Marvel Enterprises Q2 2001 Report

Official Press Release

NEW YORK (BUSINESS WIRE) - Marvel Enterprises, Inc. ("Marvel") (NYSE:MVL) today reported financial results for the fiscal 2001 second quarter and six months ended June 30, 2001 and outlined a worldwide licensing agreement for Marvel character action figures and accessories.

----------------------------------------------------------------------MARVEL ENTERPRISES, INC.SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS(dollars in thousands, except per share data)----------------------------------------------------------------------Three Months Ended Six Months EndedJune 30, June 30,2001 2000 2001 2000----------------------------------------------------------------------Net sales $45,932 $51,041 $88,604 $94,229----------------------------------------------------------------------Cost of sales 22,403 24,328 46,726 46,677----------------------------------------------------------------------Gross Profit 23,529 26,713 41,878 47,552----------------------------------------------------------------------Selling, general andadministrative expenses 13,518 19,329 25,715 40,135----------------------------------------------------------------------Pre-acquisition litigationcharge 3,000 - 3,000 -----------------------------------------------------------------------EBITDA (1) 7,011 7,384 13,163 7,417----------------------------------------------------------------------Depreciation and amortization 1,000 3,778 1,802 7,097----------------------------------------------------------------------Amortization of goodwill andother intangibles 5,921 5,990 11,842 11,982----------------------------------------------------------------------Operating income (loss) 90 (2,384) (481) (11,662)----------------------------------------------------------------------Interest expense, net 7,760 7,216 15,627 14,416----------------------------------------------------------------------Loss before income taxes (7,670) (9,600) (16,108) (26,078)----------------------------------------------------------------------Income tax provision (benefit) (349) 724 (195) 893----------------------------------------------------------------------Loss before equity in jointventure (7,321) (10,324) (15,913) (26,971)----------------------------------------------------------------------Equity in net (loss) of jointventure (82) (263) (178) (263)----------------------------------------------------------------------Net loss (7,403) (10,587) (16,091) (27,234)----------------------------------------------------------------------Less: preferred dividendrequirement 3,983 3,810 7,951 7,545----------------------------------------------------------------------Net loss attributable tocommon stock (11,386) (14,397) (24,042) (34,779)----------------------------------------------------------------------Basic and diluted loss pershare ($0.33) ($0.43) ($0.71) ($1.03)----------------------------------------------------------------------Common shares outstanding 34,163 33,651 33,992 33,644----------------------------------------------------------------------(1) "EBITDA" is defined as earnings before extraordinary items,interest expense, taxes, depreciation and amortization. EBITDAdoes not represent net income or cash flow from operations asthose terms are defined by generally accepted accountingprinciples and does not necessarily indicate whether cash flowwill be sufficient to fund cash needs.----------------------------------------------------------------------MARVEL ENTERPRISES, INC.DIVISIONAL REVENUE/EBITDA(Dollars in thousands, except per share data)----------------------------------------------------------------------Three Months Ended Six Months EndedJune 30, June 30,2001 2000 2001 2000----------------------------------------------------------------------Licensing(a): Net Sales $ 11,237 $ 7,043 $ 16,667 $ 9,370----------------------------------------------------------------------EBITDA $ 9,032 $ 4,095 $ 11,884 $ 3,266----------------------------------------------------------------------Publishing: Net Sales $ 11,157 $ 11,411 $ 21,374 $ 21,352----------------------------------------------------------------------EBITDA $ 2,775 $ 2,792 $ 5,514 $ 5,329----------------------------------------------------------------------Toy Biz: Net Sales $ 23,538 $ 32,587 $ 50,563 $ 63,507----------------------------------------------------------------------EBITDA $ 548 $ 2,428 $ 2,762 $ 2,622----------------------------------------------------------------------Pre-acquisition litigationcharge $ (3,000) -- $ (3,000) ------------------------------------------------------------------------Corporate: Net Sales -- -- -- ------------------------------------------------------------------------EBITDA $ (2,344) $ (1,931) $(3,997) $ (3,800)----------------------------------------------------------------------TOTALNETSALES $ 45,932 $ 51,041 $88,604 $ 94,229----------------------------------------------------------------------TOTALEBITDA $ 7,011 $ 7,384 $13,163 $ 7,417----------------------------------------------------------------------(a) Including Marvel Studios and Internet activities..

Toy Business Repositioning:

As previously indicated, Marvel has been exploring for some time avariety of strategic options to reduce the financial risk andunpredictability associated with its toy business. In conjunction withthis review, the Company has made several operating changes includingthe elimination of low margin, advertising-intensive toy categoriessuch as dolls and games; the planned increase in the proportion ofsales which are distributed F.O.B. Hong Kong or China (wherein ToyBiz' financial exposures are reduced); as well as certain personneland overhead reductions.

As part of this strategic repositioning, the Company announcedtoday that it has entered into a worldwide licensing agreement with anew Hong Kong-based company, Toy Biz Worldwide Ltd. This is for thesale and manufacture of toy action figures and accessories thatfeature Marvel characters other than those based upon the upcomingSpider-Man movie. Marvel will earn licensing and other fees under theagreement and will continue to work as a sales agent for Marvelcharacter toy lines but will have no equity interest in the newcompany. In addition to overseeing this relationship, Marvel's Toy Bizdivision will continue to manage its other lines of business,including the Lord of the Rings master toy license and the Spectra(R)line of flying toys.

Second Quarter and First Half Results:

Marvel's 2001 second quarter net sales decreased approximately10.0 % to $45.9 million versus $51.0 million in the second quarter of2000. The decrease was due primarily to a 27.8% decline in net salesfrom the Toy Biz division which is principally due to last year'srestructuring of the division, including the elimination of certainproduct categories.

Marvel's licensing division achieved a 59.5% increase in net salesto $11.2 million in the second quarter, primarily due to an increasein the number of high value agreements in the areas of interactivemedia, collectibles and video games. Year-to-date sales in thePublishing division were equal to last year. The Publishing divisioncontinues to gain market share as illustrated by Marvel's NorthAmerican unit market share in June 2001 of 38%, as compared with 33%in June 2000, as reported by Comics Retailer magazine.

On July 25,2001 a jury verdict was entered in Kansas DistrictCourt in the amount of $3 million, on a breach of contract actionbased on a 1994 toy license between Toy Biz and The Coleman Companythat was signed prior to the acquisition of Marvel Entertainment Groupby Toy Biz. The complaint alleged that Toy Biz did not fulfill itsobligation to spend certain monies on the advertising and promotion ofColeman's products. The Company intends to file and vigorouslyprosecute an appeal.

Excluding the litigation charge, Marvel's EBITDA for the secondquarter of 2001 rose 35%, or $2.6 million, to $10.0 million, comparedto EBITDA of $7.4 million in the year ago quarter. The improvement wasprincipally the result of an increase of approximately $4.9 million,or 121%, in EBITDA from the Licensing division as Marvel exploits thegrowing visibility and commercial interest for its portfolio ofhigh-profile characters. Year-to-date EBITDA, excluding the litigationcharge, was $16.2 million, versus $7.4 million a year ago, an increaseof 118%.

Marvel also announced that it will terminate its revolving creditfacility with Citibank, N.A. Outstanding Letters of Credit under thefacility, totaling $17.5 million, will be replaced by Letters ofCredit issued by Tot Funding, a corporation wholly-owned by IsaacPerlmutter, a director and major shareholder of the Company. Therewere no other outstanding borrowings under the Citibank facility. TheCompany is granting Tot Funding a security interest in the same assetsthat were secured in the Citibank agreement.

Marvel President and CEO, Peter Cuneo, commented, "Our secondquarter and first half results reflect the renewed emphasis we haveplaced on improving cash flows from all our business units. Aspreviously indicated, we have also shifted the focus of Toy Biz towardlower-risk, more predictable products based on our library ofcharacters as well as certain licensed properties. Our licenseagreement with Toy Biz Worldwide Ltd. represents an important stepforward in this effort, further reducing our financial exposure fromMarvel character toy sales, while still positioning Marvel to benefitsignificantly from sales of these lines. The impact of this agreementwill be to reduce net sales in the Toy Biz division, while increasingthe potential for improvements in overall gross profit margin andEBITDA contribution.

"Overall, the performance of our business in the recent quartershas been much improved, yet we remind our investors that oursequential and year-over-year quarterly results may prove to beuneven, based on the variable timing of a variety of entertainmentprojects, licensing agreements, seasonality and other factors."

Bill Jemas is New Chief Operating Officer

Mr. Cuneo added, "I am personally very pleased to note that ourPresident of Publishing, Licensing and New Media, Bill Jemas, hasdone an extraordinary job in leading these divisions during the past18 months. Accordingly, in recognition of his efforts, Bill has beennamed to the added position of Chief Operating Officer of MarvelEnterprises, Inc. Bill has been the driving force in the formulationand execution of new strategies and tactics that have pushed thesebusinesses to new heights. This promotion recognizes his outstandingperformance."

With a library of over 4,700 proprietary characters, MarvelEnterprises, Inc. is one of the world's most prominent character-basedentertainment companies. Marvel's operations are focused in fivedivisions: entertainment (Marvel Studios), licensing, toys (Toy Biz),comic book publishing and Internet/New Media. Marvel facilitates thecreation of entertainment projects, including feature films,television, home video and the Internet, based on its characters andalso licenses its characters for use in a wide range of consumerproducts and services including video and computer games, apparel,collectibles, snack foods and promotions. Marvel's characters and plotlines are created by its comic book division which continues tomaintain a leadership position in the U.S. and worldwide while alsoserving as an invaluable source of intellectual property. Foradditional information visit the Marvel Web site athttp://www.marvel.com.

Except for historical information contained herein, the statementsin this news release regarding the Company's plans are forward-lookingstatements that are dependent upon certain risks and uncertainties,including the Company's potential inability to successfully implementits business strategy, a decrease in the level of media exposure orpopularity of the Company's characters resulting in declining revenuesfrom products based on those characters, the lack of commercialsuccess of properties owned by major entertainment companies that havegranted the Company toy licenses, the lack of consumer acceptance ofnew product introductions, the imposition of quotas or tariffs on toysmanufactured in China as a result of a deterioration in traderelations between the U.S. and China, changing consumer preferences,production delays or shortfalls, continued pressure by certain of theCompany's major retail customers to significantly reduce their toyinventory levels, the impact of competition and changes to thecompetitive environment on the Company's products and services,changes in technology and changes in governmental regulation. Thoseand other risks and uncertainties are described in the Company'sfilings with the Securities and Exchange Commission, including theCompany's Annual Report on Form 10-K, Quarterly Reports on Form 10-Qand Current Reports on Form 8-K.

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