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10 Percent Revenue Growth for 2006 Driven by Royalty-Free and
Editorial Imagery; Company Generates Record Cash Flow from Operations
SEATTLE, Jan. 29 /PRNewswire-FirstCall/ -- Getty Images, Inc. (NYSE:
GYI), the world's leading creator and distributor of visual content,
today announced preliminary results for the fourth quarter and year
ended December 31, 2006.
"Our fourth quarter and full year 2006 results demonstrate Getty
Images' continuing leadership of our dynamic industry," said Jonathan
Klein, co- founder and chief executive officer. "Continuous and
relentless innovation is our overriding objective for 2007 -- in the
way we serve customers, the way we operate, and the way we grow our
business. In this changing environment, we remain very well positioned
to create and deliver the broadest range of visual content to our
customers in all segments and markets, at every price point and on all
platforms."
Quarterly Highlights
-- Revenue grew 10 percent to $204 million
-- Royalty-free imagery revenue grew 15 percent
-- Editorial imagery revenue grew 21 percent
-- Earnings per diluted share were $0.50. Excluding stock-based
compensation, the losses on leased properties and a severance charge,
earnings per diluted share were $0.66
-- The company generated strong cash from operations of $87 million
For the fourth quarter, revenue grew 9.5 percent to $203.5 million
compared to $185.8 million in the fourth quarter of 2005. Excluding the
effects of changes in currency exchange rates, revenue grew 6.5
percent. As a percentage of revenue, cost of revenue was 26.3 percent,
consistent with the fourth quarter of the prior year.
For the fourth quarter, selling, general and administrative expenses
(SG&A) were $77.0 million, including stock-based compensation of
$3.6 million. Excluding stock-based compensation, SG&A was $73.4
million or 36.0 percent of revenue compared to $63.5 million or 34.2
percent in the prior year.
Including restructuring charges of $10.8 million and stock-based
compensation of $3.6 million, income from operations was $43.1 million
in the fourth quarter compared to $58.2 million in the fourth quarter
last year. Excluding these charges, income from operations was $57.5
million compared to $58.5 million in the fourth quarter of 2005.
Including the restructuring charges and stock-based compensation
noted above, net income for the fourth quarter was $30.3 million, or
$0.50 per diluted share, compared to $42.5 million, or $0.64 per
diluted share, in the fourth quarter last year. Excluding these
charges, net income was $39.5 million compared to $42.8 million in the
fourth quarter of 2005. Earnings per diluted share, excluding these
charges, were $0.66 compared to $0.65 a year earlier.
For the fourth quarter, net cash provided by operating activities
was $87.2 million, compared to $75.9 million for the same quarter last
year. The acquisition of property and equipment was $11.9 million for
the quarter compared to $13.0 million in the fourth quarter of 2005.
Full Year Highlights
-- Revenue grew 10 percent to $807 million
-- Royalty-free imagery revenue grew 13 percent compared to 2005
-- Editorial imagery revenue grew 17 percent led by strong growth in
entertainment
-- Earnings per diluted share were $2.10. Excluding stock-based
compensation, restructuring charges and loss on the sale of short-term
investments earnings per diluted share were $2.62
-- The company generated strong cash from operations of $269 million
For 2006, revenue grew 10 percent to $807.3 million compared to
$733.7 million in the prior year. As a percentage of revenue, cost of
revenue was 25.6 percent in 2006 compared to 26.8 percent in the prior
year.
For 2006, selling, general and administrative expenses (SG&A)
were $302.7 million, including stock-based compensation of $15.1
million. Excluding stock- based compensation, SG&A was $287.7
million or 35.6 percent of revenue 2006 compared to $250.8 million or
34.2 percent in the prior year.
Including restructuring charges noted below and stock-based
compensation, income from operations was $196.7 million compared to
$225.9 million last year. Excluding these charges, income from
operations grew 6 percent to $241.1 million compared to $227.2 million
in 2005.
Including restructuring charges, investment losses and stock-based
compensation, net income for 2006 was $129.6 million. Excluding these
charges and the charge incurred in 2005 referenced below, net income
grew 5 percent to $161.9 million compared to $153.6 million in 2005.
Also excluding these charges, earnings per diluted share grew 12
percent to $2.62 compared to $2.34 a year earlier.
During 2006, the company had restructuring related charges of $29.4
million for lease losses and employee severance. Also during the year,
the company sold certain short-term investments at a loss of $4.0
million. In 2005, the company had $5.0 million of accelerated debt
issuance costs.
For the full year, the company generated a record amount of cash
provided by operating activities of $268.7 million, compared to $257.3
million in 2005. Significant uses of cash during the year included
$198.3 million for acquisitions, $207.7 million for share repurchases
and $61.5 million for the acquisition of property and equipment. The
company finished the year with a cash balance of $339 million.
Business Outlook
The following forward-looking statements reflect Getty Images'
expectations as of January 29, 2007. The company currently does not
intend to update these forward-looking statements until the next
quarterly results announcement.
For the first quarter of 2007, the company expects to report revenue
of approximately $210 million and earnings per diluted share of
approximately $0.61.
For full year 2007, the company expects percentage revenue growth in
the mid-single digit range and percentage growth in earnings per share
of at least one and one-half times the revenue growth rate.
Company guidance for 2007 includes the impact of stock-based
compensation and assumes just over 60 million fully diluted shares for
both the first quarter and for the full year.
Stock Option Review
As previously announced on November 9, 2006, the board of directors
established a special committee to conduct an internal review of the
company's historic stock option grant practices and related accounting.
The special committee has engaged independent outside legal counsel to
assist in the review. Because this review is ongoing, the company has
not yet determined if it will need to record any non-cash adjustments
to compensation expenses related to prior stock option grants, making
today's results preliminary. Specifically, the company does not know
whether any such non-cash compensation charges would affect the
preliminary financial results for the fourth quarter ended December 31,
2006 or the full year 2006 being announced today, or would be deemed
material and require the company to restate previously issued financial
statements or would require an adjustment to the retained earnings
balance on the company's balance sheet. Until the review is complete,
the company will be unable to file its Quarterly Report on Form 10-Q
for the period ended September 30, 2006 and its Annual Report on Form
10-K for the year ended December 31, 2006. The company intends to file
its Form 10-Q and Form 10-K as soon as practicable after the completion
of the special committee's review.
Web cast information
The company will host a conference call today at 2:00 p.m. PT. The
dial- in number is 1.800.500.0311 (North America) or 1.719.457.2698
(international). A live web cast of the conference call can be accessed
from the Investors page in the About Us section of the Getty Images Web
site at http://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 4393684, until January 31, at 9:00 p.m. PT. The web
cast will be archived on the Getty Images Web site and will be
available until January 29, 2008. Supplemental statistical information
referenced in the conference call will be available in the Investor
Relations 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/ .
Certain statements set forth in this press release constitute
"forward- looking statements" as that term is defined under Section 21E
of the Exchange Act and the Private Securities Litigation Reform Act of
1995. The words "believe," "expect," "anticipate," "intend," "estimate"
and other expressions that are predictions of or indicate future events
and trends and that do not relate to historical matters identify
forward-looking statements. 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 actual results to differ materially from
past performance and current expectations, assumptions and projections.
Differences may result from actions taken by Getty Images as well as
from risks and uncertainties beyond its 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. In particular,
there can be no assurances as to when Getty Images will be able to file
its Third Quarter Form 10-Q and 2006 Form 10-K or the potential effects
of the delays in such filings. 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 Getty Images with the Securities and
Exchange Commission, in particular our Form 10-Q for the quarter ended
June 30, 2006 and Annual Report on Form 10-K for the year ended
December 31, 2005. Except as required by law, Getty Images does not
undertake any obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise.
PRELIMINARY CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
2006 2005 2006 2005
(In thousands, except
per share amounts)
Revenue $203,504 $185,813 $807,310 $733,729
Cost of revenue
(exclusive of items
shown separately below) 53,515 48,627 206,761 196,887
Selling, general and
administrative expenses
(including stock-based
compensation of $3,609
and $325 for the three
months ended December 31,
2006 and 2005, respectively
and $15,068 and $1,269 for
the years ended
December 31, 2006
and 2005, respectively) 76,968 63,833 302,729 252,103
Depreciation 13,837 12,481 53,254 48,572
Amortization 5,259 3,099 19,680 9,519
Restructuring costs 10,757 -- 29,401 --
Other operating expenses
(income) 62 (388) (1,185) 717
Operating expenses 160,398 127,652 610,640 507,798
Income from operations 43,106 58,161 196,670 225,931
Investment income 3,726 3,277 8,834 11,991
Interest expense (378) (372) (1,506) (7,618)
Exchange (losses) gains,
net (240) 234 (578) 350
Other non-operating
expenses (67) -- (167) --
Income before income
taxes 46,147 61,300 203,253 230,654
Income tax expense (15,869) (18,755) (73,704) (80,951)
Net income $30,278 $42,545 $129,549 $149,703
Earnings per share
Basic $0.51 $0.68 $2.13 $2.43
Diluted 0.50 0.64 2.10 2.28
Shares used in computing
earnings per share
Basic 59,345 62,158 60,733 61,567
Diluted 60,067 66,204 61,711 65,744
PRELIMINARY CONSOLIDATED BALANCE SHEETS
(unaudited)
DECEMBER 31, 2006 2005
(In thousands)
ASSETS
Current assets
Cash and cash equivalents $339,466 $223,084
Short-term investments -- 295,191
Accounts receivable, net 121,232 107,020
Prepaid expenses 13,685 11,815
Deferred income taxes, net 12,251 --
Other current assets 1,500 8,553
Total current assets 488,134 645,663
Property and equipment, net 147,133 127,497
Goodwill 1,001,027 804,804
Identifiable intangible assets, net 77,234 50,206
Deferred income taxes, net -- 30,704
Other long-term assets 1,965 4,211
Total assets $1,715,493 $1,663,085
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $74,329 $72,344
Accrued expenses 42,314 38,676
Income taxes payable 4,467 --
Deferred income taxes, net -- 17,677
Short-term debt -- 265,000
Other current liabilities 11,767 2,948
Total current liabilities 132,877 396,645
Long-term debt 265,000 --
Deferred income taxes, net 13,080 --
Other long-term liabilities 55,036 23,480
Total liabilities 465,993 420,125
Stockholders' equity
Common stock 626 623
Additional paid-in capital 1,303,718 1,278,048
Common stock repurchased (207,676) --
Retained earnings (Accumulated deficit) 110,649 (18,900)
Accumulated other comprehensive
income (loss) 42,183 (16,811)
Total stockholders' equity 1,249,500 1,242,960
Total liabilities and
stockholders' equity $1,715,493 $1,663,085
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
YEARS ENDED DECEMBER 31, 2006 2005
(In thousands)
Cash flows from operating activities
Net income $129,549 $149,703
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 53,254 48,572
Loss on leased properties 23,807 --
Amortization of identifiable intangible assets 19,680 9,519
Employee stock-based compensation 15,068 1,269
Reduction of income taxes paid due to the
tax benefit from employee stock
option exercises 8,342 65,034
Bad debt expense 4,426 2,739
Loss on sale of investments 3,956 --
Deferred income taxes 2,968 5,898
Amortization of debt issuance and
exchange costs 67 6,060
Other changes in long-term assets and
liabilities and equity 4,007 2,763
Changes in current assets and liabilities,
net of effects of business acquisitions
Accounts receivable (4,421) (15,159)
Accounts payable (9,811) (9,783)
Accrued expenses (3,747) (8,776)
Income taxes payable 11,344 (2,486)
Changes in other current assets
and liabilities 10,256 1,924
Net cash provided by operating activities 268,745 257,277
Cash flows from investing activities
Acquisition of businesses, net of
cash acquired (198,319) (234,432)
Acquisition of available-for-sale
investments (9,330) (101,575)
Proceeds from available-for-sale investments 304,443 129,619
Acquisition of property and equipment (61,543) (57,766)
Other investing activities 300 (643)
Net cash provided by (used in) investing
activities 35,551 (264,797)
Cash flows from financing activities
Common stock repurchased (207,676) --
Proceeds from the issuance of common stock 8,017 42,172
Reduction of income taxes paid due to
windfall tax benefits 2,575 --
Other financing activities (5) (558)
Net cash (used in) provided by
financing activities (197,089) 41,614
Effects of exchange rate changes 9,175 (5,762)
Net increase in cash and cash equivalents 116,382 28,332
Cash and cash equivalents, beginning
of period 223,084 194,752
Cash and cash equivalents, end of period $339,466 $223,084
SOURCE: Getty Images, Inc.
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