NEW YORK, N.Y.- Sotheby’s (NYSE: BID) announced the results for the second quarter and first half ended June 30, 2011. For the three and six months ended June 30, 2011, Sotheby’s net income increased by 48% and 54% to $127.2 million and $129.7 million, respectively, when compared to the prior year. This improvement is principally due to significantly higher auction and private sale commission revenues, partially offset by a decline in auction commission margin 2 to 16.4% in both periods, from 18.7% in the second quarter of 2010 and 18.3% in the first half of 2010. Competitive pressures to win high value consignments resulted in lower commission margins, as Sotheby’s consolidated sales reached a record $3.4 billion in the first half of 2011.

The net income improvement versus 2010 is also partially offset by a $39.4 million, or 28%, increase in operating expenses in the second quarter and a $54.1 million, or 23%, increase in the first half. This is largely due to higher salaries and related costs – a $22.2 million, or 30%, increase in the second quarter and a $27.5 million, or 23%, increase in the first half – primarily stemming from higher incentive compensation costs, attributable to the improvement in Sotheby’s financial performance, and to higher full-time salaries, due to strategic headcount and salary increases. Also, general and administrative expenses increased $7.9 million, or 24%, in the second quarter and $9.8 million, or 15%, in the first half, largely due to increased consulting fees to develop Sotheby’s strategic initiatives and unfavorable movements in foreign currency exchange rates.

“This is the best quarter in Sotheby’s history,” said Bill Ruprecht, President and Chief Executive Officer. “Great works of art are enormously desirable to collectors from every corner of the world right now. Our operating metrics, in terms of earnings and EBITDA margins 3, are at historic levels, and we continue to enjoy great opportunity in both traditional as well as newer market environments.

Mr. Ruprecht continued: “Record first half consolidated sales (up by 44%) reflected the surge of activity from buyers and sellers across China as well as significant increases in auction sales in each of our four principal selling centers. Private sales, up 114% in the half, were another important contributor to these outstanding results. As I look back on these extraordinary six months for our business, the global appeal of art was one of the few constants in a period of continued economic uncertainty.

“An exciting fall season is already taking shape and our clients around the world can expect a number of wonderful sales and objects at Sotheby’s this autumn,” concluded Mr. Ruprecht.

Second and Third Quarter Sales
Sotheby’s London sales included some tremendous successes. Exceptional sales of Contemporary Art surpassed the high estimate and brought $174 million and $206 million for the evening and series, respectively, with the superb Duerckheim Collection contributing almost $100 million to that result. The Impressionist and Modern Art sales series achieved a combined $181 million, comfortably within the presale estimate and included the highest price of the London Impressionist week when Egon Schiele’s 1914 Cityscape Hauser mit bunter Waesche (Vorstadt II)/ Houses with Laundry (Suburb II) sold for $40 million, almost double the previous record for the artist at auction.

Our Old Master and British Paintings Evening Sale in July achieved $76.5 million and included the second highest price for any work of art sold at auction thus far this year. Achieving that distinction was Guardi’s Venice, a View of the Rialto Bridge, Looking North, from the Fondamenta del Carbon, which sold for $42.9 million, becoming the second highest price ever achieved for an Old Master Painting at auction. Also in London, the Evill/Frost sale, which brought $69.4 million and was a record for a sale of 20th Century British Art, and the Hascoe sale, which set a record for Czech Modern Art when it brought $18 million, were among the wonderful accomplishments in our London season.

Upcoming Sales
The Chinese Works of Art auction in New York on September 14th will be led by A Rare and Impressive Archaic Ritual Bronze Food Vessel (Hu) Late Shang / Early Western Zhou Dynasty 11th/10th Century BC and is estimated to bring $2.5/3 million. The piece is notable both for its highly sophisticated casting and distinguished provenance. The total sale has a pre-sale estimate of $20/28 million.

On September 15th, the South Asian Art sales, including the Indian Miniature Paintings sale has an overall pre-sale estimate of $2.5/3.6 million and will feature significant paintings from the 1960s and 1970s by leading modern artists.

Sotheby’s Hong Kong will be holding its autumn sales series from October 1st to 6th. Highlighting the Magnificent Jewels and Jadeite sale is an Important and Impressive 9.27-Carat Fancy Vivid “Golconda” Pink Diamond and Diamond Ring (pre-sale estimate of $13/19 million). Also, the second part of the Meiyintang Collection, the monumental Chinese art collection from Europe will be offered this season – The Meiyintang Collection, Part II – An Important Selection of Imperial Chinese Porcelains. The sale will present iconic pieces of Imperial Chinese porcelain from the early 15th to the 18th centuries, including An Extremely Rare Blue and White Vase with Fruit Sprays, Meiping, Ming Dynasty, Yongle Period and A Fine and Rare Famille-Rose “Peach” Vase, Tianqiuping, Seal Mark and Period of Qianlong (each with a pre-sale estimate of $10/13 million).

From October 18th to 21st in New York, Sotheby’s will offer a second sale of property from the Collections of Lily and Edmond J. Safra. From magnificent European furniture and works of art, to Russian works of art, silver, bookbindings and 19th century interior paintings, this sale is estimated to achieve in excess of $40 million.

Highlighting our November 2nd Evening sale of Impressionist and Modern Art in New York is one of the most accomplished and celebrated landscapes created by Gustav Klimt, Litzlberg am Attersee. The painting, which is estimated in excess of $25 million, follows the sale of Kirche in Cassone which set an auction record for a landscape by the artist when it achieved $43.2 million in our February 2010 London sales.

In association with the auction house PIASA, Sotheby’s will offer works from the Fabius Frères Gallery collection on the 26th and 27th of October in Paris. The 400 sculptures, pieces of furniture, works of art, drawings and 19th century paintings, estimated to sell in the region of $14.5 million, will be on view at the Galerie Charpentier for five days prior to the sale.

Beyond Limits, the company’s annual selling exhibition of monumental sculpture, to be staged within the historic grounds of the ancestral home of the Duke and Duchess of Devonshire at Chatsworth will be open to the public from September 16th to October 30th. Now in its sixth year, Beyond Limits will showcase installations by artists such as Fernand Léger, René Magritte, Nadim Karam, Takashi Murakami and William Turnbull.