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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
Commission File Number 1-9750
Sotheby's Holdings, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2478409
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
500 North Woodward Avenue, Suite 100
Bloomfield Hills, Michigan 48304
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 646-2400
---------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of July 31, 1998, there were outstanding 39,879,712 shares of Class A Limited
Voting Common Stock, par value $0.10 per share, and 17,002,094 shares of Class B
Common Stock, par value $0.10 per share, of the Registrant. Each share of Class
B Common Stock is freely convertible into one share of Class A Limited Voting
Common Stock.
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<PAGE>
INDEX
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PAGE
----
PART I: FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements:
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1998 and 1997 4
Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II: OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 13
EXHIBIT INDEX 14
SIGNATURE 15
<PAGE>
<TABLE>
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
Sotheby's Holdings, Inc. and Subsidiaries
(Thousands of dollars, except per share data)
(Unaudited)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Auction and related revenue $129,916 $118,406 $185,182 $163,522
Other revenue 16,900 12,596 29,956 21,562
-------- -------- -------- --------
Total revenues 146,816 131,002 215,138 185,084
-------- -------- -------- --------
Expenses:
Direct costs of services 23,494 21,956 41,371 31,944
Salaries and related costs 40,074 34,003 73,193 62,950
General and administrative 25,054 21,124 46,917 42,563
Depreciation and amortization 3,185 2,622 6,418 5,184
Non-recurring charges 0 3,000 0 5,500
-------- -------- -------- --------
Total expenses 91,807 82,705 167,899 148,141
-------- -------- -------- --------
Operating income 55,009 48,297 47,239 36,943
Interest income 672 616 1,320 1,408
Interest expense 2,312 1,185 5,085 1,799
Other expense (98) (226) (174) (170)
-------- -------- -------- --------
Income before taxes 53,271 47,502 43,300 36,382
Income taxes 19,709 18,162 16,021 13,825
-------- -------- -------- --------
Net Income $33,562 $29,340 $27,279 $22,557
======== ======== ======== ========
Basic Income Per Share $0.59 $0.53 $0.48 $0.40
======== ======== ======== ========
Diluted Income Per Share $0.59 $0.52 $0.48 $0.40
======== ======== ======== ========
Basic Weighted Average Shares Outstanding (in millions) 56.8 55.8 56.4 55.9
======== ======== ======== ========
Diluted Weighted Average Shares Outstanding (in millions) 57.3 56.4 57.1 56.2
======== ======== ======== ========
Dividends Per Share $0.10 $0.10 $0.20 $0.20
======== ======== ======== ========
See accompanying Notes to the Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
Sotheby's Holdings, Inc. and Subsidiaries
(Thousands of dollars)
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
----------- -----------
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $1,411 $33,642
Accounts and notes receivable, net of allowance
for doubtful accounts of $10,504 and $10,419
Accounts receivable 301,272 315,274
Notes receivable 116,975 160,807
Other 30,092 35,448
-------- --------
Total Accounts and Notes Receivable, Net 448,339 511,529
-------- --------
Inventory, net 17,648 23,574
Deferred income taxes 6,868 6,401
Prepaid expenses and other current assets 20,171 18,511
-------- --------
Total Current Assets 494,437 593,657
-------- --------
Notes receivable 251,947 111,974
Properties, less allowance for depreciation
and amortization of $75,780 and $70,342 85,162 78,542
Intangible assets, less allowance for
amortization of $17,508 and $16,671 32,668 32,618
Investments 37,013 37,466
Other assets 5,686 5,984
-------- --------
Total Assets $906,913 $860,241
======== ========
Liabilities And Shareholders' Equity:
Current Liabilities:
Due to consignors $296,364 $352,437
Short-term borrowings 10,594 2,168
Accounts payable and accrued liabilities 84,560 87,252
Deferred revenue 11,645 6,510
Accrued income taxes 30,610 23,568
-------- --------
Total Current Liabilities 433,773 471,935
-------- --------
Long-Term Liabilities:
Commercial paper 155,000 117,000
Deferred income taxes 11,715 11,908
Other liabilities 16,124 1,130
-------- --------
Total Liabilities 616,612 601,973
-------- --------
Shareholders' Equity:
Common Stock, $0.10 par value: 5,685 5,582
Authorized shares - 125,000,000 of Class A and 75,000,000 of Class B
Issued and outstanding shares - 39,852,332 and 38,762,656 of Class A,
and 17,002,094 and 17,058,400 of Class B, at June 30, 1998 and
December 31, 1997, respectively
Additional paid-in capital 86,626 71,132
Retained earnings 213,018 197,027
Accumulated other comprehensive income (15,028) (15,473)
-------- --------
Total Shareholders' Equity 290,301 258,268
-------- --------
Total Liabilities And Shareholders' Equity $906,913 $860,241
======== ========
See accompanying Notes to the Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Sotheby's Holdings, Inc. and Subsidiaries
(Thousands of dollars)
(UNAUDITED)
<CAPTION>
Six Months Ended June 30,
- -------------------------
1998 1997
--------- --------
<S> <C> <C>
Operating Activities:
Net Income $27,279 $22,557
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 6,532 5,184
Deferred income taxes (467) (182)
Tax benefit of stock option exercises 2,154 858
Asset provisions 2,208 2,571
Other 297 459
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 18,136 (57,727)
Decrease (increase) in inventory 4,917 (3,971)
Increase in prepaid expenses and other current assets (1,832) (1,462)
(Increase) decrease in other assets (1,015) 336
(Decrease) increase in due to consignors (56,605) 1,137
Increase in accrued income taxes 6,959 5,513
Increase (decrease) in other liabilities 19,573 (8,399)
--------- --------
Net cash provided (used) by operating activities 28,136 (33,126)
--------- --------
Investing Activities:
Increase in notes receivable (144,834) (109,519)
Collections of notes receivable 48,844 47,808
Capital expenditures (12,764) (4,829)
Decrease in investments 452 125
Acquisitions - (1,854)
--------- --------
Net cash used by investing activities (108,302) (68,269)
--------- --------
Financing Activities:
Increase in commercial paper 38,000 45,000
Increase in short term borrowings 8,695 16,004
Proceeds from exercise of stock options 13,444 2,320
Repurchase of common stock - (7,794)
Dividends (11,288) (11,180)
--------- --------
Net cash provided by financing activities 48,851 44,350
--------- --------
Effect of exchange rate changes on cash (916) 4,109
--------- --------
Decrease in cash and cash equivalents (32,231) (52,936)
Cash and cash equivalents at beginning of period 33,642 66,886
--------- --------
Cash and cash equivalents at end of period $1,411 $13,950
========= ========
Income taxes paid $5,561 $1,301
Interest paid $5,696 $1,716
See accompanying Notes to the Consolidated Financial Statements
</TABLE>
<PAGE>
SOTHEBY'S HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by Sotheby's Holdings, Inc. (together with its subsidiaries,
the "Company") pursuant to the rules and regulations of the Securities
and Exchange Commission. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and
the notes thereto incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Annual
Report").
In the opinion of the management of the Company, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of the results of operations for the three and six months
ended June 30, 1998 and 1997 have been included. Certain prior period
amounts have been restated to conform to the current year's
presentation. Principal activities and revenues from Emmerich Galleries
have been reclassified to auction and related revenue from other
revenue.
2. NOTES RECEIVABLE
The Company provides collectors, museums and dealers with financing
secured by works of art that the Company typically controls. As of June
30, 1998, an amount equal to approximately 65% of the Company's notes
receivable (current and non-current) was outstanding from a group of
affiliated borrowers. The loans to this group mature on December 31,
2001 and are secured by a collection of paintings which the Company
believes to be of exceptional quality. The Company also has recourse to
a guarantor with respect to a portion of the loans. No other individual
loans amounted to more than 5% of total assets at June 30, 1998. On
occasion, the Company will also make loans where the Company
participates in a share of the sales proceeds if the property sells for
more than an agreed target amount and the Company shares in a portion
of the loss if the property does not sell at or above the target
amount.
Following are the changes in the allowance for credit losses relating
to both current and non-current notes receivable for the six months
ended June 30, 1998 and 1997 (in thousands):
1998 1997
------ -------
Allowance for credit losses
at December 31, 1997 and 1996 $3,620 $2,501
Provisions 238 1,126
Write-offs 0 (3)
Other (222) 108
------ ------
Allowance for credit losses
at June 30, 1998 and 1997 $3,636 $3,732
====== ======
3. CREDIT ARRANGEMENTS
At June 30, 1998, pursuant to the Company's $300 million U.S.
commercial paper program, there were $155 million of outstanding
commercial paper notes at weighted average discount rates of 5.66% with
average maturities of 25 days. These notes have been classified on the
consolidated balance sheet as long-term liabilities based on the
Company's ability to maintain or refinance these obligations on a
long-term basis. The U.S. commercial paper program was increased to
$300 million from $200 million in July 1998. At June 30, 1998, the
Company also had $10.6 million outstanding under domestic and foreign
bank lines of credit at weighted average interest rates of 3.37%.
In May 1998, the Company filed a registration statement with the
Securities and Exchange Commission relating to a shelf registration of
$200 million of senior unsecured debt securities that may be offered
and sold from time to time.
4. COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" which
requires certain transactions to be included as adjustments to net
income in order to report comprehensive income. These transactions
referred to as other comprehensive income represent items that, under
previous accounting standards, bypassed the statement of income and
were reported directly as adjustments to the equity section of the
balance sheet. The Company's other comprehensive income consisted of
the change in the foreign currency translation adjustment amount during
the period. The foreign currency translation adjustment amount
previously reported as a separate component of shareholders' equity is
now included in accumulated other comprehensive income in the
Consolidated Balance Sheets. Comprehensive income for the three months
ended June 30, 1998 and 1997 amounted to $35.1 million and $30.0
million, respectively and for the six months ended June 30, 1998 and
1997 amounted to $27.7 million and $19.0 million, respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company, in the normal course of business, is a defendant in
various legal actions.
In conjunction with the client loan program, the Company enters into
legally binding arrangements to lend, generally on a collateralized
basis, to potential consignors and other individuals who have
collections of fine art and other objects. Unfunded commitments to
extend additional credit were approximately $26.9 million at June 30,
1998.
On certain occasions, the Company will guarantee to the consignor a
minimum price in connection with the sale of property at auction. The
Company must perform under its guarantee only in the event that the
property sells for less than the minimum price or the property does not
sell and therefore, the Company must pay the difference between the
sale price at auction and the amount of the guarantee. At August 1,
1998, the Company had outstanding guarantees totaling approximately
$1.3 million which covers auction property having a mid-estimate sales
price of approximately $1.8 million. Under certain guarantees, the
Company participates in a share of the proceeds if the property under
guarantee sells above a minimum price. In addition, the Company is
obligated under the terms of certain guarantees to fund a portion of
the guarantee prior to the auction. At June 30, 1998, no such amounts
had been funded.
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 consolidated financial statements.
6. SEASONALITY OF BUSINESS
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.
Percentage of Annual
Auction Sales
--------------------
1997 1996 1995
---- ---- ----
January - March 11% 10% 11%
April - June 35% 39% 39%
July - September 8% 9% 7%
October - December 46% 42% 43%
---- ---- ----
100% 100% 100%
==== ==== ====
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
The worldwide auction business is highly seasonal in nature, with two
principal selling seasons, spring and fall. Accordingly, first and
third quarter results reflect lower auction sales and lower operating
margins than the second and fourth quarters due to the fixed nature of
many of the operating expenses. (See Note 6 in the Notes to the
Consolidated Financial Statements for additional information.)
Following is a geographical breakdown of the Company's auction sales
for the three and six month periods ended June 30, 1998 and 1997 (in
thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
--------------------- --------------------
North America $393,820 $294,182 $567,493 $431,352
Europe 292,506 308,350 370,638 373,292
Asia 29,444 48,075 29,444 53,225
-------- -------- --------- --------
Total $715,770 $650,607 $967,575 $857,869
======== ======== ======== ========
For the quarter ended June 30, 1998, worldwide auction sales of $715.7
million increased $65.2 million, or 10%, compared to the second quarter
of 1997. For the six months ended June 30, 1998, worldwide auction
sales increased $109.7 million, or 13% compared to the same period in
1997. Auction sales recorded by the Company's foreign operations were
not materially affected by translation into U.S. dollars for the three
and six month periods ended June 30, 1998. The increase in second
quarter sales was due to a 34% increase in North America partially
offset by a 5% decrease in Europe and a 39% decrease in Asia. The
increase in North America was primarily due to American paintings,
Contemporary art, 19th Century paintings and single owner sales, most
notably the sale of silver, furniture, rare books and manuscripts from
the collection of Jamie Ortiz-Patino. Sales in Europe decreased $15.8
million in the second quarter of 1998 when compared to the same period
in 1997 primarily due to 1997 single owner sales, most notably the sale
of Illuminated Manuscripts from the Beck Collection for which there
were no comparable sales in the current year, and timing of the
Contemporary art sales. The series of Contemporary art sales,
traditionally held in June and therefore included in second quarter
results, were held in July 1998. The decrease in Europe was partially
offset by an increase in Impressionist and Modern art. The
Impressionist and Modern art increase was highlighted by the sale of
Claude Monet's WATERLILY POND AND PATH BY THE WATER, which sold for a
record of $33 million, making it the most expensive Impressionist
painting sold at any European auction since 1990. The sales decrease in
Asia was primarily due to the slow down of the economies within Asia.
Historically, Asia has accounted for approximately five percent of
annual sales.
Sales for the first six months of the year increased due to the items
previously mentioned as well as North America's Old Master paintings
and drawings sales, North America's sale of the Collection of H.R.H.
the Duke and Duchess of Windsor and Europe's results from the sale of
the Roger Collection and Russian sale held in London.
For the three months ended June 30, 1998, worldwide auction and related
revenues increased $11.5 million, or 10%, compared to the same period
in 1997. Foreign currency exchange rate movements did not materially
affect revenues for the second quarter of 1998. This increase was
primarily a result of higher commission revenue due to the increased
sales discussed above as well as an increase in principal activities
offset by a decrease in private sales. Auction and related revenue as a
percentage of sales for the three months ended June 30, 1998 was
consistent with the three months ended June 30, 1997.
For the six months ended June 30, 1998, auction and related revenues
increased $21.7 million, or 13%, compared to the six months ended June
30, 1997. Foreign currency exchange rate movements did not materially
affect revenues for the first six months of 1998. This increase was
primarily the result of higher commission revenue due to the increased
sales discussed above and expense recoveries associated with the sale
of the Collection of H.R.H. the Duke and Duchess of Windsor in the
first quarter. The increase was also due to an increase in principal
activities offset by a decrease in private sales. Auction and related
revenue as a percentage of sales for the six months ended June 30, 1998
was consistent with the same period in 1997.
Other revenue, which primarily includes revenues from art-related
financing activities and real estate operations, increased $4.3
million, or 34% in the second quarter of 1998 when compared to the same
quarter of 1997. For the six months ended June 30, 1998, other revenue
increased $8.4 million, or 39%, compared to the same period in 1997.
These increases were due to stronger real estate sales in the U.S. and
an increase in the average loan portfolio balance.
Total expenses increased $9.1 million, or 11%, in the second quarter of
1998 compared to the same quarter in 1997. For the six months ended
June 30, 1998, total expenses increased $19.7 million, or 13%, compared
to the same period in 1997. Movements in foreign currency exchange
rates did not have a material impact on expenses for the three and six
months ended June 30, 1998.
Direct costs of services (which consist largely of catalogue production
and distribution costs as well as corporate marketing and sale
marketing expenses) increased $1.5 million, or 7%, during the second
quarter of 1998 compared to the same period of 1997. This increase is
primarily due to the higher auction sales.
Direct costs of services increased $9.4 million, or 30%, during the six
months ended June 30, 1998 compared to the same period of 1997. This
increase was primarily due to the increase in auction sales, a change
in the sales mix in Europe, increased corporate marketing costs and the
impact of costs associated with the sale of the Collection of H.R.H.
the Duke and Duchess of Windsor which were partially recovered and
reflected in auction and related revenue.
Excluding non-recurring charges, all other operating expenses (which
include salaries and related costs, general and administrative expenses
as well as depreciation and amortization) totaled $68.3 million for the
second quarter of 1998, an increase of 18% compared to the second
quarter of 1997. For the six months ended June 30, 1998, these expenses
increased $15.8 million, or 14%, compared to 1997. These increases were
principally due to an increase in salaries and related costs resulting
from new initiatives and expertise, long-term incentive plans and costs
incurred relating to the startup of the Paris office.
During the second quarter and first six months of 1997, the Company
recorded non-recurring charges of $3.0 million and $5.5 million
respectively, which consist largely of legal and other professional
fees associated with the Independent Review Committee.
Net interest expense increased $1.1 million and $3.4 million for the
three and six months ended June 30, 1998, respectively, due to
additional commercial paper borrowings to fund the increased loan
portfolio.
The consolidated effective tax rate was 37% for the three and six
months ended June 30, 1998 compared to 38% for the comparable periods
in the prior year.
For the second quarter of 1998, the Company's net income improved 15%
to $33.6 million from net income of $29.3 million in the second quarter
of 1997. Diluted earnings per share for the second quarter of 1998
improved 13% to $0.59 from $0.52 for the second quarter of 1997. The
impact on diluted earnings per share for the three months ended June
30, 1998 related to the economies in Asia and the startup of the Paris
office was approximately ($0.04) and ($0.01) per share, respectively.
For the six months ended June 30, 1998, net income increased $4.7
million, or 21%, to $27.3 million from $22.6 million for the same
period in 1997. Diluted earnings per share for the first six months of
1998 improved 20% to $0.48 from $0.40 for the first six months of 1997.
The impact on diluted earnings per share for the six months ended June
30, 1998 related to the economies in Asia and the startup of the Paris
office was approximately ($0.04) and ($0.02) per share, respectively.
<PAGE>
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 $164.2 million at June 30, 1998 compared to a net debt position
of $85.5 million at December 31, 1997, reflecting higher borrowings to
fund the increased client loan portfolio. Working capital (current
assets less current liabilities) at June 30, 1998 was $60.7 million
compared to $121.7 million at December 31, 1997.
The Company's client loan portfolio increased to $372.5 million at June
30, 1998 from $276.4 million at December 31, 1997. These amounts
include $251.9 million and $112.0 million of loans which have a
maturity of more than one year at June 30, 1998 and December 31, 1997,
respectively.
The Company relies on internally generated funds and borrowings to meet
its financing requirements. The Company may issue up to $300 million of
short-term notes pursuant to its U.S. commercial paper program. The
U.S. commercial paper program was increased to $300 million from $200
million in July 1998. The Company supports any short-term notes issued
under its U.S. commercial paper program with a committed credit
facility. The Company maintains $300 million of committed and available
financing to July 11, 2001 pursuant to a Bank Credit Agreement.
Additionally, the Company has a $200 million shelf registration with
the Securities and Exchange Commission for issuing senior unsecured
debt securities, which may be offered and sold from time to time.
For the six months ended June 30, 1998, the Company's primary sources
of liquidity were derived from commercial paper and short-term
borrowings supplemented by available cash balances and operations. The
most significant cash uses during the first six months of 1998 were the
net funding of the client loan portfolio, capital expenditures and
payment of shareholder dividends.
Capital expenditures, consisting primarily of office and auction
facility refurbishment, acquisition of computer equipment and software,
and costs associated with the construction of the York Property, as
defined below, totaled $12.8 million and $4.8 million for the first six
months of 1998 and 1997, respectively.
From time to time, the Company has off-balance sheet 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 5 in the Notes to the Consolidated Financial
Statements for additional information.) The Company does not believe
that material liquidity risk exists relating to these commitments.
The Company evaluated the adequacy of its principal auction premises
for the requirements of the present and future conduct of its business.
An application to re-zone the site of the Company's New York auction
facility and global headquarters was filed with New York City in
October 1997. The filing outlined the Company's intent to construct a
six story addition and to renovate its current facility on York Avenue
("the York Property"). New York City Planning approved the re-zoning
application for the expansion project on Ausust 5, 1998. The New York
City Council review will occur in late August or early September.
This planned construction will expand auction, warehouse and office
space in New York City and will enable the Company to consolidate its
auction operations in New York into one facility. The capital
expenditures relating to the new building construction is currently
estimated to be in the range of $100-120 million. Updated cost
estimates are being performed based upon the most recent architectural
and engineering studies and should be finalized in September. As of
August 5, 1998, the Company has financial commitments in relation to
this project of approximately $12 million. The Company believes that it
has sufficient capital resources to carry out planned capital spending
relating to this proposed project.
The Company believes that operating cash flows will be adequate to meet
normal working capital requirements and that the commercial paper
program, credit facilities and the shelf registration will continue to
be adequate to fund the client loan program, peak working capital
requirements, short-term commitments to consignors and the proposed
project on the York Property.
FORWARD-LOOKING STATEMENTS
- --------------------------
This form 10-Q contains certain forward-looking statements, as such
term is defined in Section 21E of the Securities Exchange Act of 1934,
as amended, relating to future events and the financial performance of
the Company, particularly with respect to the adequacy of working
capital as well as additional capital necessary for the planned
expansion of the Company's New York auction facility. Such statements
are only predictions and involve risks and uncertainties, resulting in
the possibility that the actual events or performance will differ
materially from such predictions. Major factors which the Company
believes could cause the actual results to differ materially from the
predicted results in the forward-looking statements include, but are
not limited to, the following, which are not listed in any particular
order:
(1) The Company's business is seasonal, with peak revenues and
operating income occurring in the second and fourth quarters of each
year as a result of the traditional spring and fall art auction season.
(2) The overall strength of the international economy and financial
markets and, in particular, the economies of the United States, the
United Kingdom, and the major countries of Continental Europe and Asia
(principally Japan and Hong Kong).
(3) Competition with other auctioneers and art dealers.
(4) The volume of consigned property and the marketability at auction
of such property.
(5) The planned expansion of the New York auction facility and global
headquarters.
See Note 5 in the Notes to the Consolidated Financial Statements for
additional information.
<PAGE>
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
(i) On May 20, 1998, the Company reported on Form 8-K that
the Company funded additional secured loans which increased,
at that time, the outstanding balance of the Company's notes
receivable (current and non-current) to $384 million.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
---------- ------------
27. Financial Data Schedule
<PAGE>
SOTHEBY'S HOLDINGS, INC.
AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed this the 13th day of
August, 1998, on its behalf by the undersigned, thereunto duly
authorized and in the capacity indicated.
SOTHEBY'S HOLDINGS, INC.
By: /s/ JOSEPH A. DOMONKOS
----------------------------
Joseph A. Domonkos
Vice President, Controller
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,411
<SECURITIES> 0
<RECEIVABLES> 448,339
<ALLOWANCES> 10,504
<INVENTORY> 17,648
<CURRENT-ASSETS> 494,437
<PP&E> 85,162
<DEPRECIATION> 75,780
<TOTAL-ASSETS> 906,913
<CURRENT-LIABILITIES> 433,773
<BONDS> 0
0
0
<COMMON> 5,685
<OTHER-SE> 284,616
<TOTAL-LIABILITY-AND-EQUITY> 906,913
<SALES> 0
<TOTAL-REVENUES> 215,138
<CGS> 0
<TOTAL-COSTS> 41,371
<OTHER-EXPENSES> 126,528
<LOSS-PROVISION> 1,279
<INTEREST-EXPENSE> 5,085
<INCOME-PRETAX> 43,300
<INCOME-TAX> 16,021
<INCOME-CONTINUING> 27,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,279
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
