Sotheby's reported financial results for the fourth quarter and twelve months ended December 31, 2014. Sotheby's reported 2014 Adjusted Operating Income of $267.9 million, representing a $44 million (20%) improvement over the prior year.
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This is reflecting the continued strength of the art market along with the benefit of management's cost reduction initiatives.
On an after-tax basis, Sotheby's 2014 Adjusted Net Income is $142.4 million, an $11.6 million (9%) increase, as the improvement in operating income is partially offset by an increase in Sotheby's effective income tax rate from 30% to 39% in 2014. Adjusted Diluted Earnings per Share in 2014 is $2.03.
Including charges associated with shareholder activism, restructuring and CEO transition, operating income, net income and diluted earnings per share for 2014 are $226.0 million, $117.8 million and $1.68, respectively.
Fourth quarter 2014 net income is $74.0 million, or $1.06 per diluted share. Excluding $7.5 million in pre-tax charges principally associated with the CEO transition, Adjusted Net Income is $78.4 million and Adjusted Diluted Earnings per Share is $1.12.
For the full year 2014, auction commission revenues improved $70.4 million (10%) due to an $812.5 million (19%) increase in Net Auction Sales, partially offset by a decline in Auction Commission Margin from 15.9% to 14.7% due to the competitive environment for winning high value consignments, as well as sales mix.
Also, private sales commissions decreased 32% in 2014 as prior year results included a significant number of individual high-value transactions. In order to enhance revenue, strengthen auction commission margins and fund innovation, Sotheby's enacted a new buyer's premium rate structure that became effective 1 February 2015.
Buyers at auction now generally pay 25% on the first $200,000 of hammer price; 20% on the portion of hammer price above $200,000 up to and including $3 million; and 12% on any remaining amount above $3 million. ■