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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 June 30, 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 July 30, 2004 there were 59,304,980 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

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        GETTY IMAGES, INC.       Q2  2004       FORM 10-Q            

 

TABLE OF CONTENTS

 

        PAGE
PART I.     FINANCIAL INFORMATION    
ITEM 1.   Financial Statements (unaudited):    
    Condensed Consolidated Statements of Income—for the three and six months ended June 30, 2004 and 2003   1
    Condensed Consolidated Balance Sheets—at June 30, 2004 and December 31, 2003   2
    Condensed Consolidated Statement of Stockholders’ Equity—at December 31, 2003 and for the six months ended June 30, 2004   3
    Condensed Consolidated Statements of Cash Flows—for the six months ended June 30, 2004 and 2003   4
    Notes to Condensed Consolidated Financial Statements   5
ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)   14
ITEM 3.   Quantitative and Qualitative Disclosures about Market Risk   22
ITEM 4.   Controls and Procedures   23
PART II.     OTHER INFORMATION    
ITEM 1.   Legal Proceedings   24
ITEM 2.   Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities   24
ITEM 3.   Defaults Upon Senior Securities   24
ITEM 4.   Submission of Matters to a Vote of Security Holders   24
ITEM 5.   Other Information   24
ITEM 6.   Exhibits and Reports on Form 8-K   25
SIGNATURE   26
EXHIBIT INDEX   27

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1       GETTY IMAGES, INC.       Q2  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

JUNE 30,

    

SIX MONTHS ENDED

JUNE 30,

  
   
   
 
     2004     2003     2004     2003  
   
 
 
 
(In thousands, except per share amounts)                         

Revenue

    $   150,327     $   127,722     $   306,839     $   258,038  

Cost of sales

      41,789       36,323       85,595       73,638  
    
 
 
 

Gross profit

      108,538       91,399       221,244       184,400  
    
 
 
 

Selling, general and administrative expenses

      54,411       51,792       109,128       105,156  

Depreciation

      13,321       14,803       27,144       29,736  

Amortization

      1,091       940       2,185       1,875  

Other operating (income) expenses

      (128 )     85       2       (75 )
    
 
 
 

Operating expenses

      68,695       67,620       138,459       136,692  
    
 
 
 

Income from operations

      39,843       23,779       82,785       47,708  

Interest expense

      (913 )     (3,894 )     (1,980 )     (7,652 )

Interest income

      2,041       819       3,794       1,421  

Exchange (losses) gains, net

      (44 )     809       (751 )     1,724  

Other (expenses) income, net

      —       (3 )     (11 )     2  
    
 
 
 

Income before income taxes

      40,927       21,510       83,837       43,203  

Income tax expense

      (15,775 )     (8,344 )     (32,599 )     (16,807 )
    
 
 
 

Net income

    $ 25,152     $ 13,166     $ 51,238     $ 26,396  
   
 
 
 

Earnings per share

                                 

Basic

    $ 0.43     $ 0.24     $ 0.88     $ 0.49  

Diluted

      0.41       0.23       0.84       0.46  
   
 
 
 

Shares used in computing earnings per share

                                 

Basic

      58,590       54,854       58,128       54,424  

Diluted

      61,141       58,198       60,824       57,542  

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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2       GETTY IMAGES, INC.       Q2  2004       FORM 10-Q   PART I       ITEM 1

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

    

JUNE 30,

2004

     DECEMBER 31,
2003		  
   
 
(In thousands)             

ASSETS

                 

Current assets

                 

Cash and cash equivalents

    $ 117,922     $ 140,058  

Short-term investments

      304,160       167,525  

Accounts receivable, net

      80,734       75,781  

Prepaid expenses

      9,622       9,693  

Deferred income taxes, net

      13,206       13,206  

Other current assets

      2,877       1,246  
    
 

Total current assets

      528,521       407,509  

Property and equipment, net

      114,274       123,268  

Goodwill

      603,486       603,024  

Identifiable intangible assets, net

      14,487       16,615  

Deferred income taxes, net

      48,869       62,567  

Other long-term assets

      10,467       11,101  
    
 

Total assets

    $   1,320,104     $   1,224,084  
   
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities

                 

Accounts payable

    $ 73,826     $ 64,454  

Accrued expenses

      33,658       42,459  

Income taxes payable

      3,652       8,170  
    
 

Total current liabilities

      111,136       115,083  

Long-term debt

      265,000       265,011  

Other long-term liabilities

      9,378       8,184  
    
 

Total liabilities

      385,514       388,278  
    
 

Commitments and contingencies (Note 5)

                 

Stockholders’ equity

                 

Common stock

      592       573  

Additional paid-in capital

      1,149,699       1,098,249  

Unearned compensation

      (215 )     (448 )

Accumulated deficit

      (224,015 )     (275,253 )

Accumulated other comprehensive income

      8,529       12,685  
    
 

Total stockholders’ equity

      934,590       835,806  
    
 

Total liabilities and stockholders’ equity

    $ 1,320,104     $ 1,224,084  

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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3       GETTY IMAGES, INC.       Q2  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

    —      —      —      —       51,238       —       51,238  

Other comprehensive loss

    —      —      —      —       —       (4,156 )     (4,156 )

Amortization of unearned compensation

    —      —      —      233       —       —       233  

Stock options exercised

    1,861      19      37,517      —       —       —       37,536  

Restricted stock vesting

    —      —      39      —       —       —       39  

Tax benefit on stock options exercised

    —      —      13,894      —       —       —       13,894  
    
  
  
  
 
 
 

Balance at June 30, 2004

    59,192    $ 592    $ 1,149,699    $ (215 )   $ (224,015 )   $ 8,529     $ 934,590  

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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4       GETTY IMAGES, INC.       Q2  2004       FORM 10-Q   PART I       ITEM 1

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

SIX MONTHS ENDED JUNE 30,    2004     2003  
   
 
(In thousands)             

Cash flows from operating activities

                 

Net income

    $ 51,238     $ 26,396  

Adjustments to reconcile net income to net cash provided by operating activities

                 

Deferred income taxes

      27,719       12,297  

Depreciation

      27,144       29,736  

Bad debt expense

      2,023       2,194  

Amortization of identifiable intangible assets

    &n