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 March 31, 2004
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
At April 30, 2004 there were 58,281,910 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
| GETTY IMAGES, INC. | Q1 2004 | FORM 10-Q |
| 1 | GETTY IMAGES, INC. | Q1 2004 | FORM 10-Q | PART I | ITEM 1 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| THREE MONTHS ENDED MARCH 31, | 2004 | 2003 | ||||||
| (In thousands, except per share amounts) | ||||||||
| Revenue |
$ | 156,512 | $ | 130,317 | ||||
| Cost of sales |
43,806 | 37,315 | ||||||
| Gross profit |
112,706 | 93,002 | ||||||
| Selling, general and administrative expenses |
54,718 | 53,365 | ||||||
| Depreciation |
13,823 | 14,934 | ||||||
| Amortization |
1,094 | 934 | ||||||
| Other operating expenses (income) |
129 | (160 | ) | |||||
| Operating expenses |
69,764 | 69,073 | ||||||
| Income from operations |
42,942 | 23,929 | ||||||
| Interest expense |
(1,067 | ) | (3,758 | ) | ||||
| Interest income |
1,753 | 602 | ||||||
| Exchange (losses) gains, net |
(708 | ) | 915 | |||||
| Other (expenses) income, net |
(10 | ) | 5 | |||||
| Income before income taxes |
42,910 | 21,693 | ||||||
| Income tax expense |
(16,824 | ) | (8,463 | ) | ||||
| Net income |
$ | 26,086 | $ | 13,230 | ||||
| Earnings per share |
||||||||
| Basic |
$ | 0.45 | $ | 0.25 | ||||
| Diluted |
0.43 | 0.23 | ||||||
| Shares used in computing earnings per share |
||||||||
| Basic |
57,666 | 53,989 | ||||||
| Diluted |
60,157 | 56,782 | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 2 | GETTY IMAGES, INC. | Q1 2004 | FORM 10-Q | PART I | ITEM 1 |
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| MARCH 31, 2004 |
DECEMBER 31, 2003 |
|||||||
| (In thousands) | ||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 132,476 | $ | 140,058 | ||||
| Short-term investments |
224,140 | 167,525 | ||||||
| Accounts receivable, net |
83,865 | 75,781 | ||||||
| Prepaid expenses |
8,836 | 9,693 | ||||||
| Deferred income taxes, net |
12,697 | 13,206 | ||||||
| Other current assets |
2,459 | 1,246 | ||||||
| Total current assets |
464,473 | 407,509 | ||||||
| Property and equipment, net |
119,304 | 123,268 | ||||||
| Goodwill |
603,172 | 603,024 | ||||||
| Identifiable intangible assets, net |
15,501 | 16,615 | ||||||
| Deferred income taxes, net |
53,483 | 62,567 | ||||||
| Other long-term assets |
10,490 | 11,101 | ||||||
| Total assets |
$ | 1,266,423 | $ | 1,224,084 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 71,834 | $ | 64,454 | ||||
| Accrued expenses |
34,845 | 42,459 | ||||||
| Income taxes payable |
5,544 | 8,170 | ||||||
| Total current liabilities |
112,223 | 115,083 | ||||||
| Long-term debt |
265,000 | 265,011 | ||||||
| Other long-term liabilities |
8,792 | 8,184 | ||||||
| Total liabilities |
386,015 | 388,278 | ||||||
| Commitments and contingencies (Note 4) |
||||||||
| Stockholders’ equity |
||||||||
| Common stock |
580 | 573 | ||||||
| Additional paid-in capital |
1,114,832 | 1,098,249 | ||||||
| Unearned compensation |
(367 | ) | (448 | ) | ||||
| Accumulated deficit |
(249,167 | ) | (275,253 | ) | ||||
| Accumulated other comprehensive income |
14,530 | 12,685 | ||||||
| Total stockholders’ equity |
880,408 | 835,806 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,266,423 | $ | 1,224,084 | ||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 3 | GETTY IMAGES, INC. | Q1 2004 | FORM 10-Q | PART I | ITEM 1 |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited)
| No. of Shares of Common Stock $0.01 Par Value |
Common Stock |
Additional Paid- In Capital |
Unearned Compensation |
Accumulated Deficit |
Accumulated Other Comprehensive Income |
Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||||
| Balance at December 31, 2003 |
57,331 | $ | 573 | $ | 1,098,249 | $ | (448 | ) | $ | (275,253 | ) | $ | 12,685 | $ | 835,806 | |||||||
| Net income |
— | — | — | — | 26,086 | — | 26,086 | |||||||||||||||
| Other comprehensive income |
— | — | — | — | — | 1,845 | 1,845 | |||||||||||||||
| Amortization of unearned compensation |
— | — | — | 81 | — | — | 81 | |||||||||||||||
| Stock options exercised |
690 | 7 | 12,441 | — | — | — | 12,448 | |||||||||||||||
| Restricted stock vesting |
— | — | 9 | — | — | — | 9 | |||||||||||||||
| Tax benefit on stock options exercised |
— | — | 4,133 | — | — | — | 4,133 | |||||||||||||||
| Balance at March 31, 2004 |
58,021 | $ | 580 | $ | 1,114,832 | $ | (367 | ) | $ | (249,167 | ) | $ | 14,530 | $ | 880,408 | |||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 4 | GETTY IMAGES, INC. | Q1 2004 | FORM 10-Q | PART I | ITEM 1 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| THREE MONTHS ENDED MARCH 31, | 2004 | 2003 | ||||||
| (In thousands) | ||||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 26,086 | $ | 13,230 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
| Deferred income taxes |
14,636 | 6,924 | ||||||
| Depreciation |
13,823 | 14,934 | ||||||
| Bad debt expense |
1,421 | 1,315 | ||||||
| Amortization of identifiable intangible assets |
1,094 | 934 | ||||||
| Amortization of debt issuance costs |
477 | 313 | ||||||
| Other changes in long-term assets and liabilities |
1,021 | (34 | ) | |||||
| Changes in current assets and liabilities, net of effects of business acquisitions |
||||||||
| Accounts receivable |
(11,154 | ) | (6,724 | ) | ||||
| Accounts payable |
7,024 | 1,467 | ||||||
| Accrued expenses |
(8,035 | ) | (8,941 | ) | ||||
| Income taxes payable |
(3,144 | ) | (723 | ) | ||||
| Changes in other current assets and liabilities |
424 | (733 | ) | |||||
| Net cash provided by operating activities |
43,673 | 21,962 | ||||||
| Cash flows from investing activities |
||||||||
| Acquisition of available-for-sale investments |
(113,952 | ) | (14,664 | ) | ||||
| Proceeds from the sale of available-for-sale investments |
58,232 | — | ||||||
| Acquisition of property and equipment |
(9,097 | ) | (8,194 | ) | ||||
| Acquisition of businesses, net of cash acquired |
— | (2,383 | ) | |||||
| Proceeds from the sale of assets |
— | 300 | ||||||
| Net cash used in investing activities |
(64,817 | ) | (24,941 | ) | ||||
| Cash flows from financing activities |
||||||||
| Proceeds from the issuance of common stock |
12,448 | 4,894 | ||||||
| Debt issuance costs paid |
(136 | ) | — | |||||
| Net cash provided by financing activities |
12,312 | 4,894 | ||||||
| Effects of exchange rate differences |
1,250 | 316 | ||||||
| Net (decrease) increase in cash and cash equivalents |
(7,582 | ) | 2,231 | |||||
| Cash and cash equivalents, beginning of period |
140,058 | 76,105 | ||||||