These decreases are primarily due to lower auction commission revenues resulting from a $247 million, or 13% decline in net auction sales, the shortfall which is attributable to a historically unprecedented level of single-owner unique one-off sales in 2011, a $250 million decrease in single-owner sales in the second quarter of 2012 alone.This is a quarter with unfavorable top line comparisons. We sold materially less in Q2 2012 than we did a year ago, and that’s the story. Income is down, largely because sales are down. The overall health of the business is very much intact and we’re optimistic about our opportunities. Asian business has slowed, as has the economy there, but it remains very profitable and a source of substantial opportunity with new wealthy collectors. Luxury good companies have largely posted first half increases in 2012 in Asia, which is reassuring. There are some notable bright spots in our numbers. Our lending business is very strong with revenues up more than 44% in the quarter, reflecting what may be a trend by the wealthy to turn to their art for liquidity, having exhausted other resources over perhaps the last four years of volatility. And private sales remain robust and have contributed both growth and more than $40 million in revenues in the first six months. Offsetting the overall decline in revenues is over $13.6 million, 8% improvement in the operating expenses in the quarter. While we’re still in the early stages of property gathering for the autumn fourth quarter sales, we are pretty confident in the current state of the art market and in the number of meaningful opportunities that we see for the autumn season. I’ll have a bit more to say on that later in the call. Bill Sheridan, take over. Bill Sheridan Thank you, Bill. If you refer to Appendix A or page six of the press release, I’ll be referring to the three and six-months number there. On an overall basis, net income for the quarter is $85.4 million, or $1.24 per diluted share and $74.8 million, or $1.09 per diluted share for the first six months. This compares to our 2011 second quarter net income of $127.2 million, or $1.81 per diluted share, and first half net income of $129.7 million, or $1.85 per diluted share from a year ago. Clearly, year ago was a tough comparable and great results for the company.
Turning to total revenues for three and six months ended June 30, total revenues declined $65.8 million, or 18% and $80.5 million, or 16% respectively, when compared to the same periods in the prior year. As Bill commented on, this deterioration stems principally from single-owner sales and Bill quoted those amounts. Our Hong Kong sales were down about $131 million versus the prior year, again, principally, from single-owner sales in Hong Kong.For the three and six months ended June 30, our auction commission margins, which are highlighted in our MD&A, declined from 16.4% to 15.3% and from 16.4% to 15.8% respectively. These declines were attributable to competitive pressures to win high-value consignments, which resulted in a lower level of shared auction commission, and also was a result of our sales mix. Offsetting the revenue shortfall in the first half is a 9% increase in private sales commission stemming from the 15% growth in aggregate private sales volume over the period, which grew to $514 million. Turning to the direct costs line, direct costs of services increased $1 million, or 4% in the second quarter and remains relatively unchanged for the first half of the year. Moving to salaries and related costs, for the second quarter and first half, salaries and related costs declined $11.6 million or 12% and $7.4 million, or 5% respectively, primarily due to a decline in incentive compensation and share-based payment costs due to the lower level of Sotheby’s earnings relative to the prior year periods and reflecting the company’s ongoing commitment to a variability in our compensation structure. Read the rest of this transcript for free on seekingalpha.com