Auction house Sotheby’s reported Tuesday record revenues of $345.8 million for the fourth quarter, a 31 percent increase over the prior fourth quarter, primarily due to higher auction commission revenues. The company’s net income for the period, ended Dec. 31, 2007, was a record $102.4 million, a 46 percent improvement year-over-year, largely due to growth in auction commission revenues.

The results include a $32.2 million, or 49 percent, increase in salaries and related costs, due to higher incentive compensation costs attributable to the strong results for the period as well as higher full time salaries. 2007 brought the best financial results for Sotheby’s in its 264-year history.

Total revenues for the quarter were $917.7 million a 38 percent increase year-over-year, due to a $210 million, or 38 percent improvement in auction commission revenues. This increase in total revenues is primarily attributable to a 51 percent increase in consolidated sales, which rose to $6.2 billion in 2007. Operating income of $275.8 million was $78.6 million, 40 percent, ahead of the prior year.

Net income for the full year of 2007 totaled $213.1 million, about double the 2006 figure of $107 million, the company said.

The strong results are partially offset by a 30 percent rise in salaries and related costs from higher incentive compensation costs due to the exceptional financial performance for the year as well as increased full time salaries and stock compensation expense over the period, the company said. Also, general and administrative expenses increased by 22 percent, partly due to a 33 percent increase in professional fees and a 28 percent increase in travel and entertainment costs during the period.

The company’s results for the full year 2007 were significantly impacted by a one-time benefit of $20 million related to an insurance recovery from the key man life insurance policy covering Robert Noortman, who died unexpectedly in January 2007, and a $4.8 million gain on the sale of our former Billingshurst salesroom property in the United Kingdom, partially offset by a $15 million impairment charge related to intangible assets and goodwill of Noortman Master Paintings, B.V.

Excluding these items, Sotheby’s said 2007 net income would have been a record $204.8 million, 91 percent higher than the prior year figure of $107 million, with adjusted EBITDA a record $313.8 million, a 44 percent increase.

“2007 was a record year for Sotheby’s, significantly exceeding the company’s outstanding performance in 2006,” said Bill Ruprecht, Sotheby’s president and chief executive officer of Sotheby’s. “A 91 percent increase in adjusted net income and a 44 percent increase in adjusted EBITDA are clear indications of our continued improvement in profitability.

“Contributing to these results were Sotheby’s sale of the top lot of the year and Sotheby’s sale of four out of the five top lots of the year, while we strategically reduced lot volume by 42 percent on the low end,” Ruprecht added. “In 2007, we sold 41 lots above $10 million compared to 20 works in 2006. Our commitment to quality versus quantity translated into tremendous success in 2007.”

He continued, “Over the past five years, the number of clients buying at the top end of our business has increased by more than 200 percent and their geographical diversity has expanded by over 60 percent. In 2003 our top buyers—purchasing lots of $500,000 and above—came from 36 countries; in 2007 they came from 58 countries. Our increased global focus on our top clients is delivering excellent results—for our business, for our clients, our employees and for our shareholders.”

JCK