Getty Images Reports Financial Results for the Second Quarter of 2007
Key Initiatives in the Quarter Further the Company's Digital Media Strategy
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 announcement. 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 www.gettyimages.com. 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 http://gettyimages.com. 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 release. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) 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 computing earnings per share Basic 59,236 61,508 59,212 61,916 Diluted 60,175 62,902 60,142 63,397 CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) JUNE 30, DECEMBER 31, 2007 2006 (In thousands) ASSETS 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 LIABILITIES AND STOCKHOLDERS' EQUITY 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 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 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 activities 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.
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