Getty Restates . . .

Stock Asylum Staff Report
June 13, 2007

In a move that apparently rectifies years of inaccurate income reporting stemming from the misdating of stock options, Getty Images has restated earning dating back to 1998.

The restatements, reported in a U.S. Securities and Exchange Commission (SEC) filing on this date, take into account some $27.2 million in expenses for stock options that used "incorrect measurement dates." The changes also include $727,000 in other adjustments to reports filed between 2003 and 2005.

In the same SEC document, Getty reported official 2006 figures, showing the company collected $806.6 million in revenue during the year. Net income was $130.4 million in 2006. In a preliminary annual report released in January, the company said 2006 revenue was $807.3 million and net income was $129.6 million.

The stock photography distributor still must file its official report for the first quarter of this year. In a preliminary report issued May 1, the company said revenue for the first three months of 2006 reached $212.7 million. Net income was $38 million during the period, the company said.

Of the $27.2 million in adjustments for misdated stock options, $15.7 million came in 2000, the company said. For 2001, the company made an adjustment of $4.8 million.

An adjustment of $2.7 million was made for 2002 and a correction of $2.5 million was made for 1999. Smaller changes were made in 1998, 2003 and 2004.

The company said tax-related effects of about $7.9 million will reduce the impact of the corrections to $19.3 million over the eight years that are being restated.

Alleged backdating of stock options has been a headache for Getty executives since the SEC opened an informal investigation into the practices last year. A committee appointed by the company conducted an internal probe, finding a number of misdated options. However, the committee found no wrongdoing on the part of current company executives.

But, the company has been left to wrestle with two notices of default involving $265 million in debentures due in 2023. The notices were filed after Getty Images failed to file its third quarterly financial report with the SEC last year. The company has said it does not believe it is in default, but the matter remains unresolved.

Two shareholder lawsuits have been filed against Getty Images and a number of executives as a result of the alleged backdating.

In other matters, the report filed today revealed that:

During 2006 Getty Images added to its main stock photography collection some 150,000 images created by in-house and contract photographers, and 400,000 images supplied by partners. The company now offers 1.8 million images on its gettyimages.com web site.

The company has 1,750 employees, of which 943 are in the Americas, 663 in Europe and 144 in the rest of the world.

Getty Images repurchased about 3.5 million of its own shares for $207.7 million during 2006. The program was suspended when the company did not file its third quarter financial report and will be reviewed once the company is current with all SEC filings.

Forty-one percent ($326.4 million) of Getty's $806.6 in 2006 revenue came from the United States, 14 percent ($111.5 million) from the United Kingdom, eight percent ($68.3 million) from Germany, six percent ($48.2 million) from France and 31 percent ($252.2 million) from the rest of the world.

Getty Images Investments, LLC, the October 1993 Trust, the JD Klein Family Settlement, Getty Images Chairman Mark H. Getty and Getty Images Chief Executive Officer Jonathan Klein together owned about 19 percent of outstanding shares in the company on April 30. Of the 19 percent, 15.2 percent (about nine million shares) is held by Getty Investments, LLC. Klein owns 1.17 million shares and Mark Getty owns 1.12 million shares.

Getty Images owns the trademarks and trademark applications for the "Getty Images" name, but Getty Investments, LLC, could, for a nominal fee, regain control of the trademarks and applications if the company falls under the control of a third party not associated with the Getty family. In such an event, the company could still use the trademarks for one year.

During 2006, Klein's compensation package from Getty Images was valued at $3.95 million, including $950,000 in salary, $1.75 million in stock awards, $1.16 million in option awards and $94,416 in other compensation. Seven other company executives received compensation packages valued from $589,307 to $1.42 million. Seven Getty Images directors received compensation packages ranging from $70,046 to $147,190.

The Getty Images web site is at: http://www.gettyimages.com.