Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. SOTHEBYS (823094) 10-Q published on May 02, 2019 at 7:23 am
Reporting Period: Mar 30, 2019
Lease right-of-use assets and lease liabilities are measured and recognized on our Condensed Consolidated Balance Sheets on the lease commencement date, which is the date on which the lessor makes the underlying asset available to use. The measurement of lease right-of-use assets and lease liabilities is based on the present value of lease payments not yet made, discounted using our incremental borrowing rate ("IBR") as of the commencement date of the lease. In determining our IBR, a number factors are considered, including the term of the lease, the effects of collateral, the economic environment of the lessee, and the creditworthiness of the lessee. Short-term operating leases, which have an initial term of twelve months or less, are not recognized on our Condensed Consolidated Balance Sheets.
Operating lease cost is calculated so that the aggregate amount of fixed minimum lease payments for each lease is recognized in our Condensed Consolidated Statements of Operations on a straight-line basis over the term of the lease. Variable lease payments are not included in the lease liability recorded on our Condensed Consolidated Balance Sheets, but are recognized in our Condensed Consolidated Statements of Operations during the period in which the obligation for those payments is incurred. Our variable lease payments principally relate to lease obligations which are periodically adjusted for changes in an index or rate, including fair market rental rate adjustments that typically occur according to a scheduled rent review period. For leases with such provisions, the operating right-of-use asset and lease liability are measured using the index or fair market rental rate in effect at the lease commencement date. Under the terms of most leases, we are required to pay various service fees, real estate taxes, and insurance costs which are variable in nature and, therefore not included in the measurement of our lease liabilities.
We may reduce our financial exposure under auction guarantees through contractual risk sharing arrangements. Such auction guarantee risk sharing arrangements include irrevocable bid arrangements and, from time-to-time, partner sharing arrangements. An irrevocable bid is an arrangement under which a counterparty irrevocably commits to bid a predetermined price on the guaranteed property. If the irrevocable bid is not the winning bid, the counterparty is generally entitled to receive, as their fee, a share of the buyer's premium earned on the sale and/or a share of any auction guarantee overage. If the irrevocable bid is the winning bid, the counterparty may sometimes receive a fee as compensation for providing the irrevocable bid. This fee is netted against the counterparty's obligation to pay the aggregate purchase price (i.e., the hammer price plus buyer's premium). In a partner sharing arrangement, a counterparty commits to fund: (i) a share of the difference between the sale price at auction and the amount of the auction guarantee, if the property sells for less than the minimum guaranteed price, or (ii) a share of the minimum guaranteed price if the property does not sell, while taking ownership of a proportionate share of the unsold property. In exchange for accepting a share of the financial exposure under the auction guarantee, if the property sells, the counterparty in a partner sharing arrangement is generally entitled to receive, as their fee, a share of the buyer's premium earned on the sale and/or a share of any auction guarantee overage.
Overview—For the three months ended March 31, 2019, we reported a net loss of ($7.1) million, or ($0.15) per diluted share, compared to a net loss of ($6.5) million, or ($0.12) per diluted share, in the same period of the prior year. After excluding certain items, Adjusted Net Loss* for the period was ($6.9) million, or ($0.15) per diluted share, as compared to Adjusted Net Income* of $5 million, or $0.09 per diluted share, in the prior year.
The unfavorable comparison of our first quarter results to the prior year is principally due to a $101.1 million (15%) decrease in Net Auction Sales3 that is largely the result of lower consignment levels in our Impressionist, Modern, and Contemporary Art sales in London, caused, in part, by Brexit-related uncertainties. Another important factor impacting the comparison to the prior year is the fact that our Hong Kong spring sale series occurred on a different schedule in the current year, with more sales within the series occurring in the second quarter instead of the first quarter. Accordingly, first quarter Net Auction Sales attributable to the Hong Kong spring sales series decreased 7% from $129 million in 2018 to $120 million in 2019. However, in total, across the first and second quarters, our Hong Kong spring sales series totaled $398 million in 2019, as compared to $383 million in the same period of 2018, representing a 4% year-over-year increase.
For the three months ended March 31, 2019, our net auction results5 decreased $14.1 million (13%) principally due to a $101.1 million (15%) decrease in Net Auction Sales that is largely the result of lower consignment levels in our Impressionist, Modern, and Contemporary Art sales in London, caused, in part, by Brexit-related uncertainties. Another important factor impacting the comparison to the prior year is the fact that our Hong Kong spring sale series occurred on a different schedule in the current year, with more sales within the series occurring in the second quarter instead of the first quarter. Accordingly, first quarter Net Auction Sales attributable to the Hong Kong spring sales series decreased 7% from $129 million in 2018 to $120 million in 2019. However, in total, across the first and second quarters, our Hong Kong spring sales series totaled $398 million in 2019, as compared to $383 million in the same period of 2018, representing a 4% year-over-year increase.