NEW YORK.- Sotheby's (NYSE: BID) today announced results for the second quarter and first six months ended June 30, 2006. For the quarter ended June 30, 2006, the Company reported record revenues of $248.3 million, a $69.9 million, or 39%, increase from the prior period, primarily due to higher auction commission revenues attributable to a 52% increase in Aggregate Auction Sales as well as a 77% increase in private sale commissions. Also contributing to the improvement versus the prior year is an $8.4 million, or seven-fold, increase in principal activities revenues due to successful results from auction guarantees in the quarter. Income from continuing operations for the second quarter of 2006 was an historic high of $72.4 million, or $1.17 per diluted share, compared to $42.5 million, or $0.67 per diluted share for the prior period, a $29.9 million, or 70% improvement. Adjusted EBITDA* for the second quarter of 2006 was $123.4 million, a $48.1 million, or 64%, increase from the prior year period. This growth, which is largely due to the increase in revenues highlighted above, is partially offset by certain expense increases primarily related to the overall increase in sales and profitability, a $4.2 million, or 22%, increase in direct costs and a $9.9 million increase in incentive bonus costs attributable to the strong results of the quarter.

For the first six months of 2006, revenues reached a record high of $344.3 million, a $91.8 million, or 36%, improvement. This rise is due to the increase in auction commission and principal activities revenues discussed above. Income from continuing operations for the first half 2006 was $68.4 million, a $35.7 million, or 109%, increase from the first half of 2005. Adjusted EBITDA* for the first half 2006 was $130.9 million, a $57.9 million, or 79%, improvement from the first half 2005. Diluted earnings per share from continuing operations was $1.14 for the first half of 2006, more than double the prior period figure of $0.51.

"These results represent Sotheby's best second quarter in our history," said Bill Ruprecht, President and Chief Executive Officer of Sotheby's. "Once again, Sotheby's auctioned the top lot of the season and we sold 287 lots for over $1 million. We have more than doubled our first half 2006 net income and earnings per share from the prior year, which is an impressive achievement, especially considering the strength of last year's results as well as the competitive landscape."

"The discipline of being a public company has focused Sotheby's on running our business in the best interests of our shareholders, our clients and our employees," continued Mr. Ruprecht. "To that end, we made a conscious decision to enhance profitability by concentrating on key high end and middle market opportunities and eliminating the costly high volume, lower end marginal sales. Consequently, we have intentionally halved our lot volume over the last six years. Our excellent financial performance clearly validates this strategy."

Second and Third Quarter Sales

The most notable contributors to our performance were the Impressionist and Modern Art, Contemporary Art, Russian Art and Asian Art fields. Certainly the highlight of the second quarter was the sale of Picasso's Dora Maar au Chat, which brought $95.2 million, becoming the second highest price for a painting ever sold at auction. This masterpiece was sold in the Impressionist series of sales which brought $248.3 million, representing Sotheby's highest total since 1990 and leading this market in New York.

Sotheby's June sales in London also achieved excellent results. The Impressionist and Modern Art Sales led the market with a total of $201.8 million, at the high end of the pre-sale estimate of $149.7 to $211.3 million** and almost double last June's excellent sales total of $108.6 million. The sales brought the highest total ever for a series of auctions held in Europe, with 30 lots selling for over $1 million. The highlight of the sale was Modigliani's Portrait of Jeanne Hebuterne which sold for $30 million. The London Contemporary sales also led the market and were Sotheby's best London sales ever in this field. The sales brought $77.6 million, a 60% increase from the prior year and at the high end of the pre-sale estimate of $56.3 to $77.7 million**. Twelve new Contemporary records were set with 14 lots selling for over $1 million.

Russian Paintings and Works of Art continued to show great momentum in both New York and London in the second quarter. New York's April sale totaled $54.4 million, surpassing its pre-sale high estimate of $46.3 million** and bringing the highest total ever for a sale of Russian Art worldwide. Sotheby's broke its own record one month later in London when our May sale brought $55.4 million, soundly above its pre-sale high estimate of $42.9 million**. Twenty seven auction records were achieved in the London sale with 12 lots selling for over $1 million.

Sotheby's Spring sale of American Paintings in New York led the market and brought an exceptional $60.0 million, towards the high end of its pre-sale estimate of $41.3 to $62.3 million** and a $19.6 million, or 49%, improvement from the prior year. A number of records were set with the highlight being Norman Rockwell's poignant Homecoming Maine which depicts a young soldier's return from overseas at the end of World War II (sold for $9.2 million).

In London last month, Sotheby's Old Masters Paintings sales achieved $58.7 million with twenty three new auction records set and 65% of the lots sold in the evening sale exceeding their high estimates. Highlights of the sales included Pieter Brueghel the Younger's The Procession to Cavalry, which was the top lot of the sales at $9.5 million, and works by Jan van Huysum, Jean-Honoré Fragonard, Canaletto and Francesco Guardi.

Also sold at Sotheby's London in July was the most important book in English Literature, the First Folio edition of Shakespeare's plays for $5.2 million. The book is now the most valuable book ever sold at auction at Sotheby's London.

An important piece of American history was sold at Sotheby's New York to remarkable results. On Flag Day, June 14th, four battle flags that were captured during the American Revolution and returned to America after 225 years were sold. Taken as trophies of battle by one of Britain's most notorious commanders, Lieutenant Colonel Banastre Tarleton, during conflicts in Bedford, New York in 1779 and at Waxsaws on the North Carolina/South Carolina border in 1780, the flags sold for an astounding $17.4 million. They were estimated to sell for $4 to $10** million.

One of the most important sales ever took place at Sotheby's in New York in late June when the Collection of Dr. Martin Luther King, Jr. was sold privately to Dr. King's alma mater, Morehouse College in Atlanta for an undisclosed sum. The entire collection, which comprised more than 10,000 manuscripts and 7,000 items drafted by Dr. King in his own hand will be forever accessible to the public and to the scholarly community. Sotheby's is honored to have brokered the sale of this national treasure and to have played a role in this historic outcome.

Upcoming Sales

Sotheby's is encouraged by the current level of auction consignments for the fourth quarter.

In New York this October, Sotheby's will be offering for sale important furniture from the collection of Anthony Ingrao, President of the New York architecture and design firm Ingrao, Inc. The sale features outstanding 18th century English, French and Continental furniture as well as important 20th century design works. The sale of approximately 200 lots is expected to bring in excess of $12 million**.

Highlighting the Asia Week sales in Hong Kong this October is a theme auction entitled Visions of Enlightenment: A Collection of Important Early Ming Buddhist Bronzes which featur