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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





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FORM 10-Q





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




For the Quarterly Period Ended June 30, 2002





OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------




Commission File Number: 000-23747





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GETTY IMAGES, INC.


(EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER)





Delaware

98-0177556(STATE OF INCORPORATION)

(I.R.S. EMPLOYER IDENTIFICATION NO.)





601 N. 34th Street


Seattle, Washington 98103


(206) 925-5000


(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,  OF PRINCIPAL EXECUTIVE OFFICES)





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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety
days.    Yes  x    No  ̈





As of August 1, 2002 there were 53,479,837 shares of the registrants common stock, par value $0.01 per
share, outstanding.





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GETTY IMAGES, INC.





INDEX





Page No.PART I.    FINANCIAL INFORMATIONItem 1.

Financial Statements (unaudited):Condensed Consolidated Statements of Operationsfor the three months and six months ended June 30, 2002 and 2001

2Condensed Consolidated Balance Sheetsas of June 30, 2002 and December 31, 2001

3Condensed Consolidated Statement of Stockholders Equityas of December 31, 2001 and for the six months ended June 30, 2002

4Condensed Consolidated Statements of Cash Flowsfor the six months ended June 30, 2002 and 2001

5Notes to Condensed Consolidated Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

13Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26PART II.    OTHER INFORMATIONItem 1.

Legal Proceedings

27Item 2.

Changes in Securities and Use of Proceeds

27Item 3.

Defaults Upon Senior Securities

27Item 4.

Submission of Matters to a Vote of Security Holders

27Item 5.

Other Information

28Item 6.

Exhibits and Reports on Form 8-K

28SIGNATURE

29EXHIBIT INDEX

30




1




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##### Table of Contents




GETTY IMAGES, INC.





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)





Three months endedJune 30,


Six months endedJune 30,2002


2001


2002


2001(In thousands, except per share amounts)Sales

$
113,298


$
115,856


$
227,150


$
241,643Cost of sales


29,992



32,324



60,085



67,948Gross profit


83,306



83,532



167,065



173,695Selling, general and administrative expenses


52,181



60,911



105,353



122,437Depreciation


15,720



14,263



31,064



27,492Amortization


4,625



17,991



10,619



37,269Loss on sale of a business










812



Integration costs and loss on impairment of assets






9,341







13,318Income (loss) from operations


10,780



(18,974
)


19,217



(26,821
)Interest expense


(4,112
)


(4,300
)


(8,155
)


(8,689
)Interest income


320



670



563



1,188Exchange gains (losses), net


434



(395
)


266



(696
)Other income (expense), net


13



52



(5
)


143Loss on impairment of investments






(4,224
)






(4,224
)Income (loss) before income taxes


7,435



(27,171
)


11,886



(39,099
)Income tax (expense) benefit


(2,962
)


3,440



(4,733
)


809Net income (loss)

$
4,473


$
(23,731
)

$
7,153


$
(38,290
)Earnings (loss) per share:Basic

$
0.08


$
(0.46
)

$
0.14


$
(0.74
)Diluted


0.08



(0.46
)


0.13



(0.74
)Weighted-average shares outstanding:Basic


52,969



51,636



52,538



51,543Diluted


56,932



51,636



55,787



51,543





The accompanying notes are an integral part of these condensed consolidated
financial statements.




2




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GETTY IMAGES, INC.





CONDENSED CONSOLIDATED BALANCE SHEETS


(unaudited)





June 30, 2002


December 31, 2001(In thousands, except per share amounts)ASSETSCurrent assetsCash and cash equivalents

$
79,722


$
46,173Short-term investments


7,142



Accounts receivable, net


76,255



71,162Inventories


2,717



3,404Deferred catalog costs


1,685



8,253Prepaid expenses


7,670



7,199Deferred income taxes, net


9,463



9,430Other current assets


3,571



5,020Total current assets


188,225



150,641Property and equipment, net


137,883



147,653Goodwill


603,011



600,428Identifiable intangible assets, net


31,734



36,031Deferred income taxes, net


54,816



55,638Other long-term assets


2,664



2,690Total assets

$
1,018,333


$
993,081LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
49,242


$
50,913Accrued expenses


48,585



52,011Income taxes payable


11,610



14,498Current portion of long-term debt


19,886



19,944Total current liabilities


129,323



137,366Long-term debt


243,999



256,215Total liabilities


373,322



393,581Commitments and contingenciesStockholders equityPreferred stock, $0.01 per share par value, 5,000 shares authorized, no shares outstanding






Common stock, $0.01 per share par value, 100,000 shares authorized, 53,480 outstanding at June 30, 2002 and 51,924
outstanding at December 31, 2001


534



519Exchangeable preferred stock, no par value, 5,000 shares authorized, 45 outstanding at June 30, 2002 and 85 outstanding
at December 31, 2001


1



1Additional paid-in capital


1,000,282



969,134Accumulated deficit


(353,585
)


(360,738
)Accumulated other comprehensive loss


(2,221
)


(9,416
)Total stockholders equity


645,011



599,500Total liabilities and stockholders equity

$
1,018,333


$
993,081





The accompanying notes are an integral part of these condensed consolidated
financial statements.







3




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GETTY IMAGES, INC.





CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY


(unaudited)





Number of shares of common stock $0.01 par value

Number of shares of exchangeable preferred stock, nopar value


Common stock

Exchangeable preferred stock

Additional paid-in capital

Accumulated deficit


Accumulated other comprehensive loss


Total(In thousands)Balance at December 31, 2001

51,924

85


$
519

$
1

$
969,134

$
(360,738
)

$
(9,416
)

$
599,500Net income
















7,153







7,153Translation adjustment




















7,195



7,195Comprehensive income
























14,348Stock options exercised

1,066





11





18,112










18,123Issuance of shares upon conversion of debt

444





4





12,921










12,925Issuance of shares for acquisition of assets

6











115










115Exchange of shares

40

(40
)



















Balance at June 30, 2002

53,480

45


$
534

$
1

$
1,000,282

$
(353,585
)

$
(2,221
)

$
645,011





The accompanying notes are an integral part of these condensed consolidated
financial statements.







4




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GETTY IMAGES, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)





Six months ended June 30,2002


2001(In thousands)CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)

$
7,153


$
(38,290
)Adjustments to reconcile net income (loss) to net cash flow from operating activities:Depreciation and amortization


41,683



64,761Deferred income taxes


2,240



2,390Bad debt expense


4,384



728Amortization of debt issuance costs


986



986Impairment of assets






6,465Loss on impairment of investments






4,224Tax benefit from employee stock option exercises






1,146Other items


(201
)


803Changes in assets and liabilities, net of effects of business acquisitions:Accounts receivable


(6,900
)


1,849Inventories


29



1,426Accounts payable and accrued expenses


(6,875
)


(15,185
)Income taxes


(2,728
)


(5,777
)Other


427



(5,777
)Net cash provided by operating activities


40,198



19,749CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of property and equipment


(19,136
)


(40,244
)Acquisition of short-term investments


(7,638
)


Proceeds from the sale of short-term investments


445



Proceeds from the sale of long-lived assets






2,250Acquisition of intangible assets






(1,651
)Acquisition of businesses, net of cash acquired






(709
)Net cash used in investing activities


(26,329
)


(40,354
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the issuance of common stock


18,123



6,417Debt issuance costs


(138
)


Repayment of debt


(4
)


(411
)Net cash provided by financing activities


17,981



6,006Effects of exchange rate differences


1,699



(477
)Net increase (decrease) in cash and cash equivalents


33,549



(15,076
)Cash and cash equivalents, beginning of period


46,173



65,894Cash and cash equivalents, end of period

$
79,722


$
50,818NON-CASH INVESTING AND FINANCING ACTIVITIESAcquisition of businesses or intangibles with common stock

$
115


$
2,458Conversion of debt into common stock


12,925









The accompanying notes are an integral part of these condensed consolidated
financial statements.




5




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GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)





Estimates and Assumptions





The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (U.S.) 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 consolidated financial statements
and the revenues and expenses reported during the period. Some of the estimates and assumptions that require managements most difficult judgments include: i) determining the appropriate level of deferred tax asset valuation allowances; ii) the
designation of certain intercompany balances with foreign subsidiaries as long-term investments; iii) the appropriateness of the valuation and useful lives of long-lived and intangible assets, and iv) the appropriateness of the valuation of the
allowance for doubtful accounts, accruals for abandoned and subleased property, and accruals for integration activities. These judgments are difficult as matters that are inherently uncertain directly impact the accounting for these items. Actual
results may vary from managements estimates and assumptions.





Principles of Consolidation





The condensed consolidated financial statements and notes have been prepared by the company without audit and include the accounts of
Getty Images, Inc. and its subsidiaries, from the respective dates of acquisition. Significant intercompany balances and transactions have been eliminated.





Quarterly Results





Certain information and footnote disclosures normally included
in annual financial statements, prepared in accordance with accounting principles generally accepted in the U.S., have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. Management
believes that the condensed statements include all necessary adjustments, which are of a normal and recurring nature, and are adequate to present results of operations, financial position and cash flows for the interim periods. The condensed
information should be read in conjunction with the financial statements and notes thereto included in the companys latest Annual Report on Form 10-K.





Reclassifications





Certain prior year amounts have been reclassified to conform to
the current years presentation with no effect on previously reported net assets, cash flows or income/losses.





Common Stock





At its May 21, 2002 meeting, the stockholders approved an amendment to the companys Certificate of
Incorporation, increasing the number of authorized shares of our common stock from 75 million to 100 million.





Earnings Per Share





Basic earnings per share is calculated based upon the weighted-average number of common shares outstanding
during each period. For the periods in which the company incurred a net loss, diluted earnings per share was calculated based on the same number of shares as basic earnings per share. For the periods in which the company incurred net income, diluted
earnings per share was calculated based on the shares used to calculate basic earnings per share plus the dilutive effect of certain stock options.




6




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GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Approximately 1.3 million, 4.2 million, 1.8 million and 4.2 million
other common shares potentially issuable from stock options for the three months ended June 30, 2002 and 2001 and the six months ended June 30, 2002 and 2001, respectively, are excluded from the computation, because they are anti-dilutive. Also
excluded for the three and six months ended June 30, 2002 and for all other periods presented are 4.1 million and 4.5 million common shares, respectively, potentially issuable from convertible subordinated notes, because they are anti-dilutive.





Changes in Accounting Principles





Effective January 1, 2002, the company adopted Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets. SFAS No. 142 incorporates provisions of SFAS
No. 141 Business Combinations that require certain intangible assets, primarily business acquisition costs previously allocated to workforce in place, to be reclassified to goodwill as of January 1, 2002 due to a more restrictive
definition of identifiable intangible assets. The impact of the reclassification on goodwill is as follows:





(In thousands)Goodwill at December 31, 2001

$
600,428Reclassifications upon adoption of SFAS No. 142


2,583Goodwill at March 31 and June 30, 2002

$
603,011





SFAS No. 142 also requires the company to discontinue amortization
of goodwill as of January 1, 2002. The following table presents the impact of SFAS No. 142 on net loss and loss per share had the standard been in effect for the three and six months ended June 30, 2001:





Three months ended June
30,


Six months ended June
30,2002

2001


2002

2001(In thousands, except per share amounts)Net income (loss):As reported

$
4,473

$
(23,731
)

$
7,153

$
(38,290
)Add back: Amortization of goodwill





16,529






33,065Add back: Amortization of workforce in place, net of taxes





266






531As adjusted

$
4,473

$
(6,936
)

$
7,153

$
(4,694
)Earnings (loss) per sharebasic:As reported

$
0.08

$
(0.46
)

$
0.14

$
(0.74
)Add back: Amortization of goodwill





0.32






0.64Add back: Amortization of workforce in place, net of taxes





0.01






0.01As adjusted

$
0.08

$
(0.13
)

$
0.14

$
(0.09
)Earnings (loss) per sharediluted:As reported

$
0.08

$
(0.46
)

$
0.13

$
(0.74
)Add back: Amortization of goodwill





0.32






0.64Add back: Amortization of workforce in place, net of taxes





0.01






0.01As adjusted

$
0.08

$
(0.13
)

$
0.13

$
(0.09
)Basic shares outstanding:As reported and as adjusted


52,969


51,636



52,538


51,543Diluted shares outstanding:As reported and as adjusted


56,932


51,636



55,787


51,543




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##### Table of Contents



GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







In the first half of 2002, the company performed the transitional
impairment test for its single reporting unit, as required by SFAS No. 142, and noted no impairment of goodwill. The company is required to repeat this test on an annual basis and between annual tests in certain circumstances. When assessing
impairment, the company must determine the estimated implied fair value of its goodwill. Determining fair value involves significant assumptions and estimates based on managements best judgments of current and future circumstances. As
circumstances change, it is at least reasonably possible that future goodwill impairment tests could result in a charge to earnings. Any impairment would be recognized as a loss on impairment of assets, which would be included in the calculation of
income from operations.





Short-term Investments





Short-term investments at June 30, 2002 consisted of $7.1 million in held-to-maturity corporate bonds, carried at amortized cost. Unamortized bond premium at June 30, 2002
was nominal.





Accounts Receivable





Accounts receivable represents trade receivables, net of provisions for doubtful accounts of $23.0 million and $20.9 million at June 30, 2002 and December 31, 2001, respectively. The provisions
recorded during the three months ended June 30, 2002 and 2001 and six months ended June 30, 2002 and 2001, were $3.0 million, $0.5 million, $4.4 million and $0.7 million, respectively.





Catalogs





As part of its marketing efforts, the company
produces and distributes catalogs containing images offered through its creative professional and editorial collections. The costs of producing these catalogs through September 30, 2001, were deferred and amortized over the period during which
revenue was generated by the catalog images.





In the fourth quarter of 2001, the company began the implementation
of new financial information systems. These new systems are not capable of directly associating image revenue with specific catalogs. Accordingly, as required by American Institute of Certified Public Accountants Statement of Position No. 93-7
Reporting on Advertising Costs, catalog production costs are expensed as incurred effective October 1, 2001.





Amortization of deferred catalog costs of $3.3 million and $7.9 million for the three and six months ended June 30, 2002, respectively, was included in amortization expense, while catalog amortization of $2.8 million and $6.1 million
for the three and six months ended June 30, 2001, respectively, was included in selling, general and administrative expenses. Direct catalog production costs of $1.8 million and $3.2 million for the three and six months ended June 30, 2002,
respectively, were included in selling, general and administrative expenses, while direct catalog production costs of $2.7 million and $3.9 million for the three and six months ended June 30, 2001, respectively, were capitalized into deferred
catalog costs.





Property and Equipment





Property and equipment is stated at cost, net of accumulated depreciation of approximately $222.7 million and $194.7 million at June 30, 2002 and December 31, 2001,
respectively.




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##### Table of Contents



GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Identifiable Intangible Assets





Identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from two to 10 years. The gross carrying amounts and
related accumulated amortization as of the most recent quarter-end and year-end were as follows:





As of June 30, 2002

As of December 31, 2001Gross Amount

Accumulated Amortization

Gross Amount

Accumulated Amortization(In thousands)Film libraries

$
16,260

$
4,036

$
16,260

$
3,223Trademarks/tradenames/copyrights


11,195


3,070


11,154


2,509Customer lists


11,098


3,866


11,098


3,073Other identifiable intangible assets


5,701


1,548


12,762


6,438$
44,254

$
12,520

$
51,274

$
15,243





Amortization expense for identifiable intangible assets was $1.3
million and $2.7 million for the three and six months ended June 30, 2002, respectively. Expected amortization expense for identifiable intangible assets for the next five years is as follows:





Year

(In thousands)2002

$ 5,5712003

5,1472004

5,1392005

5,0652006

4,749





Upon adoption of SFAS No. 142, the company reassessed the remaining
useful lives of its identifiable intangible assets and determined that no adjustments were necessary. The company is required to evaluate these lives each reporting period to determine whether events and circumstances warrant revisions to the
remaining periods of amortization. Such revisions would be applied prospectively.





Accrued Loss on Abandoned and Subleased Property





During the fourth quarter of 2001, the company re-evaluated its worldwide facilities requirements and
identified excess space in New York, Seattle, San Francisco, Santa Monica, London and Munich. The company recorded a loss and a related accrual of $11.6 million during the fourth quarter to account for future minimum rental payments and costs of
subleasing the properties over the remaining lives of the leases, net of expected sublease income. Approximately $6.2 million of this accrual remains at June 30, 2002, and will be paid out in future periods through 2007.





Debt Conversion





On
May 13, 2002, the company issued 443,839 shares of common stock for conversion of the remaining $12.7 million of 4.75% convertible subordinated notes at a price of $28.5075 per share. The company will save approximately $0.9 million in interest
payments through May of 2003, the original maturity date of the notes, including $0.3 million of accrued interest that did not come due, in accordance with the original terms of the debt.




9




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GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Loss on Sale of a Business





During the first quarter of 2002, the company entered into an agreement to dispose of a subsidiary, American Royal Arts (ARA), a provider of animation art, and accrued a
loss of $0.8 million. The assets and liabilities of ARA were written off against the accrued loss upon consummation of the transaction on April 2, 2002. The net assets, results of operations and cash flow of ARA were not significant to the company
as a whole.





Integration Costs and Loss on Impairment of Assets





During the first quarter of 2001, the company continued the integration of three significant businesses acquired in the previous two years, The Image Bank, Art.com and the
Visual Communications Group. Integration costs incurred during the first quarter of 2001 totaled $4.0 million, including: $1.9 million for the termination of approximately 40 employees; $1.4 million for the abandonment of facilities; $0.4 million
for the review of processes and resultant actions to implement processes that would benefit the fully-integrated company going forward; $0.2 million for consulting and other professional assistance in determining what functions and facilities should
be combined; and $0.1 million for asset impairments.





On May 17, 2001, the company terminated the operations of a
subsidiary, Art.com, a provider of framed and unframed art and art-related products on the Internet. In connection with this event, the company recorded integration costs of approximately $1.9 million during the second quarter of 2001, including
severance costs and costs to terminate the operations and exit the facilities of Art.com, as well as a loss on the impairment of related assets of $6.5 million.





During the second quarter of 2001, the company also recorded integration costs of $0.9 million, including severance costs and facilities exit costs, relating primarily to the closure of a Canadian
office and consolidation of those operations into other offices.





Loss on Impairment of Investments





During the second quarter of 2001, the company wrote off its minority cost basis investment in two small private companies after analyses
showed that they suffered other than temporary declines in fair value. These analyses were based upon review of quantitative and qualitative information provided to management, which indicated that these companies would be unable to return the
carrying value of the companys investments. The total of these two impairment charges was $4.2 million.




10




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GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Business Segments and Geographic Areas





As a provider of visual content, the company operates in one business segment. Due to the nature of the companys operations, sales
are made to a diverse client base and there is no reliance on a single customer or group of customers. Sales are reported in the geographic area where they originate and are subject to the impact of translation differences and therefore may not
reflect the relative performance of individual areas. Sales to customers by geographic area, with countries experiencing 5% or more of sales in a reportable period shown separately, are summarized below:





Three months ended June
30,

Six months ended June
30,2002

2001

2002

2001(In thousands)United States

$
57,092

$
51,841

$
116,327

$
111,146United Kingdom


14,891


16,107


30,616


33,581Germany


8,037


8,835


16,434


17,935France


5,194


5,854


10,523


12,065Canada


3,243


11,469


6,887


23,617Rest of world


24,841


21,750


46,363


43,299Total sales

$
113,298

$
115,856

$
227,150

$
241,643





In late 2001 and early 2002, the company closed its Canadian
offices and transitioned the associated customer accounts to a U.S. office. Many sales that were previously reported as originating in Canada are reported in 2002 as originating in the U.S., leaving only sales with a Canadian billing address
reported as Canadian sales above.





Income Taxes and Net Deferred Tax Assets





The effective tax rate used to calculate income taxes for the first half of 2002 was 39.8%, while the rate for 2001 was 39.2% on income before non-deductible
amortization of goodwill. At June 30, 2002, the company had $64.3 million in net deferred tax assets, net of a valuation allowance of $16.6 million, which was established in 2001 at $12.8 million and increased by $3.8 million in the first half of
2002. The increase in the valuation allowance relates primarily to tax benefits from stock options exercised, which will increase additional paid in capital if realized.





Recent Accounting Pronouncement





Effective January 1, 2002,
the company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This pronouncement requires one model for accounting for long-lived assets to be disposed of and broadens the presentation of discontinued
operations to include more transactions. Adoption of this pronouncement did not have an impact on the companys reported financial position, results of operations or cash flows, however, it could cause any future long-lived asset disposals to
be accounted for or presented in a different manner than in the past.





Effective January 1, 2003, the company will
adopt SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This pronouncement requires that liabilities associated with exit or disposal activities be recognized when the liabilities are incurred and can be
measured, as opposed to the date that management commits to the activities. In addition, under the new standard, employee liabilities are to be booked at the present value of expected future cash outflows, and operating lease liabilities are to be
booked net of reasonable sublease income, even if it is not managements intent to sublease the property. As managements current plans do not include exit or disposal activities, management does not expect this pronouncement to have a
significant effect on the companys financial position, results of operations or cash flows.




11




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##### Table of Contents



GETTY IMAGES, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Subsequent Events





On July 15, 2002, the company terminated its $100 million senior credit facility with HSBC Investment Company plc and repaid the $20 million outstanding balance.





On July 19, 2002, the company entered into a new senior revolving credit facility with a consortium of banks led
by Bank of America, N.A. Key terms and conditions of the new facility are:





| |  |  | $85 million revolving credit facility, which may be increased by $40 million within two years of closing at the election of the company without consent of the
lenders;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | secured by all of the capital stock of certain domestic subsidiaries of the company, 65% of the capital stock of certain foreign subsidiaries, and certain
assets, primarily trademarks and current assets, of the company and these subsidiaries;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | primary financial covenants include maintenance of: a maximum leverage ratio of 3.25, stepping down to 3.0 for fiscal quarters ending December 31, 2003 and
thereafter; a minimum fixed charge coverage ratio of 1.5; and a minimum consolidated net worth not less than $484.3 million, plus 50% of future consolidated quarterly net income, plus 100% of future aggregate increases in stockholders equity
through the issuance and sale of stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | annual interest rate of either i) LIBOR, plus a spread ranging from 0.875% to 1.625% depending on the companys leverage ratio or ii) the higher of a) the
Federal Funds rate, plus .50% or b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its prime rate, plus a spread ranging from zero to 0.250% depending on the companys
leverage ratio;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | commitment fee for unutilized facilities between .25% and .40% annually, depending on the companys leverage ratio;
| | - |  | -------------------------------------------------------------------------------------------------------------------




| |  |  | expires three years after closing;
| | - |  | ----------------------------------




| |  |  | restrictions on payments include no principal payments on any subordinated debt in excess of $25 million, and no purchases of the companys own stock in
excess of the sum of unexercised employee stock options as of the date of the agreement and any future employee stock option grants;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | acquisitions of and investments in third parties are allowed without consent of the lenders, provided they do not exceed $15 million in the aggregate in any
fiscal year or $30 million in any rolling three year period. If the cash price of any acquisition exceeds $15 million, lenders representing at least 50% of the total commitments under the facility must approve the transaction;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | letters of credit issued by the lender reduce the amount available under the line of credit.
| | - |  | --------------------------------------------------------------------------------------------




Letters of credit aggregating $3.9 million have been issued under the new senior credit facility, and short-term investments of $3.9
million have been pledged as collateral and are held in a segregated account with the lender.





On August 5, 2002,
the company borrowed $15 million under this new facility.




12




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##### Table of Contents

Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)





The following should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto and other financial information
contained elsewhere and incorporated by reference in this report on Form 10-Q, including our Annual Report on Form 10-K.





The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of Getty Images, Inc. We may, from time to time, make written or oral statements that are
forward-looking, including statements contained in this Quarterly Report on Form 10-Q, the documents incorporated herein by reference, and other filings with the Securities and Exchange Commission. These statements are based on
managements current expectations, assumptions, estimates and projections about Getty Images, Inc. and its industry and are made on the basis of managements views as of the time the statements are made. All statements, trends, analyses
and other information contained in this report relative to trends in sales, gross margin, anticipated expense levels and liquidity and capital resources, as well as other statements including words such as anticipate,
believe, plan, estimate, expect, seek, intend and other similar expressions, constitute forward-looking statements. These forward-looking statements are not guarantees of future
performance and are subject to certain risks and uncertainties that are difficult to predict. Accordingly, actual results may differ materially from those anticipated or expressed in such statements. Potential risks and uncertainties include, among
others, those set forth in our Annual Report on Form 10-K for 2001 under Factors That May Affect the Business, as well as those set forth below under the same heading. Except as required by law, the company undertakes no obligation to
update any forward-looking statement, whether as a result of new information, future events or otherwise. Readers, however, should carefully review the factors set forth in the reports or documents that the company files from time to time with the
Securities and Exchange Commission.





In this Quarterly Report, Getty Images, the
company, we, us, and our refer to Getty Images, Inc. and its consolidated subsidiaries, unless the context otherwise dictates.





GENERAL





The company is a leading
provider of high quality, relevant imagery and related services to creative professionals at advertising agencies, graphic design firms, corporations, and film and broadcasting companies; press and editorial customers involved in newspaper,
magazine, book, CD-ROM and online publishing; and corporate communications departments and other business customers.





We generate our revenue from granting rights to use images and from providing related services. Revenue is principally derived from a large number of relatively small transactions involving granting rights to use single still images,
video and film clips or pre-packaged CD-ROM products containing between 100 and 300 images. We also generate revenue from subscription or bulk purchase agreements under which customers are provided access to imagery online.





Still imagery that the company licenses can be broken down into three major collections: royalty-free, rights-managed, and news and
sports. Royalty-free images are licensed on a nonexclusive basis and can be used for multiple projects over an unlimited time period. License fees for pre-packaged royalty-free CD-ROM products are generally the same for each licensee, while license
fees for single royalty-free images differ depending on the file size of the selected image. For the second quarter of 2002, the average license fee for a single image from our largest royalty-free collection was approximately $99, and average gross
margin on all royalty-free licenses was approximately 84%.





Rights-managed images are licensed on a use-by-use
basis and generally have higher license fees based on the specific intended use of the image, including type of media, total print run, geographical distribution, and level of rights protection. For the second quarter of 2002, the average license
fee for a single rights-managed image was approximately $500, and average gross margin was approximately 67%.




13




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##### Table of Contents




News and sports imagery is licensed on a single image or subscription basis.
Because many of these images are sold on a subscription basis, average license fee is not meaningful. However, average gross margin for all news and sports images licensed in the second quarter of 2002 was approximately 85%.





The company also licenses moving imagery, or motion, which may be royalty-free or rights-managed, with fees based on the specific intended
use of the image, including market, geographic area and duration of use. For the second quarter of 2002, the average license fee for a rights-managed motion clip in North America was approximately $535, and average gross margin was approximately
72%.





Our cost of sales primarily consists of commission payments to contributing photographers and
cinematographers. These suppliers are under contract with the company and typically receive payments of up to 50% of the sales value, depending on the collection (as discussed above), how the imagery is delivered (digital delivery via download
results in a lower commission), and where the imagery is licensed (licenses outside a contributors home territory result in lower commissions). We own a significant number of the images in our collections, and these images do not require
commission payments.





Aside from direct licensing to customers, the company licenses images through agents
worldwide. These agents typically earn 40% of the license fee, and we recognize the remaining 60% as revenue. Commissions paid to contributors on agent sales are generally 50% of the companys share of the license fee (generally 30% of the
total license fee). This results in an average gross margin of approximately 50% on agent sales.





Loss on Sale of a Business





During the first quarter of 2002, the company entered into an agreement to dispose of a subsidiary, American
Royal Arts (ARA), a provider of animation art, and accrued a loss of $0.8 million. The assets and liabilities of ARA were written off against the accrued loss upon consummation of the transaction on April 2, 2002. The net assets, results of
operations and cash flow of ARA were not significant to the company as a whole.





Integration Costs and Loss on Impairment of Assets





During the first quarter of 2001, the company continued the integration of three significant businesses
acquired in the previous two years, The Image Bank, Art.com and the Visual Communications Group. Integration costs incurred during the first quarter of 2001 totaled $4.0 million, including: $1.9 million for the termination of approximately 40
employees; $1.4 million for the abandonment of facilities; $0.4 million for the review of processes and resultant actions to implement processes that would benefit the fully-integrated company going forward; $0.2 million for consulting and other
professional assistance in determining what functions and facilities should be combined; and $0.1 million for asset impairments.





On May 17, 2001, the company terminated the operations of a subsidiary, Art.com, a provider of framed and unframed art and art-related products on the Internet. In connection with this event, the company recorded integration costs of
approximately $1.9 million during the second quarter of 2001, including severance costs and costs to terminate the operations and exit the facilities of Art.com, as well as a loss on the impairment of related assets of $6.5 million.





During the second quarter of 2001, the company also recorded integration costs of $0.9 million, including severance costs and
facilities exit costs, relating primarily to the closure of a Canadian office and consolidation of those operations into other offices.





Loss on Impairment of Investments





During the second quarter of 2001, the company wrote off
its minority cost basis investment in two small private companies after analyses showed that they suffered other than temporary declines in fair value. These




14




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##### Table of Contents

analyses were based upon review of quantitative and qualitative information provided to management, which indicated that these companies would be unable to return the carrying value of the
companys investments. The total of these two impairment charges was $4.2 million.





Changes in Accounting Principles





Effective January 1, 2002, the company adopted Statement of Financial Accounting Standards (SFAS) No. 142
Goodwill and Other Intangible Assets. This accounting pronouncement requires the company to discontinue amortization of goodwill as of January 1, 2002 and to test goodwill for impairment on, at least, an annual basis. The following
tables present the impact of SFAS No. 142 on net loss and loss per share had the standard been in effect for the three and six months ended June 30, 2001:





Three months ended June 30,


Year over year2002

% of sales

2001


% of sales


$ growth

% growth(In thousands, except percentages and per share amounts)Net income (loss)

$
4,473

3.9

$
(23,731
)

(20.5
)

$
28,204

118.8Earnings (loss) per share:Basic


0.08




(0.46
)





0.54

Diluted


0.08




(0.46
)





0.54

Net income (loss), adjusted for SFAS No. 142

$
4,473

3.9

$
(6,936
)

(6.0
)

$
11,409

164.5Earnings (loss) per share, adjusted for SFAS No. 142:Basic


0.08




(0.13
)





0.21

Diluted


0.08




(0.13
)





0.21







Six months ended June 30,


Year over year2002

% of sales

2001


% of sales


$ growth

% growth(In thousands, except percentages and per share amounts)Net income (loss)

$
7,153

3.1

$
(38,290
)

(15.8
)

$
45,443

118.7Earnings (loss) per share:Basic


0.14




(0.74
)





0.88

Diluted


0.13




(0.74
)





0.88

Net income (loss), adjusted for SFAS No. 142

$
7,153

3.1

$
(4,694
)

(1.9
)

$
11,847

252.4Earnings (loss) per share, adjusted for SFAS No. 142:Basic


0.14




(0.09
)





0.23

Diluted


0.13




(0.09
)





0.22







In the first half of 2002, the company performed the transitional
impairment test for its single reporting unit, as required by SFAS No. 142, and noted no impairment of goodwill. The company is required to repeat this test on an annual basis and between annual tests in certain circumstances. When assessing
impairment, the company must determine the estimated implied fair value of its goodwill. Determining fair value involves significant assumptions and estimates based on managements best judgments of current and future circumstances. As
circumstances change, it is at least reasonably possible that future goodwill impairment tests could result in a charge to earnings. Any impairment would be recognized as a loss on impairment of assets, which would be included in the calculation of
income from operations.




15




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##### Table of Contents




RESULTS OF OPERATIONS





Below are selected financial highlights from the companys unaudited results of operations and corresponding management discussion. Pro forma results represent the
results of the consolidated company less the results of Art.com and ARA, if applicable. All figures are shown in thousands, except percentages.





2002 Quarterly Results Compared to 2001 Quarterly Results





Sales





Three months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthSalesas reported

$
113,298

100.0

$
115,856

100.0

$
(2,558
)

(2.2
)Salespro forma


113,298

100.0


113,956

100.0


(658
)

(0.6
)





The sales decline from 2001 to 2002 reflected mainly volume
decreases, offset in part by sales price increases. The sales volume decreases were due to continuation of the downturn in the advertising and media sectors brought on in 2001 by general economic conditions in the United States (U.S.) and abroad.
Sales were down for the second quarter year over year in many geographic areas, particularly in the United Kingdom (U.K.), where sales were down $1.2 million or 8%.





Sales of rights-managed still images and royalty-free still images comprised 57% and 26% of sales, respectively, for the second quarter of 2002 as compared to 55% and 27%
of sales, respectively, for the second quarter of 2001. The percentage of rights-managed sales increased over the prior year, as the company focused on enhancing its rights-managed image collection. In addition, customers were not as price sensitive
as expected in a budget conscious economic climate, but instead focused on obtaining the right images for their needs. This contributed to an increase in the percentage of sales of higher priced rights-managed images and a decrease in the percentage
of sales of lower priced royalty-free images. During the second half of 2002, the company will focus on improving the depth and quality of its royalty-free collection.





Gross Profit and Gross Margin





Three months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthGross profitas reported

$
83,306

73.5

$
83,532

72.1

$
(226
)

(0.3
)Gross profitpro forma


83,306

73.5


82,694

72.6


612


0.7





Despite a slight decline in sales year over year, the
companys gross profit was nearly flat as a result of increased gross margin. This increase in gross margin was due to increased licensing of company owned images and an increase in the percentage of images digitally delivered over the
Internet.





Selling, General and Administrative Expenses (SG&A)





Three months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthSG&Aas reported

$
52,181

46.1

$
60,911

52.6

$
(8,730
)

(14.3
)SG&Apro forma


52,181

46.1


59,232

52.0


(7,051
)

(11.9
)





Selling, general and administrative expenses were lower for the
second quarter of 2002 due mainly to a decline in advertising and marketing spending of approximately $4 million and a reduction of approximately $3 million in payroll and related costs, offset in part by a $2.5 million increase in bad debt expense.







16




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##### Table of Contents

Advertising and marketing expenses were down year over year due to conscious reductions in spending and reduced catalog
costs.





Full time equivalent employees at June 30, 2002 and 2001 were approximately 1,707 and 2,335, respectively,
a decline of 628 employees or 27% of the workforce year over year. Payroll and related expenses declined year over year, but not proportional to the decline in headcount. This is due to raises effective in April 2002 and increased commissions paid
to sales personnel.





In accordance with the companys accounting policies, an additional provision for bad
debts was recorded in the second quarter of 2002 related to deterioration in the aging of customer accounts receivable.





Depreciation





Three months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth

% growthDepreciationas reported

$
15,720

13.9

$
14,263

12.3

$
1,457

10.2Depreciationpro forma


15,720

13.9


13,548

11.9


2,172

16.0





Depreciation increased from the second quarter of 2001 due mainly
to capital expenditures for new enterprise systems implemented worldwide beginning in the fourth quarter of 2001 and other technology investments. Management expects depreciation in 2002 to continue to increase as recent capital investments are
placed in service, and as investments continue to be made in technology, such as upgrades in website architecture and functionality, though at a significantly lower level than in the past.





Amortization





Three months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthAmortizationas reported

$
4,625

4.1

$
17,991

15.5

$
(13,366
)

(74.3
)





Amortization decreased year over year due to the cessation of
goodwill amortization in accordance with SFAS No. 142, offset in part by the inclusion of $3.3 million in amortization of deferred catalog costs in the second quarter of 2002. Goodwill amortization for the second quarter of 2001 was $16.8 million.





Catalog amortization will be approximately $1.7 million in the third quarter of 2002, after which deferred
catalog costs will be fully amortized. Management expects that amortization of identifiable intangible assets may increase gradually over time as the company acquires or develops intangible assets such as trademarks, tradenames, patents, copyrights,
customer lists and covenants not to compete.





Income/Loss from Operations





Three months ended June 30,


Year over year2002

% of sales

2001


% of sales


$ growth

% growthIncome (loss) from operationsas reported

$
10,780

9.5

$
(18,974
)

(16.4
)

$
29,754

156.8Income (loss) from operationspro forma


10,780

9.5


(9,211
)

(8.1
)


19,991

217.0





Income from operations increased in the second quarter of 2002 over
the same period in 2001 due to the cessation of goodwill amortization, lower SG&A expenses, and investment losses incurred only in 2001, offset in part by lower sales and increased depreciation expense, as discussed above. The pro forma loss
from operations in 2001 is significantly lower than the reported loss due mainly to integration costs related to the disposal of Art.com in 2001, as discussed in the General section above.




17




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##### Table of Contents




Income Taxes





Three months ended June 30,


Year over year2002

% of sales

2001


% of sales


$ growth

% growthIncome tax expense (benefit)as reported

$
2,962

2.6

$
(3,440
)

(3.0
)

$
6,402

186.1Income tax expensepro forma


2,962

2.6


388


0.3



2,574

664.2





The effective tax rate used to calculate income taxes for the
second quarter of 2002 was 39.8%, while the rate for 2001 was 39.2% on income before non-deductible amortization of goodwill. Income tax expense increased from the second quarter of 2001 primarily because of increased income before non-deductible
amortization of goodwill and certain identifiable intangible assets.





2002 Year-to-Date Results Compared to 2001 Year-to-Date
Results





Sales





Six months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthSalesas reported

$
227,150

100.0

$
241,643

100.0

$
(14,493
)

(6.1
)Salespro forma


226,447

100.0


235,984

100.0


(9,537
)

(4.0
)





The sales decline from the first half of 2001 to the first half of
2002 reflected mainly volume decreases, offset in part by sales price increases. The sales volume decreases were due to continuation of the downturn in the advertising and media sectors brought on in 2001 by general economic conditions in the U.S.
and abroad. Sales were down year over year in many geographic areas, particularly in the U.S., and in the U.K., where sales were down $3.0 million or 9%.





Sales of rights-managed still images and royalty-free still images comprised 57% and 26% of sales, respectively, for the first half of 2002 as compared to 54% and 27% of sales, respectively, for the
first half of 2001. These percentages fluctuated due to the same factors that caused fluctuation in second quarter sales mix year over year.





Gross Profit and Gross Margin





Six months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthGross profitas reported

$
167,065

73.5

$
173,695

71.9

$
(6,630
)

(3.8
)Gross profitpro forma


166,721

73.6


171,075

72.5


(4,354
)

(2.5
)





The companys gross profit decreased $6.6 million from the
prior year due to a decline in sales, partially offset by an increase in gross margin. This increase in gross margin was due to increased licensing of company owned images and an increase in the percentage of images digitally delivered over the
Internet.





Selling, General and Administrative Expenses (SG&A)





Six months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthSG&Aas reported

$
105,353

46.4

$
122,437

50.7

$
(17,084
)

(14.0
)SG&Apro forma


104,762

46.3


116,922

49.5


(12,160
)

(10.4
)





Selling, general and administrative expenses were lower for the
first half of 2002 due mainly to a decline in advertising and marketing spending of approximately $8 million and a reduction of approximately $6 million in payroll and related costs, offset in part by a $3.7 million increase in bad debt expense.
SG&A expenses fluctuated in each of these categories year to date for the same reasons that these expenses fluctuated between the second quarters of 2002 and 2001.




18




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##### Table of Contents




Depreciation





Six months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth

% growthDepreciationas reported

$
31,064

13.7

$
27,492

11.4

$
3,572

13.0Depreciationpro forma


31,020

13.7


26,028

11.0


4,992

19.2





Depreciation increased for the first half of 2002 from the first
half of 2001 due to the same factors that caused depreciation expense to increase for the second quarter of 2002 over the second quarter of 2001.





Amortization





Six months ended June 30,

Year over year2002

% of sales

2001

% of sales

$ growth


% growthAmortizationas reported

$
10,619

4.7

$
37,269

15.4

$
(26,650
)

(71.5
)





Amortization decreased from 2001 due to the cessation of goodwill
amortization in accordance with SFAS No. 142, offset in part by the inclusion of $7.9 million in amortization of deferred catalog costs in the first half of 2002. Goodwill amortization for the first half of 2001 was $33.6 million.





Income/Loss from Operations





Six months ended June 30,


Year over year2002

% of sales

2001


% of sales


$ growth

% growthIncome (loss) from operationsas reported

$
20,029

8.8

$
(26,821
)

(11.1
)

$
46,850

174.7Income (loss) from operationspro forma


20,320

9.0


(13,528
)

(5.7
)


33,848

250.2





Income from operations increased in the first half of 2002 over the
same period in 2001 due to the cessation of goodwill amortization, lower SG&A expenses, and investment losses incurred only in 2001, offset in part by lower sales and increased depreciation expense, as discussed above. The pro forma loss from
operations in 2001 is significantly lower than the reported loss due mainly to integration costs recorded at Art.com in 2001, as discussed in the General section above.





Income Taxes





Six months ended June 30,


Year over year2002

% of sales

2001


% of sales


$ growth

% growthIncome tax expense (benefit)as reported

$
4,733

2.1

$
(809
)

(0.3
)

$
5,542

685.0Income tax expensepro forma


4,850

2.1


4,403


1.9



447

10.1





The effective tax rate used to calculate income taxes for the first
half of 2002 was 39.8%, while the rate for 2001 was 39.2% on income before non-deductible amortization of goodwill. Income tax expense increased from the first half of 2001 primarily because of increased income before non-deductible amortization of
goodwill and certain identifiable intangible assets.





Recent Accounting Pronouncement





Effective January 1, 2002, the company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This pronouncement requires one model for accounting for long-lived assets to be disposed of and broadens the presentation of discontinued operations to include more transactions. Adoption of this pronouncement did not have an impact on the
companys reported financial position, results of operations or cash flows, however, it could cause any future long-lived asset disposals to be accounted for or presented in a different manner than in the past.




19




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##### Table of Contents




Effective January 1, 2003, the company will adopt SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. This pronouncement requires that liabilities associated with exit or disposal activities be recognized when the liabilities are incurred and can be measured, as opposed to the date that
management commits to the activities. In addition, under the new standard, employee liabilities are to be booked at the present value of expected future cash outflows, and operating lease liabilities are to be booked net of reasonable sublease
income, even if it is not managements intent to sublease the property. As managements current plans do not include exit or disposal activities, management does not expect this pronouncement to have a significant effect on the
companys financial position, results of operations or cash flows.





Subsequent Events





On July 15, 2002, the company terminated its $100 million senior credit facility with HSBC Investment Company plc and repaid the $20
million outstanding balance.





On July 19, 2002, the company entered into a new senior revolving credit facility
with a consortium of banks led by Bank of America, N.A. Key terms and conditions of the new facility are:





| |  |  | $85 million revolving credit facility, which may be increased by $40 million within two years of closing at the election of the company without consent of the
lenders;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | secured by all of the capital stock of certain domestic subsidiaries of the company, 65% of the capital stock of certain foreign subsidiaries, and certain
assets, primarily trademarks and current assets, of the company and these subsidiaries;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | primary financial covenants include maintenance of: a maximum leverage ratio of 3.25, stepping down to 3.0 for fiscal quarters ending December 31, 2003 and
thereafter; a minimum fixed charge coverage ratio of 1.5; and a minimum consolidated net worth not less than $484.3 million, plus 50% of future consolidated quarterly net income, plus 100% of future aggregate increases in stockholders equity
through the issuance and sale of stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | annual interest rate of either i) LIBOR, plus a spread ranging from 0.875% to 1.625% depending on the companys leverage ratio or ii) the higher of a) the
Federal Funds rate, plus .50% or b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its prime rate, plus a spread ranging from zero to 0.250% depending on the companys
leverage ratio;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | commitment fee for unutilized facilities between .25% and .40% annually, depending on the companys leverage ratio;
| | - |  | -------------------------------------------------------------------------------------------------------------------




| |  |  | expires three years after closing;
| | - |  | ----------------------------------




| |  |  | restrictions on payments include no principal payments on any subordinated debt in excess of $25 million, and no purchases of the companys own stock in
excess of the sum of unexercised employee stock options as of the date of the agreement and any future employee stock option grants;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | acquisitions of and investments in third parties are allowed without consent of the lenders, provided they do not exceed $15 million in the aggregate in any
fiscal year or $30 million in any rolling three year period. If the cash price of any acquisition exceeds $15 million, lenders representing at least 50% of the total commitments under the facility must approve the transaction;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | letters of credit issued by the lender reduce the amount available under the line of credit.
| | - |  | --------------------------------------------------------------------------------------------




Letters of credit aggregating $3.9 million have been issued under this senior credit facility, and short-term investments of $3.9 million
have been pledged as collateral and are held in a segregated account with the lender.





On August 5, 2002, the
company borrowed $15 million under this new facility.







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FINANCIAL CONDITION





At June 30, 2002, the company held $79.7 million in cash and cash equivalents and $80.0 million in unused credit facilities under a $100.0 million bank line of credit. This line of credit was
subsequently replaced, as discussed in the Subsequent Event section above.





Working Capital





At June 30, 2002, the companys working capital was $58.9 million, an increase of $45.6 million from the end of 2001. This growth
resulted mainly from an increase in cash and short-term investments of $40.7 million and an increase in accounts receivable of $7.3 million. Accounts receivable increased due to higher sales in the second quarter of 2002 as compared to the fourth
quarter of 2001, while cash increased due to collections on these higher sales. Another significant source of cash was $18.1 million in proceeds from the issuance of common stock through stock option exercises. Significant uses of cash during the
first half of 2002 were $19.1 million in capital expenditures and $6.9 million in interest payments, as well as payments of accounts payable and accrued expenses.





Liquidity and Capital Resources





Management expects to
invest approximately $40 million in capital expenditures during 2002, including the $19.1 million invested during the first half of the year. Existing cash and short-term investment balances, cash flows provided by operating activities and borrowing
capacity are expected to be sufficient to fund operations, capital expenditures and debt servicing requirements for at least the following 12 months.





Cash flows from operating activities are subject to many risks, particularly those discussed below under Factors That May Affect the Business. Should the company require funds beyond
current cash and short-term investment balances and cash flows from operating activities, additional amounts would be drawn down under the new senior credit facility discussed under the Subsequent Events heading above. These borrowings
would be subject to risks, particularly maintenance of the financial covenants also discussed above. Management believes the company is currently in compliance with these covenants.





FACTORS THAT MAY AFFECT THE BUSINESS





Our Business Could be Affected by a Failure to Successfully Complete the Implementation of New Enterprise Systems.





As a result of the acquisition strategy we have pursued since our inception in 1995, we have focused significant resources and attention on integrating acquired businesses. The integration focused on
the installation and development of new enterprise systems for technology, business processes, sales and marketing systems, finance and royalty systems, customer interface, and other corporate administrative functions for the continued
transformation and consolidation of company-wide systems. The October 2001 launch of gettyimages.com marked a significant milestone in the company-wide initiative to integrate the companys Web offerings and business processes, as did the
February 2002 launch of localized language websites and commerce systems in France, Germany and the United Kingdom (U.K.), and the migration of royalty-free stock photography products to the gettyimages.com website. Additional localized language
capability was added to gettyimages.com in July 2002, and we will continue to enhance the site in the future. However, our future performance will largely depend on our ability to complete the implementation of new enterprise systems for our
finance, sales and customer database systems. These implementations create risks such as:





| |  |  | disruption of our ongoing business;
| | - |  | -----------------------------------




| |  |  | delays in reporting systems, which could impact our ability to process information on a timely basis;
| | - |  | -----------------------------------------------------------------------------------------------------




| |  |  | delays in properly identifying and processing data necessary for management functions, including accounting, financial reporting and planning; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | diversion of attention of our senior management from existing operations and other potential business opportunities.
| | - |  | --------------------------------------------------------------------------------------------------------------------




We cannot guarantee that we will successfully complete the implementation of the new enterprise systems.





We May Not be Able to Respond to Rapid Technological Changes Relating to the Internet.





To be successful, we must adapt to rapidly changing Internet technologies by continually enhancing our products and services and
introducing new services to address the changing needs of our customers. We could incur substantial development or acquisition costs if we are required to modify our services or infrastructure significantly. If we are unsuccessful in adapting to
these changes or evolving technologies, or do not sufficiently increase the features and functionality of our products and services, our customers may ultimately switch to the product and service offerings of our competitors.





We May Not be Able to Compete Effectively Against Our Existing or Potential Competitors.





The visual content industry is highly competitive. We compete directly with a number of large and small visual content companies and
commissioned photographers to provide imagery to businesses. We believe that the principal competitive factors in the visual content industry are name recognition, company reputation, the quality, relevance and diversity of the images, the quality
of the contributing photographers and cinematographers under contract with a company, effective use of developing technology, customer service, pricing, accessibility of imagery, distribution capability and speed of fulfillment. Some of our existing
and potential competitors may have or may develop superior financial, marketing and other resources or greater name recognition than we have, or other such competitive advantages.





Our future performance also depends on our ability to review and refresh our collections based on current and future trends in order to provide our customers with the most
relevant content. Many of our customers are sensitive to the latest trends and require current content to meet their needs. If we fail to determine such trends and add relevant new imagery in a timely manner, customers requiring such content may use
other visual content providers to obtain imagery.





We May Not Succeed in Establishing the Getty
Images Brand.





Historically, we have marketed each of the companys collections as its own
brand. We have consolidated those collections and the associated Web-based offerings, technology platforms and business practices under the Getty Images brand name. Continued positioning of the Getty Images brand will largely
depend on the success of our advertising and promotional activities and our ability to provide customers with high quality products and strong customer service. We believe that a favorable customer reception and brand positioning is important to our
future success. Additionally, securing the Getty Images trademark is an important part of the branding strategy, and barriers arising from third parties or trademark officials in various countries may hinder our effort to secure
trademarks in key markets or trademark classes.





Our Right to Use the Getty Trademarks is
Subject to Forfeiture in the Event We Experience a Change of Control.





We own trademarks and trademark
applications for the names Getty Images and Getty, and derivatives of those names and the related logo. We use Getty Images as a corporate identity, as do certain of our subsidiaries, and we use Getty
Images as a product and service brand. We refer to the above as the Getty Trademarks. In the event that a third party or parties not affiliated with the Getty family acquire control of us, Getty Investments L.L.C. (Getty
Investments) has the right to call for an assignment to it, for a nominal sum, of all rights to the Getty Trademarks. In the event of an assignment, we will have 12 months to continue to use the Getty Trademarks, after which time we no longer would
have the right to use them. Getty Investments right to cause such an assignment might have a negative impact on the amount of consideration that a potential acquirer would be willing to pay to acquire our common stock.




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Getty Investments owns approximately 17% of the outstanding shares of our common
stock as of June 30, 2002. Mr. Mark Getty, our Executive Chairman serves as the Chairman of the Board of Directors of Getty Investments, while Mr. Jonathan Klein, our Chief Executive Officer, and Mr. Andrew Garb, a member of our Board of Directors,
serve on the Board of Directors of Getty Investments.





Our Quarterly Financial Results and Stock Price May
Fluctuate.





Historical trends and quarter-to-quarter comparisons of our operating results may not be good
indicators of our future performance.





Our revenues and operating results are expected to vary from quarter to
quarter due to a number of factors, including those listed in this Risk Factors section and the following:





| |  |  | demand for our existing and new products and services, and those of our competitors;
| | - |  | ------------------------------------------------------------------------------------




| |  |  | changes in our pricing policies and the pricing policies of our competitors;
| | - |  | ----------------------------------------------------------------------------




| |  |  | a continued or prolonged slowdown in advertising or media spending;
| | - |  | -------------------------------------------------------------------




| |  |  | changes in the sales mix of our products and services, including the mix of sales of analog and digital imagery, company owned and licensed imagery, and the
geographic distribution of such sales;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | our ability to attract visitors to our websites and the frequency of repeat purchases by our customers;
| | - |  | -------------------------------------------------------------------------------------------------------




| |  |  | shifts in the nature and amount of publicity about us, our competitors or the visual content industry;
| | - |  | ------------------------------------------------------------------------------------------------------




| |  |  | changes in the growth rate of Internet commerce;
| | - |  | ------------------------------------------------




| |  |  | the effect of fluctuations in foreign exchange rates on the results of our operations outside the U.S.;
| | - |  | -------------------------------------------------------------------------------------------------------




| |  |  | costs related to potential acquisitions of technology or businesses; and
| | - |  | ------------------------------------------------------------------------




| |  |  | changes in U.S. and global capital markets and economies, or in applicable tax laws and regulations.
| | - |  | ----------------------------------------------------------------------------------------------------




Because of these risks and others, it is possible that some future quarterly results may be below or above the expectations of public
market analysts and investors.





Impairment of the Value of Significant Assets Could Have an Adverse Impact
on Our Operating Results.





Our operating results and earnings in future periods may be adversely affected
as a result of impairments to the reported value of certain significant assets, the valuation of which require managements most difficult judgments as a result of the need to make estimates and assumptions about the effects of matters that are
inherently uncertain.





Deferred Income Taxes





Deferred income taxes reflect the impact of temporary differences between financial and tax reporting and of tax loss carryforwards, and are reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2002, the company had net deferred tax assets of $64.3 million, net of a
valuation allowance of $16.6 million. Although realization is not assured, management believes, based on its current estimates of future taxable income for its U.S. operations and tax-planning strategies, that it is more likely than not that the net
deferred tax assets will be realized within a reasonable period of time and substantially prior to the expiration of the net operating loss carryforwards. In the event that actual results differ from managements expectations, the valuation
allowance could materially change, directly impacting our financial position and results of operations. If domestic taxable income is not earned as planned, the domestic tax loss carryforwards will expire from 2018 to 2021, and the company may be
required to take the balance through the income statement as income tax expense in advance of the expiration of the loss carryforwards.




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Goodwill and Identifiable Intangible Assets





Intangible assets comprise goodwill and identifiable intangible assets. Goodwill is the excess of the purchase price and related costs
over the fair value of net assets acquired in business combinations. Identifiable intangible assets consist mainly of film libraries, trademarks, tradenames and copyrights and customer lists. The net balance of goodwill and identifiable intangible
assets at June 30, 2002 was $634.7 million. Effective January 1, 2002, the company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. This accounting pronouncement required us to
cease amortization of goodwill, and alternatively test the goodwill balance for impairment annually and between annual tests in certain circumstances. Should the company determine at some point in the future that all or a portion of the goodwill or
identifiable intangible assets balances are impaired, the company would be required to write off the impaired portion through the income statement in the period of that determination.





Certain Assets





The useful
lives of certain of the companys assets, including capitalized image duplication and digitization costs (included within property and equipment), are based upon the estimated period over which the assets are expected to provide benefit to the
company. This future benefit is inherently uncertain, and therefore, the lives of these assets require managements most difficult judgments. The balance of image duplicates and digitization, net of accumulated depreciation, was $37.2 million
at June 30, 2002 and is being depreciated over useful lives of two to four years. Should the company determine at some point in the future that the useful lives of these assets are shorter than previously determined, the company would be required to
accelerate the depreciation, or possibly write off the impaired portion, of the undepreciated balance of such assets.





Our Indebtedness Could Reduce Our Flexibility and Make Us More Vulnerable to Economic Downturns.





Our level of indebtedness may pose substantial risks to our security holders, including the risk that we may not be able to generate sufficient cash flow to satisfy our obligations under our indebtedness or to meet our capital
requirements. A portion of our cash flow from operations will be dedicated to the payment of principal and interest on any amounts outstanding under our senior credit facility and on our 5.0% convertible subordinated notes due in 2007. Our ability
to service our indebtedness will depend on our future performance, which will be affected by general economic conditions and financial, business and other factors, many of which are beyond our control. Such indebtedness could have important
consequences to our security holders, including the following:





| |  |  | our ability to make principal and interest payments on the notes could be negatively impacted;
| | - |  | ----------------------------------------------------------------------------------------------




| |  |  | our flexibility in planning for, or reacting to, changes in our business and competition could be reduced; and
| | - |  | --------------------------------------------------------------------------------------------------------------




| |  |  | we may be more vulnerable to economic downturns.
| | - |  | ------------------------------------------------




We currently anticipate that our available cash resources and cash flow from operations will be sufficient to meet our anticipated needs for working capital and capital expenditures for at least the
following 12 months. However, changes in U.S. and global capital markets, including significant fluctuations in interest rates and the price of our equity securities, or results of our operations may impede our access to, or increase the cost of,
external financing for our operations and any acquisitions.





Certain of Our Stockholders Can Exercise
Significant Influence Over Our Business and Affairs and May Have Interests That Are Different Than Yours.





Some of our stockholders own substantial percentages of the outstanding shares of our common stock.





The Getty Group collectively owned approximately 19% of the outstanding shares of our common stock as of June 30, 2002, and comprises the following persons and entities: Getty Investments L.L.C.; The October 1993 Trust; The JD Klein
Family Settlement; Mr. Mark Getty, our Executive Chairman; and Mr. Jonathan Klein, our Chief Executive Officer.




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The Torrance Group collectively owned approximately 5% of the outstanding shares
of our common stock as of June 30, 2002, and comprises the following persons and entities: PDI, L.L.C.; Mr. Mark Torrance; Ms. Wade Ballinger (the former wife of Mr. Torrance); and certain of their family members.





Pursuant to shareholder agreements among us, the Getty Group and the Torrance Group, none of the members of the Getty Group or the
Torrance Group may transfer certain of their shares of our common stock except in accordance with the terms of those agreements.





As a result of their share ownership, the Getty Group and the Torrance Group each have significant influence over all matters requiring approval of our stockholders, including the election of directors and the approval of mergers or
other business combinations. The substantial percentage of our stock held by the Getty Group and the Torrance Group could also make us a less attractive acquisition candidate or have the effect of delaying or preventing a third party from acquiring
control over us at a premium over the then-current price of our common stock. In addition to ownership of common stock, certain members of the Getty Group and the Torrance Group have management and/or director roles within our company that increase
their influence over us.





Certain Provisions of Our Corporate Documents and Delaware Corporate Law May Deter
a Third Party From Acquiring Our Company.





Our board of directors has the authority to issue up to
5,000,000 shares of preferred stock and to fix the rights, preferences, privileges and restrictions of such shares without any further vote, approval or action by our stockholders. This authority, together with certain provisions of our restated
certificate of incorporation, may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of our company. This could occur even if our stockholders consider such
change in control to be in their best interests. In addition, the concentration of beneficial ownership of our common stock in the Getty Group and the Torrance Group, along with certain provisions of Delaware law, may have the effect of delaying,
deterring or preventing a takeover of our company.





An Increase in Government Regulation of the Internet and
E-Commerce Could Have a Negative Impact On Our Business.





We are subject to a number of regulations
applicable to businesses generally, as well as laws and regulations directly applicable to e-commerce. Although existing laws and regulations affecting e-commerce are not unduly burdensome, state, federal and foreign governments have and may
continue to adopt legislation regulating the Internet and e-commerce. Such legislation or regulation could both increase our cost of doing business, and impede the growth of the Internet while decreasing its acceptance as a communications and
commerce medium. If a decline in the use of the Internet occurs, businesses and consumers may decide in the future not to use our online services.





Laws and regulations do now and could potentially more significantly govern or restrict any of the following issues:





| |  |  | user privacy and data retention and transmission;
| | - |  | -------------------------------------------------




| |  |  | pricing and taxation of goods and services over the Internet;
| | - |  | -------------------------------------------------------------




| |  |  | website content or the quality of products and services offered over the Internet; and
| | - |  | --------------------------------------------------------------------------------------




| |  |  | the liabilities for companies involved in the Internet or e-commerce.
| | - |  | ---------------------------------------------------------------------




Systems Security Risks and Concerns May Harm Our Business.





A significant barrier to e-commerce and online communications is the secure transmission of confidential information over public networks. Developments in computer capabilities, viruses, and advances
in the field of cryptography or other events could result in compromises or breaches of our security systems or those of other websites, jeopardizing our proprietary and confidential information, or causing potentially serious interruptions in our
services, sales or operations. We may be required to expend significant resources to protect against




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the threat of security breaches or to alleviate problems caused by such breaches. Additionally, any well-publicized compromises of our security system or the Internet generally may reduce our
customers desire to transact business over the Web.





We May Experience System Failures and Service
Interruptions on Our Websites That Could Result in Adverse Publicity, Customer Dissatisfaction and Revenue Losses.





A key component of our growth strategy is the increased digitization of our imagery and the distribution of such imagery and related products and services over the Internet. As a result, our revenues are dependent on the ability of
our customers to access our websites, including the gettyimages.com website. In the past, we have experienced infrequent system interruptions that made certain websites unavailable or prevented us from efficiently taking or fulfilling orders. While
we have made improvements in this area, we cannot guarantee that we can prevent these interruptions in the future. System failures or interruptions will inconvenience our users and may result in negative publicity and reduce the volume of images we
license online and the attractiveness of our online products and services to our customers.





We will need to
continue adding software and hardware, and continue to upgrade our enterprise systems and network infrastructure to accommodate increased traffic on our websites and increased sales volume. Without these upgrades, we may face additional system
interruptions, slower response times, diminished customer service, impaired quality and speed of order fulfillment, and delays in our financial reporting. We cannot project the precise rate or timing of any increases in traffic or sales volume on
our websites and, therefore, the integration, timing and cost of these upgrades are uncertain.





The computer and
communications hardware necessary to operate our corporate functions are located in metropolitan locations worldwide. Any of these systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure,
earthquake and similar events. We do not have full redundancy for all of our computer and telecommunications facilities.





Item 3.Quantitative and Qualitative Disclosures about Market Risk





The company is exposed to a variety of market risks, primarily related to fluctuations in interest rates and foreign currency rates. Please see a full discussion of these risks under this same heading
in the companys Annual Report on Form 10-K for 2001.





Interest Rate Risk





Our exposure to market rate risk for changes in interest rates relates primarily to our debt instruments, the largest of which is a fixed
rate borrowing. The book values, before unamortized debt issuance costs, and respective fair values of material long-term debt obligations are shown in the table below:





Fair ValueMaturities


June 30, 2002


Dec. 31, 20012002


2003

2007


Total(In thousands, except percentages)Fixed rate debt

$



$


$
250,000


$
250,000


$
209,063


$
219,947Average year to date interest rate









5.00
%


5.00
%


5.00
%


4.99
%Variable rate debt

$
20,000









$
20,000


$
19,810


$
19,865Average year to date interest rate


3.14
%









3.14
%


3.14
%


5.74
%





Foreign Currency Risk





The company had no outstanding foreign exchange contracts or related deferred gains or losses as of June 30, 2002.




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##### Table of Contents




PART II.    OTHER INFORMATION





Item 1.Legal Proceedings





We have been,
and may continue to be, subject to legal claims from time to time in the ordinary course of our business, including those related to alleged infringement of the trademarks and other intellectual property rights of third parties, such as the failure
to secure model and property releases. We have accrued a liability and charged operations for the estimated costs of settlement or adjudication of claims for which we believe a loss is probable. Presently, there are no pending legal proceedings to
which we are a party or to which any of our property is subject which, either individually or in the aggregate, are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity.





Item 2.Changes in Securities and Use of Proceeds





On May 13, 2002, the company issued 443,839 shares of its common stock, in connection with the conversion into common stock of $12.7 million in convertible 4.75% subordinated notes that were due in June 2003.





Item 3.Defaults Upon Senior Securities





None





Item 4.Submission of Matters to a Vote of Security Holders





The annual meeting of shareholders was held on Tuesday, May 21, 2002, in Seattle, Washington, at which the following matters were submitted to a vote of the shareholders:





| | (a) |  | Votes regarding the election of two directors for a term expiring in 2005 were as follows:
| | --- |  | ------------------------------------------------------------------------------------------




Term expiring in 2005

For

WithheldMark H. Getty

44,731,473

1,460,472Christopher H. Sporborg

45,514,857

677,088





Additional directors, whose terms of office as
directors continued after the meeting, are as follows:





Term Expiring in 2003

Term Expiring in 2004Mark Torrance

James N. BaileyJonathan D. Klein

Andrew S. Garb





| | (b) |  | Votes regarding ratification of the appointment of PricewaterhouseCoopers LLP as independent public accountants of the Company to serve for the fiscal year
ending December 31, 2002 were as follows:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




For

Against

Abstentions and Broker Non-Votes43,952,643

415,773

1,823,529







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| | (c) |  | Votes on a proposal to amend our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 75 million to 100
million were as follows:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




For

Against

Abstentions and Broker Non-Votes45,470,101

714,093

7,751





| | (d) |  | Votes on a proposal to amend and restate the Amended and Restated Getty Images, Inc. 1998 Stock Incentive Plan were as follows:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------




For

Against

Abstentions and Broker Non-Votes45,004,077

1,182,229

5,639





Item 5.Other Information





On June 13,
2002, the Board of Directors elected Michael A. Stein as the seventh member of the Board. Mr. Stein is vice president and chief financial officer of ICOS Corporation. Prior to joining ICOS in January 2001, Mr. Stein was executive vice president and
chief financial officer of Nordstrom, Inc. Mr. Stein also spent nearly 10 years with Marriott International, Inc., serving as executive vice president and chief financial officer from 1993 until 1998. Prior to Marriott, he spent 18 years with Arthur
Andersen LLP, where he was a partner. In addition to managing the commercial group in the Washington, D.C. office, he also served as an area director of the firms International Merger and Acquisition Program and was a member of the firms
U.S. Committee on Professional Standards.





Item 6.Exhibits and Reports on Form 8-K





| | (a) |  | Exhibits:
| | --- |  | ---------




Reference is made to the Index of Exhibits beginning on page 30 for a list of all exhibits filed as part of this report.





| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------




No reports on Form 8-K were filed during the quarter ended June 30, 2002.




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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 thereunto duly authorized.





GETTY IMAGES, INC.August 12, 2002By:

/s/    ELIZABETH J. HUEBNERElizabeth J. Huebner Senior
Vice President and Chief Financial Officer




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##### Table of Contents




EXHIBIT INDEX





Exhibit Number


Description of Exhibit3.1
*

Restated Certificate of Incorporation of Getty Images3.2
*

Bylaws of Getty Images, Inc.10.1


Employment Agreement between Getty Images, Inc. and A.D. Bud Albers, dated January 2,
2002(1)10.2
*

Employment Agreement between Getty Images, Inc. and Elizabeth J. Huebner, dated August 1, 200210.3
*

Credit Agreement, dated July 19, 2002, between Getty Images, Inc. and Bank of America, N.A.10.4
*

Getty Images, Inc. 1998 Stock Incentive Plan99.1
*

Certification by Jonathan D. Klein, CEO99.2
*

Certification by Elizabeth J. Huebner, CFO


---

|(1) |  | Incorporated by reference from the Exhibits to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|* |  | Filed herewith.
|- |  | ---------------



30