Looks to be an excellent investment opportunity here over the next 6-12 months as the recent Photodisc Inc. integration and forthcoming rollout of Tony Stone Online drive revenues and cut costs. Brokerages following GETY all rate as Strong Buy with $30 to $40 price targets. Long term potential looms even larger as this company is poised to benefit greatly from a networked world. Remember to perform your own due diligence, a prerequisite for those searching for their diamond in the rough.
www.getty-images.com
www.photodisc.com
Getty Images commenced operations on February 9, 1998 following the Scheme of Arrangement with Getty Communications and the acquisition of PhotoDisc. On February 10, 1998 the Company acquired Allsport.
Getty Images' sales are primarily derived from the marketing of image reproduction and broadcasting rights to a range of business customers. Sales generally comprise a large number of relatively small transactions involving the sale either of single
images, video and film clips or of CD-ROM products containing between 100 and 300 images. Getty Images utilizes a variety
of digital and analog distribution platforms, including electronic commerce via the Web, CD-ROMs, 35mm film, video and
traditional analog transparencies. Prices are determined by the extent of rights granted over the use of the image or clip and can
vary significantly across geographic markets and customer groups. Sales are also generated from subscription or bulk purchase
deals where customers are provided access to imagery on-line.
Getty Images' cost of sales consists primarily of payments to contributing photographers and cinematographers. These suppliers
are under contract to the Company and receive payments of up to 50% of sales depending on the product sold and the location
of the sale. Minimal payments are due for sales of Hulton Getty's and Allsport's imagery as sales of most of the images in these
collections do not require commission payments. This is also the case with approximately 25% of the footage at Energy Film
Library. Also included in cost of sales is the cost of CD-ROM production at PhotoDisc.
Getty Images' selling, general and administrative expenses include salaries and related staff costs, premises and utility costs, and
marketing and catalog costs. These costs have increased recently largely as a result of acquisitions and also to support the
growth of the business. In the case of Allsport, staff costs include salaries of photographers who are employed directly by the
Company.
Getty Images amortizes goodwill and other intangibles and depreciates the cost of the investment in dupes, digital files, the
archival picture collection, computer systems and other fixed assets over their expected useful lives. The acquisition of
PhotoDisc and Allsport generated $239 million of goodwill that will be amortized over twenty years and $51 million of other
intangibles that will be amortized over periods varying from one to three years.
As a result of Getty Images' various acquisitions and their consequential financial and accounting effects on net income, Getty
Images believes that EBITDA provides investors and analysts with an appropriate measure of the operating performance of
Getty Images. Getty Images defines EBITDA as earnings before interest, taxes, exchange gains/(losses), depreciation and
amortization.
The Company experienced an increase in the rate of demand for the digital search, selection and fulfillment of imagery during
1997 and the first quarter of 1998, particularly in North America, and believes this trend will continue, especially in more
developed markets. As a result, the Company intends to increase the rate of capital expenditures in digitization in 1998 and
1999, building on the significant investment made in 1997.
At the same time, the Company is planning to integrate various parts of the business following the acquisitions of PhotoDisc and
Allsport. It is anticipated that an exceptional charge of up to $10 million will be booked in either the second or third quarter of
1998. The charge will cover the one-time charges arising from the acquisitions of PhotoDisc and Allsport and their integration
and the related reorganization of the Company's businesses. |
