Marvel Reports Q3 and Nine Months EPS of $0.26 and $1.20

http://www.businesswire.com/news/home/20091103005628/en

NEW YORK--(Business Wire)--
Marvel Entertainment, Inc. (NYSE: MVL), a global character-based entertainment
and licensing company celebrating the 70th anniversary of its founding, today
reported operating results for its third quarter and nine months ended September
30, 2009.

Reflecting a lower level of feature film activity and related licensing compared
to the year-ago period, Marvel reported Q3 2009 net sales of $105.7 million and
net income of $20.4 million, or $0.26 per diluted share, compared to net sales
of $182.5 million and net income of $50.6 million, or $0.64 per diluted share,
in Q3 2008. The anticipated year-over-year decline in net sales and net income
principally reflects approximately $65 million in lower film revenues in Q3 2009
compared to the prior year period, as well as lower licensing segment net sales
related to last year`s Iron Man and The Incredible Hulk feature films as well as
the Spider-Man merchandising joint venture.

Marvel Entertainment, Inc.

Segment Net Sales and Operating Income (Unaudited)

(in millions)
Three Months Nine Months
Ended September 30, Ended September 30,

2009 2008
2009 2008
Licensing: Net Sales $ 48.9 $ 58.1 $ 181.5 $ 237.5
Operating Income 37.5 42.5 130.5 205.4
Publishing: Net Sales 32.0 34.0 89.5 92.3
Operating Income 10.2 12.7 28.2 34.3
Film Production: Net Sales 24.8 90.2 147.9 119.1
Operating (Loss) Income (2.3 ) 40.4 25.0 40.6
All Other: Net Sales - 0.2 - 3.0
Operating (Loss) (8.8 ) (7.4 ) (20.9 ) (19.4 )
TOTAL NET SALES $ 105.7 $ 182.5 $ 418.9 $ 451.9
TOTAL OPERATING INCOME $ 36.6 $ 88.2 $ 162.8 $ 260.9

Marvel's Chairman, Morton Handel, commented, "Despite the absence of any Marvel
Studios feature film releases in 2009, Marvel continued to deliver solid
operating performance across all our operating segments. Anticipation for the
high profile Iron Man 2 feature film continues to build, and we are focusing our
efforts on the film`s May 2010 release and the related licensing opportunities.
At the same time, we are making solid progress on the development and
pre-production of our Thor, The First Avenger: Captain America and The Avengers
feature film projects.

"On August 31, 2009, The Walt Disney Company and Marvel agreed, subject to
Marvel shareholder approval and other customary closing conditions, that Disney
will acquire Marvel in a stock and cash transaction. Disney is the ideal home to
nurture and further develop the distinctive Marvel brands because of its ability
to extend the breadth, diversity and global reach of Marvel-branded
entertainment and consumer products. We continue to expect this transaction will
close by calendar year end."

Third Quarter Segment Review:

* As anticipated, Q3 2009 Licensing Segment net sales declined versus the year
ago period, primarily due to the recognition in Q3 2008 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 merchandising joint venture. Q3
2009 licensing segment net sales reflect a total contribution of $6.3 million
from Hasbro, ($3.8 million within domestic consumer products and $2.5 million
within international consumer products) compared to a total contribution from
Hasbro of $12.0 million in the year ago period ($7.2 million in domestic
consumer products and $4.8 million in international consumer products).
Licensing Segment operating income also declined in Q3 2009 to $37.5 million (an
operating margin of 77%) principally reflecting the lower sales level.

Marvel Entertainment, Inc.

Licensing Sales by Division (Unaudited)

(in millions)
Three Months Ended Nine Months Ended
9/30/09 9/30/08 9/30/09 9/30/08
Domestic Consumer Products (1) $ 25.6 $ 24.8 $ 95.9 $ 97.8
International Consumer Products 15.8 22.0 61.8 67.0
Spider-Man L.P. (Domestic and International) 2.4 8.1 10.3 50.9
Studio Licensing 5.1 3.2 13.5 21.8
Total Licensing Segment $ 48.9 $ 58.1 $ 181.5 $ 237.5

(1) Domestic Consumer Products includes substantially all of Marvel `s global
interactive licensing business.

* Q3 2009 Publishing Segment net sales declined 6%, or $2 million, compared to
Q3 2008 and were in line with Q2 2009 net sales. The year-over-year decline
principally reflects $3.2 million in lower custom publishing and advertising
revenue compared to the prior year period, partially offset by a year-over-year
increase of $1.6 million in revenue from the book market. Operating income
declined by $2.5 million, or 19.7%, on a year-over-year basis, to $10.2 million
and operating margin decreased to 32% in Q3 2009 versus 37% in Q3 2008,
principally due to an increase in talent costs and the decrease in custom
publishing which carries a higher margin.
* Film Production Segment net sales declined to $24.8 million in Q3 2009 from
$90.2 million in Q3 2008. Net sales in Q3 2009 primarily reflect the recognition
of revenues associated with the international pay TV window for Iron Man and the
domestic pay TV window for The Incredible Hulk as well as contributions from DVD
sales for both Iron Man and The Incredible Hulk. Against these revenues Marvel
amortized capitalized film production costs of $20.5 million. Year-ago Q3 film
production segment results reflected theatrical box office revenues from Iron
Man and The Incredible Hulk and the opening of the home video window in certain
international pre-sold territories for Iron Man.
* In the All Other category, Marvel recorded Q3 2009 and Q3 2008 operating
losses of $8.8 million and $7.4 million, respectively, reflecting respective
corporate overhead expense of $9.5 million and $7.6 million. Q3 2009 corporate
overhead includes a provision of $2.9 million for transaction costs (principally
legal fees) associated with Disney`s proposed acquisition of Marvel.

Balance Sheet and Cash Use Update:

As of September 30, 2009, Marvel had cash and cash equivalents of $109.6
million, restricted cash of $79.0 million and no outstanding borrowings under
its $100 million line of credit. Marvel`s outstanding film-facility borrowings
increased to $21.5 million at September 30, 2009 compared to no outstanding film
borrowings at June 30, 2009. The quarterly sequential increase in film-facility
borrowings reflects ongoing production funding for the Iron Man 2 feature film.

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 52, 30-minute episodes airing on Cartoon Network in the U.S. and launching on International broadcast channels in Q4 2009
The Avengers: Earth`s Mightiest Heroes 52, 30-minute episodes in production; timing and network TBD

Marvel Licensed Entertainment Pipeline
(scheduled release dates are subject to change)
Feature Films Scheduled Release Date
Spider-Man 4 May 6, 2011
Animated TV Series Status
Black Panther 6, 30-minute episodes in production for BET; timing TBD
Fantastic Four: World`s Greatest Heroes 26, 30-minute episodes airing on Nicktoons in the U.S., various networks internationally and on Marvel.com and Marvelkids.com
Iron Man: Armored Adventures 52, 30-minute episodes. Episodes 1-26 are airing on Nicktoons in the U.S. and are on air internationally. Episodes 27-52 are currently in development
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. Episodes 27-52 are currently in development
Marvel Anime: Iron Man 12, 30-minute episodes in production. Scheduled to launch on Animax in Japan in Q2 2010. Scheduled to launch in the U.S. in 2011
Marvel Anime: Wolverine 12, 30-minute episodes in production. Scheduled to launch on Animax in Japan in Q3 2010. Scheduled to launch in the U.S. in 2011
Licensed Broadway Musical Status
Spider-Man, Turn off the Dark, Julie Taymor director; music & lyrics by U2`s Bono and The Edge Opening Night TBD
Animated Direct-to-DVD Projects Status
Planet Hulk Production complete. Scheduled for February 2010 release
Thor: Tales of Asgard Production complete. Release date TBD

Marvel Licensed Video Game Pipeline
(scheduled release dates are subject to change)
Game / Publisher Status
The Punisher: No Mercy / Zen Released July 2, 2009
Marvel vs. Capcom 2 / Capcom Released July 29, 2009 for X-Box console and August 13, 2009 for PS3 console
Marvel Ultimate Alliance 2 / Activision Released September 15, 2009
Marvel Super Hero Squad / THQ Released October 20, 2009
Iron Man 2 / Sega Scheduled for April 2010 release
Thor / Sega Scheduled for May 2011 release
Captain America / Sega Scheduled for July 2011 release

About Marvel Entertainment, Inc.

Marvel Entertainment, Inc. is one of the world's most prominent character-based
entertainment companies, built on a proven library of over 5,000 characters
featured in a variety of media over seventy years. Marvel utilizes its character
franchises in licensing, entertainment (via Marvel Studios and Marvel Animation)
and publishing (via Marvel Comics). Marvel's strategy is to leverage its
franchises in a growing array of opportunities around the world, including
feature films, consumer products, toys, video games, animated television,
direct-to-DVD and online. For more information visit www.marvel.com.

Except for any historical information that they contain, the statements in this
news release regarding Marvel`s plans are forward-looking statements, including
statements relating to (i) the ability to further develop the Marvel brand as a
result of the proposed merger with The Walt Disney Company, (ii) the closing of
the Disney merger and the expected timing of that closing and (iii) Marvel`s
future movie, television, theatrical and game releases.These forward-looking
statements are subject to certain risks and uncertainties, including those
related to Marvel`s exposure to the current economic recession, exposure to
tightening credit markets, financial difficulties of Marvel`s licensees, a
decrease in the level of media exposure or popularity of Marvel`s characters,
changing consumer preferences, delays and cancellations of movies and television
productions based on Marvel characters,Marvel Studios` potential inability to
attract and retain creative talent, key film talent`s potentially becoming
incapacitated or suffering reputational damage, the potential lack of popularity
of Marvel`s films, union activity or other events which could interrupt film
production, including strikes by Hollywood writers, directors and actors, piracy
of films and related products, Marvel Studios` dependence on a single
distributor for each self-produced film, a possible default by the lending banks
in our film facility and the risks relating to the proposed merger with The Walt
Disney Company as outlined under the heading "Risk Factors" in Amendment No. 1
to the Form S-4 filed by The Walt Disney Company on October 27, 2009 (the
"Disney S-4").

These and other risks and uncertainties are described under the headings "Risk
Factors" and Management`s Discussion and Analysis of Financial Condition and
Results of Operations" in Marvel`s filings with the Securities and Exchange
Commission, including Marvel`s Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.As noted above, certain risks relating
the Marvel`s proposed merger with Disney are described in the Disney S-4.Marvel
assumes no obligation to publicly update or revise any forward-looking
statements.

Important Merger Information and Additional Information:

This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. In
connection with the proposed transaction, Disney filed a Registration Statement
on Form S-4 with the SEC on September 22, 2009, as amended on October 27, 2009,
that includes a preliminary proxy statement of Marvel that also constitutes a
preliminary prospectus of Disney. These materials are not yet final and will be
further amended. Marvel will mail the proxy statement/prospectus to its
stockholders once it is final. Investors are urged to read the definitive proxy
statement/prospectus regarding the proposed transaction when it becomes
available, because it will contain important information. You may obtain copies
of all documents filed with the SEC regarding this transaction, including the
definitive proxy statement/prospectus when it becomes available, free of charge
at the SEC`s website, www.sec.gov, or by directing a request when such a filing
is made to The Walt Disney Company, 500 South Buena Vista Street, Burbank, CA
91521-9722, Attention: Shareholder Services or by directing a request when such
a filing is made to Marvel`s proxy solicitor, MacKenzie Partners, Inc., 105
Madison Avenue, New York, New York 10016 or by calling Mackenzie Partners, Inc.
at (800) 322-2885 (toll free) or (212) 929-5500 (call collect).

Disney, Marvel, their respective directors and certain of their executive
officers may be considered participants in the solicitation of proxies in
connection with the proposed transaction. Information about the directors and
executive officers of Marvel is set forth in the preliminary proxy
statement/prospectus contained in the Registration Statement on Form S-4
(Amendment No. 1) filed by Disney on October 27, 2009.Information about the
directors and executive officers of Disney is set forth in its definitive proxy
statement, which was filed with the SEC on January 16, 2009.

MARVEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(in thousands, except per share amounts)

Net sales $ 105,663 $ 182,499 $ 418,893 $ 451,925

Costs and expenses:
Cost of revenues (excluding depreciation expense) 35,844 60,351 153,454 108,175
Selling, general and administrative 33,633 35,596 105,777 104,175
Depreciation and amortization 401 401 1,057 1,164
Total costs and expenses 69,878 96,348 260,288 213,514
Other) income 855 2,051 4,179 22,481
Operating income 36,640 88,202 162,784 260,892
Interest expense 2,736 5,656 9,103 14,228
Interest income 155 870 481 2,812
(Loss) gain on repurchase of debt - (417 ) - 1,916
Income before income tax expense 34,059 82,999 154,162 251,392
Income tax expense 13,139 30,239 57,978 94,423
Net income 20,920 52,760 96,184 156,969
Noncontrolling interest in consolidated Joint Venture 504 2,134 2,265 14,441
Net income attributable to Marvel Entertainment, Inc. $ 20,416 $ 50,626 $ 93,919 $ 142,528

Basic and diluted earnings per share:
Net income attributable to Marvel Entertainment, Inc. $ 20,416 $ 50,626 $ 93,919 $ 142,528
Weighted average shares outstanding:
Weighted average shares for basic earnings per share 78,018 78,403 78,090 77,946
Effect of dilutive stock options and restricted stock 619 514 446 652
Weighted average shares for diluted earnings per share 78,637 78,917 78,536 78,598
Earnings per share, attributable to Marvel Entertainment, Inc.:
Basic $ 0.26 $ 0.65 $ 1.20 $ 1.83

Diluted $ 0.26 $ 0.64 $ 1.20 $ 1.81

MARVEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30, December 31,
2009 2008
(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents $ 109,604 $ 105,335
Restricted cash 37,266 12,272
Short-term investments - 32,975
Accounts receivable, net 28,853 144,487
Inventories, net 12,356 11,362
Income tax receivable - 2,029
Deferred income taxes, net 27,959 34,072
Prepaid expenses and other current assets 8,442 5,135
Total current assets 224,480 347,667

Fixed assets, net 4,523 3,432
Film inventory, net 217,416 181,564
Goodwill 346,152 346,152
Accounts receivable, non-current portion 5,157 1,321
Income tax receivable, non-current portion 6,264 5,906
Deferred income taxes, net - non-current portion 22,458 13,032
Deferred financing costs, net 2,075 5,810
Restricted cash, non-current portion 41,742 31,375
Other assets 5,801 455
Total assets $ 876,068 $ 936,714

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 1,609 $ 2,025
Accrued royalties 84,355 76,580
Accrued expenses and other current liabilities 40,183 40,635
Income tax payable 4,926 -
Deferred revenue 73,159 81,335
Film facility - 204,800
Total current liabilities 204,232 405,375
Accrued royalties, non-current portion 556 10,499
Deferred revenue, non-current portion 87,438 48,939
Film facility, non-current portion 21,537 8,201
Income tax payable, non-current portion 71,597 59,267
Other liabilities 13,811 8,612
Total liabilities 399,171 540,893

Commitments and contingencies

Marvel Entertainment, Inc. stockholders` equity:
Preferred stock, $.01 par value, 100,000,000 shares authorized, none issued -
Common stock, $.01 par value, 250,000,000 shares authorized, 134,704,780 issued and 78,021,369 outstanding in 2009 and 134,397,258 issued and 78,408,082 outstanding in 2008 1,347 1,344
Additional paid-in capital 754,621 750,132
Retained earnings 649,044 555,125
Accumulated other comprehensive loss (4,457 ) (4,617 )
Total Marvel Entertainment, Inc. stockholders` equity before treasury stock 1,400,555 1,301,984
Treasury stock, at cost, 56,683,411 shares in 2009 and 55,989,176 shares in 2008 (921,700 ) (905,293 )
Total Marvel Entertainment, Inc. stockholders` equity 478,855 396,691
Noncontrolling interest in consolidated Joint Venture (1,958 ) (870 )
Total equity 476,897 395,821
Total liabilities and equity $ 876,068 $ 936,714

MARVEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months Ended
September 30,
2009 2008
(in thousands)
Cash flows from operating activities:
Net income $ 96,184 $ 156,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,057 1,164
Amortization of film inventory 110,422 65,599
Provision for doubtful accounts 218 -
Gain on repurchase of debt - (1,916 )
Amortization of deferred financing costs 3,735 3,736
Unrealized gain on interest rate cap and foreign currency forward contracts (635 ) (253 )
Non-cash charge for stock-based compensation 6,051 4,743
Excess tax benefit from stock-based compensation (551 ) (9,013 )
Impairment of long-term assets 3,906 1,663
Deferred income taxes (3,325 ) (16,592 )
Changes in operating assets and liabilities:
Accounts receivable 111,580 (4,915 )
Inventories (994 ) (852 )
Prepaid expenses and other current assets (3,307 ) (802 )
Film inventory (150,081 ) (48,220 )
Other assets (3,111 ) (3,346 )
Deferred revenue 30,323 (5,085 )
Income taxes payable 19,303 58,847
Accounts payable, accrued expenses and other current liabilities (154 ) (14,954 )
Net cash provided by operating activities 220,621 186,773

Cash flows from investing activities:
Purchases of fixed assets (2,247 ) (441 )
Sales of short-term investments 32,983 66,055
Purchases of short-term investments (8 ) (45,039 )
Acquisition of other intangibles (1,600 ) -
Change in restricted cash (35,361 ) 1,270
Net cash (used in) provided by investing activities (6,233 ) 21,845

Cash flows from financing activities:
Borrowings from film facilities 33,037 75,600
Repayments of film facilities (224,501 ) (180,509 )
Distributions to the noncontrolling interest in consolidated Joint Venture (3.309 ) (15,135 )
Purchases of treasury stock (16,407 ) (9,945 )
Exercise of stock options 483 8,285
Excess tax benefit from stock-based compensation 551 9,013
Net cash used in financing activities (210,146 ) (112,691 )

Effect of exchange rates on cash 27 (275 )
Net increase in cash and cash equivalents 4,269 95,652
Cash and cash equivalents, at beginning of period 105,335 30,153
Cash and cash equivalents, at end of period $ 109,604 $ 125,805

Marvel Entertainment, Inc.
Rob Steffens, 310-220-8932
SVP Financial Planning
rsteffens@marvel.com
or
Jaffoni & Collins
David Collins / Richard Land, 212-835-8500
mvl@jcir.com

Copyright Business Wire 2009