Marvel Enterprises (MVL) reports a marvelous quarter

Marvel Entertainment (ticker: MVL) reported results on March 7, 2005 for
the fourth quarter and year end 2004.  Below are some highlights.

Results 4Q04 vs. 4Q03:

• GAAP EPS: $0.27 vs. $0.12 (+125%)
• Adjusted EPS: $0.21 vs. $0.12 (+75%)
• Consensus EPS was $0.16
• Revenue: $100.5M vs. $85.7M (+17%)
• Consensus revenue was $86.8M
• Gross Profit: $82.6M vs. $63.9M (+29%)
• Gross margin: 82.2% vs. 74.6% (+760bps)
• Operating Income: $41.4M vs. $26.6M (+56%)
• Operating margin: 41.2% vs. 31% (+1020bps)
• Net Income: $30.1M vs. $13.5M (+123%)
• Net margin: 30% vs. 15.8% (+1420bps)
• Cash: $205M vs. $247M (-17%)
• Debt: $0M vs. $154M (-100%)

Segment Results 4Q04 vs. 4Q03:

Licensing
Revenue: $56.7 vs. $30 (+89%)
Operating Income: $34.3 vs. $10.2 (+236%)
Operating margin: 60.5% vs. 34% (+2,650bps)

Publishing
Revenue: $22.1 vs. $19 (+16%)
Operating Income: $11.6 vs. $7.2 (+61%)
Operating margin: 52.5% vs. 37.9% (+1,460bps)

Toys
Revenue: $21.8 vs. $36.9 (-41%)
Operating Income: $2.9 vs. $14.3 (-80%)
Operating margin: 13.3% vs. 38.8% (-2,550bps)

Licensing Revenues, by Category 4Q04 vs. 4Q03:

• Apparel & Accessories: $14.5 vs. $11.7 (+24%)
• Entertainment: $26.3 vs. $8.3 (+217%)
• Toys: $7.4 vs. $4.2 (+76%)
• Other: $8.3 vs. $5.8 (+43%)

Film Pipeline:

2005:
Elektra (Fox/New Regency): released 1/14/05
Fantastik Four (Fox): release date 7/8/05

2006:
X-Men3 (Fox)
Ghost Rider (Sony)
Iron Man (New Line Cinema)
Luke Cage (Sony/Columbia)
The Punisher 2 (Lions Gate Film)
Deathlok (Paramount)

2007:
Spiderman 3 (Sony/Coumbia)
Namor (Unviersal)
The Hulk 2 (Universal)
Wolverine (Fox)

Guidance 1Q05

• Revenue: $88M - $98M; consensus was $95.7M
• Net income: $29M - $34M
• EPS: $0.25 - $0.29; consensus was $0.26

Guidance 2005

• Revenue: $370M - $390M; consensus was $382
• Net income: $120M - $126M
• EPS: $1.07 - $1.12; consensus was $1.10

Quick comments:

• Reiterated guidance in-line with analyst expetations; going forward, MVL will no longer provide quarterly guidance but will update year-end guidance on a quarterly basis
• Q4 results included a one-time income tax credit of $0.06 per share
• Licensing benefited from the JV with Sony (SNE) on Spider-man merchandising, and from improved international licensing operations
• Publishing benefited from core comic book sales as well as growth in new mass market retail chains
• Toys suffered from difficult comps versus 4Q03 when Lord of the Rings and The Hulk action figures were on sale
• MVL repurchased 1 million shares for $14.4M during Q4; during 2004, the company repurchased 4.2M shares for $58M; $43M is still available under the repurchase program
• In 2004, MVL generated $161M of cash; $151M was used to reduce debt
• MVL reached an agreement with 7-11 stores to sell comic books; the 7-11 chain has 6,000 stores
• During Q4, MVL reclassified revenued in its Toys segment to include revenues from its master licensee, Toy Biz Worldwide