Getty Images 10Q 2003 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2003

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-23747

GETTY IMAGES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		98-0177556
(State of Incorporation)		(I.R.S. Employer Identification No.)

601 N. 34TH STREET

SEATTLE, WASHINGTON 98103

(206) 925-5000

(Address, including zip code, and telephone number,

including area code, of principal executive offices)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yesx No¨

At October 31, 2003 there were 56,401,384 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

TABLE OF CONTENTS

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited):

	Condensed Consolidated Statements of Income—for the three and nine months ended September 30, 2003 and 2002	1

	Condensed Consolidated Balance Sheets—at September 30, 2003 and December 31, 2002	2

	Condensed Consolidated Statement of Stockholders’ Equity—at December 31, 2002 and for the nine months ended September 30, 2003	3

	Condensed Consolidated Statements of Cash Flows—for the nine months ended September 30, 2003 and 2002	4

	Notes to Condensed Consolidated Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)	14

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	25

ITEM 4.	Disclosure Controls and Procedures	27

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	27

ITEM 2.	Changes in Securities and Use of Proceeds	27

ITEM 3.	Defaults Upon Senior Securities	27

ITEM 4.	Submission of Matters to a Vote of Security Holders	28

ITEM 5.	Other Information	28

ITEM 6.	Exhibits and Reports on Form 8-K	28

SIGNATURE		29

EXHIBIT INDEX		30

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

PART I.FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
	2003			2002			2003			2002

(In thousands, except per share amounts)

Sales	$	130,775		$	118,189		$	388,814		$	345,339
Cost of sales		37,062			33,449			110,700			93,534

Gross profit		93,713			84,740			278,114			251,805

Selling, general and administrative expenses		51,547			51,564			156,703			156,916
Depreciation		13,826			15,073			43,563			46,137
Amortization		1,123			3,070			2,998			13,689
Other operating expenses (income)		59			—			(16	)		812

Operating expenses		66,555			69,707			203,248			217,554

Income from operations		27,158			15,033			74,866			34,251
Debt extinguishment costs		(11,777	)		—			(11,777	)		—
Interest expense		(1,204	)		(3,505	)		(8,856	)		(11,660	)
Interest income		1,501			515			2,922			1,078
Exchange (losses) gains, net		(56	)		(409	)		1,668			(144	)
Other expenses, net		(42	)		(25	)		(40	)		(30	)

Income before income taxes		15,580			11,609			58,783			23,495
Income tax expense		(6,138	)		(4,793	)		(22,945	)		(9,526	)

Net income	$	9,442		$	6,816		$	35,838		$	13,969


Earnings per share
Basic	$	0.17		$	0.13		$	0.65		$	0.26
Diluted		0.16			0.13			0.62			0.25


Shares used in computing earnings per share
Basic		56,037			53,525			54,974			52,871
Diluted		59,456			54,217			58,259			55,207

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

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	SEPTEMBER 30, 2003			DECEMBER 31, 2002

(In thousands)

ASSETS
Current assets
Cash and cash equivalents	$	156,188		$	76,105
Short-term investments		88,533			40,698
Accounts receivable, net		75,661			73,006
Inventories		738			1,615
Prepaid expenses		9,832			6,925
Deferred income taxes, net		11,098			11,147
Other current assets		1,064			3,493

Total current assets		343,114			212,989
Property and equipment, net		121,705			140,666
Goodwill		607,342			603,011
Identifiable intangible assets, net		16,683			18,606
Deferred income taxes, net		27,601			44,911
Other long-term assets		11,742			4,872

Total assets	$	1,128,187		$	1,025,055


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	56,504		$	56,207
Accrued expenses		39,655			46,770
Income taxes payable		4,816			8,101

Total current liabilities		100,975			111,078
Long-term debt		265,000			244,739
Other long-term liabilities		3,347			1,285

Total liabilities		369,322			357,102

Commitments and contingencies (Note 3)
Stockholders’ equity
Common stock		562			539
Additional paid-in capital		1,055,059			1,007,015
Unearned compensation		(564	)		(906	)
Accumulated deficit		(303,432	)		(339,270	)
Accumulated other comprehensive income		7,240			575

Total stockholders’ equity		758,865			667,953

Total liabilities and stockholders’ equity	$	1,128,187		$	1,025,055

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

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(unaudited)

	No. of Shares of Common Stock $0.01 Par Value	No. of Shares of Exchangeable Preferred Stock Without Par Value		Common Stock		Additional Paid- In Capital		Unearned Compensation			Accumulated Deficit			Accumulated Other Comprehensive Income		Total

(In thousands)

Balance at December 31, 2002	53,887	35		$	539	$	1,007,015	$	(906	)	$	(339,270	)	$	575	$	667,953
Net income	—	—			—		—		—			35,838			—		35,838
Other comprehensive income	—	—			—		—		—			—			6,665		6,665
Amortization of unearned compensation	—	—			—		—		342			—			—		342
Exchange of shares	29	(29	)		—		—		—			—			—		—
Stock options exercised	2,290	—			23		48,044		—			—			—		48,067

Balance at September 30, 2003	56,206	6		$	562	$	1,055,059	$	(564	)	$	(303,432	)	$	7,240	$	758,865

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

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

NINE MONTHS ENDED SEPTEMBER 30,	2003			2002

(In thousands)

Cash flows from operating activities
Net income	$	35,838		$	13,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		43,563			46,137
Deferred income taxes		17,739			2,240
Debt extinguishment costs		11,777			—
Bad debt expense		3,120			5,412
Amortization		2,998			13,689
Amortization of debt issuance costs		1,163			1,546
Other items		671			145
Changes in assets and liabilities, net of effects of business acquisitions:
Accounts receivable		(2,672	)		(8,925	)
Accounts payable		(2,100	)		(176	)
Accrued expenses		(9,073	)		(7,041	)
Income taxes		(2,948	)		522
Other		3,101			(2,309	)

Net cash provided by operating activities		103,177			65,209

Cash flows from investing activities
Acquisition of available-for-sale investments		(62,543	)		—
Acquisition of property and equipment		(22,503	)		(28,944	)
Proceeds from the maturity of held-to-maturity investments		14,238			—
Acquisition of businesses, net of cash acquired		(3,486	)		—
Proceeds from the disposition of assets		300			—
Acquisition of identifiable intangible assets		(56	)		(912	)
Acquisition of held-to-maturity investments		—			(28,598	)
Other		14			65

Net cash used in investing activities		(74,036	)		(58,389	)

Cash flows from financing activities
Proceeds from the issuance of long-term debt		265,000			15,000
Repayment of debt		(250,000	)		(20,046	)
Proceeds from the issuance of common stock		48,067			18,186
Debt issuance costs		(7,288	)		(714	)
Payment of debt premium		(7,142	)		—

Net cash provided by financing activities		48,637			12,426

Effects of exchange rate differences		2,305			1,824

Net increase in cash and cash equivalents		80,083			21,070
Cash and cash equivalents, beginning of period		76,105			46,173

Cash and cash equivalents, end of period	$	156,188		$	67,243

Non-cash financing activity
Subordinated notes converted to common stock	$	—		$	12,925

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

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 our consolidated financial statements and revenues and expenses reported during the period. The estimates and assumptions that require management’s most difficult judgments are: a) the appropriateness of the valuation and useful lives, if applicable, of long-lived assets, including goodwill and identifiable intangible assets, b) determining the appropriate level of deferred tax asset valuation allowances, c) the designation of certain intercompany balances with foreign subsidiaries as long-term investments and d) the sufficiency of the allowance for doubtful accounts. These judgments are difficult as matters that are inherently uncertain directly impact their valuation and accounting. Actual results may vary from management’s estimates and assumptions.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period’s presentation with no effect on previously reported: net assets; net cash flows from operating, investing or financing activities; or net income.

Principles of Consolidation

Our consolidated financial statements and notes thereto 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 Consolidated Financial Statements include all adjustments, which are of a normal and recurring nature, necessary to a fair statement of the results of operations, financial position and cash flows for the interim periods presented. The condensed information should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our latest Annual Report on Form 10-K.

Foreign Exchange Gains and Losses and Derivatives

Derivative financial instruments, namely forward foreign currency exchange contracts, are used to reduce the impact of foreign currency exchange rate risks. Our forward contracts are generally denominated in British pounds and Euros and typically range from one to three months in original maturity. Gains and losses on these forward contracts are included in exchange gains and losses in our consolidated statements of income in the period in which the exchange rates change. At September 30, 2003, we held forward contracts to sell $7.5 million worth of Euros and $6.8 million worth of British pounds in U.S. dollar functional currency sets of books. The notional amounts of forward contracts for all other currencies at September 30, 2003 were less than $3.0 million individually. There were no forward contracts outstanding at December 31, 2002.

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

Earnings Per Share

Basic earnings per share are calculated based on the weighted average number of common shares outstanding during each period. Diluted earnings per share are calculated based on the shares used to calculate basic earnings per share plus the effect of dilutive stock options and restricted stock awards.

	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2003		2002		2003		2002

(In thousands, except per share amounts)

Basic Earnings Per Share
Income available to common stockholders (numerator)	$	9,442	$	6,816	$	35,838	$	13,969
Weighted average common shares outstanding (denominator)		56,037		53,525		54,974		52,871
Basic earnings per share	$	0.17	$	0.13	$	0.65	$	0.26

Diluted Earnings Per Share
Income available to common stockholders (numerator)	$	9,442	$	6,816	$	35,838	$	13,969

Weighted average common shares outstanding		56,037		53,525		54,974		52,871
Effect of dilutive securities
Stock options		3,404		692		3,276		2,336
Restricted stock		15		—		9		—

Total weighted average common shares and dilutive securities (denominator)		59,456		54,217		58,259		55,207

Diluted earnings per share	$	0.16	$	0.13	$	0.62	$	0.25

Approximately 0.3 million, 7.2 million, 0.8 million and 3.6 million other common shares potentially issuable from stock options for the three months ended September 30, 2003 and 2002 and for the nine months ended September 30, 2003 and 2002, respectively, are excluded from the computation of diluted earnings per share because they are anti-dilutive. Also excluded in all periods because they are anti-dilutive are 4.1 million common shares that were potentially issuable from our 5.0% convertible subordinated notes. The 5.0% convertible subordinated notes were redeemed on July 10, 2003 (see Note 2).

The diluted earnings per share calculations for 2003 also exclude common shares potentially issuable upon conversion of our 0.5% convertible subordinated debentures (see Note 2). These shares are excluded because none of the conversion contingencies were satisfied during the reporting period, nor would they have been satisfied if the end of the reporting period were the end of the contingency period. The debentures may be converted to common stock at the holder’s option only if one or more of the following conditions are met: 1) the closing price of our common stock during a relevant measurement period as defined in the indenture is more than 120% of the base conversion price (120% of $61.08, or $73.30); 2) the credit rating assigned to the debentures by Standard and Poor’s (S&P) is below B- or by Moody’s Investor Services (Moody’s) is below B3; 3) the trading price of the debenture during a relevant measurement period as defined in the indenture is less than 95% of the product of the closing price of our stock and the conversion rate in effect at such time; 4) the debentures are called for redemption; or 5) upon the occurrence of certain corporate transactions as defined in the indenture.

If one or more of the conversion contingencies are satisfied in a future period, additional shares will be included in the calculation of earnings per share for that period. If the holders of the debentures exercise their conversion rights, additional shares will be included in the calculation of both basic and diluted earnings per share. If the holders do not exercise their conversion rights, additional shares will be included only in the calculation of diluted earnings per share. The number of shares included in these calculations will depend on the conversion rate in effect at the time one or more of the contingencies are satisfied. The minimum conversion rate is 16.3720, which would result in the inclusion of an additional 4.3 million shares in the calculations, while the maximum conversion rate is 26.2054, which would result in the inclusion of an additional 6.9 million shares in the calculations. The minimum conversion rate applies when our stock price is $61.08 per share or less, and the maximum conversion rate would apply only if our stock price were to rise to $153 per share.

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

Short-Term Investments

	SEPTEMBER 30, 2003		DECEMBER 31, 2002

(In thousands)

Available-for-sale debt securities	$	82,367	$	20,118
Held-to-maturity corporate bonds		6,166		16,682
Held-to-maturity certificates of deposit		—		3,898

Total short-term investments	$	88,533	$	40,698

Available-for-sale securities are carried at market value with associated unrealized holding gains and losses recorded in accumulated other comprehensive income, while held-to-maturity securities are carried at amortized cost. All held-to-maturity securities mature in 2003, while available-for-sale securities mature between 2003 and 2007. Available-for-sale securities with contractual maturities beyond one year are classified as short-term in our consolidated balance sheets because they represent the investment of cash that is available for current operations. Unamortized bond premium at September 30, 2003 and December 31, 2002 was nominal.

Accounts Receivable

Accounts receivable represent trade receivables, net of allowances for doubtful accounts of $11.2 million and $12.6 million at September 30, 2003 and December 31, 2002, respectively. The provisions recorded during the three and nine months ended September 30, 2003 were $0.9 million and $3.1 million, respectively. This is compared to provisions recorded during the three and nine months ended September 30, 2002 of $1.0 million and $5.4 million, respectively. Approximately 10% of our recorded investment in trade receivables, net of allowances for doubtful accounts, was past due 90 days or more at September 30, 2003 compared to 14% at December 31, 2002.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation of approximately $277.7 million and $237.1 million at September 30, 2003 and December 31, 2002, respectively.

Goodwill

Goodwill is the excess of the purchase price (including liabilities assumed and direct costs) over the fair value of tangible and identifiable intangible assets acquired in purchase business combinations. As of January 1, 2002, goodwill is no longer amortized but is reviewed for impairment annually on August 31 and between annual periods in certain circumstances. We performed the annual valuation as of August 31, 2003 and determined that there was no impairment of goodwill as of this date.

Goodwill changed from year-end as follows:


(In thousands)

Goodwill at December 31, 2002	$	603,011
Acquisitions of businesses (see Note 7)		4,214
Effect of foreign currency translation adjustments		117

Goodwill at September 30, 2003	$	607,342

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

Identifiable Intangible Assets

Identifiable intangible assets are assets that do not have physical representation, but that arise from contractual or other legal rights or are capable of being separated or divided from the company and sold, transferred, licensed, rented or exchanged. 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 of identifiable intangible assets at the reported balance sheet dates were as follows:

	SEPTEMBER 30, 2003				DECEMBER 31, 2002

		Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization

(In thousands)

Customer lists	$	15,630	$	7,376	$	14,935	$	5,568
Trademarks, trade names and copyrights		11,427		4,531		11,294		3,637
Other identifiable intangible assets		2,381		848		2,177		595

Totals	$	29,438	$	12,755	$	28,406	$	9,800

Amortization of identifiable intangible assets was $1.1 million, $1.3 million, $3.0 million and $4.1 million for the three months ended September 30, 2003 and 2002, and the nine months ended September 30, 2003 and 2002, respectively. Expected amortization of identifiable intangible assets for the next five years is as follows:

FISCAL YEAR

(In thousands)

2003	$	4,019
2004		4,011
2005		3,908
2006		3,374
2007		1,732

We are required to reassess the remaining useful lives of our identifiable intangible assets each reporting period to determine whether events and circumstances warrant revisions to the remaining periods of amortization. No revisions were determined to be necessary during the periods presented. Any future revisions would be applied prospectively.

Stock-Based Compensation

We apply the intrinsic value provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for stock-based compensation.

We do not recognize compensation expense when granting employee stock options, as we do not grant options with exercise prices less than the market price of our common stock on the date of the grant. The only compensation expense we recognize in relation to stock options is upon infrequent modification of certain terms of outstanding options. With respect to the periods presented in this report, there were minor stock option modifications resulting in compensation expense of less than $0.1 million recognized in the third quarter of 2002.

We recognize unearned compensation and periodic compensation expense for restricted stock awards. Unearned compensation is calculated as the market price of our common stock on the date of the award less the exercise price, if any, times the number of shares awarded, and is amortized to compensation expense on a straight-line basis over the vesting period.

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” as amended, requires the disclosure of pro forma information as if we had adopted the fair-value method of accounting for stock-based compensation. Under this method, compensation cost is measured on all awards based on the fair value of the awards at the grant date. The pro forma effect on our net income and earnings per share of applying the fair-value method of accounting would have been as follows:

	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
	2003			2002			2003			2002

(In thousands, except per share amounts)

Net income
As reported	$	9,442		$	6,816		$	35,838		$	13,969
Add: APB No. 25 stock-based compensation, net of income taxes		78			23			208			23
Deduct: SFAS No. 123 stock-based compensation, net of income taxes		(1,510	)		(2,787	)		(4,578	)		(9,357	)

Pro forma net income	$	8,010		$	4,049		$	31,468		$	4,635

Basic earnings per share
As reported	$	0.17		$	0.13		$	0.65		$	0.26
Pro forma		0.14			0.08			0.57			0.09

Diluted earnings per share
As reported	$	0.16		$	0.13		$	0.62		$	0.25
Pro forma		0.14			0.07			0.54			0.08

Shares used in computing pro forma earnings per share
Basic		56,037			53,525			54,974			52,871
Diluted		59,256			54,012			58,034			54,729

A Black-Scholes multiple option valuation model was utilized in calculating the pro forma figures, with forfeitures recognized as they occur and the following assumptions:

	THREE MONTHS ENDED SEPTEMBER 30,		NINE MONTHS ENDED SEPTEMBER 30,
	2003	2002	2003	2002


Expected future share price volatility	67%	75%	69%	74%
Risk free rate of return	3.37%	4.78%	3.72%	5.00%
Expected life of option (from vest date)	1¹/2 years	1¹/2 years	1¹/2 years	1¹/2 years
Expected rate of dividends	None	None	None	None

Catalogs

As part of our marketing efforts, we produce and distribute catalogs containing images offered through our rights-managed, royalty-free 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, we 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 the American Institute of Certified Public Accountants Statement of Position No. 93-7 “Reporting on Advertising Costs,” catalog production costs are expensed upon initial distribution of each catalog effective October 1, 2001. Deferred catalog costs were fully amortized by September 30, 2002.

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

Direct catalog production costs and amortization of any such costs that were deferred, and their impact on our consolidated statements of income are as follows:

THREE MONTHS ENDED SEPTEMBER 30,	Selling, general and administrative expenses		Amortization

(In thousands)

2003
Direct catalog production expense	$	1,697	$	—


2002
Direct catalog production expense	$	2,141	$	—
Amortization of deferred catalog costs		—		1,766

	$	2,141	$	1,766


NINE MONTHS ENDED SEPTEMBER 30,

(In thousands)

2003
Direct catalog production expense	$	3,444	$	—


2002
Direct catalog production expense	$	5,353	$	—
Amortization of deferred catalog costs		—		9,642

	$	5,353	$	9,642

Recent Accounting Pronouncements

Effective January 1, 2003, we adopted SFAS No. 143, “Accounting for Asset Retirement Obligations.” This statement requires that the fair value of a liability for an asset retirement obligation, such as an obligation to return leased property to its original condition, be recognized in the period in which the obligation is incurred if a reasonable estimate of the fair value of the obligation can be made. We do not have any material asset retirement obligations.

Effective July 1, 2003, we adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Adoption of this statement did not have a material impact on our consolidated financial statements.

Effective July 1, 2003, we adopted the effective provisions of SFAS No. 150, “Accounting for Financial Instruments With Characteristics of Liabilities, Equity, or Both.” This statement requires certain types of financial instruments with characteristics of both liabilities and equity to be classified as liabilities because they represent obligations as opposed to ownership relationships. Adoption of this statement did not have a material impact on our consolidated financial statements.

Effective July 1, 2003, we adopted Emerging Issues Task Force Issue No. 00-21 “Revenue Arrangements with Multiple Deliverables” effective for all arrangements entered into on or after that date. Adoption of this pronouncement did not have a material impact on our consolidated financial statements.

NOTE 2. LONG-TERM DEBT

Convertible Subordinated Debentures

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 1

2023. We incurred underwriters’ commissions and other debt issuance costs of approximately $8.0 million, which are deferred and included in other long-term assets in our consolidated balance sheets and are amortized to interest expense through the date that holders may first require us to redeem the debentures, June 9, 2008, using the straight-line method of amortization.

Key terms and conditions of the 0.5% convertible subordinated debentures are:

•

The base conversion price of $61.08 per share results in 16.3720 shares of common stock issued per $1,000 principal amount debenture (the conversion rate). Prior to June 9, 2008, if the applicable stock price is less than or equal to the base conversion price of $61.08, the conversion rate will be the base conversion rate. If the stock price is greater than the base conversion price, the conversion rate will be adjusted according to a pre-determined formula. Notwithstanding the foregoing, in no event will the conversion rate exceed 26.2054. On or after June 9, 2008, the conversion rate will be fixed for the remainder of the term of the debentures at the conversion rate effective on the date that is eight trading days prior to June 9, 2008.

•

The debentures may be converted at the holder’s option only under one of the following conditions: 1) the closing price of our common stock during a relevant measurement period as defined in the indenture is more than 120% of the base conversion price (120% of $61.08, or $73.30); 2) the credit rating assigned to the debentures by S&P is below B- or by Moody’s is below B3; 3) the trading price of the debenture during a relevant measurement period as defined in the indenture is less than 95% of the product of the closing price of our stock and the conversion rate in effect at such time; 4) the debentures are called for redemption; or 5) upon the occurrence of certain corporate transactions as defined in the indenture.

•

We may redeem the debentures for cash equal to the principal value plus any accrued and unpaid interest at any time on or after June 13, 2008.

•

Holders may require us to redeem the debentures for cash equal to the principal value plus any accrued and unpaid interest on June 9, 2008, 2013 and 2018.

•

We will pay contingent interest beyond the 0.5% coupon rate at the rate of 0.5% per year on the average trading price of the debentures over a five day trading period immediately preceding the first day of the applicable six-month period, commencing with the six-month period ending December 9, 2008, if such average trading price is greater than or equal to $1,200 per debenture (120% of the principal amount).

The conversion contingencies relating to the credit rating assigned to the debentures and the trading price of the debentures compared to the product of the closing price of our stock and the conversion rate in effect at such time, as well as the contingent interest feature, represent embedded derivatives. A valuation of these derivatives was performed upon issuance of the debentures and each quarter thereafter. The value of the derivatives in all reporting periods was insignificant.

Convertible Subordinated Notes and Debt Extinguishment Costs

The net proceeds from the issuance of the convertible subordinated debentures and other funds were used to redeem our 5.0% convertible subordinated notes on July 10, 2003, for $261.1 million in cash, including $250.0 million of principal, $7.1 million of call premium and $4.0 million of accrued interest. In addition, we wrote off $4.6 million of unamortized debt issuance costs associated with these notes. The call premium and unamortized debt issuance costs comprise the debt extinguishment costs in our consolidated statements of income and cash flows.

Senior Credit Facility

On July 19, 2002, we entered into a credit agreement for a senior revolving credit facility with Bank of America, N.A. and certain other lenders from time to time party to the credit agreement. Pursuant to the terms of the senior credit facility, the financial institutions agreed to make available to us and certain of our subsidiaries a senior revolving credit facility of up to $85.0 million (including a $15.0 million sublimit for the issuances of letters of credit) which we may request to increase, on a one time basis, on or before June 30, 2004, by up to $40.0 million; provided, however, that each financial institution’s obligation to increase the amount of its lending commitment is at its sole discretion.

During the second quarter of 2003, the senior revolving credit facility agreement was amended to permit the redemption of our 5.0% convertible subordinated notes and to allow additional repayment of any subordinated debt up to $100 million provided that we maintain cash and cash equivalents and short term investments balances of no less than $50 million in excess of amounts outstanding under the senior credit facility during the three month period commencing on the date of such repayment. The agreement was also amended to release $3.9 million in short-term investments as collateral for letters of credit aggregating this same amount.

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Management believes that we are in compliance with the financial covenants of the senior credit facility agreement.

NOTE 3. COMMITMENTS AND CONTINGENCIES

Commitments

Following are future minimum payments and receipts under various agreements:

	2003			2004			2005			2006			2007			THEREAFTER		TOTAL

(In thousands)

Operating lease payments	$	20,976		$	19,624		$	19,347		$	19,052		$	18,225		$	116,589	$	213,813
Sublease receipts		(5,528	)		(5,339	)		(5,225	)		(5,230	)		(833	)		—		(22,155	)
Minimum royalty guarantee payments		5,509			6,367			5,700			3,046			325			—		20,947
Minimum guaranteed receipts		(1,167	)		(2,146	)		(2,250	)		(937	)		—			—		(6,500	)

Net commitments	$	19,790		$	18,506		$	17,572		$	15,931		$	17,717		$	116,589	$	206,105

Contingencies

We indemnify certain customers from claims related to alleged infringements of the intellectual property rights of third parties, such as a photographer’s failure to secure model and property releases for an image we license. The standard terms of these guarantees require us to defend those claims and pay related damages, if any. We mitigate this risk by contractually requiring our contributing photographers and third-party image providers to secure all necessary model and property releases prior to submitting any imagery to us, and by requiring them to indemnify us in the event a claim arises in relation to an image they have provided. The third-party image providers are also required to carry insurance policies for losses related to such claims. We do not record any liabilities for these guarantees until claims are made and we are able to assess the range of possible payments and available recourse from our image providers. Historically, our exposure to such claims has been immaterial, as were our recorded liabilities for intellectual property infringement at September 30, 2003 and December 31, 2002.

In the ordinary course of business, we also enter into certain types of agreements that contingently require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or services; agreements with customers other than those licensing images, under which we may indemnify them against claims arising from their use of our products or services; agreements with distributors, under which we may indemnify them against claims arising from their distribution of our products or services; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to use of their property; agreements with directors and officers, under which we indemnify them to the full extent allowed by Delaware law against claims relating to their service to us; agreements with purchasers of business we have sold, under which we may indemnify the purchasers against claims arising from our operation of the businesses prior to sale; and agreements with initial purchasers and underwriters of our securities, under which we indemnify them against claims relating to their participation in the transactions.

The nature and terms of these indemnifications vary from contract to contract, and generally a maximum obligation is not stated. Because we are unable to estimate our potential obligation, and because management does not expect these indemnifications to have a material adverse effect on our consolidated financial position, results of operations or cash flows, no related liabilities are recorded at September 30, 2003 or December 31, 2002. We hold insurance policies that mitigate potential losses arising from certain indemnifications, and historically, we have not incurred significant costs related to performance under these obligations.

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NOTE 4. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

As a provider of visual content, we operate in one business segment. Due to the nature of our 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. The U.S. dollar value of sales reported below reflects both the sales performance of each country and the impact of the change in the currency in which each sales transaction is denominated relative to the U.S. dollar. 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 SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2003		2002		2003		2002

(In thousands)

United States	$	60,547	$	59,788	$	183,164	$	176,114
United Kingdom		18,321		16,564		51,912		47,179
Germany		10,739		8,819		30,127		25,253
France		7,174		5,561		21,876		16,084
Rest of world		33,994		27,457		101,735		80,709

Total sales	$	130,775	$	118,189	$	388,814	$	345,339

NOTE 5. INCOME TAXES AND NET DEFERRED TAX ASSETS

The effective tax rates used to calculate income tax expense for the first nine months of 2003 and 2002 were 39.0% and 40.5%, respectively. The decrease in the effective tax rate was primarily due to increased book income compared to permanent differences, principally non-deductible expenses, which did not increase proportionately. At September 30, 2003, we had $38.7 million in net deferred tax assets, net of a valuation allowance of $28.3 million. This is compared to $56.1 million in net deferred tax assets, net of a valuation allowance of $17.5 million at December 31, 2002.

Management will reevaluate the valuation allowance during the fourth quarter of 2003 upon completion of updated estimates of taxable income for future periods. Should the estimates indicate that taxable income for future periods is sufficient to utilize more of the deferred tax asset than the net balance, all or a portion of the valuation allowance will be reversed in the fourth quarter. If the full valuation allowance is reversed in the fourth quarter of 2003, approximately $13.2 million and $15.1 million will be credited to income tax expense and additional paid-in capital, respectively. However, a portion of the valuation allowance may be retained for deferred tax assets that may not be fully recovered, such as capital loss carryforwards and foreign net operating losses. If the estimates indicate that we are unable to utilize all or a portion of the net deferred tax asset balance, currently $38.7 million, a greater valuation allowance will be recorded and charged to income tax expense in the fourth quarter.

NOTE 6. ACCUMULATED OTHER COMPREHENSIVE INCOME

	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
	2003			2002			2003			2002

(In thousands)

Net income	$	9,442		$	6,816		$	35,838		$	13,969
Net unrealized gains on revaluation of foreign currency denominated long-term intercompany balances		1,109			3,013			12,169			15,466
Foreign currency translation adjustments		(360	)		(2,180	)		(5,468	)		(7,438	)
Net unrealized loss on short-term investments		(47	)		—			(58	)		—
Deferred taxes on net unrealized loss		34			—			22			—

Total comprehensive income	$	10,178		$	7,649		$	42,503		$	21,997

Unrealized gains and losses resulting from the revaluation of foreign-currency denominated intercompany balances that are long-term in nature and for which settlement is not planned or anticipated in the foreseeable future are reported in the same manner as translation adjustments in accumulated other comprehensive income. Total accumulated translation adjustments, including amounts aris - -

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ing from the revaluation of long-term intercompany balances, were net unrealized gains of $7.2 million and $0.5 million at September 30, 2003 and December 31, 2002, respectively.

NOTE 7. ACQUISITIONS

During the first quarter of 2003, we acquired ImageDirect, Inc., an editorial photography agency, for a purchase price (including liabilities assumed) of $4.5 million. The portion of the purchase price allocated to goodwill was $3.2 million, with the remaining purchase price allocated to other identifiable intangible and tangible assets.

During the second quarter of 2003, we acquired Mission Studios Limited, a United Kingdom-based entertainment photography agency. The purchase price was insignificant and was allocated to goodwill and other identifiable intangible and tangible assets.

These acquisitions were not significant to the company as a whole for any period presented.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

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 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, 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, but not limited to, 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 and that could cause our actual results to differ materially from our past performance and our current expectations, assumptions and projections. Differences may result from actions taken by the company as well as from risks and uncertainties beyond the company’s control. Potential risks and uncertainties include, among others, those set forth herein under “Factors That May Affect the Business,” as well as in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2002. Except as required by law, the company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise. Readers should carefully review the factors set forth in other 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

Overview

We are 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.

Revenue

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

STILL IMAGERY

The majority of the still imagery that we license can be broken down into three portfolios: rights-managed, royalty-free, and editorial. Rights-managed images are licensed by customers on a use-by-use basis and generally have higher license fees based on the

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intended use of the image, including type of media, geographical distribution, image size, license duration, circulation and level of rights protection. Approximately 50% of our sales for the third quarter of 2003 were for rights-managed imagery, with an average net license fee for a single rights-managed image of approximately $575, and an average gross margin for all rights-managed images licensed of approximately 66%. For the first nine months of 2003, approximately 53% of our sales were for rights-managed imagery, with an average net license fee for a single rights-managed image of approximately $560, and an average gross margin for all rights-managed images licensed of approximately 66%.

Royalty-free images are licensed by customers 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. Approximately 33% of our sales for the third quarter of 2003 were for royalty-free imagery, with an average net license fee for a single royalty-free image of approximately $150, and an average gross margin for all royalty-free images licensed of approximately 77%. For the first nine months of 2003, approximately 31% of our sales were for royalty-free imagery, with an average net license fee for a single royalty-free image of approximately $140, and an average gross margin for all royalty-free images licensed of approximately 78%.

Editorial imagery, consisting of news, sport and entertainment imagery, is generally not for resale, trade, packaging, promotion or advertising and is licensed on a single image or subscription basis. Approximately 8% of our sales for the third quarter and 7% of our sales for the first nine months of 2003 were for editorial imagery. Because many of these images are licensed on a subscription basis, average license fee is not meaningful. Average gross margin for all editorial images licensed in the third quarter and first nine months of 2003 were approximately 81% and 83%, respectively.

MOVING IMAGERY

We also license moving imagery, or film, which may be rights-managed or royalty-free, with license fees based on the intended use of the imagery, including market, geographic area and duration of use. Approximately 5% of our sales for the third quarter of 2003 were for film, with an average net price for a rights-managed film clip of approximately $635, and an average gross margin for all film licensed of approximately 75%. For the first nine months of 2003, approximately 5% of our sales were for film, with an average net price for a rights-managed film clip of approximately $605, and an average gross margin for all film licensed of approximately 74%.

Cost of Sales

Our cost of sales primarily consists of commission payments to contributors, comprised of photographers, cinematographers and third-party image providers. These contributors are under contract with the company and typically receive payments of up to 40% of the sales value, depending on the portfolio (as discussed above), and where the imagery is licensed (licenses outside a contributor’s home territory typically 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, we license imagery through distributors worldwide. Licenses through distributors comprised approximately 7% of our sales for both the third quarter and first nine months of 2003. Distributors typically earn and retain 35% to 40% of the license fee, and we recognize the remaining 60% to 65% as revenue. Commissions paid to contributors on distributor sales are generally 50% of our share of the license fee (generally 30% to 32.5% of the total license fee). This results in an average gross margin of approximately 50% on distributor sales.

Critical Accounting Policies and Estimates and Assumptions

There have been no material changes in our critical accounting policies and estimates and assumptions since December 31, 2002.

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MATERIAL CHANGES IN RESULTS OF OPERATIONS

Following is management’s discussion of material changes in our results of operations with respect to the most recent interim periods and the corresponding interim periods of the prior year. Income from operations and operating margin should not be considered alternatives to net income as indicators of our operating performance, but should be considered supplemental indicators. All figures in tables are shown in thousands, except percentages.

SALES

	THREE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change		% change


Sales	$	130,775	100.0	$	118,189	100.0	$	12,586	10.6


	NINE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change		% change


Sales	$	388,814	100.0	$	345,339	100.0	$	43,475	12.6

Sales increased year over year due mainly to: the positive impact of changes in foreign currency exchange rates on the translation of sales originated in foreign countries ($6.6 million and $21.8 million for the three and nine months ended September 30, 2003, respectively); pricing, including selective price increases, reduced levels of discounting and a shift in the mix of licensed uses towards higher priced uses; and the introduction of additional third-party image collections to the gettyimages.com website. Partially offsetting these increases were declines in the volume of images licensed in certain Getty Images collections.

Excluding the impact of foreign-currency translation, sales increased year over year in multiple geographical areas, particularly the United States of America (U.S.), Canada and several European countries. Sales increased year over year across most image collections due to the same factors as overall sales growth.

GROSS PROFIT AND GROSS MARGIN

	THREE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change		% change


Gross profit and gross margin	$	93,713	71.7	$	84,740	71.7	$	8,973	10.6


	NINE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change		% change


Gross profit and gross margin	$	278,114	71.5	$	251,805	72.9	$	26,309	10.4

Despite an increase in our gross profit year over year, gross margin declined year-to-date principally due to an increase in licenses of lower margin images, mainly third-party imagery, in the first half of 2003.

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AMORTIZATION

	THREE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change			% change


Amortization	$	1,123	0.9	$	3,070	2.6	$	(1,947	)	(63.4	)


	NINE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change			% change


Amortization	$	2,998	0.8	$	13,689	4.0	$	(10,691	)	(78.1	)

Amortization decreased year over year mainly due to the cessation of catalog amortization, which was $1.7 million and $9.6 million for the three and nine months ended September 30, 2002, respectively. Catalog production costs are expensed upon initial distribution of each catalog effective October 1, 2001, and all deferred catalog costs were fully amortized by September 30, 2002.

INCOME FROM OPERATIONS AND OPERATING MARGIN

	THREE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change		% change


Income from operations and operating margin	$	27,158	20.8	$	15,033	12.7	$	12,125	80.7


	NINE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change		% change


Income from operations and operating margin	$	74,866	19.3	$	34,251	9.9	$	40,615	118.6

Income from operations and operating margin increased as a result of higher sales and the cessation of catalog amortization, offset in part by lower gross margin year-to-date, all of which are discussed above.

INTEREST EXPENSE

	THREE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change			% change


Interest expense	$	1,204	0.9	$	3,505	3.0	$	(2,301	)	(65.6	)


	NINE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of sales	2002		% of sales	$ change			% change


Interest expense	$	8,856	2.3	$	11,660	3.4	$	(2,804	)	(24.0	)

Interest expense decreased principally due to the repayment of our 5% convertible subordinated notes and issuance of 0.5% convertible subordinated debentures. Interest expense on the new 0.5% convertible subordinated debentures will be approximately $1.3 million per year, compared to interest expense on the extinguished 5% convertible subordinated notes which was approximately $12.5 million per year.

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INCOME TAXES

	THREE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of pre-tax income	2002		% of pre-tax income	$ change		% change


Income tax expense	$	6,138	39.4	$	4,793	41.3	$	1,345	28.1


	NINE MONTHS ENDED SEPTEMBER 30,						YEAR OVER YEAR

	2003		% of pre-tax income	2002		% of pre-tax income	$ change		% change


Income tax expense	$	22,945	39.0	$	9,526	40.5	$	13,419	140.9

Income tax expense increased over the prior year due to higher income before taxes, offset in part by a decrease in our effective tax rate. The decrease in the effective tax rate was primarily due to increased book income compared to permanent differences, principally non-deductible expenses, which did not increase proportionately.

At September 30, 2003, we had net deferred tax assets of $38.7 million, net of a valuation allowance of $28.3 million. Although realization is not assured, management believes, based on its current estimates of near-term future taxable income for the company’s 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 between 2018 and 2021.

MATERIAL CHANGES IN FINANCIAL CONDITION

Liquidity

There have been no material changes since December 31, 2002, other than those discussed herein, in our sources of liquidity, the factors likely to impact these sources or the adequacy of these sources to meet our needs for at least the following 12 months.

CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash and cash equivalents and short-term investments increased 110% during the first nine months of 2003 due to cash flows from operations and proceeds from the issuance of common stock resulting from stock option exercises, offset in part by capital expenditures and acquisitions of businesses.

CONVERTIBLE SUBORDINATED DEBENTURES

On June 9, 2003, we issued $265.0 million in 0.5% convertible subordinated debentures in a private placement. The debentures are convertible into shares of our common stock based on an initial conversion price of $61.08, subject to adjustment, and mature in 2023. We incurred underwriters’ commissions and other debt issuance costs of approximately $8.0 million, which are deferred and included in other long-term assets in our consolidated balance sheets and are amortized to interest expense through the date that holders may first require us to redeem the debentures, June 9, 2008, using the straight-line method of amortization.

Key terms and conditions of the 0.5% convertible subordinated debentures are:

•

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the conversion rate will be adjusted according to a pre-determined formula. Notwithstanding the foregoing, in no event will the conversion rate exceed 26.2054. On or after June 9, 2008, the conversion rate will be fixed for the remainder of the term of the debentures at the conversion rate effective on the date that is eight trading days prior to June 9, 2008.

•

We may redeem the debentures for cash equal to the principal value plus any accrued and unpaid interest at any time on or after June 13, 2008.

•

Holders may require us to redeem the debentures for cash equal to the principal value plus any accrued and unpaid interest on June 9, 2008, 2013 and 2018.

•

CONVERTIBLE SUBORDINATED NOTES AND DEBT EXTINGUISHMENT COSTS

SENIOR CREDIT FACILITY

Management believes that we are in compliance with the financial covenants of the senior credit facility agreement.

Capital Expenditures, Contractual Obligations and Rights and Guarantees

CAPITAL EXPENDITURES

There have been no material changes in our capital expenditure plans since December 31, 2002.

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CONTRACTUAL OBLIGATIONS AND RIGHTS

The following table illustrates payments and receipts associated with significant contractual obligations and rights. The table assumes that the 0.5% convertible subordinated debentures are repaid upon maturity in 2023 and that there are no borrowings under the senior credit facility, which may or may not reflect future events. The holders of the 0.5% convertible subordinated debentures may require us to redeem the debentures in 2008, 2013 and 2018.

	2003			2004			2005			2006			2007			THEREAFTER		TOTAL

(In thousands)

Subordinated debentures – principal payments	$	—		$	—		$	—		$	—		$	—		$	265,000	$	265,000
Subordinated debentures – interest payments		663			1,325			1,325			1,325			1,325			20,537		26,500
Operating lease payments		20,976			19,624			19,347			19,052			18,225			116,589		213,813
Sublease receipts		(5,528	)		(5,339	)		(5,225	)		(5,230	)		(833	)		—		(22,155	)
Minimum royalty guarantee payments		5,509			6,367			5,700			3,046			325			—		20,947
Minimum guaranteed receipts		(1,167	)		(2,146	)		(2,250	)		(937	)		—			—		(6,500	)

Net obligations	$	20,453		$	19,831		$	18,897		$	17,256		$	19,042		$	402,126	$	497,605

GUARANTEES

In the ordinary course of business, we enter into certain types of agreements that contingently require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or services; agreements with customers other than those licensing images, under which we may indemnify them against claims arising from their use of our products or services; agreements with distributors, under which we may indemnify them against claims arising from their distribution of our products or services; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to use of their property; agreements with directors and officers, under which we indemnify them to the full extent allowed by Delaware law against claims relating to their service to us; agreements with purchasers of business we have sold, under which we may indemnify the purchasers against claims arising from our operation of the businesses prior to sale; and agreements with initial purchasers and underwriters of our securities, under which we indemnify them against claims relating to their participation in the transactions.

The nature and terms of these indemnifications vary from contract to contract, and generally a maximum obligation is not stated. Because we are unable to estimate our potential obligation, and because management does not expect these indemnifications to have a material adverse effect on our consolidated financial position, results of operations or cash flows, no related liabilities are recorded at September 30, 2003. We hold insurance policies that mitigate potential losses arising from certain indemnifications, and historically, we have not incurred significant costs related to performance under these obligations.

RECENT ACCOUNTING PRONOUNCEMENTS

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ments embedded in other contracts, and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Adoption of this statement did not have a material impact on our consolidated financial statements.

FACTORS THAT MAY AFFECT THE BUSINESS

WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST EXISTING OR POTENTIAL COMPETITORS

The visual content industry is highly competitive. We compete directly with a number of large and small visual content companies, news-wire services, and commissioned photographers to provide imagery to businesses. We believe that the principal competitive factors in the visual content industry are: the quality, timeliness, relevance and diversity of the creative and editorial images in a company’s collections; company reputation; 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 resources superior to ours, or other such competitive advantages.

OUR QUARTERLY FINANCIAL RESULTS AND STOCK PRICE MAY FLUCTUATE

Our revenues and operating results are expected to vary from quarter to quarter due to a number of factors, both within and outside of our control, including, but not limited to, the following:

•

Demand for our existing and new content, products and services, and those of our competitors;

•

Changes in our pricing policies and practices;

•

Changes in the sales mix of our products and services, including the mix of licensed uses, company owned and licensed imagery, and the geographic distribution of such licenses;

•

Our ability to attract customers to our websites and the frequency of repeat licensing by our customers;

•

The effect of fluctuations in foreign exchange rates on the results of our operations;

•

Costs related to potential acquisitions and development of technology, services, products, or new 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 our future quarterly results may differ from the expectations of analysts and investors causing our stock price to fluctuate.

THIRD-PARTY IMAGE PROVIDERS ARE IMPORTANT TO OUR BUSINESS

We have entered into commercial agreements with other businesses to host and license their imagery on the gettyimages.com website. These arrangements require resource and personnel commitments by Getty Images, limiting the number of third-party images we may host or integrate during a given period. Additionally, if there are problems with the relevancy, quality, or market and customer acceptance of this third-party imagery, our revenues and operating results may be adversely affected.

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 requires 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.

Goodwill Goodwill is the excess of the purchase price (including liabilities assumed and direct costs) over the fair value of tangible and identifiable intangible assets acquired in purchase business combinations. We test goodwill for impairment annually on August 31 and between annual tests in certain circumstances. When assessing impairment, we must estimate the implied fair value of our goodwill. This fair value is based on a discounted cash flow model that involves significant assumptions and estimates based on management’s best judgments of current and future circumstances, including currently enacted tax laws, future risk free rates of return, and

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ITEM 2

our future financial performance. As circumstances change, it is 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. The balance of goodwill at September 30, 2003 was $607.3 million.

Identifiable Intangible Assets Identifiable intangible assets are assets that do not have physical representation, but that arise from contractual or other legal rights or are capable of being separated or divided from the company and sold, transferred, licensed, rented or exchanged. In our case, these assets consist mostly of customer lists, covenants not to compete and trademarks, tradenames and copyrights. Identifiable intangible assets are generally valued based on discounted estimated future cash flows, which are inherently uncertain and therefore require management’s most difficult judgments. Should future cash flows associated with these assets not meet management’s current expectations, it is reasonably possible that we would be required to accelerate the amortization, or write off the impaired portion, of the unamortized balance of such assets. Identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives (two to 10 years), which are determined in most cases based on contractual or other legal terms. The net balance of identifiable intangible assets at September 30, 2003 was $16.7 million.

Certain Long-Lived Assets The useful lives of certain of our long-lived assets, including capitalized image content, hardware and software costs (included within property and equipment in our consolidated balance sheets), are based on the estimated period over which the assets are expected to provide a benefit to us. Should we determine at some point in the future that the useful lives of these assets are shorter than previously determined, we would be required to accelerate the depreciation, or possibly write off the impaired portion, of the undepreciated balance of such assets.

The estimated useful lives of image content, ranging from generally four years for contemporary content to 40 years for archival content, are determined based on sales history. Historical sales may not be indicative of future sales, and therefore, these estimated lives are inherently uncertain and require management’s most difficult judgments. The balance of capitalized image content costs, net of accumulated depreciation, was $57.1 million at September 30, 2003.

The three-year estimated useful life of hardware and software is determined based on prior experience with related technology and the expected future utility of the assets to us. As hardware and software providers’ future support of today’s technology and the future of technology in general are inherently uncertain, these estimated lives require management’s most difficult judgments. The balance of hardware and software, net of accumulated depreciation, was $33.5 million at September 30, 2003.

OUR DEFERRED TAX ASSETS WOULD CHANGE IF WE MODIFY OUR VALUATION ALLOWANCE.

Deferred income taxes, reflecting the impact of temporary differences between financial and tax reporting and of tax loss carryforwards, are based on currently enacted tax laws. Deferred tax assets 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. At September 30, 2003, we had net deferred tax assets of $38.7 million, net of a valuation allowance of $28.3 million. Although realization is not assured, management believes, based on its current estimates of near-term future taxable income for our U.S. operations and tax-planning strategies, that it is more likely than not that we will realize the net deferred tax assets within a reasonable period of time and substantially prior to the expiration of the net operating loss carryforwards between 2018 and 2021.

In the event that actual results differ from management’s current expectations, the valuation allowance could materially change, directly impacting our consolidated financial statements. Management will reevaluate the valuation allowance during the fourth quarter of 2003 upon completion of updated estimates of taxable income for future periods. Should the estimates indicate that taxable income for future periods is sufficient to utilize more of the deferred tax asset than the net balance, all or a portion of the valuation allowance will be reversed in the fourth quarter. If the full valuation allowance is reversed in the fourth quarter of 2003, approximately $13.2 million and $15.1 million will be credited to income tax expense and additional paid-in capital, respectively. However, a portion of the valuation allowance may be retained for deferred tax assets that may not be fully recovered, such as capital loss carryforwards and foreign net operating losses. If the estimates indicate that we are unable to utilize all or a portion of the net deferred tax asset balance, currently $38.7 million, a greater valuation allowance will be recorded and charged to income tax expense in the fourth quarter.

SYSTEMS SECURITY RISKS AND CONCERNS MAY HARM OUR BUSINESS

An important component of e-commerce and online communications is the secure transmission of confidential information and the transaction of commerce over the Internet. Developments in computer capabilities, viruses, or other events could result in compromises or breaches of our systems or those of other websites and networks, jeopardizing proprietary and confidential information

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ITEM 2

belonging to us or our customers, or causing potentially serious interruptions in our services, sales or operations. We may be required to expend significant additional resources to protect against 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 may generally reduce our customers’ desire to transact business over the Internet.

WE MAY EXPERIENCE SYSTEM FAILURES AND SERVICE INTERRUPTIONS

The digitization and Internet distribution of our visual content is a key component of our business and growth strategy. As a result, our revenues are dependent on the ability of our customers to access and conduct transactions through our website. In the past, we have experienced infrequent system interruptions that made our website unavailable or prevented us from efficiently taking or fulfilling orders. We cannot guarantee that we can prevent future interruptions. Additionally, we depend on certain third-party software and system providers for the processing and distribution of our imagery and related products. System failures or interruptions, whether as a result of our internally developed systems or those of the third-party providers, may inconvenience our customers, result in negative publicity, and negatively impact our provision of services and the volume of images we license and deliver over the Internet.

We have focused significant resources and attention on the installation and development of enterprise systems for technology, business processes, sales and marketing systems, finance and royalty systems, customer interfaces, and other corporate administrative functions. We will need to continue upgrading these enterprise systems as well as our network infrastructure to accommodate increased traffic on our website, sales volume, and the processing of the resulting information. Without continued improvement and enhancements to our enterprise systems and network infrastructure, we may face system interruptions, poor response times, diminished customer service, impaired quality and speed of order fulfillment, and potential problems with our financial reporting.

The computer and communications hardware necessary to operate our corporate functions are located in metropolitan areas 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 network and telecommunications facilities.

CERTAIN OF OUR STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR BUSINESS AND AFFAIRS

Some of our stockholders own substantial percentages of the outstanding shares of our common stock. Getty Investments L.L.C.; The October 1993 Trust; The JD Klein Family Settlement; Mr. Mark H. Getty, our Executive Chairman; and Mr. Jonathan D. Klein, our Chief Executive Officer, collectively the Getty Group, owned approximately 19% of the outstanding shares of our common stock at September 30, 2003.

As a result of their share ownership, the Getty Group has significant influence over all matters requiring approval of our stockholders, including the election of directors and the approval of business combinations. The substantial percentage of our common stock held by the Getty 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 have management and/or director roles within our company that increase their influence over us.

OUR RIGHT TO USE THE “GETTY IMAGES” TRADEMARKS IS SUBJECT TO FORFEITURE IN THE EVENT WE EXPERIENCE A CHANGE OF CONTROL

We own trademarks and trademark applications for the name “Getty Images.” 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 these trademarks and trademark applications as the Getty Images Trademarks. In the event that a third party or parties not affiliated with the Getty family acquires control of Getty Images, Getty Investments L.L.C. has the right to call for an assignment to it, for a nominal sum, of all rights to the Getty Images Trademarks. In the event of an assignment, we will have 12 months to continue to use the Getty Images 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.

Getty Investments owns approximately 17% of the outstanding shares of our common stock at September 30, 2003. Mr. Mark H. Getty, our Executive Chairman serves as the Chairman of the Board of Directors of Getty Investments, while Mr. Jonathan D. Klein, our Chief Executive Officer, and Mr. Andrew S. Garb, a member of our Board of Directors, serve on the Board of Directors of Getty Investments.

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ITEM 2

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 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 or effectiveness as a communications and commerce medium.

Existing or future laws and regulations that may impact our business include, but are not limited to, those that govern or restrict:

•

Privacy issues and data collection, processing, retention and transmission;

•

Pricing and taxation of goods and services offered over the Internet;

•

Website content, or the manner in which products and services may be offered over the Internet; and

•

Sources of liability for companies involved in Internet services or the Internet or e-commerce.

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 million 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, along with certain provisions of Delaware law, may have the effect of delaying, deterring or preventing a takeover of our company.

OUR ABILITY TO SERVICE OUR INDEBTEDNESS WILL DEPEND ON OUR FUTURE PERFORMANCE

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. We will dedicate a portion of our cash flow to pay principal and interest on any amounts outstanding under our senior credit facility and our 0.5% convertible subordinated debentures due 2023. 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.

OUR INDEBTEDNESS COULD REDUCE OUR OPERATING FLEXIBILITY

Restrictive covenants in our senior credit facility may limit our flexibility in planning for, or reacting to, changes in our business and competitive environment. While we currently anticipate that our available sources of liquidity will be sufficient to meet our needs for working capital and capital expenditures for at least the next 12 months, changes in U.S. and global capital markets and economies, including significant fluctuations in interest rates and the price of our equity securities, or fluctuations in the results of our operations may impede our access to, or increase the cost of, external financing for our operations and any acquisitions.

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PART I

ITEM 3

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As our level of cash and cash equivalents, short-term investments and debt increased since year-end, our exposure to interest rate risk increased. Following are investment and debt cash flows and weighted average interest rates by stated maturity dates at September 30, 2003.

	STATED MATURITY DATE														FAIR VALUE

	2003		2004		2005		2006		2007		THEREAFTER		TOTAL		SEPTEMBER 30, 2003		DECEMBER 31, 2002

(In thousands, except percentages)

ASSETS
Short-term investments
Fixed rate	$	28,912	$	20,994	$	15,788	$	10,828	$	12,011	$	—	$	88,533	$	88,539	$	40,707
Weighted average interest rate		3.23%		6.15%		4.42%		4.22%		3.15%		—		4.24%		—		—
LIABILITIES
Long-term debt
Fixed rate	$	—	$	—	$	—	$	—	$	—	$	265,000	$	265,000	$	231,553	$	—
Weighted average interest rate		—		—		—		—		—		0.5%		0.5%		—		—

On June 9, 2003, we issued $265.0 million in 0.5% convertible subordinated debentures in a private placement. The debentures are convertible into shares of our common stock based on an initial conversion price of $61.08, subject to adjustment, and mature in 2023. We will pay contingent interest beyond the 0.5% coupon rate at the rate of 0.5% per year on the average trading price of the debentures over a five day trading period immediately preceding the first day of the applicable six-month period, commencing with the six-month period ending December 9, 2008, if such average trading price is greater than or equal to $1,200 per debenture (120% of the principal amount).

Foreign Currency Exchange Rate Risk

FOREIGN CURRENCY TRANSLATION

For reporting purposes, revenues and expenses are translated into U.S. dollars at the prior month’s average daily exchange rate as provided by Bloomberg LLC. If revenues had been translated into U.S. dollars at the weighted average monthly exchange rates used for translation in the corresponding period of the prior year, sales for the first nine months of 2003 would have been $367.0 million rather than $388.8 million.

FOREIGN CURRENCY REVALUATION

Foreign exchange gains of $1.7 million and losses of $0.1 million for the nine months ended September 30, 2003 and 2002, respectively, arose from the revaluation of foreign-currency denominated balances, other than long-term intercompany balances. These gains and losses are reported in the consolidated statements of income as exchange gains and losses. Foreign-currency denominated balances, other than long-term intercompany balances, in excess of $3.0 million individually are summarized below by the functional currency of the operation or subsidiary where the balances are recorded. Changes in balances since December 31, 2002 are principally due to sales, cash settlements, foreign currency revaluation, and forward foreign exchange contract activity. All September 30 balances are expected to settle within 12 months in the currencies listed.

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FORM 10-Q

PART I

ITEM 3

	SEPTEMBER 30, 2003			DECEMBER 31, 2002

(In thousands)

British Pound Functional Currency
Receivables denominated in:
U.S. Dollar	$	34,560		$	14,697
Euro		11,078			5,904
Australian Dollar		1,103			4,713

Euro Functional Currency
Receivables denominated in:
British Pound	$	8,458		$	7,165

U.S. Dollar Functional Currency
Receivables denominated in:
British Pound	$	39,884		$	700
Euro		6,976			12,942
Forward Foreign Exchange Contracts denominated in:
British Pound	$	(6,789	)	$	—
Euro		(7,521	)		—

Foreign exchange gains of $12.2 million and $15.5 million for the nine months ended September 30, 2003 and 2002, respectively, arose from the revaluation of long-term intercompany balances. These gains are reported in accumulated other comprehensive income in the consolidated balance sheets. Foreign-currency denominated long-term intercompany balances in excess of $3.0 million individually, are summarized below by the functional currency of the operation or subsidiary where the balances are recorded. Changes in balances since December 31, 2002 represent intercompany transfers, the netting of offsetting balances and foreign currency revaluation.

	SEPTEMBER 30, 2003			DECEMBER 31, 2002

(In thousands)

British Pound Functional Currency
Receivables denominated in:
Euro	$	13,078		$	2,858
Australian Dollar		5,816			—
Payables denominated in:
U.S. Dollar	$	(164,844	)	$	(230,944	)

Canadian Dollar Functional Currency
Payables denominated in:
U.S. Dollar	$	(11,348	)	$	(11,091	)
British Pound		—			(3,639	)

Euro Functional Currency
Receivables denominated in:
U.S. Dollar	$	6,069		$	(2,630	)

U.S. Dollar Functional Currency
Receivables denominated in:
Euro	$	32,895		$	22,225
Payables denominated in:
British Pound	$	636		$	(68,827	)
Canadian Dollar		(8,461	)		(8,873	)

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART I

ITEM 3

RISK MITIGATION

ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2003. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2003, these disclosure controls and procedures were adequate.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the period covered by this report, there were no significant changes in the company’s internal control over financial reporting identified in connection with this evaluation that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

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 infringements of the intellectual property rights of third parties, such as the failure to secure model and property releases for imagery we license. Claims may also include those brought by photographers and cinematographers relating to our handling of images submitted to us or to the companies we have acquired. We have accrued a liability for the estimated costs of defending, adjudicating or settling claims for which we believe a loss is probable. There are no pending legal proceedings to which we are a party or to which any of our property is subject that, either individually or in the aggregate, are expected to have a material adverse effect on our consolidated financial statements.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On June 9, 2003, we issued $265.0 million in 0.5% convertible subordinated debentures due 2023 in a private placement with Deutsche Bank Securities Inc. and Goldman, Sachs and Co. as initial purchasers. The debentures are convertible into shares of our common stock based on an initial conversion price of $61.08, subject to adjustment. The issuance of these securities was exempt from registration under the Securities Act of 1933, as amended, pursuant to Rule 144A of the Securities Act. However, pursuant to a registration rights agreement that we entered into with the initial purchasers, we filed a registration statement with the Securities and Exchange Commission on Form S-3 to register these securities. This registration statement has not yet been declared effective.

We used net proceeds from the issuance of the debentures and other funds to pay approximately $7.3 million in commissions to Deutsche Bank Securities Inc. and Goldman, Sachs & Co. and other issuance costs associated with the new debentures in the second quarter of 2003, and to pay the following costs in the third quarter of 2003: the principal of our $250.0 million 5.0% convertible subordinated notes due 2007; a $7.1 million call premium on these notes; $4.0 million in interest accrued on these notes; and $0.6 million in additional costs to issue the 0.5% convertible subordinated notes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART II

ITEM 4

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

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:

We filed one report on Form 8-K during the quarter ended September 30, 2003, as follows:

On July 23, 2003, we filed an 8-K for the purpose of furnishing to the Securities and Exchange Commission our press release announcing our financial results for the quarter ended June 30, 2003.

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

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.

By:		/s/ ELIZABETH J. HUEBNER
		Elizabeth J. Huebner Senior Vice President and Chief Financial Officer

November 7, 2003

GETTY IMAGES, INC.

Q3 2003

FORM 10-Q

PART II

ITEM 6

EXHIBIT INDEX

Exhibit Number		Description of Exhibit


31.1		Section 302 Certification by Jonathan D. Klein, CEO

31.2		Section 302 Certification by Elizabeth J. Huebner, CFO

32.1		Section 906 Certification by Jonathan D. Klein, CEO

32.2		Section 906 Certification by Elizabeth J. Huebner, CFO

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Avg

Getty Images (GYI) Inactive 10-Q2003 Q3 Quarterly report

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