MARVEL RELEASES Q3 2003 NUMBERS

[MattBrady]

Marvel today released its third quarter results for 2003, and once again raised its financial guidance for fiscal 2003. For the three month period ended September 30, 2003, Marvel reported net income of $63.2 million and showed growth in licensing and publishing. Part of Marvel’s strong third quarter was helped by a one-time cash gain of $31.5 million.

The profit shown by Marvel translates into $0.85 a share. The $31.5 million, one-time gain came from a tax adjustment of an asset on Marvel’s balance sheet. Excluding this gain, Marvel’s profit was still $0.43 a share, beating the Wall Street estimate of somewhere between $0.31 and $0.41 a share. Marvel reports having net cash of $60.2 million.

Last year at this time, Marvel was reporting a $6.7 million profit, or $0.17 a share.

Wall Street apparently was anticipating good news, as the company's stock yesterday crossed the $31 mark to close at $31.64 a share, roughly a threefold increase in price since the beginning of the year. However, upon the release of relatively flat sales between 02 and 03, Marvel stock dropped to $29.90 at the market's open on Tuesday.

Net sales for the quarter were virtually the same as those of Q3 2002, $84.5 million this year versus $84.4 million in 02. In year to date (January through September 30th) sales however, Marvel is outpacing its’ 02 income, with a Q3 03 net of $261.9 million compared to a Q3 02 net of $212.5 million.

Licensing sales were up by roughly 66% from this time last year, lifting from $25 million in 02 to $41.6 million in 03. Year to date licensing sales for 03 stand at $148.3 million versus $51.3 million seen this time a year ago.

As mentioned numerous times previous to this, publishing will be the weaker sister to licensing for any comic book company, and as such, Marvel’s publishing arm saw a smaller gain between 02 and 03, rising from $15.3 million in Q3 02 to $19.6 million in Q3 03. Year to date, publishing is up compared to 02: $54.3 million versus $47.8 million.

Toy sales took it in the sack, with sales of $23.3 million in Q3 03 versus $59.3 million in Q3 02. Year to date, toy sales look fairly anemic as well, with sales of $59.3 million reported in 03 versus $113.4 million in 02. The lower sales reflect a falloff in sales of action figures based on Spider-Man between the two quarters, as well as toys from Hulk not catching on in the same manner those based on Spider-Man did.

Marvel reports an operating income of $43.1 million for Q3 03, compared to an operating income of $27.7 million in Q3 02.

In Marvel’s press release, company President and CEO, Allen Lipson, commented, "The first nine months of 2003 reflect the strength and cash generation power of our licensing driven business model as well as the growing influence of the 'Marvel' brand on consumers and retailers. Marvel-branded consumer products continue to achieve high levels of 'sell-through' at retail, causing many of our 550+ licensees to achieve sales results substantially in excess of their contractual minimum guarantees. Our third quarter results benefited from a particularly strong performance of products based on The Incredible Hulk and Spider-Man characters, as well as growing momentum from our full library of characters. Through the first nine months of 2003, licensing net sales derived from properties associated with movies released in 2003 (Daredevil, X-Men and The Hulk) accounted for roughly 48% of total licensing net sales.

Marvel’s press release also broke down the report by division:

-- Marvel's Licensing Division benefited from continued strength in consumer product licensing, with growth in both the number of new licenses as well as royalty collections above minimum guarantees. License revenues in excess of minimum guarantees, or "overages," were roughly $13 million in the quarter, demonstrating strong sales momentum from a growing base of products. Sales of consumer products based on the feature film The Hulk continued to sell during the quarter at levels in excess of internal projections. Hulk and all other Marvel character action figure and accessory toy lines (except for Spider-Man: The Movie toys) are produced and sold by Marvel's licensee, Toy Biz Worldwide Ltd., with Marvel recording related royalty income within its licensing segment. The creative and marketing talents of Marvel's in-house toy division are responsible for the design, marketing and sales representation of all Marvel-character toys manufactured and sold by Toy Biz Worldwide Ltd.

-- Marvel's Publishing Division net sales increased due to re-invigorated growth in comic sales and continued momentum in trade paperback sales and advertising income. Comic sales benefited from new landmark projects such as JLA/Avengers, 1602 and Supreme Power, which all had stronger than expected retail "sell-through." 187 titles were shipped in the quarter versus 181 in the year-ago period.

-- As anticipated in previous announcements, Marvel's Toy Division sales decreased in Q3 2003 as sales of action figures and accessories based on Spider-Man: The Movie declined to $5.9 million from $34.5 million in Q3 2002. Operating margins were roughly 34% in Q3 2003 versus 9% in Q3 2002 and 28% in the first nine months of 2003 versus 8% in the first nine months of 2002. The improvement in operating margins versus the year-ago periods was fueled by a more favorable sales mix and lower royalty expense. Sales of Spectra Star kites, which carry lower margins, were also significantly lower quarter-to-quarter as this business is being phased out.

-- Corporate Overhead decreased significantly from the June 2003 quarter, reflecting more normalized historical levels. The Company settled certain ongoing legal disputes during the period and other legal matters moved out of active litigation phases, thereby reducing expenses.

Increasing Net Cash Position:

Marvel had $211.2 million in cash, certificates of deposit and commercial paper and $151.0 million owed to holders of 12% Senior Notes as of September 30, 2003, or net cash of $60.2 million. This cash balance includes $16 million in proceeds received from the exercise of options and warrants during the quarter. This compares to cash of $144.3 million and $151.0 million owed to holders of 12% Senior Notes as of June 30, 2003, or net debt of $6.7 million. The Senior Notes are callable at Marvel's option beginning June 15, 2004 at a price of $106 per $100 principal amount, for a total consideration of approximately $160 million.

Marvel’s report also listed its upcoming film releases:

The Punisher Artisan Entertainment April 16, 2004

Spider-Man 2 Sony/Columbia July 2, 2004

Blade 3 New Line Cinema August 12, 2004

Man-Thing Fierce/Artisan August 26, 2004

Fantastic Four Fox December 24, 2004

Films/characters in active development, according to Marvel, include:

X-Men 3 Fox Film

The Hulk 2 Universal Pictures Film

Namor Universal Pictures Film

Elektra New Regency / Fox Film

Iron Man New Line Cinema Film

Ghost Rider Sony Film

DeathLok Crystal Sky/ Paramount Pictures Film

Blade Animation MTV TV

Based on its Q3 performance, Marvel raised its guidance for Q4 03 and all of 2003. Marvel’s new projected net sales for Q3 03 are now between $62 and $67 million, with the overall 2003 net sales projected to be $324 - $329 million.

Looking ahead, Marvel is anticipating 2004’s operating income to be larger than 2003’s, but 2004’s net income and earnings per share will likely fall below 2003 levels, primarily reflecting a change in Marvel's tax provision to approximately 37% in 2004, compared to 17% in 2003 - excluding the one-time non-cash income tax benefit described above.

From Marvel’s release:

Q4 2003 Highlights - Marvel believes that licensing sales will account for roughly 37% of net sales in the quarter, fueled by continued momentum in toy and consumer product license revenues. Sales in Marvel's toy division are anticipated to increase from Q3 2003 levels due to the release of an action figure and accessory line based on the third installment of the Lord of the Rings feature film trilogy and the shipment to retailers of some products based on the upcoming Spider-Man II movie. The effective tax rate for Q4 2003 is anticipated to be 37%, resulting from recording a value for Federal net operating loss carry-forwards in Q3 2003. Corporate overhead is anticipated to be slightly higher than Q3 2003 levels.

Update:

During Marvel’s conference call, Avi Arad said that he wished to clear up some misinformation about Marvel’s relationship with Artisan, stating that the studio (which was just acquired by Lion’s Gate) does not have “15 Marvel properties.” The only property Artisan has any stake in currently is Punisher. Arad said that if things go well between Artisan and Lion’s Gate, Marvel may expand and/or continue their relationship with the studio. Arad stressed that, despite reports, Artisan does not have the rights to Iron Fist and Black Panther.

Other topics mentioned by Arad included:

- Spider-Man 2 just completed principle photography
- Iron Man is targeted to be a PG-13 release and on target for a ’05 release.
- Elektra, which is in current development, will be the “sequel” to Daredevil, with the character first appearing there, and then be reunited with Daredevil in Daredevil 2.
- Marvel is “feverishly” working on Fantastic Four with Fox, and that the studio has it on it's schedule for December 2004.
- Hulk 2 is in development for an 06 release. Arad reported that 6.5 million DVDs shipped for the release, and 3.5 sold within seven days.
- Namor is in active development.
- Arad said that X-Men 3 is in development, but neither Marvel or Fox is willing to tentetively put it on the schedule yet, for either 05 or 06 release.
- Arad reported that Captain America is in discussion with top writers and directors, now that litigation surrounding the character has been resolved.
- Arad said that the production budget for Punisher was in the upper $30s, while the marketing budget will most likely be in the mid $20s (millions).
-Finally, Arad said that he should be able to release more information about upcoming Marvel film projects closer to the November 18th analysts' call.

When asked about the comics arm beating analysts’ predictions for the quarter, Gui Karyo (just named as being in charge of the operational & fiscal management of the publishing business) explained that much of the publishing success was due to JLA/Avengers #1, 1602 and Supreme Power - all of which outpaced Marvel’s internal expectations. Karyo stated that JLA/Avengers #1 sold over 200,000 copies which, with a $5.95 cover price, brought in significant revenue for the publishing arm.

Karyo noted that the three projects named were not regular publishing events, and were all special events.

When asked about the effect of the Lord of the Rings toy sales affecting Q4 numbers, Toy Biz’s Alan Fine revealed that the DVD of Return of the King will be released in May of 04, and Marvel expects toy sales to remain strong through Q4 of 03 and Q1 of 2004.

Other notes from the conference call:

- Spider-Man 2 is already seeing more licensee activity that the first film.
- Marvel is already talking to, and negotiating with licensees for Fantastic Four.
- Marvel will be working to expand its worldwide licensing business, and as such, will be opening offices in Europe and Japan to further licensee relationships internationally. The offices should be opening within the next 60 days.
-Man-Thing was named as the intial fruit of the company's strategic review - a low-budget film with Marvel creative support which may be the model for many Marvel properties in the future. Marvel acknowledged that the film will have very limited licensing, but it could spawn sequels.
-Final monies due in from Spider-Man are related to television and cable rights for the film. Revenue from those deals is expected in 2004.
-Spider-Man 2 merchandise rollout should begin in early Q1 2004 and will build through to the release of the film.

[IanZL]

translation - pretty good news. They're in the black mostly due to liscensing, Publsihing IS profitable, and toy sales are down.

[Greg B]

Just rub it in my face...

I could've bought Marvel stock about three/four years ago for a couple of bucks a share.

[Franklin Harris]

A see Arad is still pushing Fantastic Four for Christmas 2004, but movement on that front is pretty slow.

[JK Parkin]

Originally posted by Greg B
Just rub it in my face...

I could've bought Marvel stock about three/four years ago for a couple of bucks a share.

I feel your pain ... I remember almost pushing the button to buy it when it was about $3, but didn't.

Try not to think about it.

[cyclopsfan]

I am just happy to hear that everything is apparently going well. I am looking forward to every movie project that was discussed as well.

[Greg B]

Originally posted by JK Phoenix
I feel your pain ... I remember almost pushing the button to buy it when it was about $3, but didn't.

Try not to think about it.

Yeah, it's hard not to with stories like this. The sad part is, as a comic fan, I knew Marvel was going to rebound. Quesada and Jemas were starting to turn the publishing wing around and the X-Men and Spider-Man movies were around the corner. That's about as close to insider information as you can get without being illegal.

Oh well, even if I bought stock, I'd have probably panicked and sold it at $15 a share or something and now I'd be kicking myself for not holding on longer.

Hindsight's 20/20.

(deleted)

[MattBrady]

Originally posted by Renaud
Sometimes I think it's the only thing keeping them alive

it's what keeps their major competition alive as well, so why not?

MattB

(deleted)

[MattBrady]

Originally posted by Renaud
Are you kidding... of course WHY NOT, that is what is keeping them alive

I just notice how people like Mr Joe Quesada don't really saved Marvel Comics as they have nothing to do with Licensing or movies the kind of stuff I asked for years and got me in trouble for, Way back then posting news about a possible Captain America movie was a big no no for some

You're getting pretty incoherent here...layoff the rolleyes to try to get your meaning across, and use more words.

MattB

(deleted)]

[Eoghann]

So if Quesada had nothing to do with "saving Marvel Comics"... care to explain this paragraph?

-- Marvel's Publishing Division net sales increased due to re-invigorated growth in comic sales and continued momentum in trade paperback sales and advertising income. Comic sales benefited from new landmark projects such as JLA/Avengers, 1602 and Supreme Power, which all had stronger than expected retail "sell-through." 187 titles were shipped in the quarter versus 181 in the year-ago period.

See Marvel is a multi-media company. It hasn't relied on publishing alone for god knows how many years at this point. It was never Joe's job to "save the company" by turning around licensing, toys or movies or anything else.

He was hired to get the publishing side back on track... and look... he's done it.

Now quit looking for something to whine about.

[arthur pendragon]

Originally posted by MattBrady
You're getting pretty incoherent here...layoff the rolleyes to try to get your meaning across, and use more words.

MattB

That's the new comic book paradigm, mostly exemplified by Marvel, where the art tells the story.

[Eoghann]

Originally posted by arthur pendragon
That's the new comic book paradigm, mostly exemplified by Marvel, where the art tells the story.

Err... unless the book is written by Bendis... or JMS... or Neil Gaiman... or...

*cough* bullshit *cough*

[arthur pendragon]

Originally posted by Eoghann
Err... unless the book is written by Bendis... or JMS... or Neil Gaiman... or...

*cough* bullshit *cough*

Yes, Neil Gaiman is a major contributor to Marvel's overall output.

No thought balloons, no narration and minimalist dialogue typifies Marvel's books. Pointing to the exception doesn't disprove the rule.

[palefire]

No thought balloons, no narration and minimalist dialogue typifies Marvel's books. Pointing to the exception doesn't disprove the rule.

Er, how many books does Bendis write for them. Or how about JMS and then there is - Clairmont who could do with a bunch (and I mean a bunch) less words. I see your point, but you are generalizing as well.

[gOgIver]

Originally posted by Greg B
Just rub it in my face...

I could've bought Marvel stock about three/four years ago for a couple of bucks a share.

When I ended my 5 year boycott against Marvel about 5 years ago there was this young cat ringing me up a shop in the mall and his boss was ribbing him that the "kid" still does not buy Marvel comics but had just "blew" a "G" on Marvel stock for like 2 or 3 bucks a share. I wonder if that cat held on???

"Aoccdrnig to a rscheearch at an Elingsh uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht frist and lsat ltteer is at the rghit pclae. The rset can be a toatl mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae we do not raed ervey lteter by it slef but the wrod as a wlohe."

[GoudaKiller]

While I would love to see Blade animated I would also like to see a second Spider-Man season. Considering how half-a$$ed MTV does things, Marvel would be better off doing Blade as graphitti on eMpTyV's silly Times Square site. The programmers at MTV are clowns if it's not the Real World/Road Rules garbage it's that insanly dumb & unentertaining Sority garbage. Why not do this the Fox,WB or Cartoon Network?!?!?

[funjoe]

Originally posted by Franklin Harris
A see Arad is still pushing Fantastic Four for Christmas 2004, but movement on that front is pretty slow.

I can't see any possible way the FF movie will be ready by December 2004, unless they're seriously into pre-production. I just cant imagine them agreeing on a final script, casting the movie, doing all the pre-production, shooting, and post-production/sfx in 12 months. I'm thinking Summer 2005.

[Christian Otte]

Originally posted by GoudaKiller
While I would love to see Blade animated I would also like to see a second Spider-Man season. Considering how half-a$$ed MTV does things, Marvel would be better off doing Blade as graphitti on eMpTyV's silly Times Square site. The programmers at MTV are clowns if it's not the Real World/Road Rules garbage it's that insanly dumb & unentertaining Sority garbage. Why not do this the Fox,WB or Cartoon Network?!?!?

But remember, they gave us The Osbournes! ROCK AND ROLL!!

[farwell3d]

I would agree with all of that, making me wonder why they continue to hold tight to it being a 2004 movie... It just seems like it would be a better idea to say: "It took a little longer than expected, look for it in the first half of 2005 instead."

[some_bloke]

> Arad reported that 6.5 million DVDs shipped for the release, and 3.5 sold within seven days.


Wow! That's a really low take up.
I feel sorry for the sucker who bought half a dvd!
lol

[synprotokyo]

why are the anti-marvel contingents always like "they only make money 'cause they do stuff that makes money. if they did stuff that didn't make money they wouldn't make money." your position is very duh. and i think we all know that the only great writers are the ones for whom verbosity is a way of life. i hate it when comics let the art tell the story or even have it take an active role in the story telling. as if comics are a visual media. where do they get off producing these books where atrt tells the story. it's not like in the old days wherecomics had no pictures. look at the classic lee kirby fantastic four. no pictures lotsa words the way god intended comics to be. damn marvel and their foisting of drawn comics on an unsuspecting public. how dare they think that there is more than one way to tell a story and that the artisits could somehow be relevent to a comic.

[Eoghann]

Originally posted by arthur pendragon
Pointing to the exception doesn't disprove the rule.

Oh the irony. You just pointed to what you considered the exception in my list to disprove my point.

Neil Gaiman was listed not because of his huge output but because his mini-series was noted in this article as a part of what was helping the publishing division.

On the other hand the other two ARE major contributors to Marvel. JMS has two of the biggest non-X books that Marvel has had lately. His books are covered in dialogue.

Bendis is everywhere and there's no shortage of words in his books.

Those writers are not alone either, just good example. I'm not about to create a list of 20 writers just to make the rather obvious point that you were absurdly generalizing in your initial comment.

If you want more examples then Chris Claremont has been mentioned and is another obvious case. I'd say that Grant Morrison is another who relies heavily on words and not on images for his stories.