SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to _________
Commission File No. 1-13638
MARVEL ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3711775
(State of incorporation) (I.R.S. employer identification number)
10 East 40th Street
New York, New York 10016
(Address of principal executive offices, including zip code)
(212) 576-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
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 12 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 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes |X| No |_|
The approximate aggregate market value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of June 30, 2003, the last
business day of the Registrant's most recently completed second fiscal quarter,
was $885,416,924 based on a price of $12.73 per share, the closing sales price
for the Registrant's common stock (as adjusted for the stock's 3-for-2 split in
the form of a dividend in March 2004) as reported in the New York Stock Exchange
Composite Transaction Tape on that date. As of June 28, 2004, there were
109,137,031 outstanding shares of the Registrant's common stock, in addition to
11,091,000 shares held by a wholly owned subsidiary of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10, 11, 12, 13 and 14) is
incorporated by reference from the Registrant's definitive proxy statement,
which the Registrant filed with the Commission not later than 120 days after the
end of the fiscal year covered by this Report.
EXPLANATORY NOTE
This Amendment on Form 10-K/A is being filed solely for the purpose of filing
unaudited financial statements of Spider-Man Merchandising, L.P. (the
"Partnership"), a joint venture of affiliates of Marvel Enterprises, Inc. (the
"Company") and of Sony Pictures Entertainment Inc. As was stated on page 1 of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2003, the Partnership's fiscal year ends on March 31. In accordance with Rule
3-09 of Regulation S-X, the Company is now filing, as an amendment to the
aforementioned Annual Report on Form 10-K, unaudited financial statements of the
Partnership for the Partnership's fiscal year ended March 31, 2004.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed with this Report
1. Financial Statements
--------------------
See the accompanying Index to Financial Statements on page F-1 for the
financial statements filed with this Amendment No. 1 on Form 10-K/A.
2. Financial Statement Schedule
----------------------------
None filed with this Amendment No. 1 on Form 10-K/A.
3. Exhibits
--------
The following exhibits are filed with this Amendment No. 1 on Form
10-K/A:
Exhibit Number Exhibit Description
-------------- -------------------
31.1 Certification by Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act, with respect to
Amendment No. 1 on Form 10-K/A to the registrant's
Annual Report on Form 10-K for the year ended December
31, 2003. (Filed herewith.)
31.2 Certification by Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act, with respect to
Amendment No. 1 on Form 10-K/A to the registrant's
Annual Report on Form 10-K for the year ended December
31, 2003. (Filed herewith.)
32 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act, with respect to Amendment No. 1 on
Form 10-K/A to the registrant's Annual Report on Form
10-K for the year ended December 31, 2003. (Furnished
herewith.)
(b) Reports on Form 8-K.
During the first quarter of 2004, the Company filed the following
Current Reports on Form 8-K:
1. Current Report on Form 8-K filed March 9, 2004, reporting Items 7
and 12.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MARVEL ENTERPRISES, INC.
By: /s/ Allen S. Lipson
----------------------------------------------
Allen S. Lipson
President and Chief Executive Officer
Date: June 30, 2004
Signature Title Date
- --------- ----- ----
/s/ Allen S. Lipson President and Chief Executive Officer June 30, 2004
- --------------------- (principal executive officer)
Allen S. Lipson
* Chief Financial Officer June 30, 2004
- --------------------- (principal financial and accounting officer)
Kenneth P. West
* Chairman of the Board of Directors June 30, 2004
- ---------------------
Morton E. Handel
* Vice Chairman of the Board of Directors June 30, 2004
- ---------------------
F. Peter Cuneo
* Vice Chairman of the Board of Directors June 30, 2004
- ---------------------
Isaac Perlmutter
* Director June 30, 2004
- ---------------------
Avi Arad
* Director June 30, 2004
- ---------------------
Sid Ganis
* Director June 30, 2004
- ---------------------
Richard Solar
* Director June 30, 2004
- ---------------------
James F. Halpin
*By: /s/ Allen S. Lipson
-------------------------------
Allen S. Lipson
Attorney-in-Fact
Spiderman Merchandising, L.P.
Financial Statements
Year ended March 31, 2004
Contents
Report of Independent Auditors...............................................F-2
Financial Statements
Balance Sheets as of March 31, 2004 (Unaudited) and 2003.....................F-3
Statements of Operations for the Years Ended March 31, 2004 (Unaudited),
2003 and 2002 (Unaudited).................................................F-4
Statements of Partners' Capital (Deficit) for the Years Ended March 31, 2004
(Unaudited), 2003 and 2002 (Unaudited)....................................F-5
Statements of Cash Flow for the Years Ended March 31, 2004 (Unaudited),
2003 and 2002 (Unaudited).................................................F-6
Notes to Financial Statements................................................F-7
F-1
Report of Independent Auditors
The Partners
Spiderman Merchandising, L.P.
We have audited the accompanying balance sheet of Spiderman Merchandising, L.P.
(the Partnership) as of March 31, 2003, and the related statements of
operations, partners' capital (deficit) and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spiderman Merchandising, L.P.
at March 31, 2003, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
Los Angeles, California
June 23, 2003
F-2
Spiderman Merchandising, L.P.
Balance Sheets
March 31
2004 2003
----------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 8,375,792 $ 11,387,555
Accounts receivable 4,803,134 4,885,313
Due from Marvel - 4,143
----------------------------------------
Total current assets 13,178,926 16,277,011
----------------------------------------
Total assets $ 13,178,926 $ 16,277,011
========================================
Liabilities and partners' capital
Current liabilities:
Deferred revenues, current portion $ 7,523,622 $ 7,169,921
Accrued liabilities 1,899,927 458,647
Accrued participations 155,000 849,100
Due to SPE 21,991 21,991
----------------------------------------
Total current liabilities 9,600,540 8,499,659
Deferred revenues, net of current portion 2,500,000 -
Commitments and contingencies
Partners' capital:
Marvel 588,593 3,802,411
SPE 489,793 3,974,941
----------------------------------------
Total partners' capital 1,078,386 7,777,352
----------------------------------------
Total liabilities and partners' capital $ 13,178,926 $ 16,277,011
========================================
See accompanying notes.
F-3
Spiderman Merchandising, L.P.
Statements of Operations
Year ended March 31
2004 2003 2002
-----------------------------------------------------------
(Unaudited) (Unaudited)
Licensing income $ 26,905,524 $ 45,467,152 $ -
Costs and expenses:
Commissions (1,732,147) (1,689,796) -
Withholding taxes (530,236) (633,762) -
Participations (435,100) (849,100) -
Advertising and other (1,748,735) (764,635) (585,338)
-----------------------------------------------------------
(4,446,218) (3,937,293) (585,338)
Interest income 49,303 100,713 33,514
-----------------------------------------------------------
Net income (loss) $ 22,508,609 $ 41,630,572 $ (551,824)
===========================================================
See accompanying notes.
F-4
Spiderman Merchandising, L.P.
Statements of Partners' Capital (Deficit)
Marvel SPE Total
---------------------------------------------------------
Balance at March 31, 2001 (unaudited) $ (379,103) $ (379,104) $ (758,207)
Net loss (275,912) (275,912) (551,824)
Distributions to partners (1,578,822) (1,578,166) (3,156,988)
---------------------------------------------------------
Balance at March 31, 2002 (unaudited) (2,233,837) (2,233,182) (4,467,019)
Net income 20,815,286 20,815,286 41,630,572
Distributions to partners (14,779,038) (14,607,163) (29,386,201)
---------------------------------------------------------
Balance at March 31, 2003 3,802,411 3,974,941 7,777,352
Net income 11,254,305 11,254,304 22,508,609
Distributions to partners (14,468,123) (14,739,452) (29,207,575)
---------------------------------------------------------
Balance at March 31, 2004 (unaudited) $ 588,593 $ 489,793 $ 1,078,386
=========================================================
See accompanying notes.
F-5
Spiderman Merchandising, L.P.
Statements of Cash Flows
Year ended March 31
2004 2003 2002
----------------------------------------------------------
(Unaudited) (Unaudited)
Operating activities
Net income (loss) $ 22,508,609 $ 41,630,572 $ (551,824)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 82,179 (4,885,313) -
Decrease (increase) in due from Marvel 4,143 (4,143) -
Increase in deferred revenues 2,853,701 2,422,361 3,242,560
Increase (decrease) in accrued liabilities 1,441,280 458,647 (600,643)
(Decrease) increase in accrued participations (694,100) 849,100 -
(Decrease) in due to SPE - (135,573) -
----------------------------------------------------------
Net cash provided by operating activities 26,195,812 40,335,651 2,090,093
Financing activities
Amount paid to Marvel (14,468,123) (14,779,038) (1,578,822)
Amount paid to SPE (14,739,452) (14,607,163) (1,578,166)
----------------------------------------------------------
Net cash used in financing activities (29,207,575) (29,386,201) (3,156,988)
----------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (3,011,763) 10,949,450 (1,066,895)
Cash and cash equivalents at beginning of year 11,387,555 438,105 1,505,000
----------------------------------------------------------
Cash and cash equivalents at end of year $ 8,375,792 $ 11,387,555 $ 438,105
==========================================================
See accompanying notes.
F-6
Spiderman Merchandising, L.P.
Notes to Financial Statements
March 31, 2004
1. Organization and Summary of Significant Accounting Policies
Organization
Spiderman Merchandising, L.P. (the Partnership) is a Delaware limited
partnership. SPE Spider-Man GP Inc. and Marvel Characters, Inc. (Marvel) are
general partners and Sony Pictures Entertainment Inc. (SPE) and Marvel are
limited partners of the Partnership. The Partnership was formed on February 22,
1999 in conjunction with SPE and Marvel entering into the February 22, 1999
license agreement (License Agreement) to pursue licensing opportunities relating
to characters based upon movies or television shows featuring Spider-Man and
produced by SPE.
The term of the partnership is perpetual and cannot be dissolved, liquidated or
wound-up without the unanimous written consent of all of the partners. During
the periods covered by these financial statements, Marvel was entitled to an
amount (Marvel LP Share) equal to (A) the total of (1) 50% of LP Net Receipts
(if LP Net Receipts is a positive amount), as defined, plus (2) the Marvel LP
Distribution Fees, as defined, plus (3) the Marvel Third Party LP Costs if any,
as defined, less (B) the Unrecouped SPE Merchandising Participation, as defined.
SPE was entitled to an amount (SPE LP Share) equal to the total of (A) 50% of LP
Net Receipts plus (B) the SPE LP Distribution Fees, as defined, plus (C) the SPE
Third Party LP Costs if any, as defined, plus (D) the SPE Third Party Royalties,
as defined, plus (E) the amount of the Unrecouped SPE Merchandising
Participation which is deducted from Marvel's LP Share. On May 21, 2004, SPE and
Marvel settled various disputed matters described in Note 2 to the financial
statements and altered the distribution of LP Net Receipts effective April 1,
2004.
The Partnership distributes the Marvel LP Share and SPE LP Share on a quarterly
basis.
The Partnership maintains a fiscal year end of March 31.
The accompanying unaudited financial statements of the Partnership as of March
31, 2004 and for the years ended March 31, 2004 and 2002 have been prepared in
accordance with accounting principles generally accepted in the United States.
In the opinion of management, all adjustments consisting only of normal
recurring accruals necessary to present fairly the financial position of the
Partnership at March 31, 2004 and the results of its operations for the years
ended March 31, 2004 and 2002 have been included.
F-7
Spiderman Merchandising, L.P.
Notes to Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Concentration of Credit Risk and Fair Value of Financial Instruments
Financial instruments which potentially subject the Partnership to concentration
of credit risk consist principally of cash equivalents and accounts receivables.
The Partnership places its cash equivalents with high credit, quality financial
institutions. The Partnership has not incurred any losses relating to these
investments.
The Partnership licenses characters based upon movies or television shows
featuring Spider-Man worldwide. The Partnership performs periodic credit
evaluations of its customers' financial condition and does not require
collateral.
Financial instruments are carried at historical cost which approximates fair
value due to their short term maturities.
Revenue Recognition
Licensing income is initially recorded at an amount equal to the value of the
minimum guaranteed royalty payments, at the time licensed characters are
available to the licensee, and collection is reasonably assured. Royalties
earned in excess of the guaranteed minimums, if any, are recorded when reported
to the Partnership by licensees.
In the event that any of the above conditions are not met, the Partnership will
defer the recognition of revenue, including amounts received as nonrefundable
minimum guarantees, until all of the conditions for revenue recognition are met.
Deferred revenues recorded in the accompanying balance sheets reflect amounts
received by the Partnership prior to the conditions for revenue recognition
being met.
Income Taxes
The Partnership is not subject to Federal or State of California incomes taxes,
and accordingly, no provision for income taxes has been reflected in the
accompanying financial statements.
F-8
Spiderman Merchandising, L.P.
Notes to Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Related Party Transactions
During the periods covered by these financial statements, the Partnership shared
office space and certain general and administrative services with SPE. Pursuant
to the License Agreement, no shared general and administrative costs have been
allocated to the Partnership. Amounts due to SPE represent costs incurred on
behalf of the Partnership. During the years ended March 31, 2004 and 2003, the
Partnership earned licensing income of approximately $33,000 and $66,000,
respectively, from Marvel Enterprises, Inc., the parent of Marvel.
Participations Expenses
Pursuant to the License Agreement, the Partnership is obligated to make royalty
payments to various participants associated with the Spider-Man movies. Such
participation obligations are expensed when related licensing income is
recognized.
Advertising Expenses
Advertising costs are expensed in the period incurred. Advertising expenses were
approximately $1,635,000, $750,000 and $575,000 for the years ended March 31,
2004, 2003 and 2002, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant Customers
For the year ended March 31, 2003, the Partnership earned licensing income from
one customer of $11,281,200 which represented approximately 25% of the licensing
income earned by the Partnership. As of March 31, 2003, accounts receivable from
the Partnership's top two customers represented an aggregate of 30% of total
accounts receivable.
F-9
Spiderman Merchandising, L.P.
Notes to Financial Statements (continued)
2. Legal Matter
During February 2003, Marvel filed a legal complaint concerning the License
Agreement with SPE. On April 21, 2003 SPE filed a cross-complaint. In the
complaint and cross-complaint the parties' allegations included breach of
contract, fraud, and breach of fiduciary duty. On May 21, 2004, the above
litigation was settled between Marvel and SPE without payment by, or to, either
party. The settlement had no impact on the Partnership's financial statements as
of March 31, 2004 or for the year then ended.
F-10