Exhibit 99.1
MARVEL REPORTS Q2 NET SALES OF $155.5 MILLION,
OPERATING INCOME OF $63.6 MILLION AND EPS OF $0.25
New York, New York - July 29, 2004 -- Marvel Enterprises, Inc. (NYSE: MVL), a
global entertainment licensing company, today reported financial results for its
second quarter ended June 30, 2004 that were in excess of previously supplied
guidance ranges, and initiated financial guidance for the third quarter of 2004.
Marvel's Q2 2004 operating income was significantly higher than operating income
for the prior year period, while net income and EPS were affected by a more
normalized, but significantly higher effective tax rate.
Net sales for the second quarter of 2004 grew to $155.5 million compared with Q2
2003 net sales of $90.0 million, fueled by the toy segment. Q2 2004 operating
income increased approximately 47% to $63.6 million compared to the prior-year
period also as a result of toy segment performance. A significantly higher mix
of toy segment sales, as a percentage of total sales, led to a decline in
consolidated operating margins from 48% in Q2 2003 to 41% in Q2 2004. Despite an
increase in pre-tax income, an effective tax rate of 32% in Q2 2004 (compared to
16% in Q2 2003) led to a decline in diluted net income per share attributable to
common stock to $0.25 in Q2 2004 from $0.28 in 2Q 2003.
In part, the increase in operating income resulted from the consolidation, since
the beginning of Q2 2004, of the results of Spider-Man Merchandising LP, which
is Marvel's licensing joint venture with Sony. Consolidation of that entity's
results is required by Generally Accepted Accounting Principles (GAAP) as a
result of changes in the terms of that joint venture. As a result of
consolidation of the Spider-Man joint venture, Sony's share of the joint
venture's results is now accounted for as a minority interest expense which
affects net income but not operating income. Had Marvel accounted for Sony's
$3.8 million minority interest in the joint venture as an expense, consolidated
operating income would have been $59.8 million.
Marvel's President and CEO, Allen Lipson, commented, "The continued success of
entertainment projects such as films, video games, and comic books based on our
portfolio of characters has led to enhanced brand awareness for the Marvel
Universe of characters, which in turn has led to increased sales. The recent
release of Spider-Man 2 has broken box office records and has generated more
than $600 million in worldwide box office receipts to-date, and the DVD is
scheduled to ship in November. In addition, consumer products based on the movie
are currently among the strongest performing brands at retail, further cementing
both Marvel and Spider-Man as flagship brands with retail partners.
"We continue to initiate new revenue streams to raise the visibility of the
Marvel brand, an example of which is our recent agreement with Lions Gate to
develop, produce and distribute original animated DVD features based on Marvel
characters. The relationship, which has very attractive economics for Marvel,
will kick-off with the launch of The Avengers DVD in 2006."
1
Marvel Enterprises, Inc.
Segment Net Sales/Operating income
(dollars in thousands) Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------ -------- ------- ---------
Licensing: Net Sales $ 49,537 $ 56,750 $ 99,640 $106,651
Operating Income 35,566 41,238 74,050 90,065
Publishing: Net Sales 21,609 19,535 41,253 34,747
Operating Income 8,969 6,184 16,279 11,259
Toys: Net Sales 84,321 13,681 136,900 35,944
Operating Income 23,229 2,559 38,852 8,553
Corporate Overhead: (4,152) (6,795) (8,268) (11,783)
TOTAL NET SALES 155,467 89,966 277,793 177,342
TOTAL OPERATING INCOME 63,612 43,186 120,913 98,094
Segment Review:
o Licensing Segment net sales in Q2 2004 decreased to $49.5 million from
$56.8 million in Q2 2003 as revenues from a variety of licensed products
only partially offset expected declines in the toy license category.
International licensing net sales increased more than 75% year-over-year to
$7.6 million in Q2 2004 as Marvel's international offices continued to
support global marketing momentum. Q2 2004 net licensing sales include
approximately $11.2 million in net sales recognized due to the
consolidation of the revenues from the Spider-Man joint venture for the
first time. Overages were approximately $8.5 million in this quarter,
compared to $8.0 million in the prior-year period, reflecting the continued
strong performance of Marvel-branded consumer products at retail. Toy
royalty and service fees from Toy Biz Worldwide, Ltd. declined to
approximately $2.5 million in Q2 2004 from approximately $21.8 million in
Q2 2003 as sales of The Hulk toy line diminished as expected when compared
to the prior year level which coincided with the film's June 2003 release.
The table below reflects these trends.
(in thousands) Three Months Ended Six Months Ended
6/30/04 6/30/03 6/30/04 6/30/03
------- ------- ------ -------
Apparel and accessories $20,470 $12,800 $40,166 $ 17,673
Entertainment (including studios, themed
attractions and electronic games) 10,786 9,373 16,230 37,280
Toy Biz Worldwide Ltd.:
- Toy Royalties 1,837 9,757 3,906 15,472
- Toy Service Fees 706 12,031 1,880 18,729
Other Toy Royalties 8,996 5,395 15,344 8,593
Other (Domestics, food and other) 6,742 7,394 22,114 8,904
Total $49,537 $56,750 $99,640 $106,651
Total licensing operating expenses declined to $13.9 million in Q2 2004
compared to $17.7 million in the prior-year period, predominantly due to
lower revenue sharing with studio partners, which decreased to $7.8 million
in Q2 2004 versus $13.0 million in the year-ago period. The reduction in
the studio partner share expense was partially offset by an increase of
$1.5 million in total salaries, foreign commissions and overhead compared
to the year-ago period. This is primarily related to newly-opened
international offices in the United Kingdom and Japan. Operating margins
were 71.8% in Q2 2004 and 72.5% in Q2 2003. If Marvel had accounted for
Sony's minority interest in the Spider-Man joint venture as an expense,
licensing operating income in the quarter would have been $31.8 million and
operating margins for the licensing segment would have been 64.2%.
2
o Marvel's Publishing Segment net sales rose due to increased strength in the
direct and mass markets primarily driven by a higher title count and
greater overall demand for Marvel brand products. Approximately 65 comic
titles per month were published in Q2 2004 with an average circulation of
over 53,800 units versus 50 titles per month at an average circulation of
64,000 units in the 2003 period. In total, there was an approximate 10%
increase in circulation to 3.5 million units compared to the prior year
period, reflecting success in the Company's title management strategy.
Operating margins in the segment increased to 41.6% in Q2 2004 compared to
operating margins of 31.6% in the prior-year period. The year-over-year
margin increase reflects higher gross margins in the core comic business
due to operating efficiencies, coupled with a lower cost structure due to
reductions achieved in distribution costs compared to the prior-year
period. Publishing segment margins also benefited from a one-time gain of
$1.0 million in other income related to settlements of old bankruptcy
claims.
o Marvel's Toy Segment net sales increased from the prior-year period due to
strong shipments of action figures and accessories based on the Spider-Man
2 movie as retailers placed products on shelves ahead of the film's June 30
release. Spider-Man movie toy sales were $79.8 million in Q2 2004 compared
with sales of $4.1 million in Q2 2003. Operating margins in the toy segment
improved nearly 50% year-over-year from 18.5% in Q2 2003 to 27.5% in Q2
2004 due to economies of scale created by the higher sales volumes. The
company expects toy segment operating margins to decline in the second half
of 2004 due to a planned increase in advertising promotions heading into
the competitive holiday season on lower projected sales.
Strong Balance Sheet:
Following the redemption on June 15, 2004 of all of the Company's outstanding
12% Senior Notes, Marvel had $177 million in cash, certificates of deposit,
tax-exempt notes and commercial paper at June 30, 2004. Excluding any potential
share repurchases under its recently authorized $100 million common stock
repurchase plan, Marvel expects cash levels at December 31, 2004 to exceed $200
million. The Company has fully utilized its federal NOL carry-forwards and now
pays federal taxes as has been previously noted.
Marvel Character Feature Film Line-Up For 2004
(Release dates are controlled by Studio partners)
-------------------------------------------------------------------------------------------------------------------
Film/Character Studio/Distributor Targeted Release Date
------------------------------------- -------------------------- --------------------------------------------------
The Punisher Lions Gate Released April 16, 2004
------------------------------------- -------------------------- --------------------------------------------------
Spider-Man 2 Sony/Columbia Released June 30, 2004
------------------------------------- -------------------------- --------------------------------------------------
Blade: Trinity New Line Cinema December 10, 2004
------------------------------------- -------------------------- --------------------------------------------------
Marvel Character Feature Film Line-Up For 2005
(Release timing is controlled by Studio partners)
-------------------------------------------------------------------------------------------------------------------
Film/Character Studio/Distributor Status
------------------------------------- -------------------------- --------------------------------------------------
Elektra New Regency / Fox Script, Director, Filming started May `04, Jan.
15, 2005 release (1)
------------------------------------- -------------------------- --------------------------------------------------
Fantastic Four Fox Script, Director, Filming starts August '04,
July 1, 2005 release
------------------------------------- -------------------------- --------------------------------------------------
Iron Man New Line Cinema Script, Slated for November 2005 or Summer 2006
(1)
------------------------------------- -------------------------- --------------------------------------------------
Luke Cage Sony/Columbia Script, Director
------------------------------------- -------------------------- --------------------------------------------------
Man-Thing Lions Gate/Fierce TBD (1)
------------------------------------- -------------------------- --------------------------------------------------
3
Marvel Character Entertainment Projects in Development For 2006 & Beyond
(Development and release timing is controlled by Studio partners)
-------------------------------------------------------------------------------------------------------------------
Film/Character Studio/Distributor Status
------------------------------------- -------------------------- --------------------------------------------------
The Avengers (animated DVD) Lions Gate Slated for Q1 2006 release
------------------------------------- -------------------------- --------------------------------------------------
X-Men 3 Fox May 3, 2006 release (1)
------------------------------------- -------------------------- --------------------------------------------------
Namor Universal Pictures Script, Slated for Summer 2006
------------------------------------- -------------------------- --------------------------------------------------
Ghost Rider Sony Script, Director, Pre-production, Summer 2006
------------------------------------- -------------------------- --------------------------------------------------
Black Widow Lions Gate Writer, Director, Slated for 2006 release
------------------------------------- -------------------------- --------------------------------------------------
The Punisher 2 Lions Gate Writer, Director (1)
------------------------------------- -------------------------- --------------------------------------------------
The Hulk 2 Universal Pictures Development (1)
------------------------------------- -------------------------- --------------------------------------------------
Deathlok Paramount Script
------------------------------------- -------------------------- --------------------------------------------------
Spider-Man 3 Sony/Columbia Director, May 4, 2007 release
------------------------------------- -------------------------- --------------------------------------------------
Dr. Strange Dimension Contract
------------------------------------- -------------------------- --------------------------------------------------
Iron Fist Lions Gate Contract
------------------------------------- -------------------------- --------------------------------------------------
Silver Surfer Fox Contract, Development (1)
------------------------------------- -------------------------- --------------------------------------------------
Ant-Man TBD (1)
------------------------------------- -------------------------- --------------------------------------------------
Black Panther TBD
------------------------------------- -------------------------- --------------------------------------------------
Captain America TBD
------------------------------------- -------------------------- --------------------------------------------------
Nick Fury TBD
------------------------------------- -------------------------- --------------------------------------------------
Thor TBD
------------------------------------- -------------------------- --------------------------------------------------
(1) Represents a change from the previously supplied schedule
Financial Guidance:
Marvel Enterprises, Inc.
Initial Q3 3Q 2003 Updated 2004 Previous 2004
(in millions - except per share amounts) 2004 Guidance Results Guidance Guidance (3) 2003
Results
- -------------------------------------------------- --------------- ------------ ----------------- ----------------- --------------
Net sales $97 - $102 $84.5 $448 - $468 $448 - $468 $ 348
Operating income $38 - $ 43 $43.0 $195 - $205 $195 - $205 $ 167
Net income (1) (5) $23 - $ 26 $63.1 $105 - $111 $102 - $108 $ 152
EPS attributable to common stock (1) (2) (4) (5) $0.20 - $0.23 $ 0.57 $0.92 - $0.97 $0.89 - $0.94 $1.34
Weighted average diluted common shares (4) 115.5 111.3 115.1 115.1 113.4
Effective tax rate 37% 16% 37% 41% -1%
- -------------------------------------------------- --------------------------- -------------------- ------------------------------
(1) 2003 Net income and EPS attributable to common stock includes a $31.5
million ($0.29 per diluted share) one-time, non-cash benefit from the valuation
of deferred tax assets (principally net operating loss (NOL) carry-forwards).
(2) 2003 EPS attributable to common stock is net of approximately $1.2 million
in preferred stock dividends.
(3) Previous 2004 guidance ranges were provided in the Company's May 4, 2004
release.
(4) 2003 EPS and shares outstanding data have been adjusted for the March 2004
3-for-2 stock split.
(5) 2004 net income and EPS attributable to common stock include one-time
charges of approximately $12 million associated with the early debt redemption.
4
Updated FY 2004 financial guidance: Marvel continues to expect that the primary
drivers for the second half of 2004 will include Spider-Man consumer product
merchandise, increased penetration in international licensing and the on-going
renewal or replacement, on improved terms, of existing licensing contracts.
Marvel has revised its forecast for 2004 Spider-Man movie toy sales to $160-$170
million, from $175-$200 million, reflecting a weaker than expected retail
environment. The new forecast implies toy sales of $35-45 million in the second
half of 2004 (which includes shipments related to the holiday selling season).
Marvel is comfortable with its revised 2004 Spider-Man toy forecast given
sell-through trends which are well ahead of Spider-Man 1 and The Hulk sales
trends, as well as expected promotional support from the November release of the
Spider-Man 2 movie on DVD and Marvel's planned increases in toy advertising in
the second half of 2004. Marvel expects that strength in its licensing division
results in the second half of 2004 will largely offset the projected decrease in
contribution from the Company's toy division. The guidance ranges for fiscal
2004 net income and EPS have been raised to reflect the change in the expected
fiscal 2004 effective tax rate to 37% from 41%.
Second-half results should also benefit from the receipt of Marvel's share of
royalties (beyond previously paid advances) derived from Spider-Man 2 box office
receipts. For the year, operating margins are expected to fall in a range of 40%
- - 45% with margins skewing toward the higher end of this range in the fourth
quarter of 2004. Net sales derived from the licensing segment for the full year
are expected to approximate 40% - 50% of total net sales with operating margins
ranging from 70% to 75%.
Q3 2004 financial guidance: Licensing and publishing revenues should approximate
levels achieved in the second quarter. Marvel anticipates that total revenues
for Q3 2004 will be below levels achieved in the first and second quarters of
2004 as retail orders of Spider-Man 2 movie toys decrease. Operating margins are
expected to increase slightly versus the second quarter of 2004 due to a higher
percentage of revenues derived from the licensing segment, which has the highest
margins of Marvel's three segments.
2005 Drivers: While it is premature for Marvel to provide formal 2005 guidance,
the company believes the following factors will be the key drivers for its 2005
performance:
|X| Ongoing contributions from the Spider-Man 2 feature film and related movie
licensing
|X| The Fantastic Four movie release and the licensing associated with other
2005 theatrical releases noted in the table above
|X| Continued expansion of international licensing activities
|X| Domestic Licensing initiatives - Category Consolidation and retailer
exclusives
Marvel cautions investors that inherent variability in the timing of license
opportunities and entertainment events, the timing of their revenue recognition,
and their relative success contributes to sequential and year-over-year
variability in its interim financial results and could have a material impact on
quarterly results as well as Marvel's ability to achieve the financial
performance included in its financial guidance.
About Marvel Enterprises
With a library of over 4,700 proprietary characters, Marvel Enterprises, Inc. is
one of the world's most prominent character-based entertainment companies.
Marvel's operations are focused in three areas: entertainment (Marvel Studios)
and licensing, comic book publishing and toys (Toy Biz). Marvel facilitates the
creation of entertainment projects, including feature films, DVD/home video,
video games and television based on its characters and also licenses its
characters for use in a wide range of consumer products and services including
apparel, collectibles, snack foods and promotions. Marvel's characters and plot
lines are created by its publishing segment that continues to expand its
leadership position in the U.S. and worldwide while also serving as an
invaluable source of intellectual property.
Except for any historical information that they contain, the statements in this
news release regarding Marvel's plans are forward-looking statements that are
subject to certain risks and uncertainties, including a decrease in the level of
media exposure or popularity of Marvel's characters, financial difficulties of
Marvel's major licensees, delays and cancellations of movies and television
productions based on Marvel characters, poor performance of major movies based
on Marvel characters, toy-production delays or shortfalls, continued
concentration of toy retailers, toy inventory risk, significant appreciation of
Chinese currency against other currencies and the imposition of quotas or
tariffs on products manufactured in China. These and other risks and
uncertainties are described in Marvel's filings with the Securities and Exchange
Commission, including Marvel's Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K. Marvel assumes no obligation to
publicly update or revise any forward-looking statements.
For further information contact:
Matt Finick Richard Land, David Collins
Marvel Enterprises Jaffoni & Collins
212/576-4035 212/835-8500
mfinick@marvel.com mvl@jcir.com
------------
5
MARVEL ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
---- ---- ---- ----
Net sales ............................................. $ 155,467 $ 89,966 $ 277,793 $ 177,342
Cost of sales ......................................... 62,860 17,142 103,383 37,426
--------- --------- --------- ---------
Gross profit .......................................... 92,607 72,824 174,410 139,916
Operating expenses:
Selling, general and administrative .............. 30,001 31,235 62,147 47,594
Depreciation and amortization .................... 811 914 1,556 1,757
--------- --------- --------- ---------
Total operating expenses ......................... 30,812 32,149 63,703 49,351
Equity in net income of joint venture ................. -- 2,162 8,117 6,986
Other Income, net ..................................... 1,817 349 2,089 543
--------- --------- --------- ---------
Operating income ...................................... 63,612 43,186 120,913 98,094
Interest expense, net ................................. 14,973 4,382 18,893 8,833
--------- --------- --------- ---------
Income before income taxes ............................ 48,639 38,804 102,020 89,261
Income tax expense .................................... 15,680 6,051 37,791 14,286
Minority interest in consolidated joint venture ....... 3,828 -- 3,828 --
--------- --------- --------- ---------
Net income ............................................ 29,131 32,753 60,401 74,975
Less: preferred dividend requirement .................. -- -- -- 1,163
--------- --------- --------- ---------
Net income attributable to common stock ............... 29,131 32,753 60,401 73,812
========= ========= ========= =========
Basic earnings per share attributable to common stock $ 0.27 $ 0.33 $ 0.56 $ 0.77
========= ========= ========= =========
Weighted average number of basic shares outstanding ... 108,554 99,315 108,473 95,780
========= ========= ========= =========
Diluted earnings per share attributable to common stock $ 0.25 $ 0.28 $ 0.52 $ 0.66
========= ========= ========= =========
Weighted average number of diluted shares outstanding . 115,525 115,703 115,300 113,565
========= ========= ========= =========
Comprehensive income:
Net income ............................................ $ 29,131 $ 32,753 60,401 74,975
Other comprehensive income ............................ (43) (35) (86) (70)
--------- --------- --------- ---------
Comprehensive income .................................. $ 29,088 $ 32,718 $ 60,315 $ 74,905
========= ========= ========= =========
6
Marvel Enterprises, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
June 30, December 31,
2004 2003
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 104,140 $ 32,562
Certificates of deposit and commercial paper ............................... 73,000 214,457
Accounts receivable, net ................................................... 82,126 51,820
Inventories, net ........................................................... 11,485 12,975
Distribution receivable from joint venture, net ............................ -- 2,056
Deferred income taxes, net ................................................. 18,197 18,197
Deferred financing costs ................................................... -- 667
Prepaid expenses and other current assets .................................. 1,318 2,273
--------- ---------
Total current assets ................................................. 290,266 335,007
Molds, tools and equipment, net .............................................. 5,839 5,811
Product and package design costs, net ........................................ 1,517 1,433
Goodwill, net ................................................................ 341,708 341,708
Intangibles, net ............................................................. 231 335
Accounts receivable, non-current portion ..................................... 36,376 26,437
Deferred income taxes, net, non-current portion ............................. 13,830 28,246
Deferred financing costs, non-current portion ................................ -- 2,779
Other assets ................................................................. 201 101
--------- ---------
Total assets ......................................................... $ 689,968 $ 741,857
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 28,978 $ 18,455
Accrued royalties .......................................................... 46,648 32,936
Accrued expenses and other current liabilities ............................. 33,501 30,654
Accrued interest to be distributed ......................................... 704 --
Administration expense claims payable ...................................... 533 788
Unsecured creditors payable ................................................ -- 2,963
Income taxes payable ....................................................... 22,817 4,705
Deferred revenue ........................................................... 20,375 30,308
--------- ---------
Total current liabilities ............................................ 153,556 120,809
Senior notes ................................................................. -- 150,962
Accrued rent ................................................................. 492 636
Deferred revenue-non current portion ......................................... 2,500 --
--------- ---------
Total liabilities .................................................... 156,548 272,407
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued
Common stock, $.01 par value, 250,000,000 shares authorized, 120,255,122
issued and 109,164,122 outstanding in 2004, 119,706,206 issued and
108,615,206 outstanding in 2003 (1) .......................................... 1,203 1,197
Deferred stock compensation .................................................. (6,896) (4,857)
Additional paid-in capital ................................................... 572,425 566,909
Accumulated deficit .......................................................... 2,467 (57,934)
Accumulated other comprehensive loss ......................................... (2,824) (2,910)
--------- ---------
Total stockholders' equity before treasury stock ..................... 566,375 502,405
Treasury stock, 11,091,000 shares ............................................ 32,955 (32,955)
--------- ---------
Total stockholders' equity ........................................... 533,420 469,450
--------- ---------
Total liabilities and stockholders' equity ........................... $ 689,968 $ 741,857
========= =========
(1) Share amounts have been adjusted for the March 2004 three-for-two split of
the Company's common stock
7