Getty Images Reports Financial Results for the Second Quarter of 2007

Key Initiatives in the Quarter Further the Company's Digital Media Strategy

Aug 01, 2007, 01:00 ET from Getty Images, Inc.

    SEATTLE, Aug. 1 /PRNewswire-FirstCall/ -- Getty Images, Inc. (NYSE:  
 GYI), the world's leading creator and distributor of visual content, today
 reported results for the second quarter ended June 30, 2007.
      Quarterly Highlights
      *  Revenue increased 6.5 percent to $218 million compared to the second
         quarter of 2006
      *  Important strategic acquisitions of WireImage, Punchstock and Pump
         Audio were completed during the quarter
      *  Earnings per diluted share were $0.56 compared to $0.37 in the second
         quarter of 2006
      *  Cash provided by operating activities was $49 million in the quarter
     "Soon after we founded Getty Images in 1995, we recognized that the
 breadth of creators and users of digital imagery would expand. This trend
 continues and we remain the leader in all areas and categories of the
 visual content industry from traditional stock photography to microstock.
 Furthermore, we are extending our leadership position in editorial imagery,
 footage and our imagery-related products and services, all of which have
 excellent growth potential," said Jonathan Klein, co-founder and chief
 executive officer. "We are making wonderful strides with some of our newer
 businesses, including commercial music licensing and the opportunity for
 growth in the consumer market while remaining focused on stabilizing our
 traditional creative stills business."
     Revenue increased 6.5 percent to $218.0 million from $204.6 million in
 the second quarter of 2006. Excluding the effects of changes in currency
 exchange rates, revenue grew 2.4 percent. Growth in almost all areas of the
 business was partly offset by a decline in traditional creative stills
 imagery revenue.
     As a percentage of revenue, cost of revenue was 26.7 percent, compared
 to 24.8 percent in the prior year due primarily to revenue growth in
 certain of the company's product lines with average royalties that are
 higher than traditional creative stills imagery, in particular in editorial
 and microstock imagery.
     Selling, general and administrative expenses (SG&A) totaled $84.1
 million or 38.6 percent of revenue for the second quarter of 2007, compared
 to $77.9 million or 38.1 percent of revenue in the second quarter of 2006.
 Excluding $1.3 million of non-recurring professional fees, the effects of
 changes in currency exchange rates, and SG&A associated with acquired
 companies, SG&A declined on a year over year basis.
     Income from operations was $53.1 million or 24.4 percent of revenue in
 the second quarter of 2007 compared to $41.2 million in the second quarter
 of 2006. Results for the second quarter of 2006 included a restructuring
 charge of approximately $16.5 million. Excluding this charge, income from
 operations for the second quarter of 2006 was $57.7 million, or 28.2
 percent of revenue.
     Net income for the second quarter of 2007 was $33.7 million with
 earnings per diluted share of $0.56, or $0.57 excluding non-recurring
 professional fees, compared to $23.2 million and $0.37 in the second
 quarter of 2006. Results for the second quarter of 2006 included a total of
 $14.1 million after taxes for a restructuring charge and a loss on the sale
 of short-term investments. Excluding these items, net income for the second
 quarter of 2006 was $37.3 million or $0.59 per diluted share.
     Cash balances were $288.6 million at June 30, 2007. Net cash provided
 by operating activities during the second quarter of 2007 was $48.8
 million. During the quarter, the company spent a total of $248 million for
 acquired businesses, of which $120 million was financed through the
 company's senior credit facility and the remaining $128 million paid from
 existing cash balances.
     Business Outlook
     The following forward-looking statements reflect Getty Images'
 expectations as of August 1, 2007. The company currently does not intend to
 update these forward-looking statements until the next quarterly results
     The company has announced a restructuring and related reduction in
 workforce of about 100 employees that will result in a charge of
 approximately $4.0 million in the third quarter of 2007 and is expected to
 result in annualized savings of approximately $20 million in staff and
 staff related costs. The company continues to focus on managing costs
 effectively while investing in the areas of the business that provide the
 best opportunities for growth.
     For the third quarter of 2007, the company expects revenue of
 approximately $210 million and diluted earnings per share of $0.43.
 Excluding approximately $0.04 for restructuring costs, diluted earnings per
 share would be $0.47.
     For full year 2007, the company expects revenue of approximately $855
 million and earnings per share of approximately $2.18. Excluding
 approximately $0.04 for restructuring costs in the third quarter of 2007,
 diluted earnings per share would be $2.22.
     Guidance for 2007 assumes just over 60 million fully diluted shares for
 both the third quarter and for the full year.
     Web cast information
     The company will host a conference call today at 2:00 pm PT. The
 dial-in number is 877.502.9273 (North America) or 913.981.5582
 (international). There will be a live web cast of the conference call,
 which can be accessed from the Investors page in the About Us section of
 the Getty Images Web site at The company will also
 provide a replay of the conference call at 888.203.1112 (North America) or
 719.457.0820 (international), confirmation number 6421437, until August 3,
 at 9:00 pm PT. The web cast will be archived on the Getty Images Web site
 and will be available until August 1, 2008. Supplemental statistical
 information referenced in the conference call will be available in the
 Investors section of the Web site.
     About Getty Images
     Getty Images is the world's leading creator and distributor of visual
 content and the first place creative professionals turn to discover,
 purchase and manage imagery. The company's award-winning photographers and
 imagery help customers create inspiring work which appears every day in the
 world's most influential newspapers, magazines, advertising campaigns,
 films, television programs, books and Web sites. Headquartered in Seattle,
 WA and serving customers in more than 100 countries, Getty Images believes
 in the power of imagery to drive positive change, educate, inform, and
 entertain. Visit Getty Images at
     Some of the statements in this press release may constitute "forward-
 looking statements" within the meaning of the Private Securities Litigation
 Reform Act of 1995. These statements are based on management's
 expectations, assumptions and projections about our business as of the time
 the statements are made. These forward-looking statements are not
 guarantees of future performance and are subject to certain risks and
 uncertainties that could cause our actual results to differ materially from
 our past performance and our current expectations, assumptions and
 projections. Differences may result from actions taken by us as well as
 from risks and uncertainties beyond our control. These risks and
 uncertainties include, among others, the risks associated with currency
 fluctuations, changes in the economic, political, competitive and
 technological environments, and the risks associated with system security,
 upgrades, updates and service interruptions. The foregoing list of risks
 and uncertainties is illustrative, but by no means exhaustive. For more
 information on factors that may affect future performance, please review
 the reports filed by us with the Securities and Exchange Commission, in
 particular our Quarterly Report on Form 10-Q for the quarter ended March
 31, 2007 and Amended Annual Report on Form 10-K/A for the year ended
 December 31, 2006. Except as required by law, we do not intend to update or
 revise any forward-looking statements until our next quarterly earnings
                                  THREE MONTHS ENDED         SIX MONTHS ENDED
                                            JUNE 30,                 JUNE 30,
                                   2007         2006         2007        2006
     (In thousands, except
     per share amounts)
     Revenue                   $217,957     $204,608     $430,607    $405,037
     Cost of revenue
      (exclusive of items
       shown separately below)   58,188       50,681      113,024     102,947
     Selling, general and
      administrative expenses    84,091       77,861      165,494     152,137
     Depreciation                15,083       13,260       29,627      25,517
     Amortization                 7,090        5,182       12,316       8,913
     Restructuring costs            443       16,492        1,405      16,927
     Other operating income         (16)         (34)         (43)     (1,198)
     Operating expenses         164,879      163,442      321,823     305,243
     Income from operations      53,078       41,166      108,784      99,794
     Investment income (loss)     2,321       (1,203)       5,615       2,813
     Interest expense            (1,714)        (377)      (2,148)       (734)
     Other non-operating
      income (expenses)             271         (668)        (524)       (622)
     Income before income
      taxes                      53,956       38,918      111,727     101,251
     Income tax expense         (20,303)     (15,751)     (40,044)    (39,045)
     Net income                 $33,653      $23,167      $71,683     $62,206
     Earnings per share
       Basic                      $0.57        $0.38        $1.21       $1.00
       Diluted                     0.56         0.37         1.19        0.98
     Shares used in
      earnings per share
       Basic                     59,236       61,508       59,212      61,916
       Diluted                   60,175       62,902       60,142      63,397
                                                       JUNE 30,    DECEMBER 31,
                                                         2007          2006
     (In thousands)
     Current assets
     Cash and cash equivalents                         $288,578      $339,466
     Accounts receivable, net                           131,738       121,232
     Prepaid expenses                                    19,533        13,685
     Deferred income taxes, net                           9,548        11,142
     Income taxes receivable                             13,922             -
     Other current assets                                 3,624         1,500
     Total current assets                               466,943       487,025
     Property and equipment, net                        159,709       147,133
     Goodwill                                         1,217,413     1,001,027
     Identifiable intangible assets, net                132,397        77,234
     Other long-term assets                               2,001         1,965
     Total assets                                    $1,978,463    $1,714,384
     Current liabilities
     Accounts payable                                   $94,130       $74,297
     Accrued expenses                                    36,327        39,412
     Income taxes payable                                    --         6,353
     Short-term debt                                    385,000            --
     Deferred revenue                                    15,518        12,897
     Other current liabilities                              319           242
     Total current liabilities                          531,294       133,201
     Long-term debt                                          --       265,000
     Deferred income taxes, net                          40,741        11,596
     Other long-term liabilities                         66,032        56,350
     Total liabilities                                  638,067       466,147
     Stockholders' equity
     Common stock                                           627           626
     Additional paid-in capital                       1,329,501     1,321,645
     Common stock repurchased                          (207,676)     (207,676)
     Retained earnings                                  158,970        91,459
     Accumulated other comprehensive income              58,974        42,183
     Total stockholders' equity                       1,340,396     1,248,237
     Total liabilities and stockholders' equity      $1,978,463    $1,714,384
     SIX MONTHS ENDED JUNE 30,                           2007           2006
     (In thousands)
     Cash flows from operating activities
     Net income                                        $71,683        $62,206
     Adjustments to reconcile net income to
      net cash provided by operating
     Depreciation                                       29,627         25,517
     Amortization of identifiable intangible assets     12,316          8,913
     Deferred income taxes                              10,043          3,218
     Changes in income tax reserves                      7,005            132
     Employee stock-based compensation                   6,742          7,210
     Bad debt expense                                    2,230          2,165
     Restructuring costs                                 1,405         16,927
     Other changes in long-term assets and
      liabilities, net                                    (666)           228
     Loss on sale of available-for-sale
      investments                                           --          3,956
     Changes in current assets and
      liabilities, net of effects of
      business acquisitions
     Accounts receivable                                (5,663)         5,186
     Accounts payable                                    8,232           (308)
     Accrued expenses                                  (13,796)       (16,862)
     Income taxes payable                              (11,717)          (834)
     Changes in other current assets and
      liabilities, net                                  (3,684)         3,758
     Net cash provided by operating activities         113,757        121,412
     Cash flows from investing activities
     Acquisitions of businesses, net of
      cash acquired                                   (252,738)      (194,943)
     Acquisition of property and equipment             (35,768)       (35,139)
     Proceeds from available-for-sale investments           --        304,443
     Acquisition of available-for-sale investments          --         (9,330)
     Other investing activities                           (451)           300
     Net cash (used in) provided by
      investing activities                            (288,957)        65,331
     Cash flows from financing activities
     Senior credit facility borrowing                  120,000             --
     Proceeds from the issuance of common stock          1,844          5,600
     Common stock repurchased                               --       (161,449)
     Other financing activities                         (1,798)         2,400
     Net cash provided by (used in) financing
      activities                                       120,046       (153,449)
     Effects of exchange rate changes                    4,266          3,082
     Net (decrease) increase in cash and
      cash equivalents                                 (50,888)        36,376
     Cash and cash equivalents, beginning of period    339,466        223,084
     Cash and cash equivalents, end of period         $288,578       $259,460

SOURCE Getty Images, Inc.