Christie's, Sotheby's Settle Antitrust Class Action, Report 2002 Sales

NEW YORK CITY - On March 11, Sotheby's announced that, together with Christie's, it had entered into an agreement, subject to court approval, to settle the Kruman case, an antitrust class action that sought damages through the United States Courts for auctions that took place between 1993 and 2000 outside the United States.

Under the terms of the agreement, Sotheby's and Christie's will each pay $20 million to the class of plaintiffs. Sotheby's in its 2002 full year and fourth quarter results stated that it had recorded this amount in special charges during the fourth quarter of 2002.

The settlement also provides that a threatened claim in the United Kingdom will not be pursued and that a purported class action commenced in Canada will be dismissed. The agreement also requires buyers and sellers who participate in the international antitrust settlement to agree not to pursue similar claims against Sotheby's and Christie's in jurisdictions outside the United States.

Christie's Sales for 2002

From London, Christie's International reported worldwide sales totaling $1.9 billion for 2002. This figure represents auction sales of $1.8 billion and private sales of $120 million. In Christie's salesrooms around the world, 158 works of art surpassed the $1 million mark, led by Pablo Picasso's "Nu au collier," which fetched $23,919,018 at Christie's evening sale of Impressionist and Modern Art in London on June 25.

"Despite the continued economic and political uncertainty around the world in 2002, we continued to see strong buying interest in all our salerooms from both existing and new clients, led by particularly strong results in Europe," said Edward Dolman, chief executive officer, Christie's International. "The concerted efforts of everyone at Christie's to ensure that we remained totally focused on consigning the highest quality property, attracting clients into our salerooms and reducing our operating costs has resulted in a significant improvement in our profitability. We are now well positioned to achieve further profitable growth in our business and to consolidate our position as the world's leading fine art auctioneer."

Among international sale centers, Europe led with $858 million, followed by the United States with $805 million and Asia and Australia with $106 million.

Top Ten international department totals were: Nineteenth and Twentieth Century art, $668 million; Impressionist and Modern art, $430 million; postwar and contemporary art, $199 million; European furniture, $199 million; jewelry, jadeite and watches, $152 million; Asian art, $135 million; Old Masters, $103 million; books and manuscripts, $100 million; British and Irish art, $75 million; American paintings, $65 million; silver and Russian, $57 million; and Twentieth Century decorative arts, $34 million.

Several of Christie's International departments showed significant growth in 2002. Led by the sale of the Fabergé Imperial Easter egg, sales in Christie's silver and Russian works of art department increased 64 percent over the 2001 total of $35 million.

Christie's prints department realized annual sales of $24 million, 45 percent over the 2001 total of $16 million.

Sales in books and manuscripts were up 36 percent over the department's 2001 total.

Christie's antiquities sales, paced by the record-breaking Jenkins Venus, realized $25 million, an increase of 32 percent over 2001 totals.

International sales of postwar and contemporary art also saw a significant jump of 18 percent over the 2001 total of $168 million.

Christie's private sales division recorded sales exceeding $120 million in 2002.

The top ten lots sold at Christie's worldwide between January and December 2002 were: Pablo Picasso, "Nu au collier," 1932, $23,919,018; Constantin Brancusi, "Dana-de," conceived circa 1913, $18,159,500; Alberto Giacometti, "La forêt," 1950, $13,209,500; Rene Magritte, "L'empire des lumieres," 1952, $12,659,500; a highly important Roman marble statue of Venus, of Medici type, $11,644,248; Maurice de Vlaminck, "La Seine à Chatou," 1906, $10,108,249; Jasper Johns, "0 Through 9," 1961, $9,909,500; a highly important Fabergé Imperial Easter egg with original surprise given by the Tsar Nicholas II to his mother, Dowager Empress Maria Feodorovna at Easter 1913, $9,579,500; Claude Monet, "Vétheuil," 1880, $7,594,908; and Edvard Munch, "Haus in Aasgaardstrand," 1905, $7,310,509.

Additional international highlights contributed to Christie's 2002 results. In Europe, works of art from Longleat realized $39 million at Christie's King Street in June. The funds raised will be used for the preservation of Longleat House and the core historic collection.

In the Americas, the fall 2002 sales of Impressionist and Modern, postwar and contemporary art in New York totaled $172 million and established world auction records for numerous artists, including Roy Lichtenstein, Barnett Newman, Alexej von Jawlensky and Alexander Archipenko.

The Forbes collection of American historical documents realized a grand total of $29 million at Christie's Rockefeller Center in two separate sales. The sales established world auction records for documents by 16 different presidents, including George Washington and Abraham Lincoln.

In December, Christie's sold a large double-pedestal lamp designed by Frank Lloyd Wright for the Susan Lawrence Dana House in Springfield, Ill., for $1,989,500, a world auction record for any work by the artist.

In Asia, the Chinese works of art sale in Hong Kong in October realized a total of $20 million.

Sotheby's Results for 2002

Sotheby's Holdings, Inc, New York City, the parent company of Sotheby's worldwide auction business, art-related financial services and real estate brokerage activities, also announced results for the full year and fourth quarter.

For the year ended December 31, 2002, the company reported total revenues of $345.1 million, compared to $336.2 million for the previous year. Net loss for the full year 2002 was $54.7 million, or $0.89 per diluted share, compared to a net loss of $41.7 million, or $0.69 per diluted share for 2001. This includes per-tax charges in 2002 of $65.6 million, or $0.83 per share, which are related to antitrust-related matters, $41 million, employee retention costs, $22.6 million, and the company's restructuring plans of $2 million.

The antitrust-related charges principally consist of the $20.1 million European Commission fine, which was determined by the European Commission in October, and the $20 million settlement related to the international antitrust litigation, which was agreed to, subject to court approval. Excluding all of the pretax items discussed above, the company would have recorded a net loss of $3.8 million, or $0.06 per share in 2002. During full year 2001, the company recorded pretax charges of $38.8 million or $0.41 per share, related to employee retention costs of $19.8 million, the company's restructuring plans, $16.5 million, and antitrust related matters, $2.5 million. Excluding these items, the company would have recorded a net loss of $16.9 million, or $0.28 per share.

For the quarter ended December 31, 2002, the company reported total revenues of $124.3 million, compared to $110.9 million in the corresponding period in 2001 for an increase of 12 percent. The company's net loss for the fourth quarter of 2002 was $6.5 million, or $0.11 per share, compared to a net loss for the fourth quarter of 2001 of $0.4 million, or $0.01 per share.

During the fourth quarter of 2002, the company recorded pretax charges of $29.6 million, or $0.34 per share, related to antitrust-related matters, $21.9 million, employee retention costs, $4.3 million, and the company's restructuring plans $3.5 million.

The antitrust-related charges principally consist of the $20 million settlement of the international antitrust litigation, which is subject to court approval.

During the fourth quarter of 2001, the company recorded pretax net restructuring charges of $8.8 million, or $0.09 per share, and pretax employee retention costs of $6.1 million, or $0.06 per share. Excluding these items, the company would have recorded adjusted net income of $14.2 million, or $0.23 per share, in the fourth quarter of 2002, as compared to adjusted net income of $9.1 million or $0.15 per share, in the same period in 2001. Adjusted operating income, excluding the above items, also rose in the fourth quarter of 2002, increasing 80 percent to $26.9 million, as compared to $15 million in 2001.

"We are very pleased with our fourth quarter results, which showed revenues up 12 percent representing a significant improvement over the prior year," said William F. Ruprecht, president and chief executive officer of Sotheby's Holdings, Inc. "Our financial position is stronger today than at any time over the past three years," Ruprecht continued. "We exceeded our goal of $60 million in annual savings versus our 2000 cost base [excluding charges related to antitrust-related matters, the company's restructuring plans and employee retention costs]. In fact, we achieved over $70 million in annual cost saving and we expect to achieve further savings in 2003 as management continues its focus on reducing the company's cost structure. In 2002 we made considerable progress towards a return to profitability as evidenced by our fourth quarter results."

Ruprecht added, "As a result of the sale-leaseback transaction involving our York Avenue headquarters, completed on February 7, 2003, Sotheby's long-term financial situation has greatly strengthened. The $167 million in net cash proceeds allow us to refinance $100 million in borrowings under our credit facility, fund the $20.1 million European Union antitrust fine and will also provide funding for the $20 million settlement of the international antitrust litigation."

Total auction sales (hammer price plus buyer's premium) increased ten percent to $1.8 billion for the year ended December 31, 2002. Auction sales in North America increased seven percent to $866.1 million. In Europe, auction sales increased 13 percent to $814.2 million.

"Despite an unstable economy and considerable worldwide uncertainty, buyers continue to demonstrate a strong demand for works of art of superb quality and rare provenance," said Ruprecht.

"Auction sales increased ten percent over 2001, and we achieved some record individual results, including Sir Peter Paul Rubens' masterpiece 'Massacre of the Innocents,' which at $76.7 million was a sterling world record price for any work at auction. We continue to see growth in the contemporary art market. Our November contemporary sales in New York brought $94.4 million -- the highest total in over ten years -- and our strong contemporary sales in London this February continued this trend.

"Also adding to our improved results" Ruprecht noted, "was our luxury real estate brokerage business, which benefited from a strong real estate market and saw sales volume increase 13 percent over 2001."