ 26,081 $ 13,577
Europe 9,888 11,003 (8,229)
Asia (1,679) (744) (39)
Corporate (6,792) (7,370) (6,177)
--------------------------------------------------------------------------------
Total $ 30,094 $ 28,970 $ (868)
--------------------------------------------------------------------------------
Identifiable Assets
North America $326,975 $ 291,361 $292,245
Europe 205,859 258,883 272,039
Asia 24,250 9,112 13,373
--------------------------------------------------------------------------------
Total $557,084 $ 559,356 $577,657
--------------------------------------------------------------------------------
Note D--Accounts and Notes Receivable and Due to Consignors
Accounts and notes receivable consist of the following:
December 31 1994 1993
(Thousands of dollars)
Auction operations:
Auction receivables $185,438 $170,490
Advances for consignors 1,455 2,201
Other receivables 783 767
Allowance for doubtful accounts (7,155) (6,496)
180,521 166,962
Finance operations:
General purpose secured loans 113,020 61,366
Cash advances to consignors 10,688 30,667
Other guaranteed loans 9,878 10,000
Allowance for doubtful accounts (2,292) (3,614)
131,294 98,419
Other:
Other receivables 14,160 13,156
Allowance for doubtful accounts (718) (486)
13,442 12,670
Total $325,257 $278,051
31
Auction receivables included $1.9 million and $5.3 million at December 31,
1994 and 1993, respectively, relating to the purchase of art objects at
auction by employees, officers, directors and other related parties.
Under the standard terms and conditions of the Company's auction sales,
the Company is not obligated to pay consignors if it has not been paid by
the purchaser. If the purchaser defaults on payment, the Company may cancel
the sale and return the property to the owner, re-offer the property at
public auction or contact other bidders to negotiate a private sale.
In certain situations, when the purchaser takes possession of the property
before payment is made, the Company is liable to the seller for the net sale
proceeds. As of December 31, 1994 and 1993, accounts and notes receivable
included approximately $85.9 million and $80.1 million, respectively, of
such sales. Amounts outstanding in the prior year which remained outstanding
at December 31, 1994 totaled $0.8 million. Management believes that adequate
allowances have been established to provide for potential losses on these
amounts.
The average interest rates charged on finance receivables were 7.4% and 6.8%
at December 31, 1994, and 1993, respectively.
The estimated fair value of finance receivables was $129.8 million and
$97.2 million at December 31, 1994 and 1993, respectively.
Approximately 37% of the Company's loan portfolio at December 31, 1994 was
extended to one borrower. The Company's general policy in relation to
secured loans is to obtain collateral with a low estimated auction value
equivalent to or greater than 200% of the secured loan. The low auction
estimate of the collateral for this secured loan exceeded the Company's
general policy requirements at December 31, 1994. No other individual
loan amounted to more than 5% of total assets.
In May of 1993, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which
must be adopted by the Company by 1995. Under SFAS No. 114, impairment
is generally measured based on the present value of expected future
principal and interest cash flows, discounted at the loan's effective
interest rate, and a valuation allowance is established relating to those
impaired loans. Impairment may also be measured based on the fair value
of the collateral, if the loan is collateral dependent. A loan is
considered impaired under the Statement when, based on current information
and events, it is probable that the Company will be unable to collect all
amounts due. Presently, credit losses on the client loan portfolio are
accounted for through the allowance for doubtful accounts, which
is adequate to absorb losses inherent in this portfolio. The impact of
implementing the new standard, which the Company will adopt effective
January 1, 1995, is not expected to materially affect the financial
statements.
Note E--Inventory
Inventory consists principally of objects obtained as a result of the
auction process primarily as a result of honoring authenticity claims of
purchasers, foreclosing on accounts receivable after the consignor has been
paid and purchasing property at the minimum price assured by the Company.
The inventory and related allowances to adjust the cost of inventory to
management's estimated realizable value are as follows:
December 31 1994 1993
(Thousands of dollars)
Inventory, at cost $35,325 $31,751
Realizable value allowances (14,995) (14,334)
Total $20,330 $17,417
32
Note F--Investment in Partnership
On May 23, 1990, the Company purchased the common stock of the Pierre
Matisse Gallery Corporation ("Matisse") for approximately $153 million.
The assets of Matisse consisted of a collection of fine art (the "Matisse
inventory"). Upon consummation of the purchase, the Company contributed
the Matisse inventory to AMA and entered into the AMA partnership
agreement with Acquavella Contemporary Art, Inc. to sell the Matisse
inventory. The Company accounts for its investment in AMA under the equity
method of accounting in the Consolidated Financial Statements, including
its share of AMA's income in income (loss) from inventory and other
auction-related activities. The total net assets of the partnership
consist principally of the inventory described above. The Company
reflects its 50% interest in the net assets of the partnership as
investment in partnership, which totaled $44.3 million and $45.7 million at
December 31, 1994 and 1993, respectively. For the years ended December 31,
1994, 1993 and 1992, income earned from AMA totaled $0.7 million. $0.6
million and $1.3 million, respectively.
According to the terms of the partnership agreement, each partner has a
50% interest in the earnings of AMA and all cash available for distribution
was initially distributed to the Company until the Company received $270.3
million, together with a return equal to the prime rate (as defined). Cash
distributions now are being made on a 50-50 basis pursuant to the terms of
the partnership agreement. Cash distributed to the Company in accordance
with the partnership agreement totaled $281.5 million through December 31,
1994. To the extent that the partnership requires working capital, the
Company has agreed to lend the same to the partnership. As of December 31,
1994, no such amounts are outstanding.
Note G--Properties
Properties consist of the following:
December 31, 1994 1993
(Thousands of dollars)
Land $170 $170
Building and building improvements 32,893 32,000
Leaseholds and leasehold improvements 36,774 34,480
Furniture, fixtures and equipment 45,217 44,887
Other 5,235 4,641
120,289 116,178
Less: Accumulated depreciation (53,464) (51,100)
Total $66,825 $65,078
Note H--Credit Arrangements
Short-term borrowings consist of the following:
December 31, 1994 1993
(Thousands of dollars)
Bank lines of credit $5,266 $1,238
Note payable 3,622 3,336
Other short-term obligations 15 9
Total $8,903 $4,583
Bank Lines of Credit At December 31, 1994 and 1993, $5.2 million and $1.2
million, respectively, were outstanding under lines of credit at weighted
average interest rates of 6.57% and 10.84%, respectively.
Note Payable York Avenue Development, Inc. ("York") has signed a demand
note payable to Taubman York Avenue Associates, Inc. (see Note J).
Interest on the original note was prime plus 1%. During the fourth quarter
of 1994, the note was renegotiated and the interest rate was retroactively
reduced to prime minus 1/2%. The note was paid in full and cancelled
in January 1995.
33
Commercial Paper The Company may issue up to $200 million in notes under
its U.S. commercial paper program. At December 31, 1994 and 1993, commercial
paper borrowings amounting to $27.5 million and $34.0 million, respectively,
have been classified on the Consolidated Balance Sheets as long-term
liabilities based on the Company's ability to maintain or refinance these
obligations on a long-term basis. The notes do not bear interest but are
issued at a discount, which is negotiated by the Company and purchaser
prior to each issuance. The weighted average interest rates on these notes
was 6.21% and 3.54% at December 31, 1994 and 1993, respectively. During
1993 the Company had a Euro-commercial paper program available to issue up
to $200 million in notes. This program was discontinued in March of 1994.
Bank Credit Facilities During 1994 the Company entered into a $300 million
Bank Credit Agreement (the "Credit Agreement"). Borrowings under the Credit
Agreement are permitted through January 31, 1998 in either U.S. dollars or
U.K. pounds sterling. Under the terms of the Credit Agreement, interest is
calculated based on the London Interbank Offering Rate, "LIBOR", and a
facility fee of 0.15% per annum is charged on the amount of the commitment.
Commitment fees totaled $0.2 million in 1994. The Agreement contains
certain financial covenants including limitations on the Company's ability
to incur debt. The Credit Agreement contains no restriction on the payment
of dividends. However, the Company is required to maintain consolidated
tangible net worth, as defined, of at least $150 million. At December
31, 1994, consolidated tangible net worth, as defined, was $196.6 million.
Prior to August 1994, the Company had an aggregate of $175 million
available under various Bank Credit Facilities. Borrowings under these
facilities were based on one of several interest rates, at the option of
the Company. Commitment fees on the unused portion of the facilities totaled
$0.2 million, $0.4 million, and $0.3 million for the years ended December
31, 1994, 1993, and 1992, respectively.
Interest paid on borrowings totaled $4.1 million, $4.5 million and $6.2
million in the years ended December 31, 1994, 1993 and 1992, respectively.
Note I--Income Taxes
Year ended December 31, 1994 1993 1992
(Thousands of dollars)
Income Before Taxes:
Domestic $19,880 $17,180 $8,981
Foreign 13,885 14,977 (2,490)
Total $33,765 $32,157 $6,491
Income Taxes:
Current:
Federal $ 5,401 $3,877 $2,450
State and local 3,090 3,340 998
Foreign 7,226 4,419 745
$15,717 $11,636 $4,193
Deferred:
Federal (1,070) 1,227 850
Foreign (1,141) (2,512)
(2,211) 1,227 (1,662)
Total $13,506 $12,863 $2,531
As required by SFAS No. 109, which was adopted by the Company effective
December 31, 1992, the components of deferred income tax assets and
liabilities are disclosed below:
December 31, 1994 1993
(Thousands of dollars)
Current Deferred Tax Assets:
Taxable loss carryforwards $2,922 $2,874
Asset provisions and
accrued liabilities 9,131 5,801
34
Total $12,053 $8,675
Non-Current Deferred Tax Liabilities:
Basis difference in
partnership assets $15,667 $16,089
Depreciation 2,756 1,167
Total $18,423 $17,256
The effective tax rate varied from the statutory rate as follows:
Year ended December 31, 1994 1993 1992
(Thousands of dollars)
Statutory federal income
tax rate 35.0% 35.0% 34.0%
State and local taxes, net of
federal tax benefit 6.0 6.8 10.1
Foreign taxes at rates greater
(less) than U.S. rates 3.6 (2.6) (14.2)
Taxable foreign source
income (0.9) 4.9 6.6
Other (3.7) (4.1) 2.5
Effective income tax rate 40.0% 40.0% 39.0%
Undistributed earnings of foreign subsidiaries included in consolidated
retained earnings at December 31, 1994 and 1993 amounted to $12.7 million
and $15.3 million, respectively. Such amounts are considered to be
reinvested indefinitely or will be distributed from income that would not
incur a significant tax consequence and, therefore, no provision has been
made for taxes that would be payable upon distribution of these earnings.
Total income tax payments, net of refunds, during 1994, 1993 and 1992 were
$4.7 million, $9.2 million and $5.2 million, respectively.
Taxing authorities periodically challenge positions taken by the Company on
its tax returns. On the basis of information presently available, it is the
opinion of management that any assessments resulting from current tax
audits will not have a material adverse effect on the financial position of
the Company.
In 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes."
SFAS No. 109 establishes financial accounting and reporting standards for
the effects of income taxes that result from activities during the current
and preceding years. The Statement requires an asset and liability approach
for financial accounting and reporting for income taxes. It also requires
the Company to adjust its deferred tax balances in the period of enactment
for the effect of enacted changes in tax rates. The effect of this change
was not material for the year ended December 31, 1992.
Note J--Lease Commitments
The Company conducts its business on premises leased in various locations
under long-term operating leases expiring through 2060. Net rental
payments under operating leases amounted to $11.3 million, $11.1 million and
$12.0 million, respectively, for the years ended December 31, 1994, 1993
and 1992.
Properties under capital leases, which relate primarily to computer and
office equipment, are not material. Future minimum lease payments under
noncancelable operating leases in effect at December 31, 1994 are as
follows:
Operating
Leases
(Thousands of dollars)
35
1995 $9,233
1996 7,556
1997 6,350
1998 4,635
1999 4,009
Thereafter 51,226
Total future minimum lease payments
$83,009
In addition to the above rentals, under the terms of certain of the leases,
the Company pays real estate taxes, utility costs and other increases
based on a price-level index.
Operating leases include a lease expiring in 2009 (which can be extended
until 2039) on the North American headquarters building in New York City
(the "York Property"). York Avenue Development, Inc. ("York"), a
wholly-owned subsidiary of Sotheby's, Inc. (itself a wholly-owned subsidiary
of the Company), holds a purchase option on the York Property. The option
can be exercised anytime until January 31, 1999 for ten times the rent at
the date the option is exercised plus a profit-sharing arrangement of from
$5 million to $10 million, or at defined dates in 1999, 2004 and 2009 for
ten times the rent at the date the option is exercised, subject to certain
limitations.
The Company has reached an agreement with Taubman York Avenue Associates,
Inc. ("Associates") under which Associates will assist York in developing
and financing a new mixed-use tower (the "New Tower") over the existing
four-story building on the York Property, if the Company chooses to
develop the New Tower. Associates is controlled by the largest shareholder
and Chairman of the Company. Under the Agreement:
(i) York will be responsible at its sole cost and expense for developing
the New Tower (but without recourse to the Company or any of its other
subsidiaries);
(ii) The investment of Sotheby's, Inc. in the development of the New Tower
totaled $5.7 million at December 31, 1994.
(iii) Associates will lend funds and provide certain guarantees, including
guarantees that may be required by any construction lender in order to
provide the necessary resources for the development of the New Tower; and
(iv) York will indemnify Associates against liabilities arising from the
construction of the New Tower and any guarantees given by Associates.
If the New Tower is developed, under the agreement with Associates,
Sotheby's, Inc. will either acquire a condominium to be composed of the
existing building and the first floor of the New Tower (the "Condominium")
for $1.00 or lease the Condominium from York for $1.00 per year under a
long-term lease. In addition, York is entitled to receive 10% of the first
$15.0 million of the cash profits plus 25% of any cash profits in excess of
$15.0 million from the development of the New Tower. Associates will receive
the remainder of the cash profits from the development of the New Tower.
If construction does not begin on or before September 30, 1997, Associates'
arrangements with Sotheby's Inc. and York will terminate.
Note K--Shareholders' Equity
Common Stock and Public Offering Effective May 13, 1988, 11,006,214 shares
of Class A Common Stock were sold in an initial public offering. Effective
June 30, 1992, an additional 11,000,000 shares of Class A Common Stock were
sold in a secondary public offering. All proceeds from the sales were
received by the selling shareholders in exchange for the shares sold. The
Class A Common Stock is traded on stock exchanges in both the United States
and the United Kingdom.
36
Each share of Class A Common Stock is entitled to one vote and each share
of Class B Common Stock is entitled to ten votes. Both classes of Common
Stock share equally in dividend distributions.
Preferred Stock In addition to Class A and B Common Stock outstanding, the
Company has the authority to issue 50,000,000 shares of Preferred Stock,
no par value. No such shares were issued and outstanding at December 31,
1994 and 1993.
1987 Stock Option Plan At December 31, 1994, the Company has reserved
9,711,000 shares of Class B Common Stock for issuance in connection with
the 1987 Stock Option Plan (the "Plan").
Pursuant to the Plan, options are granted with an exercise price equal to
or greater than fair market value at the date of grant. For options
granted through September 1992, options vest and become exercisable ratably
during each of the fourth, fifth and sixth years after the date of grant.
For options granted subsequent to September 1992, options vest and become
exercisable ratably in each of the second, third, fourth, fifth and
sixth years after the date of grant (except in the U.K. where options
vest three-fifths in the fourth year and one-fifth in each of the fifth
and sixth years after the date of grant). The options are exercisable
into shares of Class B Common Stock, which are either authorized but
unissued shares or reacquired shares. The shares of Class B Common Stock
issued upon exercise are convertible into an equivalent number of
shares of Class A Common Stock. Under the current rules of the New York
Stock Exchange, substantially all options granted after April 1988 may
only be exercised if the optionee agrees to convert Class B shares to Class
A shares.
At December 31, 1994 and 1993, there were outstanding options for the
purchase of 5,504,915 and 5,229,977 shares, respectively, at prices ranging
from $1.50 to $22.62 per share. Stock option transactions during 1994,
1993 and 1992 are summarized as follows (shares in thousands):
Shares Reserved for Options Outstanding
-------------------
Issuance under the Plan Shares Prices
Initial grant
September 1, 1987 12,507 7,628 $1.50
Balance at
December 31, 1991 10,028 6,359 $1.50-22.62
Options granted 919 $10.62-13.25
Options canceled (136) $1.50-13.25
Options exercised (3,325) (3,325) $1.50-12.19
Balance at
December 31, 1992 6,703 3,817 $1.50-22.62
Options granted 2,350 $12.50-13.38
Options canceled (273) $10.50-15.50
Options exercised (664) (664) $1.50-13.38
Increase in shares reserved 4,000
Balance at
December 31, 1993 10,039 5,230 $1.50-22.62
Options granted 923 $12.25-18.00
Options canceled (320) $1.50-16.50
Options exercised (328) (328) $1.50-15.50
Balance at
December 31, 1994 9,711 5,505 $1.50-22.62
In February 1995, the Company approved an additional aggregate grant of
800,000 options pursuant to the 1987 stock option plan.
Stock Repurchase Program During 1990, the Company authorized a stock
repurchase program (the "repurchase program") to acquire up to 3,000,000
shares of its outstanding Class A common stock through open market or
other transactions. As of December 31, 1994, one million shares had been
repurchased under this program. The program has been discontinued by the
Company.
Note L--Restructuring Charge
37
During 1992, the Company incurred costs in its auction operations as a
result of certain restructuring activities. These included termination costs
related to staff reductions ($3.2 million), reorganization costs ($1.2
million) and lease cancellations and accelerated depreciation of capital
improvements ($0.5 million).
Note M--Pension and Incentive Bonus Arrangements
The Company has a U.S. defined contribution plan that covers employees
after 90 days of service. The Company contributes 2% of each participant's
compensation to the plan. In addition, participants may elect to contribute
between 2% and 12% of their compensation, up to the maximum amount
allowable under IRS regulations, on a pre-tax basis. Employee savings are
matched by a Company contribution of up to an additional 3% of the
participant's compensation. The Company's contributions amounted to $1.5
million, $1.4 million and $1.2 million for the years ended December 31,
1994, 1993 and 1992, respectively.
The Company also has a defined benefit pension plan covering employees in
the United Kingdom. The U.K. pension plan covers substantially all U.K.
employees and contributions to the plan are funded annually.
The components of the net pension expense for the U.K. pension plan are
as follows:
Year ended December 31, 1994 1993 1992
(Thousands of dollars)
Service cost $3,031 $2,582 $3,472
Interest cost on projected
benefit obligations 4,837 4,546 5,317
Actual return on plan assets (2,485) (20,327) (2,504)
Net amortization and
deferral (4,417) 14,105 (4,331)
Net pension expense $966 $906 $1,954
The funded status of the plan is as follows:
December 31, 1994 1993
(Thousands of dollars)
Accumulated vested
benefit obligations $61,428 $54,609
Effect of future salary increases 4,497 6,832
Total projected benefit obligations 65,925 61,441
Plan assets at fair market value,
primarily stocks and bonds 85,739 79,566
Excess of plan assets over
projected benefit obligations 19,814 18,125
Unrecognized net transition asset (3,741) (3,978)
Unrecognized prior service cost 3,342
Unrecognized net gain (16,773) (11,815)
Prepaid pension cost recognized in
consolidated balance sheet $2,642 $2,332
The weighted-average discount rate used in determining actuarial values for
the U.K. pension plan was 8.0% in 1994 and 7.5% in 1993; the increase in
future compensation levels was 7.0% in 1994 and in 1993; and the expected
weighted-average long-term rate of return on plan assets was 9.0% in 1994
and 1993.
Note N--Related Party Transactions
Members of the Board of Directors, the Advisory Board and employees are
not charged the vendor's commission on property sold at auction for their
38
benefit. Due to consignors included $4.2 million at December 31, 1994
relating to the sale of art objects at auction by employees, officers,
directors and other related parties. In addition, the Company has a
term loan program whereby the Company lends money to certain officers
and staff to purchase a residence under term notes bearing interest at an
annual rate equal to 1 to 2 percentage points below the prime rate. This
program is available to employees at the Company's discretion. Outstanding
under this program were loans amounting to $5.2 million and $4.2 million at
December 31, 1994 and 1993, respectively. See Notes D, H, O and J for
additional related party disclosure.
Note O--Commitments and Contingencies
Legal Actions The Company, in the normal course of business, is a defendant
in various legal actions.
Lending and Other Contingencies In conjunction with the client loan
program, the Company enters into legally binding arrangements to lend, on
a collateralized basis, to potential consignors and other individuals who
have collections of fine art or other objects. Unfunded commitments to
extend additional credit were approximately $25.7 million and $16.0 million
at December 31, 1994 and February 28, 1995, respectively.
The Company has a mortgage guarantee program available to certain
employees whereby the employee borrows directly from a bank on a demand
basis and pays an annual interest rate equal to the prime rate. All of the
repayment obligations of the employee are guaranteed by the Company.
These obligations totaled $2.3 million at December 31, 1994. In the U.K.,
the Company has guaranteed a portion of a mortgage loan. The amount of the
guarantee was $0.3 million at December 31, 1994.
On certain occasions, the Company will guarantee to the consignor a minimum
price in connection with the sale of property. The Company must perform
under its guarantee only in the event that (a) the property fails to sell
at auction and (b) the consignor prefers to be paid the guarantee price
rather than retain ownership of the unsold property. In such event, the
Company purchases the property at the guaranteed price. At December 31,
1994, there were no outstanding guarantees. At March 28, 1995, outstanding
guarantees totaled approximately $37.9 million, covering property having
a mid-estimate sales price of $49.6 million. Under the guarantees, the
Company participates in a share of the profit if the property under
guarantee sells above a minimum price.
In the opinion of management, the commitments and contingencies described
above currently are not expected to have a material adverse effect on the
Company's financial statements.
Note P--Supplemental Cash Flow Information
In 1992, the Company purchased a business for $4.8 million. In conjunction
with the acquisition, liabilities were assumed as follows (in thousands):
Fair value of assets acquired $12,620
Cash paid 4,845
Liabilities assumed $7,775
Note Q--Quarterly Results (Unaudited)
First Second Third Fourth
(Thousands of dollars, except per share data)
1994
Auction
Auction sales $161,281 $530,799 $105,154 $532,767
Revenues 34,659 87,591 24,976 91,544
Operating income (loss) (9,354) 30,999 (20,059) 28,622
Income (loss) before taxes (8,322) 31,225 (19,193) 30,333
39
Financial Services
Revenues 1,676 2,358 2,550 2,662
Income before taxes 742 1,208 996 730
Real Estate
Revenues 2,617 3,459 2,903 2,570
Income before taxes 509 1,231 695 567
Corporate operating expenses (1,505) (1,727) (1,686) (1,874)
Other non-operating income (expense) 98 (163) 24 (123)
Consolidated
Operating income (loss) (9,608) 31,711 (20,054) 28,045
Income (loss) before taxes (8,478) 31,774 (19,164) 29,633
Net Income (Loss) $(5,087) $19,065 $(11,499) $17,780
Earnings (Loss) Per Share $(0.09) $0.34 $(0.21) $0.31
1993
Auction
Auction sales $129,585 $505,653 $84,667 $605,429
Revenues 31,882 82,637 20,768 99,685
Operating income (loss) (9,600) 27,035 (21,184) 35,215
Income (loss) before taxes (8,620) 27,636 (20,409) 35,626
Financial Services
Revenues 2,305 1,732 1,760 1,803
Income before taxes 920 525 726 632
Real Estate
Revenues 2,359 3,035 2,152 2,212
Income before taxes 486 880 433 272
Corporate operating expenses (1,639) (1,418) (2,049) (2,264)
Other non-operating income (expense) 345 (36) 108 3
Consolidated
Operating income (loss) (9,833) 27,022 (22,074) 33,855
Income (loss) before taxes (8,508) 27,587 (21,191) 34,269
Net Income (Loss) $(5,190) $16,637 $(12,714) $20,561
Earnings (Loss) Per Share $(0.09) $0.30 $(0.23) $0.36
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of
Sotheby's Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Sotheby's
Holdings, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
40
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Sotheby's Holdings, Inc.
and subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
New York, New York
February 28, 1995
REPORT OF MANAGEMENT
The Company's consolidated financial statements were prepared by
management, which is responsible for their integrity and objectivity. The
financial statements have been prepared in accordance with generally
accepted accounting principles and, as such, include amounts based on
management's best estimates and judgments.
Management is further responsible for maintaining a system of internal
control structure and related policies and procedures designed to
provide reasonable assurance that assets are adequately safeguarded
and that the accounting records reflect transactions executed in
accordance with management's authorization.
Kevin A. Bousquette
Senior Vice President and
Chief Financial Officer
Thomas F. Gannalo
Vice President, Controller and
Chief Accounting Officer
41
AUDIT AND COMPENSATION
COMMITTEE CHAIRMAN'S LETTER
The Audit and Compensation Committee (the "Committee") of the Board of
Directors consisted of three independent Directors. Information as to
these persons, as well as the scope of duties of the Committee, is provided
in the Proxy Statement. During 1994, the Committee met six times and
reviewed with Deloitte & Touche LLP, the Director of the Internal Audit
Department and management the various audit activities and plans, together
with the results of selected internal audits. The Committee also reviewed
the reporting of consolidated financial results and the adequacy of
internal controls. The committee recommended the appointment of Deloitte &
Touche LLP as independent public accountants and considered factors related
to their independence. Deloitte & Touche LLP and the Director of the
Internal Audit Department met privately with the Committee on occasion to
encourage confidential discussion as to any auditing matters.
Max M. Fisher
Chairman, Audit and
Compensation Committee
SOTHEBY'S HOLDINGS, INC.
BOARD OF DIRECTORS
A. Alfred Taubman,
Chairman
Max M. Fisher,
Vice Chairman
Lord Camoys,
Deputy Chairman
Diana D. Brooks,
President and Chief Executive Officer,
Michael L. Ainslie
Viscount Blakenham,
Executive Chairman, Pearson PLC
Ambassador Walter J. P. Curley,
Chairman, The French American Foundation
The Rt. Hon. The Earl of Gowrie,
Chairman,The Arts Council
The Marquess of Hartington
R. Julian de la M. Thompson,
Chairman, Sotheby's Asia
42
Leslie H. Wexner,
President and Chairman,
The Limited, Inc.
CORPORATE OFFICERS
Diana D. Brooks,
President and Chief Executive Officer
Kevin A. Bousquette,
Senior Vice President and
Chief Financial Officer
Susan Alexander,
Senior Vice President, Human Resources
Suzanne McMillan,
Senior Vice President, Marketing
Diana Phillips,
Senior Vice President, Public Relations
Marjorie E. Stone,
Senior Vice President, General Counsel
John S. Brittain, Jr.,
Vice President and Treasurer
Richard J. Cody,
Vice President and Director of Taxes
Thomas F. Gannalo,
Vice President, Controller and
Chief Accounting Officer
Joseph A. Williams,
Vice President, Information Systems
Jeffrey H. Miro,
Secretary
ADVISORY BOARD
Giovanni Agnelli
Her Royal Highness The Infanta
Pilar de Borbon, Duchess of Badajoz
Ann Getty
Emilio Gioia
Alexis Gregory
43
Anne Ford Johnson
Sir Quo-Wei Lee
Graham D. Llewellyn
John L. Marion
The Hon. Sir Angus Ogilvy, K.C.V.O.
Carroll Petrie
William Pitt
Mrs. Charles H. Price
Prof. Dr. Werner Schmalenbach
Baron Hans Heinrich Thyssen-Bornemisza de Kaszon
WORLDWIDE AUCTION LOCATIONS
Sotheby's North and South America
---------------------------------
United States
Atlanta
Baltimore
Boston
Beverly Hills
Chicago
Dallas
Fort Worth
Honolulu
Houston
Miami
Minneapolis
New Orleans
New York
North Carolina
Palm Beach
Philadelphia
St. Louis
San Francisco
Virginia
Washington, D.C.
Canada
Toronto
Vancouver
Victoria B.C.
Argentina
44
Buenos Aires
Brazil
Rio de Janiero
Sao Paulo
Mexico
Mexico City
Monterrey
Venezuela
Caracas
Sotheby's Europe
----------------
United Kingdom
and Ireland
Cheltenham
Chester
Derbyshire
Devon
Hampshire
Harrogate
Kent
Lincolnshire
London
Norfolk
Suffolk
Sussex
Wiltshire
Yorkshire
Scotland and Border Counties
Aberdeenshire
Edinburgh
Glasgow
Newcastle-upon-Tyne
Northern Ireland
Newtonards, Co. Down
Ireland
Dublin
Channel Islands
Guernsey, C.I.
Jersey
Austria
Graz
Klagenfurt
Vienna
45
Belgium
Brussels
Cyprus
Nicosia
Czech Republic
Prague
Denmark
Copenhagen
Finland
Helsinki
France
Bordeaux
Montpellier
Paris
Strasbourg
Germany
Berlin
Cologne
Frankfurt
Hamburg
Karlsruhe
Lower Saxony
Munich
Stuttgart
Greece
Holland
Amsterdam
Hungary
Budapest
Iceland
Reykjavik
India
New Delhi
Israel
Tel Aviv
Italy
Florence
Milan
Rome
Turin
46
Liechtenstein
Luxembourg
Monaco
Norway
Oslo
Portugal
Lisbon
Spain
Barcelona
Madrid
Sweden
Gothenburg
Stockholm
Switzerland
Basel
Geneva
Lugano
Zurich
Syria and Jordan
Sotheby's Asia
--------------
Australia
Melbourne
Sydney
Hong Kong
Taiwan
Taipei
China
Shanghai
Japan
Tokyo
Malaysia
Kuala Lumpur
South Korea
Seoul
Singapore
47
17 Salerooms
43 Countries
SOTHEBY'S WORLDWIDE OPERATIONS
NORTH AND SOUTH AMERICA
BOARD OF DIRECTORS
Diana D. Brooks,
President and Chief Executive Officer,
Sotheby's Holdings, Inc.
Richard E. Oldenburg,
Chairman, Sotheby's North and South America
William F. Ruprecht,
Managing Director, Sotheby's North and South America
John D. Block,
Executive Vice President, Head of Jewelry and Precious Objects
David J. Nash,
Executive Vice President, Worldwide Head of Impressionist and Modern Art
Warren P. Weitman, Jr.,
Executive Vice President, Worldwide Head of Business Development
Robert C. Woolley,
Executive Vice President, Decorative Arts
Susan Alexander,
Senior Vice President, Worldwide Head of Human Resources,
Sotheby's Holdings, Inc.
Kevin A. Bousquette,
Senior Vice President and Chief Financial Officer, Sotheby's Holdings, Inc.
Suzanne McMillan
Senior Vice President, Marketing, Sotheby's Holdings, Inc.
Thierry Millerand,
Senior Consultant, European Furniture
Diana Phillips,
Senior Vice President, Worldwide Head of Public Relations,
Sotheby's Holdings, Inc.
David N. Redden,
Senior Vice President, Worldwide Head of Books and Manuscripts and Collectibles
William W. Stahl, Jr.,
Senior Vice President, Head of Decorative Arts
Marjorie E. Stone,
Senior Vice President, General Counsel, Sotheby's Holdings, Inc.
48
Mitchell Zuckerman,
President, Sotheby's Financial Services
EUROPE
SOTHEBY'S BOARD OF DIRECTORS
Simon de Pury,
Chairman, Sotheby's Europe
Henry Wyndham,
Chairman, Sotheby's United Kingdom
George Bailey,
Managing Director, Sotheby's Europe
Diana D. Brooks,
President and Chief Executive Officer, Sotheby's Holdings, Inc.
Princess de Beauvau Craon,
Chairman, Sotheby's France
David W. Bennett, F.G.A.,
Senior Director, Head of Jewelry and Precious Objects
Paul M. Cervino,
Chief Financial and Administrative Officer, Sotheby's Europe
Melanie Clore,
Senior Director, Head of Impressionist and Modern Art
Dr. Christoph Graf Douglas,
Chairman, Sotheby's Germany
Paul J. Mack,
Senior Director, Head of Furniture and Books
James Stourton,
Senior Director, Head of European Business Development
Michel Strauss,
Senior Director, Impressionist and Modern Art
Simon Taylor,
Senior Director, Head of Paintings
R. Julian de la M. Thompson,
Chairman, Sotheby's Asia
SOTHEBY'S FINANCIAL SERVICES
Mitchell Zuckerman,
President
49
SOTHEBY'S INTERNATIONAL REALTY
Michael L. Ainslie,
Chairman
Stuart N. Siegel,
President
ASIA
BOARD OF DIRECTORS
R. Julian de la M. Thompson,
Chairman, Sotheby's Asia
Tetsuji Shibayama,
Managing Director, Sotheby's Japan
Diana D. Brooks,
President and Chief Executive Officer, Sotheby's Holdings, Inc.
Robert Bleakley,
Chairman, Sotheby's Australia
Lisa Hubbard,
Senior Vice President, Head of Jewelry and Precious Objects
Peter Huggler,
Chairman, Sotheby's Japan
Mee Seen Loong,
Director, Sotheby's Hong Kong
Colin Mackay,
Senior Director, Head of Chinese Works of Art, Sotheby's London
Suzanne Mitchell,
Senior Vice President, Japanese Business Development, Sotheby's North America
John Tancock,
Senior Vice President, Impressionist and Modern Art, Sotheby's
North America and Japan
Suzanne Tory,
Southeast Asian, Business Development, Sotheby's Singapore
Rita Wong,
Managing Director, Sotheby's Taiwan
Administrative Offices
c/o Sotheby's Service Corporation
301 Merritt 7
Norwalk, Connecticut 06851
Transfer Agents
Mellon Securities Trust Company
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
50
The Royal Bank of Scotland plc
Registrar's Department
P.O. Box 82
Caxton House, Redcliffe Way
Bristol BS99 7NH England
Common Stock Information
Sotheby's Holdings, Inc. Class A Common Stock is listed
on the New York Stock Exchange (symbol: BID) and the London Stock Exchange.
Annual Meeting
The Annual Meeting of Shareholders will be held at
Sotheby's, 34-35 New Bond Street, London, on Thursday,
June 15, 1995, at 10:00 AM.
Form 10-K and Shareholder Information
The 1994 annual report filed with the Securities and Exchange Commission and
other investor information may be obtained by writing to:
Investor Relations
Debbie Murray
Jeffrey Pierne
Sotheby's
1334 York Avenue
New York, New York 10021
(212) 606-7507
U.K. Corporate Secretary's Office
Sotheby's
34-35 New Bond Street
London W1A 2AA
071-408-5257
Certified Public Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
Common Stock Price
The quarterly price ranges and dividends per share of Class A Common Stock
in 1994 and 1993 were as follows:
1994 High Low Cash
Dividends
Per Share
First $ 19-1/2 $ 15-3/8 $ 0.06
Second 18-3/8 11-7/8 0.06
Third 13-1/4 12 0.06
51
Fourth 13 10-3/4 0.06
1993 High Low Cash
Dividends
Per Share
First $ 14-1/4 $12-1/4 $ 0.15
Second 14-7/8 11-3/8 0.15
Third 13-1/8 10-3/4 0.06
Fourth 17-1/4 11-3/4 0.06
The Company also has Class B Common Stock convertible on a share-for-share
basis into Class A Common Stock. There is no public market for the Class
B Common Stock. Cash dividends are payable equally on the Class A and B
Common Stock.
The number of holders of record of the Class A Common Stock as of March 9,
1995 was 1,418. The number of holders of record of the Class B Common Stock
as of March 9, 1995 was 40.
52