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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 September 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
(State of Incorporation)
 
98-0177556
(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 November 1, 2002 there were 53,606,376 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.
       
12
Item 3.
       
27
Item 4.
       
27
PART II.    OTHER INFORMATION
      
Item 1.
       
28
Item 2.
       
28
Item 3.
       
28
Item 4.
       
28
Item 5.
       
28
Item 6.
       
28
    
29
    
30
    
32

1


Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
GETTY IMAGES, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    
Three months ended September 30,

    
Nine months ended September 30,

 
    
2002

    
2001

    
2002

    
2001

 
    
(In thousands, except per share amounts)
 
Sales
  
$
118,189
 
  
$
107,505
 
  
$
345,339
 
  
$
349,148
 
Cost of sales
  
 
33,449
 
  
 
27,941
 
  
 
93,534
 
  
 
95,888
 
    


  


  


  


Gross profit
  
 
84,740
 
  
 
79,564
 
  
 
251,805
 
  
 
253,260
 
Selling, general and administrative expenses
  
 
51,564
 
  
 
57,792
 
  
 
156,916
 
  
 
180,229
 
Depreciation
  
 
15,073
 
  
 
14,676
 
  
 
46,137
 
  
 
42,168
 
Amortization
  
 
3,070
 
  
 
18,546
 
  
 
13,689
 
  
 
55,816
 
Loss on sale of a business
  
 
—  
 
  
 
—  
 
  
 
812
 
  
 
—  
 
Integration and restructuring costs and loss on impairment of assets
  
 
—  
 
  
 
4,776
 
  
 
—  
 
  
 
18,094
 
    


  


  


  


Income (loss) from operations
  
 
15,033
 
  
 
(16,226
)
  
 
34,251
 
  
 
(43,047
)
Interest expense
  
 
(3,505
)
  
 
(4,244
)
  
 
(11,660
)
  
 
(12,934
)
Interest income
  
 
515
 
  
 
540
 
  
 
1,078
 
  
 
1,729
 
Exchange losses, net
  
 
(409
)
  
 
(618
)
  
 
(144
)
  
 
(1,315
)
Other expense, net
  
 
(25
)
  
 
(227
)
  
 
(30
)
  
 
(84
)
Loss on impairment of investments
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(4,224
)
    


  


  


  


Income (loss) before income taxes
  
 
11,609
 
  
 
(20,775
)
  
 
23,495
 
  
 
(59,875
)
Income tax (expense) benefit
  
 
(4,793
)
  
 
2,541
 
  
 
(9,526
)
  
 
3,350
 
    


  


  


  


Net income (loss)
  
$
6,816
 
  
$
(18,234
)
  
$
13,969
 
  
$
(56,525
)
    


  


  


  


Earnings (loss) per share:
                                   
Basic
  
$
0.13
 
  
$
(0.35
)
  
$
0.26
 
  
$
(1.09
)
Diluted
  
 
0.13
 
  
 
(0.35
)
  
 
0.25
 
  
 
(1.09
)
    


  


  


  


Weighted-average shares outstanding:
                                   
Basic
  
 
53,525
 
  
 
51,870
 
  
 
52,871
 
  
 
51,653
 
Diluted
  
 
54,217
 
  
 
51,870
 
  
 
55,207
 
  
 
51,653
 
 
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)
 
      
September 30,
2002

      
December 31,
2001

 
      
(In thousands, except per share amounts)
 
ASSETS
                     
Current assets
                     
Cash and cash equivalents
    
$
67,243
 
    
$
46,173
 
Short-term investments
    
 
28,476
 
    
 
—  
 
Accounts receivable, net
    
 
76,864
 
    
 
71,162
 
Inventories
    
 
2,249
 
    
 
3,404
 
Deferred catalog costs
    
 
—  
 
    
 
8,253
 
Prepaid expenses
    
 
8,573
 
    
 
7,199
 
Deferred income taxes, net
    
 
9,467
 
    
 
9,430
 
Other current assets
    
 
5,149
 
    
 
5,020
 
      


    


Total current assets
    
 
198,021
 
    
 
150,641
 
Property and equipment, net
    
 
133,359
 
    
 
147,653
 
Goodwill
    
 
603,011
 
    
 
600,428
 
Identifiable intangible assets, net
    
 
30,507
 
    
 
36,031
 
Deferred income taxes, net
    
 
54,908
 
    
 
55,638
 
Other long-term assets
    
 
3,760
 
    
 
2,690
 
      


    


Total assets
    
$
1,023,566
 
    
$
993,081
 
      


    


LIABILITIES AND STOCKHOLDERS’ EQUITY
                     
Current liabilities
                     
Accounts payable
    
$
51,840
 
    
$
50,913
 
Accrued expenses
    
 
45,632
 
    
 
52,011
 
Income taxes payable
    
 
14,617
 
    
 
14,498
 
Current portion of long-term debt
    
 
33
 
    
 
19,944
 
      


    


Total current liabilities
    
 
112,122
 
    
 
137,366
 
Long-term debt
    
 
258,682
 
    
 
256,215
 
      


    


Total liabilities
    
 
370,804
 
    
 
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, 53,484 outstanding at September 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 September 30, 2002 and 85 outstanding at December 31, 2001
    
 
1
 
    
 
1
 
Additional paid-in capital
    
 
1,000,384
 
    
 
969,134
 
Accumulated deficit
    
 
(346,769
)
    
 
(360,738
)
Accumulated other comprehensive loss
    
 
(1,388
)
    
 
(9,416
)
      


    


Total stockholders’ equity
    
 
652,762
 
    
 
599,500
 
      


    


Total liabilities and stockholders’ equity
    
$
1,023,566
 
    
$
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
    
—  
    
—  
 
  
 
—  
  
 
—  
 
 
—  
 
 
13,969
 
  
 
—  
 
 
 
13,969
Translation adjustment
    
—  
    
—  
 
  
 
—