(Source: Business Wire)
Marvel Entertainment, Inc. (NYSE: MVL), a global character-based entertainment and licensing company celebrating the 70th anniversary of its founding in 1939, today reported operating results for its second quarter and six months ended June 30, 2009. Marvel also today raised the low end of its full year 2009 financial guidance for net sales, net income and diluted earnings per share as a result of stronger than anticipated operating performance in the first half of 2009.
For Q2 2009, Marvel reported net sales of $116.3 million and net income of $29.0 million, or $0.37 per diluted share, compared to net sales of $156.9 million and net income of $46.7 million, or $0.59 per diluted share, in Q2 2008. The year-over-year decrease in net sales principally reflects the anticipated decrease in Licensing Segment net sales which benefited in the year-ago period from the initial recognition of licensing revenues related to the Iron Man and The Incredible Hulk feature films and from licensing associated with the Spider-Man 3 feature film which debuted in May 2007.
Marvel Entertainment, Inc. Segment Net Sales and Operating Income (Unaudited) (in millions) Three Months Ended June 30, 2009 2008 Six Months Ended June 30, 2009 2008 Licensing: Net Sales $ 51.8 $ 94.9 $ 132.6 $ 179.4 Operating Income 34.1 77.5 92.9 162.9 Publishing: Net Sales 31.7 31.8 57.5 58.3 Operating Income 10.9 11.7 17.9 21.6 Film Production: Net Sales 32.8 28.9 123.1 28.9 Operating Income 11.7 2.2 27.3 0.2 All Other: Net Sales -- 1.3 -- 2.8 Operating (Loss) (4.2 ) (6.2 ) (12.0 ) (12.0 ) TOTAL NET SALES $ 116.3 $ 156.9 $ 313.2 $ 269.4 TOTAL OPERATING INCOME $ 52.5 $ 85.2 $ 126.1 $ 172.7 -------------------------------------------------------------------------------
Marvel's Chairman, Morton Handel, commented, "Marvel's solid Q2 operating results reflect the strength of our core businesses supported by the growing global exposure of our corporate and character brands. We remain focused on extending demand for Marvel branded entertainment and licensed products, particularly for brands and international markets that have previously been underdeveloped. We pursue these initiatives while maintaining the strategic and financial discipline that has yielded high operating margins and strong cash flows.
"Principal photography for our Iron Man 2 feature film concluded on schedule last month, and the media and fan anticipation for this May 2010 release continues to build, as was demonstrated by tremendous media coverage and positive fan response around the recent Comic-Con in San Diego, attended by well over 120,000 fans. Iron Man 2 will be the first of four self-produced films to debut over the two-year period 2010-2012, in an ambitious creative project that will, for the first time, unite many of Marvel's favorite Super Heroes in a story arc that builds to The Avengers in May 2012.
"Driving further brand exposure are the multiple Marvel character animated television series on air in the US and abroad. After the successful '09 launches of Iron Man Armored Adventures and Wolverine and the X-Men, we are looking forward to the September launch of The Super Hero Squad on The Cartoon Network. This new series re-imagines existing Marvel characters for younger audiences. Also, our online exposure is ramping nicely with increasing levels of content and games which has led to a solid increase in our online traffic."
Second Quarter Segment Review:
Q2 2009 Licensing Segment net sales of $51.8 million were higher than anticipated primarily reflecting strength in collecting worldwide royalty minimum guarantees. Licensing Segment net sales declined versus Q2 2008 reflecting the recognition in the year-ago period of merchandise licensing revenue related to the Iron Man and The Incredible Hulk feature films, as well as a decrease in revenue from the Spider-Man JV. Licensing Segment operating income was $34.1 million in Q2 2009, reflecting an operating margin of 66%.
Marvel Entertainment, Inc. Licensing Sales by Division (Unaudited) (in millions) Three Months Ended Six Months Ended 6/30/09 6/30/08 6/30/09 6/30/08 Domestic Consumer Products (1) $ 20.9 $ 47.3 $ 70.3 $ 73.1 International Consumer Products 24.3 30.1 45.9 45.0 Spider-Man L.P. (Domestic and International) 2.8 13.0 7.9 42.7 Studio Licensing 3.8 4.5 8.5 18.6 Total Licensing Segment $ 51.8 $ 94.9 $ 132.6 $ 179.4 -------------------------------------------------------------------------------
(1) Domestic Consumer Products includes substantially all of Marvel 's global interactive licensing business.
Q2 2009 Publishing Segment net sales were in line with Q2 2008 and reflect a $5.9 million or 23% sequential increase over Q1 2009. The sequential improvement principally reflects a gain in advertising and custom publishing sales as well as an increase in the number of comic and trade titles released. Operating income declined by 7% on a year-over-year basis to $10.9 million in Q2 2009, principally attributable to a lower level of high-margin advertising and custom publishing sales reflecting conditions in the broader advertising market. The Publishing Segment operating margin was 34% in Q2 2009 versus 37% in Q2 2008.
Film Production Segment net sales in Q2 2009 primarily reflect initial revenues for the Iron Man domestic pay TV window as well as ongoing Iron Man DVD sales. Against these revenues, Marvel amortized capitalized film production costs of $18.9 million. Marvel had film production revenue of $28.9 million and operating income of $2.2 million in Q2 2008, primarily from the theatrical component of foreign presales of Iron Man and The Incredible Hulk.
Under the category All Other, Marvel recorded operating losses (principally corporate overhead) of $4.2 million and $6.2 million in Q2 2009 and Q2 2008, respectively. All Other in Q2 2009 includes $2.4 in other income from a distribution of a 1998 bankruptcy-related settlement. In Q2 2008, All Other included $1.3 million in revenue and $1.3 million in operating income contribution from Marvel's former in-house toy operations. Corporate overhead in Q2 2009 and Q2 2008 was $7.3 million and $7.5 million, respectively.
Balance Sheet and Cash Use Update:
As of June 30, 2009, Marvel had cash and cash equivalents of $81.0 million, restricted cash of $80.5 million and no outstanding borrowings under its $100 million line of credit with HSBC Bank. Marvel also had no outstanding film-facility borrowings at June 30, 2009 compared to $61.9 million at March 31, 2009, reflecting strong cash receipts associated with the Iron Man and The Incredible Hulk feature films. Production costs of the Iron Man 2 feature film incurred in Q2 2009 were financed through Marvel's one-third funding of the film's budget as well as from cash receipts from both Iron Man and The Incredible Hulk collected during the quarter. Marvel did not repurchase any shares of its common stock during Q2 2009 and has $111.3 million remaining under its share repurchase authorization.
Marvel Studios Entertainment Pipeline (scheduled release dates are subject to change) Feature Films Scheduled release date Iron Man 2 May 7, 2010 Thor May 20, 2011 The First Avenger: Captain America July 22, 2011 The Avengers May 4, 2012 Animated TV Series Status The Super Hero Squad 26, 30-minute episodes in production; scheduled for Q3 2009 release on Cartoon Network The Avengers: Earth's Mightiest Heroes 26, 30-minute episodes in production; planned for Q3 2011 release; network TBD Marvel Licensed Entertainment Pipeline (scheduled release dates are subject to change) Feature Films Scheduled Release Date X-Men Origins: Wolverine Released May 1, 2009 Spider-Man 4 May 6, 2011 Animated TV Series Status Black Panther 8, 30-minute episodes in production for BET; timing TBD. Fantastic Four: World's Greatest Heroes 26, 30-minute episodes airing internationally and on Marvel.com and Marvelkids.com Iron Man: Armored Adventures 26, 30-minute episodes airing in the U.S. on Nicktoons and on various networks internationally Spectacular Spider-Man 26, 30-minute episodes airing on Disney XD in the U.S. and on various networks internationally Wolverine and the X-Men 52, 30-minute episodes. Episodes 1-26 are airing on Nicktoons in the U.S. and are on air internationally.
