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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 19, 1998
Getty Images, Inc.
--------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 000-23747 98-0177556
--------------- ---------------- -------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
2101 FOURTH AVENUE, FIFTH FLOOR 101 BAYHAM STREET
SEATTLE, WASHINGTON LONDON, ENGLAND
98121 NWI OA6
(206) 695-3400 (011 44 171) 544-3456
(Addresses, including zip code, and telephone numbers,
including area code, of principal executive offices)
None
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
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2
ITEM 5. OTHER EVENTS.
Reference is made to the pro forma financial statements filed as part of
this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Unaudited Condensed Pro Forma Consolidated Financial
Information
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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 hereto duly authorized.
GETTY IMAGES, INC.
By: /s/ Lawrence Gould
---------------------------------
Name: Lawrence Gould
Dated: August 19, 1998
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
99.1 Unaudited Condensed Pro Forma Consolidated Financial
Information
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
INTRODUCTORY NOTE
The following unaudited condensed pro forma consolidated financial
information (the "Pro Forma Consolidated Financial Information") gives pro
forma effect to the completion of the acquisition of PhotoDisc, Inc. (the
"PhotoDisc Acquisition"), the acquisition of Allsport Photographic plc (the
"Allsport Acquisition"), and the issuance by the Company of an aggregate of
1,518,644 shares of Common Stock to Getty Investments LLC for an aggregate
consideration of $28 million (the "Getty Investments Subscription," and
together with the PhotoDisc Acquisition and the Allsport Acquisition, 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 Getty Images, Inc.
("Getty Images") (which are included in the Company's Quarterly Report on
Form 10-Q for the six month period ended June 30, 1998).
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 has accounted 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 tangible and intangible assets acquired and the
liabilities assumed with the excess cost being allocated to goodwill and
presented as an intangible asset.
1
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UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1998
The following unaudited condensed pro forma income statement for the six
months ended June 30, 1998 is derived from the unaudited historical
consolidated financial statements of Getty Communications for the period
January 1, 1998 through February 9, 1998, the unaudited historical
consolidated financial statements of Getty Images for the period February 10,
1998 through March 31, 1998, the unaudited historical consolidated financial
statements of PhotoDisc, Inc ("PhotoDisc") for the period January 1, 1998
through February 9, 1998 and the unaudited historical consolidated financial
statements of Allsport Photographic plc ("Allsport") for the period January 1,
1998 through February 10, 1998, 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, 1998 the first day of the financial period presented in
the Pro Forma Consolidated Financial Information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 THREE MONTHS SIX MONTHS
----------------------------------------------------------- ENDED ENDED
JUNE 30, 1998 JUNE 30, 1998
------------- -------------
GETTY PRO FORMA PRO FORMA GETTY PRO FORMA
IMAGES ALLSPORT PHOTODISC ADJUSTMENTS(1) CONSOLIDATED IMAGES CONSOLIDATED
$'000S $'000S $'000S $'000S $'000S $'000S $'000S
------- -------- --------- -------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Sales 37,931 1,910 4,882 0 44,723 48,126 92,849
Cost of sales (11,607)* (319) (838) 0 (12,764)* (13,909)* (26,673)*
------- ------ ------ ------ ------- ------- -------
Gross profit 26,324 1,591 4,044 0 31,959 34,217 66,176
Selling, general and administrative
expenses (19,748)* (1,764) (3,273) 0 (24,785)* (25,837)* (50,622)*
Amortization of intangibles (6,897) 0 (7) (3,044)(a) (9,948) (10,007) (19,955)
Depreciation (2,897) (91) (281) 0 (3,269) (3,547) (6,816)
Non-recurring integration/
restructuring costs 0 0 0 0 0 (9,137) (9,137)
------- ------ ------ ------ ------- ------- -------
Operating (loss)/income (3,218) (264) 483 (3,044) (6,043) (14,311) (20,354)
Net interest (expense)/income (551) (2) 10 (300)(b) (843) (768) (1,611)
Exchange (loss) (356) 0 (24) (380) 296 (84)
------- ------ ------ ------ ------- ------- -------
(Loss)/income before income taxes (4,125) (266) 469 (3,344) (7,266) (14,783) (22,049)
Income taxes (1,080) (43) (176) 101 (c) (1,198) 712 (486)
------- ------ ------ ------ ------- ------- -------
Net (loss)/income before extraordinary
items (5,205) (309) 293 (3,243) (8,464) (14,071) (22,535)
Extraordinary items 0 0 0 0 0 (830) (830)
------- ------ ------ ------ ------- ------- -------
Net income/(loss) (5,205) (309) 293 (3,243) (8,464) (14,901) (23,365)
------- ------ ------ ------ ------- ------- -------
------- ------ ------ ------ ------- ------- -------
EBITDA 6,576 (173) 771 0 7,174 (757) 6,417
------- ------ ------ ------ ------- ------- -------
------- ------ ------ ------ ------- ------- -------
Loss per share--basic (0.28) (0.77)
Average number of shares outstanding--
basic ('000s) 29,980 30,167
</TABLE>
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* Getty Images' and pro forma cost of sales and selling, general and
administrative costs are exclusive of depreciation, which is included in
depreciation separately below.
See accompanying notes to the Pro Forma Consolidated Financial Information on
pages 4 to 6.
2
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NOTE 1--PRO FORMA ADJUSTMENTS TO INCOME STATEMENT
The pro forma adjustments comprise the following:
(a) Amortization of intangible assets, had the Transactions taken place on
January 1, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1998
$
--------------
(IN THOUSANDS)
<S> <C>
Amortization of goodwill relating to Allsport............................................. 566
Amortization of Allsport's other intangible assets........................................ 180
------
746
Amortization of goodwill relating to PhotoDisc............................................ 2,379
Amortization of PhotoDisc's other intangible
assets.................................................................................. 4,584
------
6,963
------
Less amount amortized by Getty Images in the period following the Transactions............ (4,665)
------
3,044
------
------
</TABLE>
The acquisitions of PhotoDisc and Allsport generated goodwill of $193.0
million and $45.9 million, respectively. 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
acquisitions ($46.4 million and $4.6 million for PhotoDisc and Allsport,
respectively, based on the allocation of purchase prices) will be capitalized
and amortized over a period of 1 to 3 years.
No such adjustment is required in respect of the three months ended June 30,
1998.
(b) Interest expense on long-term debt
The acquisitions of PhotoDisc and Allsport were funded in part via
long-term debt amounting to $30.7 million. Interest on this debt was payable
at 1.25% above U.S. dollar LIBOR, which is assumed to be 7.5546% for the three
months ended March 31, 1998 for the purposes of this Pro Forma Financial
Information (which was the average 3 month rate for the period).
The resulting interest charge to the income statement, had the acquisitions
taken place on January 1, 1998, would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1998
$
--------------
(IN THOUSANDS)
<S> <C>
Interest.................................................................................. 291
Amortization of arrangement fee over a five year period................................... 9
---
300
---
---
</TABLE>
No such adjustment is required in respect of the three months ended June 30,
1998.
The variable interest rate assumed above is based on rates prevailing
during the period indicated. A 0.125% variance in variable interest rates
would have an impact of $4,000 on the pro forma interest expense for the three
months ended March 31, 1998.
3
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NOTE 1--PRO FORMA ADJUSTMENTS TO INCOME STATEMENT (CONTINUED)
(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, 1998 is $101,000 for the three months
ended March 31, 1998.
No such adjustment is required in respect of the three month period ended
June 30, 1998.
NOTE 2--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.
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