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http://www.newsarama.com/forums/showthread.php?s=&threadid=48875
MARVEL RELEASES Q3 2005 NUMBERS
Marvel today released its third quarter financial statement for 2005, and overall reported a 29% drop in profits from last year at this time (albeit Spider-Man 2 was still showing strong effects through the third quarter of 2004). In total, Marvels third quarter profit dropped from $34.4 million in Q3 2004 to $23.4 million in Q3 2005. Overall revenue for the quarter fell from $135.1 million in Q3 2004 to $81.4 million in Q3 2005.
As if that news didnt have stockholders happy, Marvels projection for 2006 had them seriously depressed the company is now scaling back its profit projections for 2006. How much? For 2005, Marvel is projecting full-year earnings to hit somewhere between $1.02 and $1.07 a share. For 2006 Marvel is projecting earnings of $0.37 to $0.52 a share. Chief among the reasons for the small projections, Marvel Chairman Morton Handel is quoted in Marvels report as saying 2006 will be a difficult year for both toys and licensing."
And thats with the third X-Men feature film opening in May.
Traditionally, like many companies, Marvel is very conservative in regards to projected earnings, and most analysts are still estimating Marvels 2006 earnings to be $1.13 a share.
Despite the report and outlook, Marvel has authorized a $250 million stock buyback program. Half of the money for the buyback will come from a new credit line from HSBC Bank USA.
By division of the company:
Licensing:
Still the powerhouse (60% of 2005s revenue) in regards of revenue, Marvel saw third quarter total licensing revenues drop from $64.2 million in Q3 2004 to $33.2 million in Q3 2005. Of the divisions within the licensing division, only domestic consumer products saw an increase between quarters (from $17.5 million in 2004 to $20.5 million in 2005), while all other divisions (international consumer products, Spider-Man LP (Marvels profit sharing agreement with Sony), and the studios) all saw decreased revenue. Among the divisions, the Spider-Man LP saw the most precipitous drop, from $28.4 million in Q3 2004 to $2.9 million in Q3 2005, again, reflecting the performance of Spider-Man 2 in 2004.
Publishing:
The only division of Marvel able to hold its head high in Q3 2005, publishing saw a 14% increase in revenue compared to Q3 2004, increasing to $25.8 million. Marvel credits the increase in higher trade paperback sales (which it claims is responsible for $3.2 million of the increase).
Toys:
Seeing a similar decline to licensing, Toy Biz saw a decline of 54% between Q3 2004 and Q3 2005, due largely to declined revenue from the Spider-Man and Lord of the Rings lines (which were still performing well in Q3 2004). Toy Bizs Q3 2004 revenue was $48.4 million, while in Q3 2005, it was $22.1 million. Obviously, the decline in revenues also reflects the modest performance of toys based on the Fantastic Four movie.
Marvel also credits some of the low performance to lower than anticipated contributions from the TNA Wrestling and Curious George lines most of the products from which have been pushed back to 2006 due to the weak retail environment. Marvel reported that it had planned to see $20 million from toy sales in the two lines, but now only expects to see $3 million in 2005.
Again, the wild swings of both licensing and toys reflects the pendulum like performance of Marvel, that is, when it has popular products out in the mass market, such as the Spider-Man films or previously, the X-Men films, toys and licensing perform anywhere from very well to spectacularly. When Marvel is in the lull between popular films (which 2005 now appears to have been), licensing and toys suffer. Of course, of note in all of this is Marvels publishing segment, which continues to post gains in its quarterly reports. While the segment is the smallest in terms of revenue generated, its recent performance shows it to be Marvels most stable.
2006
The bulk of Marvels Q3 2005 report was devoted to its 2006 outlook, and its rationale for explaining its rather dim outlook for the future.
From the report:
Nominal contributions from feature films: X-Men 3, Ghost Rider, and The Punisher 2.
Modest expected initial contributions from animated projects: Avengers 1 direct-to-DVD in Q2 2006 and the Fantastic Four animated television series in Europe.
Modest contributions from wholesale sales of Ghost Rider and X-Men 3 toys by our Master Toy Licensee plus sales from Curious George and Marvel Legends.
No contribution expected from the Spider-Man L.P. (compared to over $20 million in 2005).
Studio revenues of $10 - $12 million (compared to over $20 million in 2005).
Continued, modest top-line and bottom-line growth from the publishing division.
Approximately $16 million in interest expense and non-cash amortization expenses related to Marvel's $525 million credit facility for feature film production. [Marvels 2006 guidance reflects a $16 million payment of interest and non-cash amortization expenses related to the credit facility]
Roughly $5 million of incremental non-cash expenses related to the expensing of stock options.
Up to $5 million in incremental expenses related to the expansion of activities and infrastructure within the Marvel Studios division.
Marvel's guidance does not reflect the impact of any share repurchase activity under the $250 million authorization announced today.
And as we noted earlier, Marvels own report indicates that investors can expect swings in Marvels revenue and returns on their respective investments:
Marvel cautions investors that inherent variability in the timing of license opportunities and entertainment events, the timing of their revenue recognition, and their level of success may contribute to sequential and year-over-year variability in its interim financial results and could have a material impact on quarterly results as well as Marvel's ability to achieve the financial performance included in its financial guidance.
Upcoming Releases:
As is customary for Marvel, it also utilized the Q3 report as a chance to list its upcoming film and videogame slate. Among the titles named:
X-men 3 - May 26, 2006
Ghost Rider - July 14th, 2006
The Punisher 2 - targeted for fall 2006
Spider-Man 3 - May 4, 2007
Fantastic Four 2 - July 4, 2007
Films with no release dates listed by Marvel include: Silver Surfer, Wolverine, Deathlok, Hulk 2, and Thor. Namor, Black Widow, and Iron Man were also listed, and it was noted that the three were in the Marvel Film-Backed Credit Facility, that is, films that will be produced by Marvel and distributed by Paramount under its agreement. Other projects in the facility include: Ant-Man, The Avengers, Black Panther, Captain America, Cloak & Dagger,
Doctor Strange, Hawkeye, Nick Fury, Power Pack and Shang-Chi. Of note among the properties is Marvels inclusion of Iron Man among the properties is plans to develop, as it was recently reported that the company had regained the film rights to the character. Whether the inclusion is an official notice that Marvel plans to produce an Iron Man film itself, or it merely wanted to list the project among its upcoming films is unknown.
Marvels direct to DVD animated projects with Lions Gate will kick off with the Ultimate Avengers on February 21, 2006. Other titles forthcoming include: Ultimate Avengers 2, Iron Man and Doctor Strange.
Marvel animated TV projects in development include: Partnership with Moonscoop SAS (formerly Antefilms Productions) to produce an original animated television series based on the Fantastic Four. Twenty-six, 30-minute 2D/3D animated episodes are planned with initial TV airings in 2006.
Live action television projects in development include: Blade, Alter Ego, and Skrull Kill Krew.
Upcoming videogame releases listed by Marvel showed nothing new, with Ghost Rider the only videogame property announced for a 2006 release.