<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) : FEBRUARY 9, 1998
GETTY IMAGES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-23747 98-0177556
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification
No.)
</TABLE>
2013 FOURTH AVENUE, FOURTH FLOOR 101 BAYHAM STREET
SEATTLE, WASHINGTON LONDON, ENGLAND
98121 NW1 OA6
(206) 441-9355 (011 44 171) 544-3456
(Addresses, including zip code, and telephone numbers,
including area code, of principal executive offices)
------------------------
122 SOUTH MICHIGAN AVENUE
SUITE 900
CHICAGO, ILLINOIS 60603
(Former address, if changed since last report)
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<PAGE>
EXPLANATORY NOTE
This Amendment No. 1 to the Current Report on Form 8-K dated February 9,
1998 (the "Report") filed by Getty Images, Inc., a Delaware corporation ("Getty
Images" or the "Company"), relates to the Company's completion of the
transactions described below. The purpose of this Amendment is to amend Item 7
to update and provide the required financial information relating to such
transactions which, in each case, it was impracticable to provide at the time
the Company filed the Report.
On February 9, 1998, Getty Images completed a series of transactions that
resulted in the combination of the businesses of Getty Communications plc, a
public limited company organized under the laws of England and Wales ("Getty
Communications"), and PhotoDisc, Inc., a Washington corporation ("PhotoDisc").
Descriptions of these transactions were included in (i) the Report as filed with
the Securities and Exchange Commission (the "Commission") on February 24, 1998
and (ii) the Registration Statement on Form S-4 (No. 333-38777) that the Company
filed with the Commission (as amended, the "Registration Statement") in
connection with the meetings of shareholders of Getty Communications and the
special meeting of the shareholders PhotoDisc that were required to approve the
transactions.
As a result of such transactions, Getty Images became the successor to Getty
Communications. Trading in Getty Communications American Depository Shares
("ADSs") on the Nasdaq National Market (NASDAQ: GETTY) terminated on February
10, 1998 and trading subsequently commenced in shares of Getty Images common
stock on the Nasdaq National Market (NASDAQ:GETY). Registration of the Getty
Communications ordinary shares and ADSs under the Securities Exchange Act of
1934, as amended, has been terminated.
Also as described in the Report, (i) on February 9, 1998, Getty Investments,
L.L.C. ("Getty Investments") completed a subscription for 1,518,644 shares of
Getty Images common stock at a purchase price of $18.4375 per share or an
aggregate of $28 million (the "Getty Investments Subscription") and (ii) on
February 10, 1998, Getty Images and Getty Communications completed their
acquisition (the "Allsport Acquisition") of all of the issued and outstanding
shares of Allsport Photographic plc ("Allsport").
1
<PAGE>
ITEM 7.FINANCIAL STATEMENTS, PRO FORMA CONSOLIDATED FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Businesses Acquired.
(1) The audited financial statements of PhotoDisc, Inc. as of December
31, 1997 and for the year ended December 31, 1997, are set forth on pages
F-2 to F-15. Prior period financial statements for PhotoDisc, Inc. were
included in the Registration Statement.
(2) The audited financial statements of Allsport Photographic plc as of
November 30, 1997 and for the year ended November 30, 1997 are set forth on
pages F-16 to F-34.
(b) Pro Forma Financial Information.
In this Item 7 (b), the following shall have the meaning indicated:
<TABLE>
<S> <C>
Acquisitions................. the Allsport Acquisition and the Merger, together
Acquisition Agreement........ the agreement dated February 6, 1998, among Getty Images,
Getty Communications and Stephen Michael Powell and others
named therein
Allsport..................... Allsport Photographic plc, a public limited company
organized under the laws of England and Wales
Allsport Acquisition......... the acquisition of Allsport pursuant to the Acquisition
Agreement
Allsport Ordinary Shares..... the issued ordinary shares, nominal value L1 per share, of
Allsport
EBITDA....................... earnings before interest, taxes, exchange gains/(losses),
depreciation, legal settlement costs and amortization
Getty Communications......... Getty Communications plc, a public limited company organized
under the laws of England and Wales, the predecessor company
to Getty Images
Getty Images................. Getty Images, Inc., a Delaware corporation
Getty Images Common Stock.... common stock, par value $0.01 per share, of Getty Images
Getty Ordinary Shares........ the issued Class A and Class B ordinary shares, nominal
value L0.01 per share, of Getty Communications
Merger....................... the merger of PhotoDisc and Merger Sub, with Merger Sub as
the surviving corporation in the Merger, with each then
outstanding share of PhotoDisc Common Stock converting into
the right to receive the amount of cash and number of shares
specified in the Merger Agreement
Merger Agreement............. the agreement dated September 15, 1997 by and among Getty
Images, Getty Communications, Merger Sub and PhotoDisc
Merger Sub................... Print Merger, Inc., a Washington corporation and wholly
owned subsidiary of Getty Images
PhotoDisc.................... PhotoDisc, Inc., a Washington corporation
PhotoDisc Common Stock....... common stock, par value $0.01 per share, of PhotoDisc
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Scheme of Arrangement........ the arrangement in accordance with the Companies Act, 1985
of Great Britain whereby each Getty Ordinary Share was
transferred to Getty Images or its nominees and the holders
of Getty Ordinary Shares were issued one share of Getty
Images Common Stock for every two Getty Ordinary Shares and
Getty Communications became a subsidiary of Getty Images
Series A Preferred Stock..... series A preferred stock, par value $0.01 per share, of
PhotoDisc
</TABLE>
The following unaudited condensed pro forma consolidated financial
information (the "Pro Forma Consolidated Financial Information") gives pro forma
effect to the completion of the Scheme of Arrangement, the Merger, the Getty
Investments Subscription and the Allsport Acquisition (collectively, the
"Transactions"), after giving effect to the pro forma adjustments described in
the accompanying notes. The Pro Forma Consolidated Financial Information has
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of each of Getty
Communications (which are included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997) and PhotoDisc and Allsport (which are
included in this Current Report on Form 8-K/A).
The Pro Forma Consolidated Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
results of operations or financial position of Getty Images would have been had
the Transactions occurred on the respective dates assumed, nor is it necessarily
indicative of Getty Images' future operating results or consolidated financial
position.
Getty Images will account for the acquisitions of PhotoDisc and Allsport by
the purchase method of accounting in accordance with U.S. GAAP. Accordingly, the
purchase consideration for acquiring the share capital of PhotoDisc and Allsport
has been allocated to the assets acquired, the liabilities assumed, goodwill and
other intangible assets acquired. A preliminary allocation of the purchase price
for each of PhotoDisc and Allsport has been reflected in the Pro Forma
Consolidated Financial Information. A final allocation of the purchase price for
each of PhotoDisc and Allsport is dependent upon the completion of certain
valuations and other studies which will be completed before the announcement of
the results of operations of Getty Images for the quarter ended March 31, 1998.
Getty Images believes that, once the valuations and other studies are completed,
the resulting allocation of purchase price will not result in an overall result
significantly different from the preliminary allocation and period of
amortization assumed for the purposes of the Pro Forma Consolidated Financial
Information.
3
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME STATEMENT AND
SUMMARIZED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
The following unaudited condensed pro forma income statement and summarized
statement of cash flows for the year ended December 31, 1997 are derived from
the audited historical consolidated statement of operations and consolidated
statement of cash flows of Getty Communications for the year then ended, the
audited historical consolidated statement of operations and consolidated
statement of cash flows of PhotoDisc for the year then ended, and the audited
historical consolidated profit and loss account and consolidated statement of
cash flows of Allsport for the year ended November 30, 1997, after giving effect
to the pro forma adjustments described in the notes to the Pro Forma
Consolidated Financial Information. Such adjustments have been determined as if
the Transactions took place on January 1, 1997 the first day of the financial
period presented in the Pro Forma Consolidated Financial Information.
<TABLE>
<CAPTION>
GETTY PRO FORMA PRO FORMA
COMMUNICATIONS ALLSPORT PHOTODISC ADJUSTMENTS(1A) ADJUSTMENTS(2) CONSOLIDATED
$'000S $'000S $'000S $'000S $'000S $'000S
--------------- --------- ----------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales................................ 100,797 15,401 41,995 158,193
Cost of sales........................ (37,514)* (1,948) (8,083) 1,368 (46,177)*
------- --------- ----------- ------- ------- ------------
Gross profit......................... 63,283 13,453 33,912 1,368 112,016
Selling, general and administrative
expenses........................... (43,936)* (12,572) (29,686) 2,108 (84,086)*
Amortization of intangibles.......... (3,253) -- -- (32,191)(a) (35,444)
Depreciation......................... (8,214) -- -- (3,065) (11,279)
------- --------- ----------- ------- ------- ------------
Operating income/(loss).............. 7,880 881 4,226 411 (32,191) (18,793)
Net interest income/(expense)........ 1,187 (90) 181 (2,329)(b) (1,051)
Other expenses....................... -- -- (185) (185)
Exchange losses...................... (198) -- -- (198)
Legal settlement..................... (974) -- -- (974)
------- --------- ----------- ------- ------- ------------
Income before taxes.................. 7,895 791 4,222 411 (34,520) (21,201)
Income taxes......................... (3,873) (401) (1,594) (127) 815(c) (5,180)
------- --------- ----------- ------- ------- ------------
Net income/(loss).................... 4,022 390 2,628 284 (33,705) (26,381)
------- --------- ----------- ------- ------- ------------
------- --------- ----------- ------- ------- ------------
EBITDA............................... 19,347 2,041 6,542 -- -- 27,930
------- --------- ----------- ------- ------- ------------
------- --------- ----------- ------- ------- ------------
Net cash provided by/(used in):
Operating activities............... 13,174 1,098 5,514 (2,245)(b) 17,541
Investing activities............... (35,447) (1,161) (6,053) (70,974)(3c) (113,635)
Financing activities............... (3,052) 13 (1,998) 59,794(d) 54,757
Loss per share
--primary.......................... (0.90)
--fully diluted.................... (0.82)
Average number of shares outstanding
--primary.......................... 29,452,988
--fully diluted.................... 32,065,347
</TABLE>
- ------------------------
* Getty Communications' pro forma cost of sales and selling, general and
administrative expenses are exclusive of depreciation, which is included in
depreciation separately below.
See accompanying notes to the Pro Forma Consolidated Financial Information on
pages 7 to 15
4
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1997
The following unaudited condensed pro forma balance sheet at December 31,
1997 is derived from the audited historical consolidated balance sheet of Getty
Communications at December 31, 1997, the audited historical consolidated balance
sheet of PhotoDisc at December 31, 1997 and the audited historical consolidated
balance sheet of Allsport at November 30, 1997, after giving effect to the pro
forma adjustments described in the notes to the Pro Forma Consolidated Financial
Information. Such adjustments have been determined as if the Transactions took
place on December 31, 1997.
5
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
GETTY ADJUSTMENTS PRO FORMA PRO FORMA
COMMUNICATIONS ALLSPORT PHOTODISC (1B) ADJUSTMENTS(3) CONSOLIDATED
$'000 $'000 $'000 $'000 $'000 $'000
--------------- ----------- ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................ 29,234 1,848 3,778 (2,329) (11,180)(a) 21,351
Accounts receivable...................... 23,431 2,835 2,660 28,926
Inventories.............................. -- -- 1,752 1,752
Income taxes receivable.................. -- -- 859 859
Prepaid expenses and other assets........ 7,839 328 1,063 9,230
------- ----------- ----------- ----------- ------- ------------
TOTAL CURRENT ASSETS..................... 60,504 5,011 10,112 (2,329) (11,180) 62,118
Fixed assets, net........................ 39,853 5,701 7,432 (3,608) 49,378
Intangible assets........................ 66,870 -- 234 289,538(b) 356,642
Other long term assets................... -- -- 388 388
Deferred assets.......................... 4,411 69 -- 4,480
------- ----------- ----------- ----------- ------- ------------
TOTAL ASSETS............................. 171,638 10,781 18,166 (5,937) 278,358 473,006
------- ----------- ----------- ----------- ------- ------------
------- ----------- ----------- ----------- ------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable......................... 21,461 933 3,890 26,284
Accrued expenses......................... 10,305 1,287 1,913 13,505
Income taxes payable..................... 3,580 504 1,175 5,259
Short-term borrowing, including current
portion of long term debt.............. 2,096 232 -- 2,328
------- ----------- ----------- ------------
TOTAL CURRENT LIABILITIES................ 37,442 2,956 6,978 47,376
LONG-TERM DEBT........................... 14,657 1,356 -- 5,588 31,794(c) 53,395
------- ----------- ----------- ----------- ------- ------------
TOTAL LIABILITIES........................ 52,099 4,312 6,978 5,588 31,794 100,771
------- ----------- ----------- ----------- ------- ------------
SHAREHOLDERS' EQUITY
Common stock............................. 608 110 85 7 (511)(h) 299
Preferred stock.......................... -- -- 17 (17)(h) --
Additional paid-in capital............... 108,049 35 4,552 84 111,135(h) 223,855
Note receivable from shareholder......... -- -- (18) 18(h) --
Deferred compensation.................... -- -- (195) 195(h) --
Revaluation reserve...................... -- 3,530 -- (3,530) --
Capital reserve.......................... -- 45 -- (45)(h) --
Retained earnings........................ 8,124 2,776 6,754 (8,086) (1,444)(h) 8,124
Cumulative translation adjustments....... 2,758 (27) (7) 34(h) 2,758
Equity restructuring adjustments......... -- -- -- 137,199(h) 137,199
------- ----------- ----------- ----------- ------- ------------
TOTAL SHAREHOLDERS' EQUITY............... 119,539 6,469 11,188 (11,525) 246,564 372,235
------- ----------- ----------- ----------- ------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY................................. 171,638 10,781 18,166 (5,937) 278,358 473,006
------- ----------- ----------- ----------- ------- ------------
------- ----------- ----------- ----------- ------- ------------
</TABLE>
See accompanying notes to the Pro Forma Consolidated Financial Information on
pages 7 to 15.
6
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
NOTE 1--ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS
The historical financial statements of PhotoDisc are presented in U.S.
dollars and prepared in accordance with U.S. GAAP. The historical financial
statements of Allsport are prepared in accordance with U.K. GAAP, are presented
in pounds sterling and have been translated to U.S. dollars for the purposes of
this Pro Forma Consolidated Financial Information.
Certain reclassifications have been made to reflect the differences arising
from the adoption of Getty Images' classification of income and expenses and
accounting policies. In addition, adjustments have been made to recognize the
effect of certain costs arising from the Transactions, the exercise of warrants
over shares of PhotoDisc Common Stock and the application of U.S. GAAP to the
financial statements of Allsport. These adjustments to the financial statements
are detailed below.
(a) Income statement adjustments:
<TABLE>
<CAPTION>
$
---------------
(IN THOUSANDS)
<S> <C>
COST OF SALES
Reclassification of PhotoDisc credit card costs to selling, general and
administrative expenses...................................................... 605
Reclassification of PhotoDisc depreciation in respect of images to
depreciation................................................................. 763
------
1,368
------
------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Reclassification of PhotoDisc credit card costs from cost of sales............. (605)
Reclassification of PhotoDisc depreciation in respect of assets other than
images to depreciation....................................................... 1,553
Reclassification of Allsport depreciation in respect of assets to
depreciation................................................................. 749
Capitalisation of Allsport costs to conform with the accounting policies of
Getty Images................................................................. 411
------
2,108
------
------
DEPRECIATION
Reclassification of depreciation, as above..................................... (3,065)
------
------
INCOME TAXES
The capitalisation of Allsport costs give rise to an increase in the income
rate charge calculated at 31%................................................ (127)
------
------
</TABLE>
7
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
NOTE 1--ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS (CONTINUED)
(b) Balance sheet adjustments:
<TABLE>
<CAPTION>
$
--------------------
(IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS
Receipt of cash as a result of exercise of the outstanding warrants to
purchase an aggregate of 500,880 shares of PhotoDisc Common Stock at
$0.125 per share and 167,592 shares of PhotoDisc Common Stock at $0.1575
per share, which were exercised in connection with the Merger or would
have expired............................................................. 91
PhotoDisc's transaction expenses........................................... (3,254)
Less: PhotoDisc transaction expenses incurred at December 31, 1997......... 932
---------
(2,322)
Allsport's transaction expenses............................................ (98)
---------
(2,329)
---------
---------
FIXED ASSETS
Write-off of Allsport's film library included at valuation in the Allsport
historical financial statements.......................................... 3,608
---------
---------
LONG TERM DEBT
Cash paid to holders of options over shares of PhotoDisc Common Stock prior
to closing............................................................... 5,588
---------
---------
COMMON STOCK
Par value of new shares issued as a result of exercise of warrants over
shares of PhotoDisc Common Stock......................................... 7
---------
---------
ADDITIONAL PAID-IN CAPITAL
Premium on new shares issued as a result of exercise of warrants over
shares of PhotoDisc Common Stock......................................... 84
---------
---------
REVALUATION RESERVE
Write-off of Allsport's film library included at valuation in the Allsport
historical financial statements.......................................... (3,530)
---------
---------
RETAINED EARNINGS
PhotoDisc's transaction expenses........................................... (3,254)
Less: PhotoDisc transaction expenses incurred at December 31, 1997......... 932
---------
(2,322)
Cash paid to holders of options over shares of PhotoDisc Common Stock prior
to closing............................................................... (5,588)
Allsport's transaction expenses............................................ (98)
Write-off of Allsport's film library....................................... (78)
---------
(8,086)
---------
---------
</TABLE>
8
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
NOTE 2--PRO FORMA ADJUSTMENTS TO INCOME STATEMENT AND SUMMARIZED STATEMENT OF
CASH FLOWS
The pro forma adjustments comprise the following:
(a) Amortization of intangible assets, had the Transactions taken place on
January 1, 1998
<TABLE>
<CAPTION>
$
--------------------
<S> <C> <C>
(IN THOUSANDS)
Amortization of Allsport's other intangible assets......................... 3,039
Amortization of goodwill relating to Allsport.............................. 2,189
---------
5,228
Amortization of PhotoDisc's other intangible assets........................ 17,404
Amortization of goodwill relating to PhotoDisc............................. 9,559
---------
26,963
---------
32,191
---------
---------
</TABLE>
The acquisitions of PhotoDisc and Allsport generated goodwill of
$191,181,000 and $43,778,000, respectively, based on the preliminary allocation
of the purchase prices (see Note 3(b)). These balances will be capitalized and
amortized. Getty Images' management considers twenty years to be a suitable
period of amortization for this goodwill. Other intangible assets arising on the
Acquisition ($50,008,000 and $4,571,000 for PhotoDisc and Allsport,
respectively, based on the preliminary allocation of purchase prices) will be
capitalized and amortized over a period of 1 to 4 years.
(b) Interest expense on long-term debt
The Acquisitions have been funded in part via long-term debt amounting to
$32,215,000 (see Note 3(c)). Interest on this debt is payable at 1.25% above
U.S. dollar LIBOR, which is assumed to be 5.7188% for the purposes of this Pro
Forma Consolidated Financial Information (which was the 1 month rate quoted by
BT Alex. Brown Incorporated on December 31, 1997).
The resulting interest charge to the income statement, had the Acquisitions
taken place on January 1, 1997, would have been as follows:
<TABLE>
<CAPTION>
$
---------------
<S> <C>
(IN THOUSANDS)
Interest at 6.9688%............................................................ 2,245
Amortization of arrangement fee over a five year period........................ 84
-----
2,329
-----
-----
</TABLE>
The variable interest rate assumed above is based on rates prevailing as at
December 31, 1997. A 0.125% variance in variable interest rates would have an
impact of $40,000 on the pro forma interest expense for the year ended December
31, 1997.
(c) The pro forma interest charge qualifies for tax relief at 35%. The
resulting credit to the income statement that would have occurred had the
Acquisitions taken place on January 1, 1997 is $815,000 for the year ended
December 31, 1997.
9
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
NOTE 2--PRO FORMA ADJUSTMENTS TO INCOME STATEMENT AND SUMMARIZED STATEMENT OF
CASH FLOWS (CONTINUED)
(d) The Transactions give rise to a cash inflow on financing activities as
follows:-
<TABLE>
<CAPTION>
$
-------------
(IN
THOUSANDS)
<S> <C>
Total term debt (see Note 3(c))................................................ 32,215
Arrangement fee, paid from cash and cash equivalents (see Note 3 (c)).......... (421)
------
31,794
Subscription for shares of Getty Images Common Stock (see Note 3(a))........... 28,000
------
59,794
------
------
</TABLE>
NOTE 3--PRO FORMA ADJUSTMENTS TO BALANCE SHEET
(a) The effect of the Transactions on cash and cash equivalents is
summarized below:-
<TABLE>
<CAPTION>
$
(IN
THOUSANDS)
-------------
<S> <C>
Subscription for 1,518,644 shares of Getty Images Common Stock pursuant to the
Getty Investments Subscription............................................... 28,000
Cash outgoings in respect of the Acquisitions (see Note 3(c)).................. (39,180)
-------------
(11,180)
-------------
-------------
</TABLE>
(b) Under the Acquisition Agreement, holders of Allsport Ordinary Shares
were entitled to receive stock consideration and cash consideration. This,
together with other associated costs, is summarised below:
<TABLE>
<CAPTION>
$
(IN
THOUSANDS)
-------------
<S> <C>
PURCHASE PRICE OF ALLSPORT
Cash consideration to holders of Allsport Ordinary Shares at closing........... 26,998
Getty Images' transaction expenses............................................. 900
------
Cash costs of the Allsport Acquisition (see Note 3(c))......................... 27,898
Stock Consideration--Shares of Getty Images Common Stock issued (691,899 @
$21.25) (see note 3(d))...................................................... 14,703
Fair value of options over shares of Allsport Common Stock converted to options
over shares of Getty Images Common Stock (see Note 3(f))..................... 8,511
------
Total purchase price........................................................... 51,112
Estimated fair value of Allsport at November 30, 1997 (see Note 3(g)).......... (2,763)
------
Excess of purchase price over net assets acquired.............................. 48,349
Amount allocated to other intangibles (amortized over 1 to 3 years)............ (4,571)
------
Amount allocated to goodwill (amortized over 20 years)......................... 43,778
------
------
</TABLE>
10
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
NOTE 3--PRO FORMA ADJUSTMENTS TO BALANCE SHEET (CONTINUED)
Under the Merger Agreement, holders of shares of PhotoDisc Common Stock were
entitled to receive at the closing of the Merger, stock consideration and cash
consideration. This, together with other associated costs, is summarized below:
<TABLE>
<CAPTION>
$
(IN
THOUSANDS)
-------------
<S> <C>
PURCHASE PRICE OF PHOTODISC
Cash consideration to holders of shares of PhotoDisc Common Stock and Series A
Preferred Stock at closing................................................... 34,076
Getty Images' transaction expenses............................................. 9,000
-------------
Cash costs of the Merger (see Note 3(c))....................................... 43,076
Stock consideration - Shares of Getty Images Common Stock issued (8,083,831 @
$21.25) (see Note 3(d) and 3(e))............................................. 171,781
Fair value of options over shares of PhotoDisc Common Stock converted to
options over shares of Getty Images Common Stock (see Note 3(f))............. 29,701
-------------
Total purchase price........................................................... 244,558
Estimated fair value of PhotoDisc at December 31, 1997 (see Note 3(g))......... (3,369)
-------------
Excess of purchase price over net assets acquired.............................. 241,189
Amount allocated to other intangibles (amortized over 2 to 3 years)............ (50,008)
-------------
Amount allocated to goodwill (amortized over 20 years)......................... 191,181
-------------
-------------
Total goodwill arising on the PhotoDisc and Allsport acquisitions.............. 234,959
-------------
-------------
Total goodwill and other intangible assets..................................... 289,538
-------------
-------------
</TABLE>
(c) The debt required totalling $36,215,000, together with the associated
costs, are reflected in the pro forma balance sheet as follows:
<TABLE>
<CAPTION>
$
(IN THOUSANDS)
----------------------------
<S> <C> <C>
Cash costs of the Allsport Acquisition......................... 27,898
Cash costs of the Merger....................................... 43,076
-------------
70,974
-------------
-------------
Funded by:
Long term debt............................................... 32,215
Less: arrangement fee (see Note 3(a))........................ (421)
------
31,794
Cash and cash equivalents.................................... 39,180
-------------
70,974
-------------
-------------
</TABLE>
11
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
NOTE 3--PRO FORMA ADJUSTMENTS TO BALANCE SHEET (CONTINUED)
(d) The number of shares of Getty Images Common Stock issued by way of stock
consideration has been valued at the closing trading price of Getty
Communications ADSs on the Nasdaq National Market on the closing date of
February 9, 1998.
(e) Of the number of shares of Getty Images Common Stock issued by way of
stock consideration to PhotoDisc shareholders, approximately 1.0 million are
escrow shares. Escrow shares are included in the purchase price for accounting
purposes.
(f) Options over shares of PhotoDisc Common Stock which convert into options
over shares of Getty Images Common Stock, have been valued by reference to the
Black-Scholes option pricing model.
Employees of Allsport held options over Allsport Ordinary Shares owned by an
Employee Benefit Trust. Shares of Getty Images Common Stock issued to the
Employee Benefit Trust have not been valued for the purposes of calculating the
costs of acquisition but the underlying options over Allsport Ordinary Shares,
which convert into options over shares of Getty Images Common Stock, have been
valued by reference to the Black-Scholes option pricing model.
(g) The estimated fair values are calculated as follows:
<TABLE>
<CAPTION>
$
(IN
THOUSANDS)
-------------
<S> <C>
ALLSPORT
Total shareholders' equity..................................................... 6,469
Adjustments to Allsport........................................................ (3,706)
-------------
2,763
-------------
-------------
PHOTODISC
Total shareholders' equity..................................................... 11,188
Adjustments to PhotoDisc....................................................... (7,819)
-------------
3,369
-------------
-------------
</TABLE>
(h) Under the Scheme of Arrangement, Getty Images issued one share of Getty
Images Common Stock for every two shares held by holders of Getty Ordinary
Shares. Getty Images issued shares to holders of Allsport Ordinary Shares and
shares of PhotoDisc Common Stock in accordance with the Acquisition Agreement
and Merger Agreement, respectively. The following consolidation adjustments are
required in respect of shareholders' equity as a result of these transactions.
12
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
NOTE 3--PRO FORMA ADJUSTMENTS TO BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
$
(IN THOUSANDS)
---------------------
<S> <C> <C>
COMMON STOCK
Elimination of Allsport Ordinary Shares at par............................................. (110)
Shares of Getty Images Common Stock issued at par to Allsport shareholders................. 11
---------
(99)
Elimination of shares of PhotoDisc Common Stock at par, following the exercise of 688,472
warrants over shares of PhotoDisc Common Stock........................................... (92)
Shares of Getty Images Common Stock issued at par to PhotoDisc shareholders................ 81
---------
(11)
Elimination of Getty Ordinary Shares at par and issue of shares of Getty Images Common
Stock at a ratio of 1:2.................................................................. (416)
Subscription for shares of Getty Images Common Stock at par (see Note 3(a))................ 15
----------
(511)
----------
----------
PREFERRED STOCK
Conversion and elimination of PhotoDisc's Series A Preferred Stock......................... (17)
----------
----------
ADDITIONAL PAID IN CAPITAL
Elimination of additional paid-in capital of Allsport...................................... (35)
Premium on shares of Getty Images Common Stock issued to holders of Allsport Ordinary
Shares................................................................................... 24,170
---------
24,135
Elimination of additional paid-in capital of PhotoDisc, following the exercise of warrants
over shares of PhotoDisc Common Stock.................................................... (4,636)
Premium on shares of Getty Images Common Stock issued to holders of shares of PhotoDisc
Common Stock............................................................................. 171,700
---------
167,064
Elimination of additional paid-in capital of Getty Communications.......................... (108,049)
Premium on subscription for shares of Getty Images Common Stock (see Note 3(a))............ 27,985
----------
111,135
----------
----------
</TABLE>
13
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
NOTE 3--PRO FORMA ADJUSTMENTS TO BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
$
(IN THOUSANDS)
-------------------------------
<S> <C> <C> <C>
NOTE RECEIVABLE FROM SHAREHOLDER
Elimination of note receivable from shareholders by PhotoDisc.......................... 18
---------
---------
DEFERRED COMPENSATION
Elimination of PhotoDisc deferred compensation......................................... 195
---------
---------
CAPITAL RESERVES
Elimination of capital reserves of Allsport............................................ (45)
---------
---------
RETAINED EARNINGS
Elimination of Allsport pre-acquisition retained earnings
Reserves at November 30, 1997........................................................ (2,776)
Allsport's transaction expenses...................................................... 98
Write-off of film library............................................................ 78
---------
(2,600)
Elimination of PhotoDisc pre-acquisition retained earnings:
Reserves at December 31, 1997........................................................ (6,754)
Cash paid to holders of options over shares of PhotoDisc Common Stock prior to 5,588
closing............................................................................
PhotoDisc's transaction expenses..................................................... 3,254
Less: PhotoDisc transaction expenses incurred at December 31, 1997................... (932)
---------
2,322
---------
1,156
---------
(1,444)
---------
---------
CUMULATIVE TRANSLATION ADJUSTMENTS
Elimination of Allsport pre-acquisition translation adjustments........................ 27
Elimination of PhotoDisc pre-acquisition translation adjustments....................... 7
---------
34
---------
---------
</TABLE>
14
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
NOTE 3--PRO FORMA ADJUSTMENTS TO BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
$
(IN THOUSANDS)
--------------------
<S> <C> <C>
EQUITY RESTRUCTURING ADJUSTMENTS
Fair value of options over shares of Allsport Common Stock held by an Employee Benefit Trust
converted to options over shares of Getty Images' Common Stock (see Note 3(f)).............. 8,511
Shares of Getty Images Common Stock issued to an Employee Benefit Trust, options over which
are held by employees of Allsport........................................................... (9,478)
---------
(967)
Elimination of Getty Ordinary Shares at par, net of the conversion to shares of Getty Images
Common Stock................................................................................ 416
Fair value of options over shares of PhotoDisc Common Stock converted to options over shares
of Getty Images' Common Stock (see Note 3(f))............................................... 29,701
Elimination of additional paid in capital of Getty Communications............................. 108,049
---------
137,199
---------
---------
</TABLE>
(i) Options over shares of Getty Communications ADSs have converted into
equivalent options over shares of Getty Images Common Stock. This conversion
does not require the establishment of a new measurement date.
NOTE 4--GENERAL
(a) The Pro Forma Consolidated Financial Information does not include
adjustments to eliminate amounts relating to transactions between Getty
Communications and PhotoDisc and Allsport because such amounts are not
considered material.
(b) Potential cost savings and efficiencies resulting from the Transactions
have not been reflected in the Pro Forma Consolidated Financial Information.
(c) Exhibits.
The following exhibits are filed as part of this report:
<TABLE>
<S> <C>
23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of Maidment Penney Quick & Co.
</TABLE>
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PHOTODISC, INC. FINANCIAL STATEMENTS
Report of Independent Accountants............................................. F-2
Consolidated Balance Sheet as of December 31, 1997............................ F-3
Consolidated Statement of Operations for the year ended December 31, 1997..... F-4
Consolidated Statement of Stockholders' Equity for the year ended December 31,
1997........................................................................ F-5
Consolidated Statement of Cash Flows for the year ended December 31, 1997..... F-6
Notes to Consolidated Financial Statements.................................... F-7 to F-15
ALLSPORT PHOTOGRAPHIC PLC FINANCIAL STATEMENTS PRESENTED IN ACCORDANCE WITH
U.K. GAAP
Report of Independent Accountants............................................. F-16
Consolidated Profit and Loss Account for the year ended November 30, 1997..... F-17
Consolidated Balance Sheet at November 30, 1997............................... F-18
Consolidated Statement of Cash Flows for the year ended November 30, 1997..... F-20
Notes to the Consolidated Statement of Cash Flows............................. F-21
F-22 to
Notes to Consolidated Financial Statements.................................... F-34
</TABLE>
The financial statements of Allsport Photographic plc refer to Allsport
Photographic plc as the company and to Allsport Photographic plc and its
subsidiaries as the group.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
PhotoDisc, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of PhotoDisc,
Inc. and Subsidiaries (the Company) as of December 31, 1997, and the related
consolidated statement of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. We did
not audit the financial statements of PhotoDisc Europe, a wholly-owned
subsidiary, which statements reflect total assets of $2,374,094 at December 31,
1997 and total revenues and net income of $9,315,919 and $68,752, respectively,
for the year then ended. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for PhotoDisc Europe, is based solely on the report of the
other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 1997, and the consolidated results of their operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
February 25, 1998
Seattle, Washington
F-2
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997
---------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................................ $ 3,778
Trade accounts receivable, net of allowance of $500.................................................. 2,614
Other accounts receivable............................................................................ 46
Inventories.......................................................................................... 1,752
Deferred taxes....................................................................................... 859
Prepaid expenses..................................................................................... 1,063
---------
Total current assets............................................................................... 10,112
Property and equipment:
Leasehold improvements............................................................................... 470
Furniture and equipment.............................................................................. 1,350
Computer equipment and software...................................................................... 5,737
Image collection..................................................................................... 3,327
---------
10,884
Less accumulated depreciation........................................................................ (3,452)
---------
Net property and equipment......................................................................... 7,432
Other assets:
Goodwill, net of accumulated amortization of $53..................................................... 234
Other................................................................................................ 388
---------
Total assets....................................................................................... $ 18,166
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................................................... $ 3,890
Accrued payroll...................................................................................... 987
Other accrued liabilities............................................................................ 926
Taxes payable........................................................................................ 1,175
---------
Total current liabilities.......................................................................... 6,978
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value--authorized 20,000,000 shares; issued and outstanding, 8,445,030........ 85
Series A Preferred stock, $.01 par value - authorized 5,000,000 shares, 1,701,879 shares issued and
outstanding, (preference in liquidation of $7,199 per share)....................................... 17
Additional paid-in capital........................................................................... 4,552
Retained earnings.................................................................................... 6,754
Cumulative foreign currency translation adjustments.................................................. (7)
Deferred compensation................................................................................ (195)
Note receivable for stock............................................................................ (18)
---------
Total stockholders' equity......................................................................... 11,188
---------
Total liabilities and stockholders' equity......................................................... $ 18,166
---------
---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Net sales.............................................................................................. $ 41,995
Cost of sales:
Cost of royalties.................................................................................... 3,597
Cost of finished product............................................................................. 4,486
---------
8,083
---------
Gross profit....................................................................................... 33,912
Operating expenses:
Sales and marketing.................................................................................. 13,867
Customer service and fulfillment..................................................................... 3,552
Product development.................................................................................. 3,476
General and administrative........................................................................... 8,791
---------
29,686
---------
Operating income................................................................................... 4,226
Other income (expense):
Interest income...................................................................................... 181
Other................................................................................................ (185)
---------
(4)
---------
Income before provision for income taxes........................................................... 4,222
Provision for income taxes............................................................................. 1,594
---------
Net income............................................................................................. $ 2,628
---------
---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY NOTE
COMMON PREFERRED PAID-IN RETAINED TRANSLATION DEFERRED RECEIVABLE
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT COMPENSATION FOR STOCK
------------- ----------- ----------- ----------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997....... $ 86 $ 17 $ 6,230 $ 4,126 $ (22) $ -- $ --
Exercise of common stock
options..................... 1 1
Issuance of common stock
options..................... 260 (260)
Amortization of deferred
compensation................ 65
Issuance of note receivable
for exercise of common stock
options..................... 1 17 (18)
Issuance of 18,750 shares of
common stock for services... 1 40
Net income.................... 2,628
Repurchase of 333,334 shares
of common stock............. (4) (1,996)
Foreign currency
translation................. 15
--- ----- ----------- ----------- ----- ----- -----
Balances, December 31, 1997..... $ 85 $ 17 $ 4,552 $ 6,754 $ (7) $ (195) (18)
--- ----- ----------- ----------- ----- ----- -----
--- ----- ----------- ----------- ----- ----- -----
<CAPTION>
TOTAL
---------
<S> <C>
Balances, January 1, 1997....... $ 10,437
Exercise of common stock
options..................... 2
Issuance of common stock
options..................... --
Amortization of deferred
compensation................ 65
Issuance of note receivable
for exercise of common stock
options..................... --
Issuance of 18,750 shares of
common stock for services... 41
Net income.................... 2,628
Repurchase of 333,334 shares
of common stock............. (2,000)
Foreign currency
translation................. 15
---------
Balances, December 31, 1997..... $ 11,188
---------
---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-5
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Cash flows from operating activities:
Net income............................................................................................ $ 2,628
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................................... 2,333
Provision for losses on accounts receivable......................................................... 312
Deferred income taxes............................................................................... (690)
Loss on asset disposition........................................................................... 5
Amortization of deferred compensation expense....................................................... 65
Compensation for stock issued for services.......................................................... 41
Cash provided (used) by changes in operating assets in liabilities:
Accounts receivable............................................................................... (976)
Inventories....................................................................................... (544)
Prepaid expenses.................................................................................. (254)
Other assets...................................................................................... (117)
Accounts payable.................................................................................. 1,204
Accrued liabilities............................................................................... 608
Taxes payable..................................................................................... 899
---------
Net cash provided by operating activities............................................................. 5,514
Cash flows from investing activities:
Purchase of property and equipment.................................................................... (5,766)
Purchase of subsidiary................................................................................ (287)
---------
Net cash used in investing activities................................................................. (6,053)
Cash flows from financing activities:
Proceeds from exercise of common stock options........................................................ 2
Common stock repurchase............................................................................... (2,000)
---------
Net cash (used in) provided by financing activities................................................... (1,998)
---------
Net (decrease) in cash and cash equivalents............................................................. (2,537)
Cash and cash equivalents:
Beginning of year..................................................................................... 6,315
---------
End of year........................................................................................... $ 3,778
---------
---------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes........................................................................................ $ 1,460
Issuance of common stock for services................................................................. $ 41
Issuance of note receivable for exercise of common stock options...................................... $ 18
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
PhotoDisc, Inc. and its subsidiaries (the "Company") develops
high-resolution photographs on CD-ROM which are sold primarily through retail
catalog sales to digital publishing and multimedia markets domestically and
internationally. The Company also sells single images that are downloaded from
their worldwide WEB site, PhotoDisc.com.
The Company is subject to certain business risks which could affect future
operations and financial performance. These risks include changes in technology
and related delivery of products, increased competition and litigation against
the Company based on intellectual property rights.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of PhotoDisc,
Inc. and its 100% owned foreign subsidiaries, PhotoDisc Europe, Ltd., PhotoDisc
Deutschland GmbH, PhotoDisc Japan KK, and PhotoDisc Australia Pty. All
significant intercompany transactions are eliminated upon consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Management believes concentrations of credit risk with respect to trade
receivables are limited due to the nature of the customers comprising the
Company's customer base. The Company performs credit reviews on certain of its
customers and generally does not require collateral. Reserves are maintained for
potential credit losses.
The Company maintains its cash in a bank in amounts, which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
INVENTORIES
Inventories consist of raw materials and finished goods, and are valued at
the lower of first-in, first-out cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets ranging from three to seven years. Maintenance and repairs are charged to
expense as incurred. Significant betterments are capitalized. Upon retirement or
sale the cost of assets disposed of and the related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in the
consolidated statement of operations. Image collection costs represent
capitalized production and image acquisition costs and refer to direct costs for
the purchase or development of images; such costs include scanning, direct
labor, overhead, and other costs related to the development of products. Costs
are amortized over three years and charged to cost of
F-7
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES , CONTINUED:
sales. The remaining estimated useful lives of images are evaluated
periodically, and adjusted as deemed appropriate based on units produced and
estimated units to be sold.
ADVERTISING EXPENSES
The cost of advertisements are expensed at the time of the first ad running,
all other costs are expensed as incurred. Total marketing and promotional
expense, for 1997 were $8,825.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign subsidiaries are translated to U.S.
dollars using the exchange rate in effect at the balance sheet date. Results of
operations are translated using the average exchange rate during the year.
Resulting translation adjustments are recorded as a separate component of
stockholder's equity as "Cumulative Foreign Currency Translation Adjustments."
REVENUE RECOGNITION
Revenues are primarily recognized upon shipment of goods to customers or,
for Internet sales when products are downloaded from the Company's web site. The
Company has a policy which guarantees refunds or exchanges for all product
returns, regardless of reason, for 30 days after purchase. The Company provides
allowances for such returns based on historical return patterns and specific
customer information.
INCOME TAXES
PhotoDisc, Inc. and subsidiaries file a U.S. federal income tax return.
Foreign subsidiaries file separate income tax returns in the applicable foreign
jurisdictions.
Prior to 1995, the Company's stockholders elected to file income taxes as a
subchapter S corporation. On January 1, 1995, the Company changed its status to
a C corporation. The Company follows the liability method of accounting for
income taxes pursuant to Statement of Financial Accounting Standards No. 109
("Statement 109"). Under Statement 109, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The Company
provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.
F-8
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES , CONTINUED:
Significant estimates, used by the Company include the development of the
allowance for doubtful accounts, estimated units of inventory to be sold,
depreciable and amortizable lives of property and equipment, allowance for sales
returns, and income taxes.
FOREIGN SALES
The Company had sales to customers in foreign countries, primarily in
Europe, Asia, Australia, and the Middle East. The foreign sales accounted for
33% of total consolidated revenues in aggregate for the year ended December 31,
1997. No one country accounted for more than 10% of sales for 1997.
Summary financial information of the Company's European subsidiary,
PhotoDisc Europe, Ltd., is presented below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
<S> <C>
Total assets.................................................................... $ 2,374
Total liabilities............................................................... 2,556
Total stockholders' (deficit)................................................... (182)
Total revenue................................................................... 9,316
Net income...................................................................... 69
</TABLE>
PRODUCT DEVELOPMENT COSTS
Product development costs consist of payroll and related expenses for
development and internet network operations personnel and consultants. Certain
costs directly related to the production of images, such as photoshoot costs,
and costs related to the scanning and editing of images, are capitalized as a
component of property and equipment. All other product development costs are
expensed as incurred.
2. INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Raw materials (primarily packaging).................................................. $ 1,050
Finished goods....................................................................... 702
---------
$ 1,752
---------
---------
</TABLE>
3. ACQUISITION OF FOREIGN SUBSIDIARY
In February 1997, the Company established PhotoDisc Deutschland GmbH
("PDD"), a subsidiary in Hamburg, Germany. PDD manages sales and marketing
activities in Germany, Austria, and Switzerland. The Company held a 70% interest
in the shares of PDD and options to purchase the remaining 30% interest for
$300. The options to purchase the remaining 30% were exercised in November 1997,
which resulted in the recording of approximately $280 in goodwill to be
amortized on the straight line basis over 5
F-9
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
3. ACQUISITION OF FOREIGN SUBSIDIARY , CONTINUED:
years. The Company also issued 18,750 shares of common stock to the former
minority owners in return for their entering into employment and consulting
agreements. The Company recorded compensation expense and paid-in capital in
amounts equal to the estimated fair value of the shares issued for services.
4. STOCKHOLDERS' EQUITY
PREFERRED STOCK
Preferred stock is issuable in one or more series, each with such
designations, preferences, rights, qualifications, limitations and restrictions
as the Board of Directors of the Company may determine at the time of issuance.
The Company's Articles of Incorporation, amended June 1996, authorized
1,701,879 shares of Series A Preferred stock and 1,701,879 shares of Series A-1
Preferred stock. As of December 31, 1997, no shares of the Series A-1 Preferred
stock had been issued. The Company issued 1,701,879 shares of Series A Preferred
stock during 1996 with the following terms:
CONVERSION: Each share of Series A Preferred stock is convertible at
the option of the holder into shares of common stock based on the Series A
conversion price. The conversion price of $4.23 per share was greater than
the fair market value of the Company's common stock as of the date the
Series A Preferred stock was issued. The conversion price is subject to
possible adjustment for the dilutive effect of additional shares of common
stock, except common stock issued pursuant to an incentive equity ownership
program or to effect a joint venture or other partnering arrangement,
merger, or reorganization (see Note 8). Each share is automatically
converted in the event of a public offering of the Company's common stock.
In addition, in the event of an initial public offering of the Company's
common stock, or a merger, consolidation or other transaction in which more
than 50 percent of the Company's common stock is disposed of, the holders of
the Company's Series A Preferred stock are entitled to receive additional
cash consideration in connection with the conversion of their shares into
common stock (see Note 8). The amount of cash consideration is determined
based on a formula which takes into account the timing of the transaction,
the fully diluted valuation of the Company and the original price of the
Series A Preferred stock.
LIQUIDATION: In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of Series A Preferred
stock will be entitled to receive, prior to any distributions of the surplus
funds of the Company to the holders of common stock, an amount equal to
$4.23 per share plus any declared but unpaid dividends.
VOTING: The holders of Series A Preferred stock are entitled to the
number of votes they would be entitled to if the shares of Series A
Preferred stock were converted to common stock.
The rights, preferences, privileges, and restrictions relating to the Series
A-1 Preferred stock are the same as those for the Series A Preferred stock,
except that no adjustments will be made to the conversion price.
F-10
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
4. STOCKHOLDERS' EQUITY , CONTINUED:
COMMON STOCK
During 1997, the Company repurchased 333,334 shares for $6.00 per share.
The Company received a note receivable from a stockholder in exchange for
the exercise of incentive stock options. The note has been recorded as a
reduction of stockholders' equity.
5. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is subject to legal proceedings and claims in the ordinary
course of business. The Company is not currently aware of any legal proceedings
or claims that the Company believes will have, individually or in the aggregate,
a material adverse effect on the Company's financial position or results of
operations.
ROYALTY AGREEMENTS
The Company enters into licensing agreements in connection with the purchase
of images. The Company is required under certain licensing agreements to pay
royalties based on a percentage of net sales to photographers and stock photo
houses as long as the product is marketed. Such royalties are recorded as
expense when revenue is recognized and paid quarterly. The Company may grant
advance royalties to photographers on a case-by-case basis, which are accounted
for as a prepaid expense and amortized over future royalty earnings.
The parties to the licensing agreements have agreed to certain mutually
restrictive covenants with regard to confidentiality, indemnification,
disclosure of sales information, promotional use of products, and noncompete
agreements. Management believes the Company is in compliance with such covenants
at December 31, 1997.
OPERATING LEASES
The Company leases office space from an officer and stockholder under an
operating lease expiring December 2002. The Company has made certain building
improvements totaling approximately $360 that will be treated as reimbursements
to the lessor and amortized over the remaining lease period. Lease payments of
approximately $42 are due monthly. Lease payments to the related party were
approximately $401 for 1997. Also, the Company leases other office space and
office equipment from unaffiliated parties
F-11
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
5. COMMITMENTS AND CONTINGENCIES , CONTINUED:
under operating leases over three to five years. Rent expense was approximately
$1,428 for 1997. Approximate future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 1,602
1999................................................................................. 1,655
2000................................................................................. 1,588
2001................................................................................. 1,561
2002................................................................................. 1,495
Thereafter........................................................................... 231
---------
$ 8,132
---------
---------
</TABLE>
6. EMPLOYEE BENEFITS
DEFINED CONTRIBUTION PLANS
The Company established a 401(k) Retirement Plan (the "Plan") in 1996 which
covers substantially all eligible employees. The Plan is a qualified salary
reduction plan in which all eligible participants may elect to have a percentage
of their compensation contributed to the Plan, subject to certain guidelines
issued by the Internal Revenue Service. The Company can contribute to the plan
at the discretion of the Board of Directors. There were no contributions made by
the Company during 1997.
STOCK OPTION PLANS
The Company has reserved 3,000,000 shares of common stock for issuance under
its 1994 Stock Option Plan for certain qualified employees and directors.
Options granted under this plan may be either incentive stock options or
nonqualified stock options and are generally granted at the fair market value of
the Company's common stock at the date of grant. Options vest and expire under
the terms established at the date of grant. The remaining contractual option
lives range from 8 to 10 years. The Company has agreed to pay an aggregate of
approximately $149 to two option holders upon their exercise of options to
purchase an aggregate of 859,200 shares should their options be about to
terminate or in connection with the occurrence of certain extraordinary
corporate events including the closing of the Merger Agreement described in Note
8. The $149 was recorded as compensation expense in 1997. A summary of stock
options follows:
F-12
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
6. EMPLOYEE BENEFITS , CONTINUED:
STOCK OPTION PLANS, CONTINUED
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
---------- ---------------
<S> <C> <C>
Options outstanding at January 1, 1997............................. 2,151,300 $ 0.67
Granted.......................................................... 630,000 7.07
Exercised........................................................ (124,450) 0.16
Canceled......................................................... (31,500) 3.12
----------
Options outstanding at December 31, 1997........................... 2,625,350 2.20
----------
----------
Options exercisable at December 31, 1997........................... 1,540,463 0.33
----------
----------
Options available for grant at December 31, 1997................... 374,650
----------
----------
Weighted average fair value of options granted in 1997 whose
exercise price was equal to the fair value of the stock on the
date of grant.................................................... $ 6.90
-----
-----
Weighted average fair value of options granted in 1997 whose
exercise price was less than the fair value of the stock on the
date of grant.................................................... $ 7.61
-----
-----
</TABLE>
The following table summarizes information about common stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF REMAINING NUMBER OF
OPTIONS CONTRACTUAL OPTIONS
RANGE OF EXERCISE PRICES OUTSTANDING LIFE EXERCISABLE
- ------------------------------------------------------ ----------- --------------- ----------
<S> <C> <C> <C>
$0.16................................................. 1,477,950 6.63 1,413,950
$2.22................................................. 526,900 8.64 125,574
$4.25 - $6.00......................................... 375,250 9.39 939
$7.00 - $9.00......................................... 227,750 9.65
$11.70 - $16.65....................................... 17,500 9.81
----------- --- ----------
2,625,350 7.71 1,540,463
----------- --- ----------
----------- --- ----------
</TABLE>
During 1995, the Company granted warrants to purchase 500,880 shares of
common stock at $0.125 per share to a majority shareholder and 167,592 shares at
$0.1575 per share to founding shareholders, in recognition of various
contributions to the Company since its inception. Fair market value at the date
of both grants was deemed to be $0.1575 per share. In connection with the
acquisition of the Company by Getty Communications plc (see Note 8), all of the
outstanding warrants at December 31, 1997 were exercised in 1998.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
F-13
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
6. EMPLOYEE BENEFITS , CONTINUED:
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair value of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
Had compensation expense been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of SFAS No.
123, the Company's net income would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
Net income:
As reported................................................................... $ 2,628
Pro forma..................................................................... $ 2,241
</TABLE>
The effects of applying SFAS No. 123 in the above pro forma disclosure are
not indicative of future amounts.
The fair market value of each option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the foregoing
assumptions: expected life, 2 years following vesting; stock volatility, 0%;
risk free interest rate, 6.29% for the year ended December 31, 1997; and no
dividends during the expected term.
7. INCOME TAXES
As described more fully in Note 1, the Company changed from a subchapter S
corporation to a C corporation during 1995. As a result of the termination of
the Subchapter S election, during 1995 the Company distributed to the
stockholders their pro rata share of $389 in previously undistributed taxable
profits.
The provision (benefit) for income taxes for the year ended December 31,
1997 are comprised of the following:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Current tax expense.................................................................. $ 2,284
Deferred tax expense................................................................. (690)
---------
$ 1,594
---------
---------
</TABLE>
F-14
<PAGE>
PHOTODISC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
7. INCOME TAXES , CONTINUED:
The Company's provision for income tax differs from the amount computed by
applying the statutory rate as follows:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Tax at statutory rate................................................................. 34.00%
Benefit of foreign sales corporation.................................................. (4.60)
Nondeductible merger expenses......................................................... 5.28
Foreign taxes......................................................................... 0.68
Nondeductible meals and entertainment................................................. 0.81
Other................................................................................. 1.61
---------
Effective tax rate.................................................................... 37.78%
---------
---------
</TABLE>
The tax effects of the temporary differences comprising the Company's
deferred tax assets (liabilities) at December 31 are as follows:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Inventory............................................................................. $ 343
Allowance for bad debt and returns.................................................... 162
Prepaid expenses...................................................................... (94)
Accrued payroll and related liabilities............................................... 52
Other accrued liabilities............................................................. 393
Property and equipment................................................................ 3
---------
$ 859
---------
---------
</TABLE>
Although realization is not assured, management believes that it is more
likely than not that all of the net deferred tax asset will be realized through
future taxable income.
8. SUBSEQUENT EVENTS
On February 9, 1998, the Company was acquired by Getty Communications plc, a
United Kingdom corporation, according to the terms of a September 15, 1997
merger agreement which was approved by the stockholders of both companies on
January 30, 1998. Pursuant to the transaction, Getty Communications formed Getty
Images, Inc. as a new United States holding company of Getty Communications and
the Company. All shares of Getty Communications (including shares underlying
American Depository Shares) were converted into approximately 19.2 million
shares of Getty Images trading on the NASDAQ National Market (NASDAQ: GETY).
The stockholders of the Company received approximately 8.1 million shares of
Getty Images Common stock and $39,600. Of this amount, approximately 1 million
shares were placed in escrow by certain principal stockholders of the Company to
collateralize certain indemnifications of obligations. All options to purchase
shares of the Company's common stock that were outstanding on February 9, 1998
were assumed by Getty Images and become exercisable for shares of common stock
of Getty Images in a ratio equivalent to that used in determining the merger
consideration to be received by the stockholders of the Company. In connection
with the acquisition, the Company incurred $2,668 in investment banking fees.
F-15
<PAGE>
AUDITORS' REPORT TO THE
MEMBERS OF ALLSPORT PHOTOGRAPHIC PLC
We have audited the financial statements on pages F-17 to F-34.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors are responsible for the preparation of the financial
statements. It is our responsibility to form an independent opinion based on our
audit on those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements and of whether the
accounting policies are appropriate to the group's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the company and the group as at 30 November 1997 and of the
profit, total recognized gains and cash flows of the group for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
/s/ MAIDMENT PENNEY QUICK & CO
- -----------------------------------------
Maidment Penney Quick & Co
Chartered Accountants and
Registered Auditors
61 Chandos Place
London WC2N 4HG
17 April 1998
- ----------------------------
F-16
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 NOVEMBER 1997
<TABLE>
<CAPTION>
NOTE 1997
----- ------------
<S> <C> <C>
L
Turnover..................................................................................... 3 9,367,838
Cost of sales................................................................................ 1,185,809
------------
GROSS PROFIT................................................................................. 8,182,029
Other operating expenses..................................................................... 4 7,646,597
------------
OPERATING PROFIT............................................................................. 535,432
Interest receivable.......................................................................... 5 49,604
Interest payable............................................................................. 6 (104,179)
------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION................................................ 480,857
Tax on profit on ordinary activities......................................................... 10 (244,594)
------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................................................. 236,263
------------
RETAINED PROFIT AS PREVIOUSLY STATED AT 30 NOVEMBER 1996..................................... 1,438,079
PRIOR YEAR ADJUSTMENT........................................................................ 9 (80,030)
------------
RETAINED PROFIT AT 30 NOVEMBER 1996 RESTATED................................................. 1,358,049
------------
RETAINED PROFIT AT 30 NOVEMBER 1997.......................................................... L 1,594,312
------------
------------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
PROFIT/(LOSS) FOR THE FINANCIAL YEAR
Allsport Photographic Plc.................................................................. 1,309,669
Subsidiary companies....................................................................... (1,073,406)
------------
236,263
Translation differences on foreign currency.................................................. (9,807)
------------
TOTAL RECOGNISED GAINS RELATING TO THE YEAR.................................................. L226,456
------------
------------
</TABLE>
The notes on pages F-22 to F-34 form an integral part of these financial
statements.
Auditors' report page F-16.
F-17
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
CONSOLIDATED BALANCE SHEET AT 30 NOVEMBER 1997
<TABLE>
<CAPTION>
NOTE 1997
----- ------------------------
<S> <C> <C> <C>
L L
FIXED ASSETS
Tangible assets................................................................. 11 3,393,253
CURRENT ASSETS
Debtors......................................................................... 13 1,923,526
Cash at bank and in hand........................................................ 1,099,842
----------
3,023,368
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.................................. 14 1,747,482
----------
NET CURRENT ASSETS.............................................................. 1,275,886
------------
TOTAL ASSETS LESS CURRENT LIABILITIES........................................... 4,669,139
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR......................... 15 807,127
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred Tax.................................................................... 17 11,750
------------
NET ASSETS...................................................................... L3,850,262
------------
------------
CAPITAL AND RESERVES
Called-up share capital......................................................... 20 64,775
Reserves........................................................................ 21 3,785,487
------------
EQUITY SHAREHOLDERS' FUNDS...................................................... 22 L3,850,262
------------
------------
</TABLE>
These financial statements were approved by the board on 26 March 1998 and
signed on its behalf.
<TABLE>
<S> <C>
Signed on behalf of the board
/s/ ADRIAN MURRELL
- ----------------------------
Adrian Murrell
/s/ LEE MARTIN
- ---------------------------- DIRECTORS
Lee Martin
17 April 1998
- ----------------------------
</TABLE>
The notes on pages F-22 to F-34 form an integral part of these financial
statements.
Auditors' report page F-16.
F-18
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
COMPANY BALANCE SHEET AT 30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
----------------------------
NOTE L L
-----
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets.............................................................. 11 3,023,635
Investments.................................................................. 12 6,040
-------------
3,029,675
CURRENT ASSETS
Debtors...................................................................... 13 1,075,625
Cash at bank and in hand..................................................... 25,002
-------------
1,100,627
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR........................................................ 14 319,778
-------------
NET CURRENT LIABILITIES...................................................... 780,849
-------------
TOTAL ASSETS LESS CURRENT LIABILITIES........................................ 3,810,524
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR...................... 15 807,127
PROVISIONS FOR LIABILITIES AND CHARGES....................................... 17 11,750
-------------
NET ASSETS................................................................... L2,991,647
-------------
-------------
Called-up share capital...................................................... 20 64,775
Reserves..................................................................... 21 2,926,872
-------------
EQUITY SHAREHOLDERS' FUNDS................................................... 22 L2,991,647
-------------
-------------
</TABLE>
These financial statements were approved by the board on 26 March 1998 and
signed on its behalf.
<TABLE>
<S> <C>
Signed on behalf of the board
/s/ ADRIAN MURRELL
- ----------------------------
ADRIAN MURRELL
/S/ LEE MARTIN
- ---------------------------- DIRECTORS
LEE MARTIN
17 APRIL 1998
- ----------------------------
</TABLE>
The notes on pages F-22 to F-34 form an integral part of these financial
statements.
Auditors' report page F-16.
F-19
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 1997
<TABLE>
<CAPTION>
NOTE 1997
--------------- -----------
(PAGE F-21) L
<S> <C> <C>
CASH FLOW STATEMENT
Net Cash Inflow from Operating Activities............................................... 1 667,750
Returns on Investments and Servicing of Finance......................................... 2 (54,575)
Taxation................................................................................ (255,164)
Capital Expenditure..................................................................... 2 (396,341)
-----------
Net Cash (outflow) before Financing..................................................... (38,330)
Financing............................................................................... 2 7,723
-----------
(Decrease) in cash...................................................................... L (30,607)
-----------
-----------
ANALYSIS OF CHANGES IN NET CASH
(Decrease) in Cash in the Year.......................................................... 3 (30,607)
Cash inflow in net debt................................................................. 3 7,777
-----------
(Decrease) in Net Cash.................................................................. (22,830)
Net Cash at 1 December 1996............................................................. 128,388
-----------
Net Cash at 30 November 1997............................................................ 3 L 105,558
-----------
-----------
</TABLE>
The notes on pages F-22 to F-34 form an integral of these financial statement.
Auditors' report page F-16
F-20
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 1997
1. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1997
-----------
L
<S> <C>
Operating Profit..................................................................................... 535,432
Depreciation......................................................................................... 465,823
Loss on sale of fixed assets......................................................................... 1,488
Increase in debtors.................................................................................. (544,434)
Increase in creditors................................................................................ 291,969
Prior year adjustment................................................................................ (80,030)
Exchange rates....................................................................................... (2,498)
-----------
Net cash Inflow from continuing operating activities................................................. L 667,750
-----------
-----------
</TABLE>
2. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
1997
-----------
L
<S> <C>
RETURN ON INVESTMENTS AND SERVICING OF FINANCE
Interest received.................................................................................... 49,604
Interest paid........................................................................................ (104,179)
-----------
Net cash outflow from returns on investments and servicing finance................................... L (54,575)
-----------
-----------
CAPITAL EXPENDITURE
Purchase of tangible fixed assets.................................................................... (396,341)
Proceeds from sale of fixed assets................................................................... --
-----------
Net cash outflow from capital expenditure............................................................ L(396,341)
-----------
-----------
FINANCING
Issue of ordinary share capital...................................................................... 15,500
Increase in loans due in more than one year.......................................................... 167,692
Capital element of finance lease rental payments..................................................... (84,011)
Repayment of bank loans.............................................................................. (91,458)
-----------
Net cash inflow from financing....................................................................... L 7,723
-----------
-----------
</TABLE>
3. ANALYSIS OF CHANGES IN NET CASH
<TABLE>
<CAPTION>
NON-CASH
1996 CASH FLOWS CHANGE 1997
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Cash at bank................................................ 1,130,449 (30,607) -- 1,099,842
------------- ---------- ----------- ------------
Debt due within 1 year...................................... (91,458) 91,458 (137,500) (137,500)
Debt due after 1 year....................................... (801,042) -- 137,500 (663,542)
Finance leases.............................................. (109,561) (83,681) -- (193,242)
------------- ---------- ----------- ------------
(1,002,061) 7,777 -- (994,284)
------------- ---------- ----------- ------------
L 128,388 L(22,830) L -- L 105,558
------------- ---------- ----------- ------------
------------- ---------- ----------- ------------
</TABLE>
F-21
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
1. ACCOUNTING POLICIES
A summary of the principal accounting policies is set out below, all of
which have been applied consistently throughout the year and the preceding year.
BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost
convention modified by the revaluation of the film library.
BASIS OF CONSOLIDATION
The group financial statements consolidate the financial statements of
Allsport Photographic plc and all its subsidiaries made up to 30 November each
year, except for Allsport Photography USA Inc, whose financial year end is 31
October.
TURNOVER
Turnover represents net invoiced sales, excluding value added tax.
FIXED ASSETS
Tangible assets (other than the film library) are stated at cost less
depreciation. Depreciation is calculated to write off the cost of fixed assets
over their estimated useful lives at the following annual rates:
<TABLE>
<S> <C>
Freehold building.................................. -- 2% on cost
Photographic equipment............................. -- 25% straight line
Fixtures and fittings.............................. -- 20% straight line
-- 25% reducing
Motor vehicles..................................... balance
</TABLE>
No depreciation is provided on freehold land.
FILM LIBRARY
An annual reassessment of the library's current value to the business is
undertaken and the valuations are based on revenues earned on the library
assets. Any increase in carrying amounts arising from the annual assessment of
the library is credited directly to the group's equity as a revaluation surplus.
To the extent that a decrease in carrying amount offsets a previous increase for
the same category of photograph, it is charged against that revaluation surplus.
DEFERRED TAXATION
Deferred taxation is provided on the liability method on accelerated capital
allowances to the extent that they are expected to reverse in the future without
being replaced, calculated at the rate at which it is estimated that tax will be
payable.
F-22
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
1. ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCIES
Exchange differences arising in the financial statements of individual
companies from transactions denominated in foreign currencies are dealt with in
the individual companies' profit and loss account.
For the purposes of consolidation, and application of the equity method of
accounting, the closing rate method is used, under which translation gains or
losses are shown as a movement on reserves. Profit and loss accounts of overseas
subsidiary undertakings are translated at the closing exchange rate.
PENSIONS
The group operates two money purchase schemes, both of which are contracted
out of the state scheme. Contributions are charged to the group profit and loss
account as they arise.
LEASES
The group entered into finance leases as described in note 16.
Assets held under finance leases are initially reported at the present value
of the minimum lease payments at the inception of the lease, with an equivalent
liability categorised as appropriate under creditors due within or after one
year. The asset is depreciated over the shorter of the lease term and its useful
economic life. Finance charges are allocated to accounting periods over the
period of the lease to produce a constant rate of return on the outstanding
balance. Rentals are apportioned between finance charges and reduction of the
liability, and allocated to cost of sales and other operating expenses as
appropriate.
2. HOLDING COMPANY PROFIT AND LOSS ACCOUNT
The company has taken advantage of the exemption in the Companies Act 1985,
S.230, not to present its own profit and loss account.
3. TURNOVER
A geographical analysis of turnover is as follows:
<TABLE>
<CAPTION>
1997
------------
L
<S> <C>
United Kingdom.................................................................. 4,452,302
Overseas........................................................................ 4,915,536
------------
L9,367,838
------------
------------
</TABLE>
F-23
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
4. OTHER OPERATING EXPENSES
<TABLE>
<CAPTION>
1997
------------
L
<S> <C>
Photographic costs.............................................................. 4,693,757
Administration expenses......................................................... 2,952,840
------------
L7,646,597
------------
------------
</TABLE>
5. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Bank interest received.......................................................... L49,604
------------
------------
</TABLE>
6. INTEREST PAYABLE
<TABLE>
<CAPTION>
1997
------------
L
<S> <C>
Bank loans and overdrafts....................................................... 83,893
Hire purchase interest.......................................................... 20,286
------------
L104,179
------------
------------
</TABLE>
7. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after charging:
<TABLE>
<CAPTION>
1997
------------
L
<S> <C>
Depreciation on tangible fixed assets:--
--owned....................................................................... 393,373
--held under finance leases................................................... 72,451
Auditors' remuneration.......................................................... 39,000
Staff costs (note 8)............................................................ 3,265,707
Hire of equipment............................................................... 43,763
------------
------------
</TABLE>
8. STAFF COSTS
(a) Particulars of employees, including directors, are as shown below:
<TABLE>
<CAPTION>
1997
------------
L
<S> <C>
Wages and salaries.............................................................. 2,933,242
Social security costs........................................................... 380,517
Other pension costs............................................................. 51,948
------------
L3,265,707
------------
------------
</TABLE>
F-24
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
8. STAFF COSTS (CONTINUED)
The average number of persons employed by the group during the year was as
follows:
<TABLE>
<CAPTION>
1997
NUMBER
EMPLOYED
-------------
<S> <C>
Administration..................................................................... 88
Photographic....................................................................... 46
---
134
---
---
</TABLE>
(c) Directors' remuneration
The employee costs shown above include the following remuneration in respect
of directors of the company.
<TABLE>
<CAPTION>
1997
------------
<S> <C>
L
Emoluments (including pension contributions).................................... L627,830
------------
------------
Benefits in kind................................................................ L 33,876
------------
------------
</TABLE>
The directors' remuneration shown above (excluding pension contributions)
included:
<TABLE>
<CAPTION>
1997
------------
<S> <C>
L
Chairman........................................................................ L171,234
------------
Highest paid director........................................................... L146,307
------------
------------
</TABLE>
Other directors received emoluments (excluding pension contributions) in the
following ranges:
<TABLE>
<CAPTION>
1997
NUMBER
-------------
<S> <C>
L 30,001 -- L 35,000................................................................ 2
L 60,001 -- L 65,000................................................................ 1
L 75,001 -- L 80,000................................................................ 2
L 80,001 -- L 85,000................................................................ 1
L145,001 -- L150,000................................................................ 1
</TABLE>
One director was wholly remunerated outside the United Kingdom.
9. PRIOR YEAR ADJUSTMENT
The financial statements for the year ended 30 November 1996 have been
adjusted so as to reflect the deferred income resulting on client contracts in
the US. The net income and the retained earnings for the year ended 30 November
1996 have decreased by L80,030.
F-25
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
10. TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge is based on the taxable profit for the year and comprises:
<TABLE>
<CAPTION>
1997
------------
L
<S> <C>
Corporation tax at 32.3%........................................................ 288,350
Over-provision in previous years................................................ (3,738)
Overseas taxation............................................................... 491
Overseas deferred taxation...................................................... (52,259)
Deferred taxation............................................................... 11,750
------------
L244,594
------------
------------
</TABLE>
F-26
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
11. TANGIBLE FIXED ASSETS
A) GROUP
<TABLE>
<CAPTION>
FILM LIBRARY FREEHOLD PHOTOGRAPHIC FIXTURES MOTOR TOTAL
------------ LAND & EQUIPMENT FITTINGS VEHICLES ------------
BUILDINGS ------------ ------------ ---------
L ---------- L L L L
L
<S> <C> <C> <C> <C> <C> <C>
COST OR VALUATION
At 1 December 1996
Cost.............................. -- 542,648 1,708,660 1,029,766 53,256 3,334,330
Valuation......................... 2,147,147 -- -- -- -- 2,147,147
Additions......................... -- 14,644 316,415 65,282 -- 396,341
Disposals......................... -- -- -- (7,456) -- (7,456)
Exchange reserve.................. -- -- -- (17,294) (526) (17,820)
------------ ---------- ------------ ------------ --------- ------------
AT 30 NOVEMBER 1997............... L2,147,147 L557,292 L2,025,075 L1,070,298 L52,730 L5,852,542
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
DEPRECIATION
At 1 December 1996................ -- 96,224 1,137,786 728,637 47,298 2,009,945
Charge for year................... -- 10,104 313,173 141,056 1,490 465,823
Disposals......................... -- -- -- (5,968) -- (5,968)
Exchange reserve.................. -- -- -- (9,986) (525) (10,511)
------------ ---------- ------------ ------------ --------- ------------
AT 30 NOVEMBER 1997............... L -- L106,328 L1,450,959 L 853,739 L48,263 L2,459,289
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
NET BOOK VALUE
AT 30 NOVEMBER 1997............. L2,147,147 L450,964 L 574,116 L 216,559 L 4,467 L3,393,253
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
LEASED ASSETS
NET BOOK VALUE
AT 30 NOVEMBER 1997............. L -- L -- L 155,948 L 1 L 1 L 155,950
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
</TABLE>
Included in Freehold Land and Buildings is L52,050 in respect of land which is
non-depreciable.
F-27
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
11. TANGIBLE FIXED ASSETS (CONTINUED)
B) COMPANY
<TABLE>
<CAPTION>
FILM LIBRARY FREEHOLD PHOTOGRAPHIC FIXTURES MOTOR TOTAL
------------ LAND & EQUIPMENT FITTINGS VEHICLES ------------
BUILDINGS ------------ ------------ ---------
L ---------- L L L L
L
<S> <C> <C> <C> <C> <C> <C>
COST OR VALUATION
At 1 December 1996
Cost.............................. -- 502,616 1,291,952 263,416 34,961 2,092,945
Valuation......................... 2,147,147 -- -- -- -- 2,147,147
Additions......................... -- -- 229,396 -- -- 229,396
Disposals......................... -- -- -- -- -- --
------------ ---------- ------------ ------------ --------- ------------
AT 30 NOVEMBER 1997............... L2,147,147 L502,616 L1,521,347 L 263,416 L34,961 L4,469,488
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
DEPRECIATION
At 1 December 1996................ -- 93,895 874,132 175,352 29,004 1,172,383
Charge for year................... -- 9,011 224,964 38,005 1,490 273,470
Reclassifications................. -- -- -- -- -- --
Disposals......................... -- -- -- -- -- --
------------ ---------- ------------ ------------ --------- ------------
AT 30 NOVEMBER 1997............... L -- L102,906 L1,099,096 L 213,357 L30,494 L1,445,853
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
NET BOOK VALUE AT 30 NOVEMBER 1997 L2,147,147 L399,711 L 422,251 L 50,059 L 4,467 L3,023,635
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
LEASED ASSETS NET BOOK VALUE AT 30
NOVEMBER 1997................... L -- L -- L 153,948 L -- L -- L 153,948
------------ ---------- ------------ ------------ --------- ------------
------------ ---------- ------------ ------------ --------- ------------
</TABLE>
Included in Freehold Land and Buildings is L52,050 in respect of land which is
non-depreciable.
F-28
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
12. INVESTMENTS
The following non-listed investments are carried at cost by the company:
<TABLE>
<CAPTION>
1997
---------
L
<S> <C>
Shares in subsidiaries............................................................. L6,040
---------
---------
</TABLE>
<TABLE>
<CAPTION>
COUNTRY OF
SUBSIDIARY COMPANY INCORPORATION SHAREHOLDING NATURE OF BUSINESS
- --------------------------------------- ------------- ------------- -----------------------
<S> <C> <C> <C>
Allsport (UK) Limited.................. UK 100% Sports photo sales
Allsport Photography USA Inc........... USA 100% Sports photo sales
</TABLE>
13. DEBTORS: AMOUNTS DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -------------
1997 1997
------------- -------------
L L
<S> <C> <C>
Trade debtors...................................................................... 1,686,849 --
Other debtors...................................................................... 66,882 41,355
Prepayments........................................................................ 128,631 --
Due from subsidiaries.............................................................. -- 1,034,270
Deferred tax....................................................................... 41,164 --
------------- -------------
L1,923,526 L1,075,625
------------- -------------
------------- -------------
</TABLE>
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -------------
1997 1997
------------- -------------
L L
<S> <C> <C>
Trade creditors.................................................................... 555,022 --
Bank loans and overdrafts.......................................................... 137,500 137,500
Obligations under finance lease contracts (note 16)................................ 49,657 40,890
Social security and other taxes.................................................... 191,288 3,630
Other creditors.................................................................... 13,984 13,984
Accruals and deferred income....................................................... 511,681 123,774
UK Corporation tax................................................................. 288,350 --
------------- -------------
L1,747,482 L319,778
------------- -------------
------------- -------------
</TABLE>
F-29
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
---------- ----------
1997 1997
---------- ----------
L L
<S> <C> <C>
Bank loans................................................................................ 663,542 663,542
Obligations under finance lease contracts (note 16)....................................... 143,585 143,585
---------- ----------
L807,127 L807,127
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROUP COMPANY
---------- ----------
1997 1997
---------- ----------
L L
<S> <C> <C>
BANK LOANS DUE AFTER MORE THAN ONE YEAR
Between one and two years................................................................. 160,000 160,000
Between two and five years................................................................ 477,292 477,292
After five years.......................................................................... 26,250 26,250
---------- ----------
L663,542 L663,542
---------- ----------
---------- ----------
</TABLE>
The bank loans are secured by a legal mortgage over the freehold property of
the company, and a mortgage debenture over the company's fixed and floating
assets.
16. OBLIGATIONS UNDER FINANCE LEASE CONTRACTS
The future minimum lease payments to which the group and company are
committed under finance leases are as follows:
<TABLE>
<CAPTION>
GROUP COMPANY
---------- ----------
1997 1997
---------- ----------
L L
<S> <C> <C>
Within one year........................................................................... 49,657 40,891
Between one and two years................................................................. 128,842 128,842
Between two and five years................................................................ 14,743 14,743
---------- ----------
L193,242 L184,476
---------- ----------
---------- ----------
Obligations payable within one year....................................................... 49,657 40,891
Obligations payable after one year........................................................ 143,585 143,585
---------- ----------
L193,242 L184,476
---------- ----------
---------- ----------
</TABLE>
F-30
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
17. DEFERRED TAXATION
Details of deferred taxation provided in the financial statements are set
out below.
a) Group
<TABLE>
<CAPTION>
1997
--------------------
PROVIDED NOT
--------- PROVIDED
L ---------
L
<S> <C> <C>
Accelerated capital allowances.............................................................. L11,750 L60,109
--------- ---------
--------- ---------
</TABLE>
b) Company
<TABLE>
<CAPTION>
1997
--------------------
PROVIDED NOT
--------- PROVIDED
L ---------
L
<S> <C> <C>
Accelerated capital allowances.............................................................. L11,750 L86,150
--------- ---------
--------- ---------
</TABLE>
Timing differences arising from capital allowances are partially provided
for to the extent that such differences will reverse in the foreseeable future.
No tax liability is expected to arise in the foreseeable future on revalued
assets and accordingly this is not provided or quantified.
18. CONTINGENT LIABILITIES
Allsport Photographic plc. has entered into an unlimited cross guarantee
with Allsport (UK) Limited in respect of bank borrowings.
19. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
GROUP COMPANY
--------- -----------
1997 1997
--------- -----------
L L
<S> <C> <C>
Authorised but not contracted for............................................................. L -- L --
--------- -----------
--------- -----------
</TABLE>
F-31
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
20. CALLED-UP SHARE CAPITAL
<TABLE>
<CAPTION>
1997
----------
L
<S> <C>
AUTHORISED
100,000 Ordinary shares of L1 each.................................................................... L100,000
----------
----------
ALLOTTED, CALLED-UP AND FULLY PAID
64,775 Ordinary shares of L1 each..................................................................... L 64,775
----------
----------
</TABLE>
During the year options to subscribe for 775 L1 ordinary shares in Allsport
Photographic plc. (the "Company") were exercised by a former director at an
option price of L20 per share.
On 23 December 1997, outstanding options to subscribe for 14,325 Company
shares were abandoned for no consideration. On the same date, the Company
established an Employee Benefit Trust (EBT) and, following the gift of L200,000
by the Company to the EBT, the EBT subscribed for 14,541 ordinary L1 shares in
the Company. Options were granted, at a nominal exercise price, for these shares
to be purchased by Group Company employees. Options to purchase 1,318 Company
shares were subsequently exercised by four of these optionholders.
Prior to the sale of the Company, 19,140 of the allotted share capital were
re-categorised into 19,140 'A' ordinary L1 shares. Of the authorised but
unissued share capital, 200 ordinary L1 shares were re-categorised into
2,000,000 'B' ordinary 0.01p shares.
The 'A' ordinary L1 shares and the 'B' ordinary 0.01p shares rank pari passu
in all respects except that the directors had a one-off right in respect of the
'A' ordinary shares to pay, and the shareholders had a one-off right to receive,
a bonus issue of 100 'B' ordinary 0.01p shares for such 'A' ordinary L1 shares
held. On 12 January 1998 a bonus issue was paid to all holders of 'A' ordinary
L1 shares.
As part of the acquisition of the Company by Getty Communications plc. and
Getty Images Inc. all Company shares held by the EBT were exchanged for
4,671,204 worth of Getty Images Inc. shares of common stock of 1 cent each, this
being calculated as the value of Company shares then held by the EBT. In
accordance with the EBT scheme rules, existing options to purchase Company
shares were replaced with options to purchase Getty Images Inc. shares of common
stock of 1 cent each.
F-32
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
21. RESERVES
A) GROUP
<TABLE>
<CAPTION>
REVALUATION FOREIGN CAPITAL SHARE PROFIT TOTAL
RESERVE CURRENCY RESERVES PREMIUM & LOSS ------------
------------ RESERVES --------- ACCOUNT ACCOUNT
L --------- L --------- ------------ L
L L L
<S> <C> <C> <C> <C> <C> <C>
At 1 December 1996.................... 2,094,933 58,373 26,546 6,405 1,438,079 3,624,336
Prior Year Adjustment................. -- -- -- -- (80,030) --
------------ --------- --------- --------- ------------ ------------
Restated at 1 December 1996........... 2,094,933 58,373 26,546 6,405 1,358,049 3,544,306
Share premium on share issue.......... 14,725 14,725
Foreign Currency Translation.......... -- (9,807) -- -- -- (9,807)
Profit for the year................... -- -- -- -- 236,263 236,263
------------ --------- --------- --------- ------------ ------------
AT 30 NOVEMBER 1997................... L2,094,933 L48,566 L26,546 L21,130 L1,594,312 L3,785,487
------------ --------- --------- --------- ------------ ------------
------------ --------- --------- --------- ------------ ------------
</TABLE>
B) COMPANY
<TABLE>
<CAPTION>
REVALUATION CAPITAL SHARE PROFIT & TOTAL
RESERVE REDEMPTION PREMIUM LOSS ------------
------------ RESERVE ACCOUNT ACCOUNT
L ----------- --------- ----------- L
L L L
<S> <C> <C> <C> <C> <C>
At 1 December 1996.............................. 2,094,933 20,000 6,405 (518,860) 1,602,478
Share premium on share issue.................... 14,725 14,725
Profit for the year............................. -- -- -- 1,309,669 1,309,669
------------ ----------- --------- ----------- ------------
AT 30 NOVEMBER 1997............................. L2,094,933 L20,000 L21,130 L790,809 L2,926,872
------------ ----------- --------- ----------- ------------
------------ ----------- --------- ----------- ------------
</TABLE>
The company results of Allsport Photographic plc., for the year, reflect an
exceptional credit of L819,483 being the waiver of monies due to its subsidiary
company Allsport (UK) Limited.
Provision has also been made for the receipt of a dividend of L845,000 from
its subsidiary company Allsport (UK) Limited.
22. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -------------
1997 1997
------------- -------------
L L
<S> <C> <C>
Profit for the financial year....................................................... 236,263 1,309,669
Other recognised gains and losses................................................... (9,807) --
Share capital issued................................................................ 775 775
Share premium on share options exercised............................................ 14,725 14,725
Prior year adjustments.............................................................. (80,030) --
Opening shareholders' funds......................................................... 3,688,336 1,666,478
------------- -------------
Closing shareholders' funds......................................................... L3,850,262 L2,991,647
------------- -------------
------------- -------------
</TABLE>
F-33
<PAGE>
ALLSPORT PHOTOGRAPHIC PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 1997
23. POST BALANCE SHEET EVENTS
On 9 February 1998, the shareholders of Allsport Photographic plc., (the
"Company"), sold their entire shareholdings in the company to Getty
Communications plc., (a company registered in England and Wales, whose name has
since been changed to Getty Communications Limited) and Getty Images Inc. (a
Delaware corporation).
The shares of Getty Images Inc. are quoted on the US NASDAQ exchange.
Prior to the sale of the company to Getty Communications plc., and Getty
Images Inc., and independently of the sale transaction, an Employee Benefit
Trust (EBT) was established by the Company to subscribe for Company shares,
further details of which are set out in Note 20.
Pursuant to the sale of the company an amount of L584,000 was paid to a
former director Mr. A. Duffy in respect of certain agreements he had with the
company.
Auditors' report page F-16.
F-34
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C> <C>
GETTY IMAGES, INC.
By: /s/ LAWRENCE GOULD
-----------------------------------------
Name: Lawrence Gould
Date: April 27, 1998 Title: Chief Financial Officer
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Current Report on Form 8-K/A (File No.
0-23747) of our report dated February 25, 1998, on our audit of the consolidated
financial statements of PhotoDisc, Inc. and Subsidiaries for the year ended
December 31, 1997.
Coopers & Lybrand L.L.P.
Seattle, Washington
April 24, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Current Report on Form 8-K/A (File No.
0-23747) of our report dated April 17, 1998, on our audit of the consolidated
financial statements of Allsport Photographic plc and Subsidiaries for the year
ended November 30, 1997.
Maidment Penney Quick & Co
Chartered Accountants
London
April 24, 1998
