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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number: 000-23747
 

 
GETTY IMAGES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
Delaware
 
98-0177556
(STATE OF INCORPORATION)
 
(I.R.S. EMPLOYER IDENTIFICATION NO.)
 
601 N. 34th Street
Seattle, Washington 98103
(206) 925-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,  OF PRINCIPAL EXECUTIVE OFFICES)
 

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.    Yes  x    No  ¨
 
As of August 1, 2002 there were 53,479,837 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
 


Table of Contents
 
GETTY IMAGES, INC.
 
INDEX
 
           
Page No.

PART I.    FINANCIAL INFORMATION
      
    Item 1.
  
Financial Statements (unaudited):
      
         
2
         
3
         
4
         
5
         
6
Item 2.
       
13
Item 3.
       
26
PART II.    OTHER INFORMATION
      
Item 1.
       
27
Item 2.
       
27
Item 3.
       
27
Item 4.
       
27
Item 5.
       
28
Item 6.
       
28
    
29
    
30

1


Table of Contents
 
GETTY IMAGES, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    
Three months ended
June 30,

    
Six months ended
June 30,

 
    
2002

    
2001

    
2002

    
2001

 
    
(In thousands, except per share amounts)
 
Sales
  
$
113,298
 
  
$
115,856
 
  
$
227,150
 
  
$
241,643
 
Cost of sales
  
 
29,992
 
  
 
32,324
 
  
 
60,085
 
  
 
67,948
 
    


  


  


  


Gross profit
  
 
83,306
 
  
 
83,532
 
  
 
167,065
 
  
 
173,695
 
Selling, general and administrative expenses
  
 
52,181
 
  
 
60,911
 
  
 
105,353
 
  
 
122,437
 
Depreciation
  
 
15,720
 
  
 
14,263
 
  
 
31,064
 
  
 
27,492
 
Amortization
  
 
4,625
 
  
 
17,991
 
  
 
10,619
 
  
 
37,269
 
Loss on sale of a business
  
 
—  
 
  
 
—  
 
  
 
812
 
  
 
—  
 
Integration costs and loss on impairment of assets
  
 
—  
 
  
 
9,341
 
  
 
—  
 
  
 
13,318
 
    


  


  


  


Income (loss) from operations
  
 
10,780
 
  
 
(18,974
)
  
 
19,217
 
  
 
(26,821
)
Interest expense
  
 
(4,112
)
  
 
(4,300
)
  
 
(8,155
)
  
 
(8,689
)
Interest income
  
 
320
 
  
 
670
 
  
 
563
 
  
 
1,188
 
Exchange gains (losses), net
  
 
434
 
  
 
(395
)
  
 
266
 
  
 
(696
)
Other income (expense), net
  
 
13
 
  
 
52
 
  
 
(5
)
  
 
143
 
Loss on impairment of investments
  
 
—  
 
  
 
(4,224
)
  
 
—  
 
  
 
(4,224
)
    


  


  


  


Income (loss) before income taxes
  
 
7,435
 
  
 
(27,171
)
  
 
11,886
 
  
 
(39,099
)
Income tax (expense) benefit
  
 
(2,962
)
  
 
3,440
 
  
 
(4,733
)
  
 
809
 
    


  


  


  


Net income (loss)
  
$
4,473
 
  
$
(23,731
)
  
$
7,153
 
  
$
(38,290
)
    


  


  


  


Earnings (loss) per share:
                                   
Basic
  
$
0.08
 
  
$
(0.46
)
  
$
0.14
 
  
$
(0.74
)
Diluted
  
 
0.08
 
  
 
(0.46
)
  
 
0.13
 
  
 
(0.74
)
    


  


  


  


Weighted-average shares outstanding:
                                   
Basic
  
 
52,969
 
  
 
51,636
 
  
 
52,538
 
  
 
51,543
 
Diluted
  
 
56,932
 
  
 
51,636
 
  
 
55,787
 
  
 
51,543
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2


Table of Contents
 
GETTY IMAGES, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 
    
June 30, 2002

    
December 31, 2001

 
    
(In thousands, except per share amounts)
 
ASSETS
                 
Current assets
                 
Cash and cash equivalents
  
$
79,722
 
  
$
46,173
 
Short-term investments
  
 
7,142
 
  
 
—  
 
Accounts receivable, net
  
 
76,255
 
  
 
71,162
 
Inventories
  
 
2,717
 
  
 
3,404
 
Deferred catalog costs
  
 
1,685
 
  
 
8,253
 
Prepaid expenses
  
 
7,670
 
  
 
7,199
 
Deferred income taxes, net
  
 
9,463
 
  
 
9,430
 
Other current assets
  
 
3,571
 
  
 
5,020
 
    


  


Total current assets
  
 
188,225
 
  
 
150,641
 
Property and equipment, net
  
 
137,883
 
  
 
147,653
 
Goodwill
  
 
603,011
 
  
 
600,428
 
Identifiable intangible assets, net
  
 
31,734
 
  
 
36,031
 
Deferred income taxes, net
  
 
54,816
 
  
 
55,638
 
Other long-term assets
  
 
2,664
 
  
 
2,690
 
    


  


Total assets
  
$
1,018,333
 
  
$
993,081
 
    


  


LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities
                 
Accounts payable
  
$
49,242
 
  
$
50,913
 
Accrued expenses
  
 
48,585
 
  
 
52,011
 
Income taxes payable
  
 
11,610
 
  
 
14,498
 
Current portion of long-term debt
  
 
19,886
 
  
 
19,944
 
    


  


Total current liabilities
  
 
129,323
 
  
 
137,366
 
Long-term debt
  
 
243,999
 
  
 
256,215
 
    


  


Total liabilities
  
 
373,322
 
  
 
393,581
 
    


  


Commitments and contingencies
                 
Stockholders’ equity
                 
Preferred stock, $0.01 per share par value, 5,000 shares authorized, no shares outstanding
  
 
—  
 
  
 
—  
 
Common stock, $0.01 per share par value, 100,000 shares authorized, 53,480 outstanding at June 30, 2002 and 51,924 outstanding at December 31, 2001
  
 
534
 
  
 
519
 
Exchangeable preferred stock, no par value, 5,000 shares authorized, 45 outstanding at June 30, 2002 and 85 outstanding at December 31, 2001
  
 
1
 
  
 
1
 
Additional paid-in capital
  
 
1,000,282
 
  
 
969,134
 
Accumulated deficit
  
 
(353,585
)
  
 
(360,738
)
Accumulated other comprehensive loss
  
 
(2,221
)
  
 
(9,416
)
    


  


Total stockholders’ equity
  
 
645,011
 
  
 
599,500
 
    


  


Total liabilities and stockholders’ equity
  
$
1,018,333
 
  
$
993,081
 
    


  


 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 

3


Table of Contents
 
GETTY IMAGES, INC.
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited)
 
    
Number of shares of common stock $0.01 par value

    
Number of shares of exchangeable preferred stock, no
par value

    
Common stock

    
Exchangeable preferred stock

 
Additional paid-in capital

  
Accumulated deficit

    
Accumulated other comprehensive loss

   
Total

    
(In thousands)
Balance at December 31, 2001
  
51,924
    
85
 
  
$
519
    
$
1
 
$
969,134
  
$
(360,738
)
  
$
(9,416
)
 
$
599,500
Net income
  
—  
    
—  
 
  
 
—  
    
 
—  
 
 
—  
  
 
7,153
 
  
 
—  
 
 
 
7,153
Translation adjustment
  
—  
    
—  
 
  
 
—  
    
 
—  
 
 
—  
  
 
—  
 
  
 
7,195
 
 
 
7,195
                                                         

Comprehensive income
               &