Press Release Source: Marvel Entertainment....IMO Their guidance is way low for 2003. I like that. Things are only going to get better with time. 20+ by year end. This company is on a MAJOR roll!!
Marvel Completes Strategic Transformation in 2002 and Raises 2003 Guidance for Net Income, EBITDA And EPS
Monday March 3, 4:01 pm ET
- Global Sales of Marvel-Licensed Consumer Products Exceeded $2 Billion in 2002 -
NEW YORK--(BUSINESS WIRE)--March 3, 2003-- Marvel Enterprises, Inc. (NYSE: MVL - News), a global provider of entertainment content, today reported financial results for its fourth quarter and year ended December 31, 2002 and raised its financial guidance for 2003. Marvel's 2002 results and strong 2003 prospects mark its successful transformation to a licensing-driven business focused on entertainment media (film, comics, TV, video games, online, toys, etc.) and consumer products and promotions.
The year 2002, with the launch of Spider-Man: The Movie, also marked the debut of improved feature film economics that provide Marvel the potential for substantial royalty income, based on the success of films featuring its characters.
Q4 Overview:
Reflecting particularly strong contributions from licensing and toys, Q4 net sales rose 74% to $86.5 million, EBITDA increased 136% to $24.8 million and free cash flow increased $33.6 million to $33.1 million. Reflecting previously announced one-time, non-cash charges principally related to the Convertible Preferred Stock exchange offer in November and the early retirement of a bank loan, Marvel reported a Q4 2002 net loss applicable to common stockholders of $48.7 million, or $1.03 per share. Excluding these one-time, non-cash charges, Marvel would have reported Q4 earnings applicable to common stockholders of $12.4 million, or $0.19 per share.
Q4 results included approximately $4.3 million in royalty income from DVD/video sales of Spider-Man: The Movie and approximately $6.7 million in EBITDA from Marvel's equity interest in net income from the Spider-Man: The Movie licensing joint venture with Sony. Initial royalties related to the DVD/video sales were recognized earlier than the previous forecast of Q1 2003.
Marvel President and CEO, Allen Lipson, commented, "In 2002 Marvel re-emerged as one of the leading providers of entertainment content for global media and consumer products, demonstrating that Marvel's reach goes well beyond our comic books and legions of fans. A telling illustration of Marvel's reach is our estimate, based on the reported sales of our licensees, that more than $2 billion worth of Marvel character licensed consumer products were purchased at retail in 2002. This figure excludes over $1.4 billion in Spider-Man: The Movie ticket and DVD/video sales. Tens of millions of people around the world saw Spider-Man: The Movie and many millions more read our comic book offerings, played Marvel character video games, or purchased or received Marvel branded toys or licensed products. We are now able to leverage our intellectual property across multiple revenue streams and benefit from the related consumer exposure and project synergies. With three films, six video game titles, several TV series, untold numbers of licensed products slated for release in 2003, and a growing pipeline of entertainment events and products for 2004 and beyond, we look forward to continued future success within our business model.
"The influence, power and consumer reach of the entire Marvel character universe was again showcased by the success of the recent release of the Fox feature film, DareDevil, which has amassed over $84 million in box office revenues just in the U.S. during its first 17 days of release. Importantly, DareDevil generated approximately $42.5 million in domestic box office revenue its first weekend, more than doubling the previous box office record for a President's Day weekend release, despite a bitter snowstorm in the Northeast. This performance continues an impressive streak of Marvel character-based feature films achieving blockbuster opening weekends and underscores Marvel's rich history of timeless storytelling and creativity with a broad demographic reach. We continue to prove that all of our characters, even those less well known, are unrivaled in their power to entertain and captivate consumers through both entertainment projects and consumer products."
Marvel Enterprises, Inc.
Divisional Revenue/EBITDA
----------------------------------------------------------------------
Three Months Twelve Months
(in millions) Ended Ended
December 31, December 31, YTD %
2002 2001 2002 2001 Change
------------------------------- ------------- --------------- --------
Licensing: Net Sales $28.2 $17.4 $79.6 $40.0 + 99 %
------------------------------- ------ ------ ------- ------- --------
EBITDA (1) $26.1 $9.2 $69.4 $25.1 + 176 %
------------------------------- ------ ------ ------- ------- --------
Publishing: Net Sales $16.7 $15.3 $64.5 $49.5 +30 %
------------------------------- ------ ------ ------- ------- --------
EBITDA (2) $5.2 $8.5 $19.5 $17.6 + 11 %
------------------------------- ------ ------ ------- ------- --------
Toys: Net Sales $41.6 $16.9 $155.0 $91.7 + 69 %
------------------------------- ------ ------ ------- ------- --------
EBITDA (3) $1.6 $(4.7) $14.5 $0.4 + 3525 %
------------------------------- ------ ------ ------- ------- --------
Corporate: Net Sales -- -- -- --
------------------------------- ------ ------ ------- ------- --------
EBITDA (4) (5) $(8.1) $(2.5) $(17.3) $(12.5) N/A
------------------------------- ------ ------ ------- ------- --------
TOTAL NET SALES $86.5 $49.6 $299.1 $181.2 + 65 %
------------------------------- ------ ------ ------- ------- --------
TOTAL EBITDA $24.8 $10.5 $86.1 $30.6 + 181 %
------------------------------- ------ ------ ------- ------- --------
(1) Toy licensing royalties from Toy Biz Worldwide Ltd. (reported in Licensing segment) totaled $14.8 million and $21.8 million in the fourth quarter and twelve months of 2002, respectively, and $1.6 million and $3.2 million in the fourth quarter and twelve months of 2001, respectively.
(2) 2001 Q4 and full year Publishing EBITDA reflects an income item of approximately $3.5 million from the reversal of administrative claim accruals that are no longer required related to the bankruptcy of Marvel Entertainment Group.
(3) 2002 Q4 and full year Toys EBITDA results include charges of $2.5 million and $3.4 million, respectively, for the planned discontinuance of the Spectra Star division and charges of $4.8 million and $7.9 million, respectively, related to the accelerated write-off of prepaid royalty advances related to the Lord of the Rings toy license.
(4) 2002 Q4 and full year Corporate EBITDA results include reserves totaling approximately $4.4 million for estimated settlement values associated with three litigation matters.
(5) Twelve months 2001 Corporate EBITDA results include a $3 million charge from a litigation settlement regarding a 1994 toy license between the Company and The Coleman Company.
Divisional Review
Net sales in the Licensing Division, Marvel's principal source of profit and cash flow, increased approximately 62% to $28.2 million in Q4 from $17.4 million in the prior year period. In addition to revenue associated with Spider-Man: The Movie noted above, the division benefited from strong demand for Marvel character-based consumer goods including video games, and toy lines sold by Toy Biz Worldwide, a Marvel licensee. As evidenced by the growing demand for Marvel-related merchandise, net sales in the licensing division increased 99% or $39.6 million to $79.6 million in 2002 from $40.0 million in 2001, and EBITDA increased by $44.3 million to $69.4 million for the year. This improvement reflects a combination of new licenses, improving licensing terms and new license categories as well as substantial royalties above guaranteed advance payments from existing agreements.
Marvel's Publishing Division net sales increased 9% to $16.7 million in the fourth quarter and 30% in 2002 over 2001. The improvements are due to renewed interest in comics, supported by Marvel's creative enhancements and growing profile, as well as a full-year contribution of Marvel's re-launched graphic novel (trade paperback) offerings which amounted to $15.5 million in sales in 2002 compared to $5.3 million in 2001.
Marvel's Toy Division sales increased 146% to $41.6 million in Q4 2002 compared to sales of $16.9 million in the year ago period. The increase is attributable to continued strong sales success of Marvel's Spider-Man: The Movie action figure line which is developed and sold by Marvel's Toy Biz Division. Full year revenues increased 69% in 2002 due principally to the contribution of Spider-Man: The Movie toys, which generated over $100 million in total revenue for Marvel in the period. In contrast, in fiscal 2003 the bulk of Marvel character-based toys will be produced and sold by Marvel's licensee, Toy Biz Worldwide, and recorded as a royalty income contribution within Marvel's licensing segment. This shift from in-house production to licensing will lead to a previously disclosed decline in toy revenue, but no anticipated decline in the Company's overall EBITDA.
Balance Sheet Improvements in 2002:
In November, Marvel exchanged approximately 85% of its 8% convertible preferred shares for 24.5 million shares of Marvel common stock, reducing future annualized paid in-kind dividends by approximately $14.5 million. Additionally, utilizing growing cash flows, Marvel prepaid the balance of a three-year $37 million term loan which was initiated in December 2001. Marvel had approximately $53.7 million in cash and $151.0 million in 12% Senior Notes as of December 31, 2002, or net debt of $97.3 million. This compares to cash of $21.6 million and debt of $188.0 million at December 31, 2001, or net debt of $166.4 million, and reflects Marvel's improving free cash flows.
Mr. Lipson commented on Marvel's strategy for 2003 and beyond, "From a business standpoint, our focus continues to be on maximizing profits and free cash flow while minimizing capital risk and investment. Our capital expenditure budget remains a very modest $2-$3 million in 2003, allowing us to accumulate our free cash flows for the repayment of our high yield debt, when callable, in June 2004. We remain committed to leveraging our vast pipeline of intellectual property across a growing array of consumer and entertainment markets, and we will continue to minimize capital investments of any kind. This efficient business model is built upon the teaming of our incomparable portfolio of entertainment content and our tremendous creative talents in comic publishing, entertainment development and toy design and development, with a broad and diversified base of world-class partners that are committed to our characters and to ensuring high quality output and timely development. Though unique in the entertainment realm, we believe our strategy is ideally suited for Marvel to continue building on our successful transformation to yield strong year-over-year financial performance with expected variability in quarter-over-quarter comparisons."
Pro Forma Comparison:
The following pro forma comparison excludes a number of non-recurring and non-cash items in order to derive a more useful comparison of year-over-year operating results. Please review the footnotes below which reflect assumptions and adjustments that were made to arrive at the pro forma figures:
Marvel Enterprises, Inc.
Pro Forma Comparison
----------------------------------------------------------------------
Quarter Ended Twelve Months Ended
December 31, 2002 December 31, 2002
(in millions, except Pro Forma Reported Pro Forma Reported
per share data)
---------------------------------- ----------------- -----------------
Net sales $86.5 $86.5 $299.1 $299.1
---------------------------------- ----------------- -----------------
EBITDA $24.8 $24.8 $86.1 $86.1
---------------------------------- ----------------- -----------------
Interest expense (1) $4.8 $14.0 $20.5 $41.7
---------------------------------- ----------------- -----------------
Income before income taxes $18.2 $8.9 $59.8 $38.7
---------------------------------- ----------------- -----------------
Income tax provision (2) $1.5 $1.9 $5.0 $11.9
---------------------------------- ----------------- -----------------
Net income (2) (3) $16.7 $7.2 $54.8 $22.6
---------------------------------- ----------------- -----------------
Net income attributable to common
stock (4) $16.0 $(48.7) $41.9 $(45.5)
---------------------------------- ----------------- -----------------
Net income per share attributable
to common stock (4) $ 0.25 $ (1.03) $ 0.86 $ (1.18)
---------------------------------- ----------------- -----------------
Weighted average number of
Diluted common shares (4) 67.8 47.3 63.4 38.5
---------------------------------- ----------------- -----------------
(1) Pro forma excludes non-cash expense of $9.2 million and $21.2 million in Q4 and the full year, respectively, from amortization of non-cash HSBC loan costs and warrants, warrants issued to Isaac Perlmutter for his bank loan guarantee, and from senior note offering costs.
(2) Pro forma excludes non-cash charges applicable to the utilization of pre-acquisition NOLs for the three-months and year ended December 31, 2002. These charges represent the estimated current cash tax provision for state and foreign taxes.
(3) Pro forma results for Q4 2002 excludes a non-cash tax benefit of $200,000 and also full year 2002 excludes a one-time, non-cash, after-tax charge of $4.2 million, initially recorded in the first quarter, related to the implementation of FAS 142.
(4) Excludes a one-time, non-cash preferred stock dividend of $55.3 million in the fourth quarter and full year 2002 related to Marvel's exchange offer for its 8% convertible preferred stock. The dividend reflects the value of the issuance of 6.2 million shares of Marvel common stock (valued at $8.95 per share), which was in excess of the conversion terms of the convertible preferred stock.
Marvel Character Feature Film Line-Up
Release dates and development timing are not within Marvel's control
----------------------------------------------------------------------
Film/Character Studio/Distributor Targeted
Release Date
----------------------------------------------------------------------
DareDevil New Regency/Fox February 14,
2003
----------------------------------------------------------------------
X2 (X-Men Sequel) Fox May 2, 2003
----------------------------------------------------------------------
The Incredible Hulk Universal June 20, 2003
----------------------------------------------------------------------
The Punisher Artisan 2004 (1)
----------------------------------------------------------------------
Spider-Man II Sony/Columbia May 7, 2004
----------------------------------------------------------------------
Iron Fist Artisan 2004 (1)
----------------------------------------------------------------------
Ghost Rider Paramount 2004 (1)
----------------------------------------------------------------------
Deathlok Paramount 2004 (1)
----------------------------------------------------------------------
Elektra New Regency/Fox 2005 (1)
----------------------------------------------------------------------
DareDevil sequel New Regency/Fox 2005 (1)
----------------------------------------------------------------------
Dr. Strange Miramax 2005 (1)
----------------------------------------------------------------------
Namor Universal 2005 (1)
----------------------------------------------------------------------
Fantastic 4 Fox TBD (1)
----------------------------------------------------------------------
Silver Surfer Fox TBD (1)
----------------------------------------------------------------------
Iron Man New Line TBD (1)
----------------------------------------------------------------------
Blade III New Line TBD (1)
----------------------------------------------------------------------
Prime Universal TBD
----------------------------------------------------------------------
(1) Denotes new or adjusted release timing
----------------------------------------------------------------------
Marvel Character Video Game and Online Game Line-Up:
(development/release schedule timing are outside Marvel's control)
----------------------------------------------------------------------
Marvel Character/Property Publisher Release Date (2)
----------------------------------------------------------------------
Blade Activision 2000, 2002
----------------------------------------------------------------------
Spider-Man Activision 2001, 2002,
2005/2006 (1)
----------------------------------------------------------------------
X-Men Activision 2001, 2002, 2003
----------------------------------------------------------------------
Marvel vs Capcom Capcom 2002, 2003
----------------------------------------------------------------------
DareDevil Encore 2003
----------------------------------------------------------------------
Iron Man Activision 2002
----------------------------------------------------------------------
The Incredible Hulk Universal
Interactive 2003
----------------------------------------------------------------------
The Punisher THQ Inc. 2003
----------------------------------------------------------------------
Wolverine Activision 2003
----------------------------------------------------------------------
Elektra Encore 2004
----------------------------------------------------------------------
Fantastic Four Activision In development
----------------------------------------------------------------------
Captain America THQ Inc. TBD
----------------------------------------------------------------------
Nick Fury THQ Inc. TBD
----------------------------------------------------------------------
----------------------------------------------------------------------
Marvel Universe (3) Universal
Interactive 2006 (1)
----------------------------------------------------------------------
(1) Denotes new or adjusted release timing
----------------------------------------------------------------------
(2) Actual and potential timing of release
----------------------------------------------------------------------
(3) Online Massive Multi-Player Persistent Universe Game
----------------------------------------------------------------------
Updated Financial Guidance: Based on stronger than expected performances across the company and notwithstanding the early realization of approximately $4.3 million in Spider-Man The Movie revenues in Q4 '02 from Q1 '03, Marvel is raising its Q1 and full-year 2003 guidance as reflected in the table below. The substantial increase in Q1 guidance reflects license royalties expected to be earned associated with contracts executed well in advance of Marvel's earlier expectations, including expected contributions from Marvel's toy licensee for action figures and accessories (principally from the Hulk toy line). Accordingly, Marvel is raising its full year EBITDA guidance range by $4 million to $92-$97 million. As previously noted, Q1 and fiscal 2003 guidance also reflects contributions associated with Marvel's recently amended video game agreement with Activision.
Marvel estimates that approximately 10% of EBITDA guidance for 2003 is directly attributable to royalties the Company anticipates from the three Marvel-character feature films slated for 2003 release. Contributions from these films, excluding The Hulk, for which there is a gross participation cap on the first film (no cap on any sequels), are expected to continue into 2004 and beyond. Marvel's guidance also includes expected contributions from a growing array of consumer product and toy licenses; a growing lineup of TV exposures from first run series; continued growth in the Company's comic book and trade paperback business; and an unprecedented lineup of six Marvel character video game releases on all of the major game platforms.
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 for entertainment and licensing revenue streams, could have a material impact on quarterly and full year results.
Marvel Enterprises, Inc. - Updated Q1 and Full-Year 2003 Guidance
----------------------------------------------------------------------
(in millions - except per New Previous New
share amounts) Q1 2003 Q1 2003 FY 2003
Guidance Guidance Guidance
----------------------------------------- -------------- -------------
Total revenues $80 - $85 $67 - $72 $215 -$220
----------------------------------------- -------------- -------------
EBITDA $45 - $50 $22 - $27 $92 - $97
----------------------------------------- -------------- -------------
Net income (3) $27 - $31 $10 - $14 $50 - $54
----------------------------------------- -------------- -------------
EPS attributable to common
stock (1) (2) (3) $0.36 - $0.41 $0.15 - $0.19 $0.64 -$0.69
----------------------------------------- -------------- -------------
Weighted average diluted
common shares 73.7 73.1 73.7
----------------------------------------- -------------- -------------
Free cash flow $23 - $28 $16 - $20 $69 - $74
----------------------------------------- -------------- -------------
Free cash flow per share $0.31 -$0.38 $0.22 - $0.29 $0.94 -$1.00
----------------------------------------- -------------- -------------
(in millions - except per share Previous Actual Actual
amounts) FY 2003 Q1 2002 FY 2002
Guidance
----------------------------------------------------- -------- -------
Total revenues $205 - $215 $57.2 $299.1
----------------------------------------------------- -------- -------
EBITDA $88 - $93 $10.3 $86.1
----------------------------------------------------- -------- -------
Net income (3) $42 - $45 $1.0 $26.8
----------------------------------------------------- -------- -------
EPS attributable to common stock (1)
(2) (3) $0.57 - $0.62 ($0.09) $0.32
----------------------------------------------------- -------- -------
Weighted average diluted common shares
69.7 34.4 44.0
----------------------------------------------------- -------- -------
Free cash flow $69 - $74 $3.1 $91.8
----------------------------------------------------- -------- -------
Free cash flow per share
$0.99 - $1.06 $0.09 $2.09
----------------------------------------------------- -------- -------
(see accompanying footnotes)
(1) Full-year 2002 net income per share attributable to common stock excludes a $55.3 million non-cash charge related to the completion of Marvel's Preferred Share exchange offer (described above).
(2) Q1 2003 and FY 2003 net income attributable to common stock includes approximately $700,000 and $2.7 million in preferred stock dividends, respectively. Q1 2002 and FY 2002 net income attributable to common stock includes approximately $4.1 million and $12.8 million (excluding the above one-time, non-cash charge of $55.3 million) in preferred stock dividends respectively.
(3) Q1 and FY 2002 net income excludes the impact of the non-cash SFAS 142 impairment charge of $4.6 million and $4.2 million, respectively.
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