NEW YORK, NY. - Sotheby’s today announced results for the second quarter and first six months ended June 30, 2009. For the quarter ended June 30, 2009, the Company reported operating revenues of $167.3 million, a $152.8 million, or 48%, decrease from the prior period. This decrease is primarily due to a 66% decline in net auction sales attributable to the downturn in the global economy and international art market. Partially offsetting this decline is a 620 basis point, or 41%, increase in auction commission margin, from 15.1% in the second quarter of 2008 to 21.3% in the current period, as a result of the Company’s revenue enhancement strategies and a change in sales mix. Also positively impacting revenues is a $10.8 million reduction in principal activities losses over the period due to the significant level of auction guarantee losses in the prior period. Sotheby’s has substantially reduced its use of auction guarantees for sales occurring in 2009 and expects to continue to significantly limit its use of auction guarantees for the foreseeable future.

Net income for the second quarter of 2009 is $12.2 million, or $0.18 per share, compared to $95.3 million, or $1.41 per share, for the prior period. This decrease is largely due to the aforementioned revenue decline and is partially offset by a $50.3 million, or 30%, reduction in operating expenses. Excluding restructuring charges in 2009 and a non recurring benefit recorded in 2008, the reduction in operating expenses is $73.5 million*, or 39%*, from the prior second quarter. This expense improvement is attributable to management’s cost reduction initiatives as well as a lower level of net auction sales during the period.

For the first six months of 2009, operating revenues totaled $221.7 million, a $227.7 million, or 51%, decline from the prior period, and net loss was ($22.3) million, or ($0.34) per share, compared to net income of $82.9 million, or $1.23 per share, for the prior period. This decline is primarily due to a 51% decline in first half operating revenues, attributable to a 67% decline in net sales over the period, and is partially offset by a 28% reduction in operating expenses in the first half of 2009 as compared to the same period in the prior year. Excluding restructuring charges in 2009 and a non-recurring benefit recorded in 2008, the reduction in operating expenses is $116.6 million*, or 35%, from the prior year.

“With auction commission margins up 41% and costs down 39%* (excluding restructuring charges in 2009 and a nonrecurring benefit recorded in 2008), Sotheby’s second quarter results demonstrate Management’s response to the global economic turbulence of 2008,” said Bill Ruprecht, President and Chief Executive of Sotheby’s. “The 620 basis point improvement in auction commission margin to 21.3% for the second quarter brought an incremental $39.3 million or 24% of total revenues for the period, a very significant increase. We adjusted quickly to the different and difficult environment that suddenly presented itself and we are very well positioned to capitalize on a market rebound and benefit from our improved margins and lower costs.”

Mr. Ruprecht added: “The steady improvement in sell through rates by lot since November has been another positive indicator. In Impressionist and Modern Art, those rates in our evening sales went from 64% (November) to 81% (May) to 85% (June) and from 68% (November) to 81% (May) to 93% (June) for Contemporary Art. These figures and the 46% increase in second quarter private sales to $134 million show active participation at new price levels and give confidence to consignors and to buyers alike that there is now a more stable marketplace.

“We are on track to achieve the $160 million in cost savings in 2009 as compared to 2008 as announced last quarter. These substantial savings, as well as a new three year $150 million revolving credit facility that we expect to close with GE Capital later this month (subject to the conditions in the GE Capital commitment letter), have us on solid ground for the future.”

Second and Third Quarter Sale
Sotheby’s summer fine arts sales in London in late June brought $132.0 million, near the high end of the pre-sale estimate of $144 million and with a high sell through rate of 86% for the series. The Impressionist and Modern Art sales brought $75.8 million and were highlighted by the sale of Pablo Picasso’s Homme à l’épée for $11.5 million, the highest price of the London summer sales season for any auction house. London’s Contemporary Art sales totaled $56.2 million and were highlighted by the sale of Andy Warhol’s 1963 painting Mrs. McCarthy and Mrs. Brown (Tunafish Disaster) for $6.1 million, above the pre-sale low estimate of $5.8 million.

Sotheby’s July London Old Masters and British sales led the market and brought $72.4 million, well within the pre-sale estimate of $59/$85 million and including the Collection of Barbara Piasecka Johnson which brought $16.9 million. The top lot of the sales was Pieter Brueghel’s The Massacre of the Innocents which sold for $7.4 million, above the pre-sale high estimate of $5.6 million. Auction records were set for nine artists during the week.

Upcoming Sale
Sotheby’s fall Hong Kong sales will be held from October 3rd to 8th and will offer over 2,000 lots with a combined pre-sale estimate of approximately $95 million. A number of private collections with exceptional provenance will be offered, including a single-owner collection consisting of Imperial works of art and objects from the Qianlong Reign. Highlights from this collection will include An Imperial Knife with a Rhinoceros Horn Scabbard, Mark and Period of Qianlong (est. in excess of $1 million) and A Han Dynasty Jade Bi in an Imperial Zitan Mount, Mark and Period of Qianlong (est. $0.8/$1 million).

Other highlights of the series include An Outstanding Imperial Carved Zitan ‘Ten Dragon’ Throne, Qianlong Period (est. $2.6/$3.8 million), A Superb and Rare Large Blue and White ‘Dragon’ Moonflask, Seal Mark and Period of Qianlong (est. $1.9/$2.6 million) and Sanyu’s Lotus et Poissons Rouges (Lotus and Red Fish) (est. $1.9/$3.2 million). Wine from two superb American single-owner collections will include over 6,000 bottles with a combined pre-sale estimate of $4/$6 million.