MVL Q3 2002......This company is coming around. IMO, it's a buy and hold. I think Daredevil will surprise. Jennifer G is the Hot actress as of now, which really helps. X-men2 with Halle B will do good. I truely believe the HULK will be a mega BLOCKBUSTER. Which will make 2 in 2 years......things are looking good..............
Press Release Source: Marvel Enterprises, Inc.
Growing Exposure of Marvel Characters Drives Year-To-Date Increases: Net Sales +61%, EBITDA +205%, And EPS Rises to $0.08 From Loss of $0.85
Wednesday October 30, 4:03 pm ET
Increases Full-Year 2002 EBITDA Guidance to $72 - $77 Million
NEW YORK--(BUSINESS WIRE)--Oct. 30, 2002-- Marvel Enterprises, Inc. (NYSE:MVL - News) today reported financial results for its third quarter and nine months ended September 30, 2002 and provided financial guidance for the fourth quarter and full year 2002.
Q3 Overview:
Marvel extended its recent trend of year-over-year gains in net sales, EBITDA and net income, and its three principal business segments continued to benefit from a growing list of entertainment, publishing, toy and consumer product exposures including Spider-Man: The Movie and upcoming films for 2003. Q3 net sales rose 96% to $84.4 million, EBITDA increased 313% to $29.3 million and net income attributable to common stock increased to $6.7 million, or $0.17 per share, versus a loss of $5.1 million, or $0.15 per share, in the prior year period. Q3 results reflect approximately $4 million in revenue and EBITDA related to Spider-Man: The Movie which had been anticipated to be received in Q4 2002. This consisted of approximately $2 million from Marvel's participation in the movie's worldwide box office receipts and approximately $2 million representing Marvel's equity interest in net income from Marvel's Spider-Man: the Movie licensing joint venture with Sony.
Marvel Enterprises, Inc.
Divisional Revenue/EBITDA
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
(in millions) September 30, September 30, YTD%
2002 2001 2002 2001 Change
----------------------------------------------------------------------
Licensing: Net Sales (1) $25.0 $6.0 $51.3 $22.6 + 127%
----------------------------------------------------------------------
EBITDA (1) $22.5 $4.1 $43.4 $15.8 + 175%
----------------------------------------------------------------------
Publishing: Net Sales $15.4 $12.8 $47.8 $34.2 + 40%
----------------------------------------------------------------------
EBITDA $4.4 $3.6 $14.4 $9.1 + 58%
----------------------------------------------------------------------
Toys: Net Sales $44.0 $24.2 $113.4 $74.8 + 52%
----------------------------------------------------------------------
EBITDA (1) $5.8 $2.4 $12.8 $5.2 + 146%
----------------------------------------------------------------------
Corporate: Net Sales -- -- -- --
----------------------------------------------------------------------
EBITDA (2) $(3.4) $(3.0) $(9.3)$(10.0) N/A
----------------------------------------------------------------------
TOTAL NET SALES $84.4 $43.0 $212.5 $131.6 + 61%
----------------------------------------------------------------------
TOTAL EBITDA (2) $29.3 $7.1 $61.3 $20.1 +205%
----------------------------------------------------------------------
(1) Toy licensing royalties from Toy Biz Worldwide Ltd. (reported in Licensing segment) totaled $5.4 million and $7.0 million in the third quarter and nine months of 2002, and $1.6 million and $1.6 million in the third quarter and nine months of 2001, respectively.
(2) Nine months 2001 corporate and total EBITDA results include a $3 million charge from a litigation settlement regarding a 1994 toy license between the Company and The Coleman Company.
Net sales in the Licensing Division, Marvel's principal cash flow source, increased over four-fold to $25.0 million, benefiting from accelerating demand for character licenses. The period benefited from payment guarantees from a substantial long-term license granted to Universal Interactive to develop an online massive multi-player persistent universe game based on the Marvel Universe, as well as from successes related to the Spider-Man feature film.
Marvel's Publishing Division continued to deliver strong growth with comic book, trade paperback and advertising revenues growing 40.0% year-over-year, well in excess of industry rates and underscoring Marvel's three-year trend of market share gains. Importantly, the comic industry in the U.S. and Canada also demonstrated total dollar growth of 11.2% for the 12 months ended September 30, 2002, the first annual growth since 1993. Marvel currently publishes approximately 60 titles per month, and typically 18 or 19 are in the top 25.
Led by the success of the Spider-Man: The Movie toy line, Marvel's Toy Division sales increased 81.8% in Q3 versus the year ago period. Toy revenues also reflect initial shipments of action figures and accessories for The Two Towers, the second film in the Lord of the Rings movie trilogy. Q3 also marked the transition from Marvel-produced action figures and accessories based on Spider-Man: The Movie to Spider-Man non-movie toys. Spider-Man non-movie toys and all other toys based on Marvel characters are produced, marketed and sold by a licensee, and the related revenues are reflected within Marvel's licensing division results.
Improving Balance Sheet and Capital Structure:
Marvel had approximately $58.2 million in cash as of September 30, 2002, versus $42.4 million at June 30, 2002 and $21.6 million at December 31, 2001. At September 30, 2002, Marvel's total debt stood at approximately $174.9 million, including $151.0 million of 12% Notes. Accordingly, Marvel's net debt is approximately $120.2 million, compared to net debt of approximately $189.0 million at September 30, 2001.
On October 5th Marvel initiated an Offer to Exchange all 20.8 million shares outstanding of its 8% cumulative preferred stock (each preferred share is convertible into 1.039 common shares) at an incentive rate of 1.39 shares of common stock for each preferred share tendered. Before one-time non-cash charges, the exchange offer is expected to be immediately accretive to EPS by substantially reducing or eliminating preferred dividends which amounted to $16.3 million for the twelve months ended September 30, 2002. The offer is also intended to reduce Marvel's obligation to redeem the preferred shares for $10.00 each in 2011, while also increasing the trading liquidity and float of Marvel's common stock. The exchange offer is scheduled to expire on November 18, 2002.
Marvel President and CEO, Peter Cuneo, commented, "Marvel's resurgence throughout 2002 has been supported by the overwhelming popularity and success of Spider-Man: The Movie, which has spurred licensing and toy revenues; the expanding scope of our publishing efforts; and our strong and growing line-up of entertainment projects scheduled for release in 2003 and beyond. We measure the financial performance of our Company in operating profit and cash flow. We also measure the marketing performance of our Company in the number and quality of consumer impressions we achieve worldwide and in the strength and quality of our licensing partners and the products they make. All of our business segments are currently performing equal to or above our expectations.
"On a global basis, the value of our character brands continues to rise with their increased exposure and success, and a growing number of companies are recognizing that Marvel character brands can have a substantial impact at retail. We are working very diligently to monetize this growing value and remain committed to our business model in which we expose our characters in high-impact entertainment channels and in large consumer product categories on a worldwide basis. This is done primarily through license agreements that do not require any financial investments on Marvel's part. Our recent agreements with Vivendi Universal for online persistent gaming and two additional feature film franchises (Namor: The Sub-Mariner and Prime) are excellent examples of this approach, as they should generate revenue and global exposure for our characters with virtually no cost to Marvel."
Mr. Cuneo concluded, "With our strong cash flows we are now taking steps to enhance our balance sheet as evidenced by the $10 million prepayment on our HSBC loan on August 30th. The preferred stock exchange offer also represents another major step to improve our capital structure, and we are optimistic about the outcome of this effort."
Pro Forma Comparison:
The following pro forma comparison has been prepared to exclude a number of non-recurring and non-cash items as well as to illustrate the benefit of the preferred stock exchange offer. The following assumptions and adjustments have been made to arrive at the pro forma figures.
1. Excludes non-cash interest expense of $2.5 million and $7.9
million, in the third quarter and nine months, respectively,
related to the amortization of HSBC loan costs and warrants,
warrants issued to Isaac Perlmutter, as well as senior note
offering costs. Also excludes $4.1 million in non-cash loan
costs amortization that were accelerated to Q3 as a result of
Marvel's $10 million prepayment, in August 2002, on its bank
debt.
2. Excludes non-cash charges applicable to the utilization of
pre-acquisition NOLs for the three-month and nine-month
periods ended September 30, 2002. This charge represents the
current cash tax provision for state and foreign taxes.
3. Pro forma results for the nine-month period exclude a
one-time, non-cash, after-tax charge of $4.4 million related
to the implementation of FAS 142.
4. Assumes 100% of 20.8 million preferred shares were tendered in
exchange for 28.9 million additional shares of common stock on
January 1, 2002, as well as the related elimination of PIK
preferred dividends of approximately $4.0 million and $12
million in the third quarter and nine-month periods. Excludes
related non-cash charge described in guidance section of
today's release.
Marvel Enterprises, Inc.
Pro Forma Comparison
----------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 30, 2002 September 30, 2002
(in millions, except per share Pro Forma Reported Pro Forma Reported
data)
----------------------------------------------------------------------
Net sales $84.4 $84.4 $212.5 $212.5
----------------------------------------------------------------------
EBITDA $29.3 $29.3 $61.3 $61.3
----------------------------------------------------------------------
Interest expense (1) $5.4 $12.0 $15.7 $27.7
----------------------------------------------------------------------
Income before income taxes $22.2 $15.6 $41.7 $29.7
----------------------------------------------------------------------
Income tax provision (2) $1.1 $5.0 $1.6 $10.0
----------------------------------------------------------------------
Net income (2) (3) $21.1 $10.8 $40.1 $15.4
----------------------------------------------------------------------
Net income attributable to common
stock (4) $21.1 $6.7 $40.1 $3.2
----------------------------------------------------------------------
Net income per share attributable
to common stock (4) $ 0.30 $ 0.17 $ 0.58 $ 0.08
----------------------------------------------------------------------
Weighted average number of
Diluted common shares (4) 69.5 40.6 69.3 40.4
----------------------------------------------------------------------
Marvel Character Feature Film Line Up
----------------------------------------------------------------------
Film/ Studio/ Actors/ Scheduled Release
Character Distributor Director Date*
----------------------------------------------------------------------
Daredevil New Regency/ Ben Affleck, Jennifer February 14, 2003
Fox Garner, Michael Clarke
Duncan, Colin Farrell;
Mark Steven Johnson -
Director
----------------------------------------------------------------------
X2 Fox Patrick Stewart, Halle May 2, 2003
(X-Men Sequel) Berry, Hugh Jackman, Ian
McKellen; Bryan Singer -
Director
----------------------------------------------------------------------
The Universal Eric Bana, Jennifer June 20, 2003
Incredible Connelly, Nick Nolte,
Hulk Sam Elliott; Ang Lee -
Director
----------------------------------------------------------------------
The Punisher Artisan Jonathan Hensleigh - First Half 2004
Director
----------------------------------------------------------------------
Spider-Man II Sony/Columbia Tobey Maguire, Kirsten May 7, 2004
Dunst;
Sam Raimi - Director
----------------------------------------------------------------------
* Release dates are not within Marvel's control
----------------------------------------------------------------------
Marvel Motion Picture Development Pipeline:
(Timing of feature film development is outside Marvel's control)
----------------------------------------------------------------------
Character/Film Studio/Distributor
----------------------------------------------------------------------
Blade III New Line
----------------------------------------------------------------------
Dr. Strange Miramax
----------------------------------------------------------------------
Iron Fist Artisan
----------------------------------------------------------------------
Namor: The Sub-Mariner Universal
----------------------------------------------------------------------
Prime Universal
----------------------------------------------------------------------
Marvel Video Game and Online Game Licensees:
(development/release schedule timing are outside Marvel's control)
----------------------------------------------------------------------
Marvel Character/ Publisher Release Date*
Property
----------------------------------------------------------------------
Blade Activision 2000, 2002
----------------------------------------------------------------------
Spider-Man Activision 2001, 2002, 2004
----------------------------------------------------------------------
X-Men Activision 2001, 2002
----------------------------------------------------------------------
Marvel vs Capcom Capcom 2002
----------------------------------------------------------------------
Daredevil Encore 2003
----------------------------------------------------------------------
Iron Man Activision 2003
----------------------------------------------------------------------
The Incredible Hulk Universal Interactive 2003
----------------------------------------------------------------------
The Punisher THQ Inc. 2003
----------------------------------------------------------------------
Wolverine Activision 2003
----------------------------------------------------------------------
Elektra Encore 2004
----------------------------------------------------------------------
The Call THQ Inc. In development
----------------------------------------------------------------------
Fantastic Four Activision In development
----------------------------------------------------------------------
Captain America THQ Inc. TBD
----------------------------------------------------------------------
Nick Fury THQ Inc. TBD
----------------------------------------------------------------------
* Actual and potential timing of release
----------------------------------------------------------------------
----------------------------------------------------------------------
Marvel Universe** Universal Interactive 2005
----------------------------------------------------------------------
** Online Massive Multi-Player Persistent Universe Game
----------------------------------------------------------------------
Updated Financial Guidance: Based on its performance to-date, Marvel initiated Q4 guidance and raised its full year 2002 guidance as provided in the table below. Marvel's Q4 guidance reflects the shift of $4 million in Spider-Man movie and movie licensing revenues from Q4 to Q3. Marvel has raised its full year 2002 EBITDA guidance to $72 - $77 million from previous guidance of $68 - $73 million. Marvel's guidance is based on management's current view of business trends and expectations for all operating divisions. Marvel cautions investors that changes in the timing of entertainment projects and licensing opportunities and their relative success as well as timing of revenue recognition, could have a material impact on quarterly and full year results.
The guidance provided in the following table does not reflect the impact of a one-time, non-cash charge that will result upon the consummation of the Offer to Exchange. The charge would reflect the value of common shares exchanged in excess of the conversion terms of the Preferred Stock (1.039 shares of common stock per preferred share), or approximately 0.351 common shares per share of preferred stock tendered for exchange, multiplied by the number of preferred shares validly tendered and the closing price of Marvel's common stock on November 18, 2002, the scheduled expiration date of the Offer to Exchange. The formula is as follows: (1.39 - 1.039) x closing common share price on 11/18/02 x number of preferred shares validly tendered for exchange. If all preferred shares were tendered for exchange, and the closing price of the Common stock was $8.25, this would result in a one-time, non-cash charge of $60 million, to be recorded as a preferred dividend.
Additionally, in the event that Marvel voluntary accelerates the payments of any amounts due under its bank term loan before year-end, such accelerated principal repayments would result in the accelerated recognition of related deferred costs, which amount to approximately $9 million as of September 30, 2002. To the extent that either or both of the above transactions are realized during the fourth quarter of 2002, net income and income per share will be materially reduced by these non-cash charges.
Excluding the impact on diluted earnings per share for the above, and the impact of the non-cash FAS 142 impairment charge of $4.6 million recorded effective January 1, 2002, income attributable to diluted common stock per share is expected to range from $0.12 to $0.20 per share for 2002.
For 2003, Marvel expects EBITDA and net income to exceed the results it anticipates for 2002. Marvel expects continued strength in its licensing, publishing and toy operations, supported by revenues related to the release of three feature films during 2003 as well as continuing revenues from Spider-Man: The Movie and its sequel, now in development. Marvel expects to release specific revenue and EBITDA guidance for 2003 by the end of 2002.
Guidance Actual
---------------------------------------------------------------------
(in millions, except
per share) Q4 2002 FY 2002 Q4 2001 FY 2001
---------------------------------------------------------------------
Total revenues $63 - $68 $275 - $280 $49.6 $181.2
---------------------------------------------------------------------
EBITDA $11 - $16 $72 - $77 $10.6 $30.9
---------------------------------------------------------------------
Net income (loss) (1) (2) $1 - $5 $21 - $24 $3.4 ($27.5)
---------------------------------------------------------------------
1 Does not reflect the effects of the currently outstanding
Offer to Exchange Preferred Shares, or the effect of an
acceleration, if any, of bank term loan repayment.
2 Q4 2001 and full year 2001 net loss excludes one-time gains of
approximately $19.1 million and $32.7 million, respectively,
for the retirement of senior notes at a discount to face
value.
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 comic book division which continues to expand its leadership position in the U.S. and worldwide while also serving as an invaluable source of intellectual property. For additional information visit the Marvel Web site at marvel.com.
Except for historical information contained herein, the statements in this news release regarding the Company's plans are forward-looking statements that are dependent upon certain risks and uncertainties, including the lack of success of the Company's pending exchange offer for its preferred stock, the Company's potential inability to successfully implement its business strategy, a decrease in the level of media exposure or popularity of the Company's characters resulting in declining revenues from products based on those characters, the timing of releases and the decisions to proceed with feature films and TV series based on the Company's characters, the lack of commercial success of entertainment projects based on the Company's characters, the lack of commercial success of properties owned by major entertainment companies that have granted the Company toy licenses, the lack of consumer acceptance of new product introductions, the imposition of quotas or tariffs on toys manufactured in China as a result of a deterioration in trade relations between the U.S. and China, changing consumer preferences, production delays or shortfalls, continued pressure by certain of the Company's major retail customers to significantly reduce their toy inventory levels, the impact of competition and changes to the competitive environment on the Company's products and services, the ability of the Company's licensees to successfully market and sell the licensed products, changes in technology and changes in governmental regulation and the continued financial stability of major licensees of the Company. Those and other risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report 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.
Marvel Enterprises, Inc.
Summary Consolidated Statements Of Operations
(in thousands, except per share data)
----------------------------------------------------------------------
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
----------------------------------------------------------------------
Net sales $ 84,378 $ 43,026 $212,539 $131,630
----------------------------------------------------------------------
Cost of sales 41,100 23,188 104,163 69,914
----------------------------------------------------------------------
Gross profit 43,278 19,838 108,376 61,716
----------------------------------------------------------------------
Selling, general and
administrative expenses 16,015 12,629 55,188 38,344
----------------------------------------------------------------------
Pre-acquisition litigation charge
(1) -- -- -- 3,000
----------------------------------------------------------------------
Equity in net income (loss) of
joint venture (2) 1,785 (92) 7,126 (270)
----------------------------------------------------------------------
Other income 253 -- 967 --
----------------------------------------------------------------------
EBITDA (3) 29,301 7,117 61,281 20,102
----------------------------------------------------------------------
Depreciation and amortization 1,590 2,179 3,642 3,982
----------------------------------------------------------------------
Amortization of goodwill and other
intangibles 85 5,940 255 17,782
----------------------------------------------------------------------
Operating income (loss) 27,626 (1,002) 57,384 (1,662)
----------------------------------------------------------------------
Interest expense, including
amortization of debt discount (4) 11,973 7,162 27,652 22,789
----------------------------------------------------------------------
Income (loss) before income taxes 15,653 (8,164) 29,732 (24,451)
----------------------------------------------------------------------
Income tax provision (5) 5,017 6,584 9,955 6,389
----------------------------------------------------------------------
Income (loss) before cumulative
effect of change in accounting
principle 10,636 (14,748) 19,777 (30,840)
----------------------------------------------------------------------
Cumulative effect of change in
accounting principle, net of
taxes 175 -- 4,386 --
----------------------------------------------------------------------
Extraordinary gain, net of income
tax provision -- 13,645 -- 13,645
----------------------------------------------------------------------
Net income (loss) $ 10,811 $ (1,103) $ 15,391 $(17,195)
----------------------------------------------------------------------
Preferred dividend requirement 4,080 4,006 12,216 11,957
----------------------------------------------------------------------
Net income (loss) attributable to
common stock $ 6,731 $ (5,109) $ 3,175 $(29,152)
----------------------------------------------------------------------
Diluted income (loss) per common
share from continuing operations $0.17 ($0.54) $0.19 ($1.25)
----------------------------------------------------------------------
Diluted income (loss) per common
share after cumulative effect of
change in accounting principle
and extraordinary gain $0.17 ($0.15) $0.08 ($0.85)
----------------------------------------------------------------------
Weighted average number of
diluted common shares 40,586 34,529 40,448 34,173
----------------------------------------------------------------------
(1) Reflects a $3 million litigation charge related to a 1994 toy
license between Toy Biz and The Coleman Company.
(2) Marvel's share of revenues, net of expenses, from its
licensing joint venture with Sony for Spider-Man: The Movie.
(3) EBITDA is defined as earnings before cumulative effect of
change in accounting principle, extraordinary gain, interest
expense, income taxes, and depreciation and amortization.
EBITDA does not represent net income or cash flows from
operations as those terms are defined by generally accepted
accounting principles. EBITDA does not necessarily indicate
whether cash flows will be sufficient to fund cash needs.
(4) FY 2002 Q3 and nine months interest expense include,
respectively, $2.5 million and $7.9 million in non-cash items
related to the amortization of HSBC credit facility costs,
warrants issued to Isaac Perlmutter and senior note offering
costs. Also includes $4.1 million in non-cash loan costs
amortization that were accelerated to Q3 as a result of
Marvel's $10 million prepayment, in August 2002, on its
bank debt.
(5) Estimated actual state and foreign taxes to be paid in cash
are $1.9 million for the 2002 period. The remainder represents
non-cash provisions relating to the use of net operating loss
carry forwards incurred in the operating period before the
bankruptcy and available to offset current year income. |
