UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-13638
MARVEL ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3711775
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 East 40th Street, New York, NY 10016
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(Address of principal executive offices) (Zip Code)
212-576-4000
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes [X] No [ ]
At May 4, 2004, the number of outstanding shares of the registrant's common
stock, par value $.01 per share, was 108,960,347. This number does not include
11,091,000 shares of the registrant's common stock held by a wholly owned
subsidiary of the registrant.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)....... 1
Condensed Consolidated Balance Sheets as of March 31, 2004 and
December 31, 2003............................................. 2
Condensed Consolidated Statements of Income and Comprehensive
Income for the Three Months Ended March 31, 2004 and 2003..... 3
Condensed Consolidated Statements of Cash Flows for Three Months
Ended March 30, 2004 and 2003................................. 4
Notes to Condensed Consolidated Financial Statements.......... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 12
Results of Operations......................................... 14
Liquidity and Capital Resources............................... 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 17
Item 4. Controls and Procedures....................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 19
Item 6. Exhibits and Reports on Form 8-K.............................. 20
SIGNATURES .............................................................. 21
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
(Unaudited)
1
MARVEL ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2004 2003
--------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 61,403 $ 32,562
Certificates of deposit and commercial paper ................................... 230,155 214,457
Accounts receivable, net ....................................................... 60,295 51,820
Inventories, net ............................................................... 15,954 12,975
Distribution receivable from joint venture, net ................................ 1,447 2,056
Deferred income taxes, net ..................................................... 18,197 18,197
Deferred financing costs ....................................................... 667 667
Prepaid expenses and other current assets ...................................... 1,249 2,273
--------- ---------
Total current assets ..................................................... 389,367 335,007
Molds, tools and equipment, net .................................................. 5,513 5,811
Product and package design costs, net ............................................ 1,488 1,433
Goodwill, net .................................................................... 341,708 341,708
Intangibles, net ................................................................. 283 335
Accounts receivable, non-current portion ......................................... 38,438 26,437
Deferred income taxes, net ....................................................... 20,387 28,246
Deferred financing costs ......................................................... 2,613 2,779
Other assets ..................................................................... 87 101
--------- ---------
Total assets ............................................................. $ 799,884 $ 741,857
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................... $ 21,779 $ 18,455
Accrued royalties .............................................................. 42,170 32,936
Accrued expenses and other current liabilities ................................. 42,790 30,654
Administration expense claims payable .......................................... 619 788
Unsecured creditors payable .................................................... 2,968 2,963
Income taxes payable ........................................................... 16,758 4,705
Deferred revenue ............................................................... 18,705 30,308
--------- ---------
Total current liabilities ................................................ 145,789 120,809
Senior notes ..................................................................... 150,962 150,962
Accrued rent ..................................................................... 564 636
--------- ---------
Total liabilities ........................................................ 297,315 272,407
--------- ---------
8% cumulative convertible exchangeable redeemable preferred stock, $.01 par value,
75,000,000 shares authorized, none outstanding ................................... -- --
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued ....... -- --
Common stock, $.01 par value, 250,000,000 shares authorized, 119,706,206 issued
and 108,615,206 outstanding in 2003, and 120,050,890 issued and 108,959,890
outstanding in 2004 ............................................................ 1,200 1,197
Deferred stock compensation ...................................................... (7,515) (4,857)
Additional paid-in capital ....................................................... 571,370 566,909
Accumulated deficit .............................................................. (26,664) (57,934)
Accumulated other comprehensive loss ............................................. (2,867) (2,910)
--------- ---------
Total stockholders' equity before treasury stock ......................... 535,524 502,405
Treasury stock, 11,091,000 shares ................................................ (32,955) (32,955)
--------- ---------
Total stockholders' equity ............................................... 502,569 469,450
--------- ---------
Total liabilities and stockholders' equity ............................... $ 799,884 $ 741,857
========= =========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
2
MARVEL ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
Three Months
Ended March 31,
2004 2003
---- ----
Net sales ............................................. $122,326 $ 87,377
Cost of sales ......................................... 40,523 20,284
-------- --------
Gross profit .......................................... 81,803 67,093
Operating expenses:
Selling, general and administrative .............. 32,146 16,359
Depreciation and amortization .................... 745 843
-------- --------
Total operating expenses ......................... 32,891 17,202
Equity in net income of joint venture ................. 8,117 4,824
Other income, net ..................................... 272 --
-------- --------
Operating income ...................................... 57,301 54,715
Interest expense, net ................................. 3,920 4,258
-------- --------
Income before income taxes ............................ 53,381 50,457
Income tax expense .................................... 22,111 8,236
-------- --------
Net income ............................................ 31,270 42,221
Less: preferred dividend requirement .................. -- 1,163
-------- --------
Net income attributable to common stock ............... $ 31,270 $ 41,058
======== ========
Basic earnings per share attributable to common stock . $ 0.29 $ 0.45
======== ========
Weighted average number of basic shares outstanding ... 108,392 92,206
======== ========
Diluted earnings per share attributable to common stock $ 0.27 $ 0.38
======== ========
Weighted average number of diluted shares outstanding . 115,075 111,390
======== ========
Comprehensive income
Net income ......................................... $ 31,270 $ 42,221
Other comprehensive income ......................... 43 35
-------- --------
Comprehensive income ............................... $ 31,313 $ 42,256
======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
3
MARVEL ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
2004 2003
---- ----
Cash flows from operating activities:
Net income ............................................... $ 31,270 $ 42,221
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................ 745 843
Provision for doubtful accounts .......................... 748 132
Amortization of deferred financing costs ................. 166 167
Non-cash charge for compensatory stock options ........... 621 --
Tax benefit of stock option exercise ..................... 544 --
Deferred income taxes .................................... 7,859 6,534
Equity in net income from joint venture .................. (8,117) (4,824)
Changes in operating assets and liabilities:
Accounts receivable ................................... (21,224) (1,222)
Inventories ........................................... (2,979) 4,753
Distributions received from joint venture ............. 3,321 5,247
Prepaid expenses and other current assets ............. 1,024 887
Other assets .......................................... 14 1
Deferred revenue & distributions in excess of equity in
joint venture ...................................... (6,198) (16,026)
Income taxes payable .................................. 12,053 1,375
Accounts payable, accrued expenses and other current
liabilities ........................................ 24,665 (10,632)
-------- --------
Net cash provided by operating activities ..................... 44,512 29,456
-------- --------
Cash flows from investing activities:
Payment of administrative claims and unsecured claims,
net ................................................. (164) (22)
Purchases of molds, tools and equipment ............... (130) (24)
Expenditures for product and package design ........... (320) (469)
Purchases of certificates of deposit and commercial
paper .............................................. (15,698) --
-------- --------
Net cash (used) in investing activities .................... (16,312) (515)
-------- --------
Cash flows from financing activities:
Exercise of warrants and stock options ................ 641 2,103
-------- --------
Net cash provided by financing activities .................. 641 2,103
-------- --------
Net increase in cash and cash equivalents .................. 28,841 31,044
Cash and cash equivalents, at beginning of period .......... 32,562 53,690
-------- --------
Cash and cash equivalents, at end of period ................ $ 61,403 $ 84,734
======== ========
Supplemental disclosures of cash flow information:
Income taxes paid during the period .................... $ 1,672 $ 240
Non-cash transactions:
Preferred stock dividends .............................. -- 1,163
Conversion of preferred stock to common stock .......... -- 33,943
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
4
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements of
Marvel Enterprises, Inc. and its subsidiaries (collectively, the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The Condensed Consolidated Statements of
Income and Comprehensive Income and the Condensed Consolidated Statements of
Cash Flows for the three-month period ended March 31, 2004 are not necessarily
indicative of those for the full year ending December 31, 2004. For further
information on the Company's historical financial results, refer to the
Consolidated Financial Statements and Notes thereto contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Certain
prior period amounts have been re-classified to conform with the current
period's presentation.
All share and per share amounts in the accompanying unaudited Condensed
Consolidated Financial Statements have been adjusted for the 3 for 2 common
share stock split effective March 26, 2004.
2. SIGNIFICANT ACCOUNTING POLICIES
Accounting for Stock Based Compensation - In accordance with the provisions
of SFAS 148 "Accounting for Stock-Based Compensation", the Company has elected
to continue to account for its stock options under APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on date
of grant, no compensation expense is recognized. For the purposes of SFAS 148
pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting periods. The Company's pro forma information
follows:
Three Months Ended
March 31,
------------------
2004 2003
(In thousands)
Net income, as reported ........................................... $31,270 $42,221
Net income attributable to common stock, as reported .............. 31,270 41,058
Net income per share attributable to common stock - basic, as
reported ........................................................ 0.29 0.45
Net income per share attributable to common stock - diluted, as
reported ........................................................ 0.27 0.38
Stock based employee compensation cost, net of tax, if SFAS 123 was
applied ......................................................... 2,919 1,396
Pro forma net income .............................................. 28,351 40,825
Pro forma net income attributable to common stock ................. 28,351 39,662
Pro forma net income per share attributable to common stock - basic 0.26 0.43
Pro forma net income per share attributable to common stock -
diluted ......................................................... 0.25 0.37
The fair value for each option grant under the stock option plans was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for the various grants made during
2000: risk free interest rates ranging from 6.12% to 6.72%; no dividend yield;
expected volatility of 0.55; and expected life of three years. The weighted
average assumptions for the 2001 grants are: risk free interest rates ranging
from 2.91% to 4.90%; no dividend yield; expected volatility of 0.92; and
expected life of three years. The weighted average assumptions for the 2002
5
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2004
(Unaudited)
grants are: risk free interest rates ranging from 3.19% to 4.92%; no dividend
yield; expected volatility of 0.83; and expected life of five years. The
weighted average assumptions for the 2003 grants are: risk free interest rates
ranging from 2.32% to 3.43%; no dividend yield; expected volatility ranging from
0.59 to 0.78; and expected life of five years. The weighted average assumptions
for the 2004 grants are: risk free interest rates ranging from 2.81% to 3.36%;
no dividend yield; expected volatility ranging from 0.54 to 0.58; and expected
life of five years. The Black Scholes option pricing model was developed for use
in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, the option valuation model
requires the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock options have
characteristics significantly different from those traded options, and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing model does not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
The effects of applying SFAS 123 for providing pro forma disclosures are
not likely to be representative of the effects on reported net income in future
periods.
3. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
March 31, December 31,
2004 2003
---- ----
(in thousands)
Accounts receivable, net, consist of the following:
Accounts receivable ................................ $77,913 $68,738
Less allowances for:
Doubtful accounts ................................ ( 5,514) ( 5,073)
Advertising, markdowns, returns, volume, discounts
and other ..................................... ( 12,104) ( 11,845)
------- -------
Total .......................................... $60,295 $51,820
======= =======
Inventories, net, consist of the following:
Finished goods ..................................... $10,071 $ 8,613
Component parts, raw materials and work-in-process.. 5,883 4,362
------- -------
Total .......................................... $15,954 $12,975
======= =======
Accrued expenses and other current liabilities consists
of the following:
Inventory purchases ................................ $17,887 $ 7,290
Bonuses ............................................ 1,196 4,074
Accrued expenses - Fleer sale including pension
benefits ......................................... 5,200 5,234
Litigation and legal accruals ...................... 2,971 2,719
Interest expense ................................... 5,608 1,079
Other accrued expenses ............................. 9,928 10,258
------- -------
Total .......................................... $42,790 $30,654
======= =======
6
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
March 31, 2004
(Unaudited)
4. EARNINGS PER SHARE
The total number of shares of common stock outstanding as of March 31, 2004
was 108,959,890, net of treasury shares; assuming the exercise of all
outstanding stock options, the number of shares would be 123,548,422. During the
three month period ended March 31, 2004, 174,969 shares of common stock were
issued through stock option exercises.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
Three Months Ended
March 31,
----------------------
2004 2003
---- ----
Numerator:
Net income $ 31,270 $ 42,221
Preferred dividends -- (1,163)
--------- ---------
Numerator for basic earnings per share 31,270 41,058
Preferred dividends* -- 1,163
--------- ---------
Numerator for diluted earnings per share $ 31,270 $ 42,221
========= =========
Denominator:
Weighted average common shares outstanding 108,392 92,206
Effect of dilutive warrants/options 6,683 14,193
Effect of dilutive redeemable cumulative
exchangeable preferred stock -- 4,991
--------- ---------
Denominator for diluted earnings per share -
adjusted weighted average common shares and
assumed conversions 115,075 111,390
========= =========
Basic earnings per share $ 0.29 $ 0.45
========= =========
Diluted earnings per share $ 0.27 $ 0.38
========= =========
* In accordance with the provisions of SFAS 128 "Earnings Per Share", under the
if-converted method, preferred dividends applicable to convertible preferred
stock are added back to the numerator and the resulting common shares are
included in the denominator for the entire period being presented. Effective
March 2003, all outstanding shares of convertible preferred stock were converted
into Common Stock.
5. SEGMENT INFORMATION
The Company's business is divided into three operating segments: Toy
Merchandising and Distribution, Publishing and Licensing.
Toy Segment
The toy segment designs, develops, sources, markets and distributes a
limited line of toys to the worldwide marketplace. The Company's toy products
are based upon movies and television shows featuring Spider-Man and produced by
Sony Pictures, and upon the movie trilogy Lord of the Rings (New Line Cinema).
The Spectra Star division (which ceased manufacturing operations in March 2003
and was closed in July of 2003) designed, produced and sold kites in both mass
market stores and specialty hobby shops. Spectra Star's sales amounted to
approximately $0.9 million and $7.8 million for the three month periods ended
March 31, 2004 and 2003, respectively.
7
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
Publishing Segment
The publishing segment creates and publishes comic books and trade
paperbacks principally in North America. Marvel has been publishing comic books
since 1939 and has developed a roster of more than 4,700 Marvel Characters. The
Company's titles feature classic Marvel Super Heroes such as: Spider-Man, X-Men,
the Incredible Hulk, Daredevil and newly developed Marvel Characters and
characters created by others and licensed to the Company.
Licensing Segment
The licensing segment is responsible for the licensing of Marvel Characters
for use in a wide variety of products, including toys, electronic games,
apparel, accessories, footwear, collectibles and novelties in a variety of
media, including feature films, television programs and destination based
entertainment (e.g., theme parks), and for promotional use.
Set forth below is certain operating information for the segments of the
Company.
Three month period ended March 31, 2004
Licensing Publishing Toys Corporate Total
(in thousands)
Net sales $50,103 $19,644 $52,579 $ -- $122,326
Gross profit 50,103 10,714 20,986 -- 81,803
Operating income (loss) 38,484* 7,310 15,623 (4,116) 57,301
Three month period ended March 31, 2003
Licensing Publishing Toys Corporate Total
(in thousands)
Net sales $49,902 $15,212 $22,263 $ -- $87,377
Gross profit 49,902 8,385 8,806 -- 67,093
Operating income (loss) 48,724* 5,042 5,937 (4,988) 54,715
(*) Includes equity in net income of joint venture of $8,117 and $4,824 for the
three month periods ended March 31, 2004 and 2003, respectively.
8
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
6. BENEFIT PLANS
In connection with the 1999 sale of a subsidiary, the company retained
certain liabilities related to a defined benefit pension plan for certain of
such subsidiary's employees. In prior years, this plan was amended to freeze the
accumulation of benefits and to prohibit new participants. Assumptions include:
a discount rate of 6.25% for 2004 expense, 6.25% for the obligation and an
expected rate of return of 8.0%.
Three Months Ended
March 31,
2004 2003
---- ----
(in thousands)
Total cost for plan period
Service cost...................................... $ -- $ --
Interest cost..................................... 294 300
Expected return on plan assets.................... ( 278) ( 272)
Amortization of:
Unrecognized Net Transition Obligation (Asset) -- 23
Unrecognized Prior Service Cost............. ( 13) ( 13)
Unrecognized Net (Gain)/Loss................ 30 --
----------- -----------
Net periodic pension cost............................ $ 33 $ 38
=========== ===========
7. INCOME TAXES
The Company's effective tax rate for the three months ended March 31, 2004
(41.4%) was higher than the Federal statutory rate due primarily to state and
local taxes and foreign taxes. At March 31, 2004, the Company had completely
utilized its Federal net operating loss carryforwards. The Company retains
various state and local net operating loss carryforwards of approximately $310
million, which will expire in various jurisdictions in years 2005 through 2024.
As of March 31, 2004, there is a valuation allowance of approximately $7.0
million against certain state and local net operating losses, as there is no
assurance that such assets will be realized in the future.
The Company's effective tax rate for the three months ended March 31, 2003
was lower than the Federal statutory rate due primarily to the expected benefit
from the utilization of net operating loss carryforwards for which benefit was
not previously taken.
8. JOINT VENTURE
For the three month periods ended March 31, 2004 and 2003, the Company
recognized $8.1 million and $4.8 million in income, respectively, in connection
with its share in a jointly owned limited partnership with Sony whose purpose is
to pursue licensing opportunities for motion picture and television related
merchandise relating to Spider-Man movie characters. The Company accounts for
the activity of this joint venture under the equity method.
9
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
9. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is a party to certain legal actions described below. In
addition, the Company is involved in various other legal proceedings and claims
incident to the normal conduct of its business. Although it is impossible to
predict the outcome of any legal proceeding and there can be no assurances, the
Company believes that its legal proceedings and claims (including those
described below), individually and in the aggregate, are not likely to have a
material adverse effect on its financial condition, results of operations or
cash flows.
Brian Hibbs, d/b/a Comix Experience v. Marvel. On May 6, 2002, plaintiff
commenced an action on behalf of himself and a purported class consisting of
specialty store retailers and resellers of Marvel comic books against the
Company and Marvel Entertainment Group, Inc. (a wholly owned subsidiary of the
Company) (the "Marvel Defendants") in New York State Supreme Court, County of
New York, alleging that the Marvel Defendants breached their own Terms of Sale
Agreement in connection with the sale of comic books to members of the purported
class, breached their obligation of good faith and fair dealing(s), fraudulently
induced plaintiff and other members of the purported class to buy comics and
unjustly enriched themselves. The relief sought in the complaint consists of
certification of the purported class and the designation of plaintiff as its
representative, compensatory damages of $8 million on each cause of action and
punitive damages in an amount to be determined at trial. The parties have
reached a proposed settlement in which the retailers and resellers would receive
a credit to their account with Marvel's exclusive distributor, depending on
their prior purchases of certain comic book issues. The parties have tendered
that settlement to the Court for approval. It is not known when the Court will
act on this matter or how long it will take for final approval of the
settlement. In the event the matter does not settle, Marvel intends to defend
vigorously against the claims made in this action on their merits.
Stan Lee v. Marvel. On November 12, 2002, Stan Lee commenced an action in
the United States District Court for the Southern District of New York, alleging
claims for breach of his November 1, 1998 employment agreement. Mr. Lee claims
the right to a 10% profit participation in connection with the Spider-Man movie
and other film and television productions that utilize Marvel characters.
Pursuant to the terms of the Employment Agreement, the Company is currently
paying Mr. Lee a salary of $1.0 million per year and believes that Mr. Lee's
claim is without merit. Marvel has answered the complaint and denied all of its
material allegations. The action is currently in the discovery phase and no
trial date has been set.
Marvel Characters, Inc. v. Sony Pictures Entertainment Inc. et al. On
February 25, 2003, Marvel Characters, Inc. ("MCI"), a wholly owned subsidiary of
Marvel Enterprises, Inc., filed suit against Sony Pictures Entertainment Inc.
("SPE") and related entities, in California Superior Court for Los Angeles
County, alleging, among other things, that the 1999 license agreement for
Spider-Man between MCI and SPE should be dissolved based on SPE's fraudulent
representations to MCI during the negotiation of the license agreement. As the
Company has previously announced, the suit is not an attempt to stop production
of the Spider-Man movie sequel or to change or upset any of the merchandising
deals that are in place for the sequel. On April 21, 2003, in response to
Marvel's complaint, SPE filed a cross-complaint in which SPE alleges, among
other things, that MCI has breached the licensing agreement with respect to the
licensing of Spider-Man merchandise unrelated to Spider-Man: The Movie to SPE's
financial detriment. Marvel believes that SPE's claims are without merit and
intends to defend vigorously against those claims. The action is currently in
the discovery phase and no trial date has been set.
10
MARVEL ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
Tribune Entertainment Company v. Marvel Enterprises, Inc. On October 30,
2003, Tribune Entertainment Company ("Tribune") filed a complaint against the
Company in New York State Supreme Court, New York County. The complaint alleges
three causes of action: fraud, negligent misrepresentation, and breach of
warranty, all in connection with the license from the Company under which
Tribune produced the Mutant X television series (the "Tribune License"). Prior
to release of the Mutant X television series in 2001, both the Company and
Tribune were sued by Twentieth Century Fox Film Corporation ("Fox"), the
licensee of the X-Men properties for motion pictures, among other rights. That
suit, which alleged breach of the 1993 X-Men movie license, unfair competition,
copyright infringement and tortious interference with contract, all arising from
the Tribune License, was settled between the Company and Fox in February 2003.
According to the action filed by Tribune on October 30, 2003, Tribune settled
with Fox on October 3, 2003. Tribune's October 30, 2003 complaint against the
Company alleges that the Company misrepresented the rights it was granting to
Tribune in the Tribune License, and that the Company breached its warranty in
the Tribune License that the Mutant X property did not conflict with the rights
of any third party. On December 11, 2003, the Company filed its answer, denying
all material allegations of Tribune's complaint and asserting two counterclaims.
First, the Company asserted a claim for breach of contract, alleging that
Tribune has failed to pay the Company any monies under a provision of the
Tribune License that grants the Company a portion of Tribune's receipts from the
Mutant X series, as defined in the Tribune License. Second, the Company alleged
that the 2001 Fox litigation was due to Tribune's actions and therefore the
Company is owed indemnification for its costs and expenses incurred in its
defense of that litigation. The current action is in the discovery phase and no
trial date has been set.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURTIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed herein
concerning the Company's business and operations could cause actual results to
differ materially from those contained in forward-looking statements made in
this Form 10-Q Quarterly Report. When used in this Form 10-Q, the words
"intend", "estimate", "believe", "expect", and similar expressions are intended
to identify forward-looking statements. In addition, the following factors,
among others, could cause the Company's financial performance to differ
materially from that expressed in any forward-looking statements made by the
Company: (i) a decrease in the level of media exposure or popularity of the
Company's characters, (ii) financial difficulties of the Company's major
licensees, (iii) delays and cancellations of movies and television productions
based on the Company's characters, (iv) poor performance of major movies based
on the Company's characters, (v) toy-production delays or shortfalls, continued
concentration of toy retailers, and toy inventory risk and (vi) significant
appreciation of the Chinese currency against other currencies and the imposition
of quotas or tariffs on products manufactured in China. These forward-looking
statements speak only as of the date of this report. The Company does not intend
to update or revise any forward-looking statements to reflect events or
circumstances after the date of this report, including changes in business
strategy or planned capital expenditures, or to reflect the occurrence of
unanticipated events.
Management Overview of Business Trends
The Company principally operates in three distinct operating segments:
licensing, publishing and toys. The Company's strategy is to increase exposure
of the Marvel characters through its media and promotional licensing activities,
which it believes will create revenue opportunities for the Company through
sales of toys and other licensed merchandise. The Company uses comic book
publishing to support consumer awareness of the Marvel characters and to develop
new characters and storylines.
A key driver of operating results is the successful release of major
entertainment programming, such as movies, published materials and television
shows, based on the Company's characters, which fuels demand for all products
based on the featured characters. In 2003, the Company had three major
theatrical releases that fueled growth in its businesses: Daredevil, The Hulk
and X-Men II. These releases resulted in increased awareness of these
characters, which subsequently drove sales of Marvel-branded licensed products,
including toys and published materials based on these characters. The Company's
results are partially dependent on the successful release of theatrical films
and acceptance of products developed for the characters appearing in the films.
Marvel is also involved in the creative direction of all entertainment projects
based on its characters.
Licensing
Marvel's licensing group is responsible for the merchandising, licensing
and promotions for Marvel's characters worldwide. The licensing group has
expanded its overseas businesses through recently established offices located in
London and Tokyo. The licensing group is pursuing a strategy of concentrating
its licensee relationships in a smaller number of high-quality licensees, and
negotiating higher guaranteed royalty amounts from each licensee. The licensing
group is also focusing on entering into licenses in new product categories. The
Company typically enters into multi-year merchandise license agreements that
specify guaranteed minimum royalty payments and include a significant
down-payment upon signing. The Company recognizes license revenue when it
satisfies the requirements of completing the earnings process, which is normally
upon the effective date of the agreement. If sales of the licensee's merchandise
are high enough to entitle the Company to royalties over the amount of the
minimum royalty guarantee (which excess amounts are defined as "overages"), the
Company receives the remaining balance of the guaranteed payment sooner than
provided for in the agreement's payment schedule. Overages are not recognized as
revenue, in most cases, until the minimum guaranteed payments are fully
collected. Licensing fees collected in advance of the period in which revenue
would be recognized are recorded as deferred revenue.
12
Revenue recognized under license agreements during the three month periods
ended March 31, 2004, and 2003 were generated within the following business
categories:
Licensing Division Categories
Three Months Ended
March 31,
--------------------
2004 2003
---- ----
(in thousands)
Apparel and accessories $19,697 $ 4,873
Entertainment (including studios, themed
attractions and electronic games) 5,444 27,908
Toy Royalties 8,418 7,414
Toy Service Fees 1,173 8,197
Other 15,371 1,510
------- -------
Totals $50,103 $49,902
======= =======
Merchandise license income related to Spider-Man movie characters, other
than for toys, are recorded through the Company's investment in the joint
venture with Sony. Accordingly, the Company's share of such license income is
excluded from the above table of License revenue.
Publishing
Marvel's publishing group is in the process of expanding its advertising
and promotions business with an increased emphasis on custom comics and
in-school marketing. The publishing business will also continue its long-term
focus on expanding distribution to new channels, like the mass market, and
expanding its product line to target new demographics, although the Company does
not expect these initiatives to have a significant impact on 2004 revenue.
Growth in 2004 is expected to come largely from expansion of the core product
lines of comics and trade paperbacks, and increased sales due to the anticipated
effects of future media events.
Toys
2004 business outlook for toys is closely tied to the scheduled release on
June 30, 2004 of the movie, Spider-Man 2. Following up on the huge box office
and merchandising success of the first Spider-Man movie released in May 2002,
Spider-Man 2 is one of the Toy Industry's most highly anticipated events of
2004, and retailers have developed strategies to fully embrace this property.
However, no one can guarantee the box office success of a movie release, and
sequels are challenged to outperform the original.
Revenues from Sales of the Company's Toys vs. from Licensed Toys
The only toys produced by or for the account of the Company are (i) toys
based on Spider-Man movies and television shows produced by Sony Pictures and
(ii) toys based on the Lord of the Rings movie trilogy. Sales of toys produced
by or for the account of the Company are recorded in the Company's toy segment.
The Company has licensed the right to make all other toys based on Marvel
characters to licensees. Royalties received by the Company from the sales of
licensed toys are recorded in the Company's licensing segment, as royalties.
In 2003, there was no release of a Spider-Man movie, and there were several
movies released that featured Marvel characters (notably The Hulk) on which
licensed toys are based. As a result, the Company's toy segment revenue for 2003
was somewhat lower, and the Company's licensing segment revenue for 2003 was
somewhat higher, than if there had been a Spider-Man movie release.
13
On June 30, 2004, the second Spider-Man movie is scheduled to be released,
and is expected to drive toy sales more than any other Marvel-character movie in
2004. The Company therefore expects that in 2004 (as in 2002), toy segment
revenues will be somewhat higher and licensing segment revenues will be somewhat
lower than if 2004's main Marvel-character movie were based on any other Marvel
character.
Results of Operations
Three month period ended March 31, 2004 compared with the three month period
ended March 31, 2003
Net Sales
The Company's net sales of $122.3 million in the first quarter of 2004 were up
significantly versus the year-ago period, which was approximately $87.4 million.
Sales from the Licensing segment remained relatively flat versus the previous
year, and licenses related to the Spider-Man 2 movie are recorded in the Equity
in Joint Venture line, not licensing sales. Overages, which are license revenues
in excess of minimum guarantees, were approximately $7.9 million in the first
quarter of 2004 versus $7.5 million in the first quarter of 2003. The major
categories of the improvements in Licensing revenue included apparel and
domestics, which offset the loss in revenue from video game sales.
Three Months
Ended March 31,
(in thousands)
2004 2003 Change
---- ---- ------
Licensing $50.1 $49.9 0%
Publishing 19.6 15.2 29%
Toys 52.6 22.3 136%
------ ----- ----
Total $122.3 $87.4 40%
====== ===== ====
Sales from the Publishing division increased approximately $4.4 million to
approximately $19.6 million in the first quarter of 2004, from $15.2 million in
the first quarter of 2003, fueled by increases in sales of comics and
advertising income. As anticipated, sales from the Toy segment increased
approximately $30.3 million to approximately $52.6 million in the first quarter
of 2004, primarily due to an increase in the sales of action figures and
accessories based on characters associated with Spider-Man 2.
Gross Profit
Gross profit increased approximately $14.7 million to approximately $81.8
million in the first quarter of 2004 primarily due to growth in the publishing
and toy divisions. The Company's gross profit as a percentage of sales decreased
to 67% in the first quarter of 2004, as compared to 77% in the first quarter of
2003, due to an increase in toy revenue as a percentage of total revenue. Gross
margins are lower in the case of toy revenue than for Publishing or Licensing
revenue.
Three Months Ended March 31,
(in thousands)
2004 Margin 2003 Margin
---- ------ ---- ------
Licensing $ 50.1 100% $ 49.9 100%
Publishing 10.7 55% 8.4 55%
Toys 21.0 40% 8.8 39%
----- ----- ------ -----
Total $ 81.8 67% $ 67.1 77%
===== ===== ====== =====
SG&A
Selling, general and administrative (SG&A) expenses increased approximately
$15.7 million to approximately $32.1 million in the first quarter of 2004. As a
percentage of sales, SG&A increased to 26% of net sales in the first quarter of
2004 from approximately 19% of net sales in the first quarter of 2003. The
licensing division exhibited the highest year-over-year growth in absolute
dollars and as a percentage of licensing sales with an increase of $13.7
million, primarily due to higher royalty provisions for the share of merchandise
license royalties owed to the Company's studio partners. General Corporate
expenses decreased approximately $0.9 million due to the closure of certain
legal matters.
14
Three Months Ended March 31,
(in thousands)
2004 2003
---- ----
Licensing $ 19.7 39% $ 6.0 12%
Publishing 3.4 17% 3.4 22%
Toys 4.9 9% 2.0 9%
Corporate Overhead 4.1 N/A 5.0 N/A
----- ---- ----- ----
Total $ 32.1 26% $ 16.4 19%
===== ==== ===== ====
For the three months ended March 31, 2004 and 2003, the Company recognized
income of $8.1 million and $4.8 million, respectively, in connection with its
share in a jointly owned limited partnership with Sony. The purpose of this
joint venture is to pursue licensing opportunities, other than toys, relating to
characters based upon movies and television shows featuring Spider-Man and
produced by Sony. The Company accounts for the activity of this joint venture
under the equity method.
Operating Income
Operating income increased approximately $2.6 million to approximately
$57.3 million in the first quarter of 2004. As a percentage of sales, operating
margins decreased to 47% of net sales in the first quarter of 2004 from
approximately 63% of net sales in the first quarter of 2003. While operating
margins increased versus the prior year in the publishing and toy divisions,
margins in the licensing division decreased due to higher percentage of net
sales that required a share with the studio partners in the first quarter of
2004 than in the comparable period in 2003.
Three Months Ended March 31,
(in thousands)
2004 Margin 2003 Margin
---- ------ ---- ------
Licensing $ 38.5 77% $ 48.7 98%
Publishing 7.3 37% 5.1 33%
Toys 15.6 30% 5.9 26%
Corporate Overhead (4.1) N/A (5.0) N/A
----- --- ----- ----
Total $ 57.3 47% $ 54.7 63%
===== === ===== ====
Net interest expense decreased approximately $0.4 million to approximately
$3.9 million in the first quarter of 2004, as compared to approximately $4.3
million in the first quarter of 2003. This decrease was the result of higher
interest income generated by the rising cash balance.
The Company's effective tax rate for the three months ended March 31, 2004
(41.4%) was higher than the Federal statutory rate due primarily to state and
local taxes and foreign taxes. At March 31, 2004, the Company has completely
utilized its Federal net operating loss carryforwards. The Company retains
various state and local net operating loss carryforwards of approximately $310
million, which will expire in various jurisdictions in years 2005 through 2024.
As of March 31, 2004, there is a valuation allowance of approximately $7.0
million against certain state and local net operating losses, as there is no
assurance that such assets will be realized in the future.
The Company is currently under examination by the Internal Revenue Service
for the 1995 through 1998 years. The Company has reached a tentative agreement
on all matters with the IRS, which will be reviewed in accordance with
procedures of the Congressional Joint Committee on Taxation. The effects of
these agreed adjustments are not material to the Company's financial position,
results of operations or cash flows.
15
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash and certificates of
deposit on hand and cash flows from operations. The Company anticipates that its
primary needs for liquidity will be to: (i) conduct its business; (ii) early
retire its outstanding Senior Notes; (iii) make capital expenditures; and (iv)
pay administration expense claims.
Net cash provided by operating activities was approximately $44.5 million
for the three month period ended March 31, 2004 as compared to net cash provided
by operating activities of $29.5 million for the three month period ended March
31, 2003.
At March 31, 2004, the Company had working capital of $243.6 million.
Under the terms of the Company's 8% Preferred Stock, the Company was able
to force the conversion of all outstanding shares of 8% Preferred Stock
following the completion of 10 consecutive trading days (ending March 18, 2003)
on which the closing price of the Company's common stock exceeded $7.70 per
share. As a result, and as the Company announced on March 19, 2003, the Company
forced the conversion of all of the outstanding 8% Preferred Stock. The
conversion extinguished the Company's obligation to redeem any remaining shares
of 8% Preferred Stock for $10.00 per share in cash in 2011. The conversion was
effective on March 30, 2003.
The Company will be required to make a cash payment, at such time as the
amount thereof is determined, to parties who were unsecured creditors of Marvel
Entertainment Group, Inc., prior to that company's emergence from Chapter 11
proceedings on October 1, 1998. The Company initially deposited $8 million into
a trust account to satisfy the maximum amount of such payment. The balance in
the trust account as of March 31, 2004 is approximately $2.9 million.
The Company has outstanding Senior Notes due June 15, 2009 which bear
interest at 12% per annum payable semi-annually on June 15th and December 15th.
The Senior Notes may be redeemed beginning June 15, 2004 for a redemption price
of 106% of the principal amount, plus accrued interest. Principal and interest
on the Senior Notes are guaranteed on a senior basis jointly and severally by
each of the Company's domestic subsidiaries. Management intends to redeem all of
such notes on June 15, 2004 with available cash resources, which will result in
a non-recurring charge associated with the accelerated write-off of previously
unamortized deferred debt costs, of approximately $3.3 million during the
quarter ending June 30, 2004, plus the charge associated with the 6% premium
necessitated by the terms of the redemption of approximately $9.0 million.
The Company maintains a credit facility with HSBC Bank USA ("HSBC Credit
Facility") to provide for a $15.0 million revolving credit facility and a $15.0
million letter of credit facility. As of March 31, 2004, $0.1 million of letters
of credit were outstanding and there were no borrowings under the HSBC revolver.
The HSBC Credit Facility contains customary event of default provisions and
covenants restricting the Company's operations and activities, including the
amount of capital expenditures, and also contains certain covenants relating to
the maintenance of minimum tangible net worth and minimum free cash flow. The
HSBC Credit Facility is secured by (a) a first priority perfected lien in all of
the assets of the Company; and (b) a first priority perfected lien in all of the
capital stock of each of the Company's domestic subsidiaries. Borrowings would
bear interest at prime or LIBOR-plus-two percent per annum.
In connection with the HSBC Credit Facility, the Company and Isaac
Perlmutter entered into a Security Agreement. Under the terms of the Guaranty,
Mr. Perlmutter has guaranteed the payment of the Company's obligations under the
HSBC Credit Facility in an amount equal to 25% of all principal obligations
relating to the HSBC Credit Facility plus an amount, not to exceed $10.0
million, equal to the difference between the amount required to be in the cash
reserve account maintained by the Company and the actual amount on deposit in
such cash reserve account at the end of each fiscal quarter; provided that the
aggregate amount guaranteed by Mr. Perlmutter will not exceed $30.0 million.
Under the terms of the Security Agreement, Mr. Perlmutter has provided the
creditors under the HSBC Credit Facility with a security interest in the
following types of property, whether currently owned or subsequently acquired by
him: all promissory notes, certificates of deposit, deposit accounts, checks and
other instruments and all insurance or similar payments or any indemnity payable
by reason of loss or damage to or otherwise with respect to any such property.
16
The Company believes that cash on hand, cash flow from operations, and other
sources of liquidity will be sufficient for the Company to conduct its business,
retire its existing debt, make capital expenditures and pay administration
expense claims.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has operations in Hong Kong, the UK and Japan. In the normal
course of business, these operations are exposed to fluctuations in currency
values. Management believes that the impact of currency fluctuations do not
represent a significant risk in the context of the Company's current
international operations. The Company does not generally enter into derivative
financial instruments in the normal course of business, nor are such instruments
used for speculative purposes.
Market risks related to the Company's operations result primarily from
changes in interest rates. At March 31, 2004, the Company's Senior Notes bore
interest at a fixed rate. A 10% increase or decrease in the interest rate on the
Company's credit facility is not expected to have a significant future impact on
the Company's financial position or results of operations.
Additional information relating to the Company's outstanding financial
instruments is included in Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.
ITEM 4. CONTROLS AND PROCEDURES
The Company's management, with the participation of its principal executive
officer and principal financial officer, has evaluated the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based on this evaluation,
the Company's principal executive officer and principal financial officer
concluded that these disclosure controls and procedures are effective. The
Company has not identified any changes in its internal controls over financial
reporting during the quarter ended March 31, 2004 that have materially affected,
or are reasonably likely to materially affect, its internal controls over
financial reporting.
17
PART II. OTHER INFORMATION.
--------------------------------
18
Item 1. Legal Proceedings
The Company is a party to certain legal actions described below. In
addition, the Company is involved in various other legal proceedings and claims
incident to the normal conduct of its business. Although it is impossible to
predict the outcome of any legal proceeding and there can be no assurances, the
Company believes that its legal proceedings and claims (including those
described below), individually and in the aggregate, are not likely to have a
material adverse effect on its financial condition, results of operations or
cash flows.
Brian Hibbs, d/b/a Comix Experience v. Marvel. On May 6, 2002, plaintiff
commenced an action on behalf of himself and a purported class consisting of
specialty store retailers and resellers of Marvel comic books against the
Company and Marvel Entertainment Group, Inc. (a wholly owned subsidiary of the
Company) (the "Marvel Defendants") in New York State Supreme Court, County of
New York, alleging that the Marvel Defendants breached their own Terms of Sale
Agreement in connection with the sale of comic books to members of the purported
class, breached their obligation of good faith and fair dealing(s), fraudulently
induced plaintiff and other members of the purported class to buy comics and
unjustly enriched themselves. The relief sought in the complaint consists of
certification of the purported class and the designation of plaintiff as its
representative, compensatory damages of $8 million on each cause of action and
punitive damages in an amount to be determined at trial. The parties have
reached a proposed settlement in which the retailers and resellers would receive
a credit to their account with Marvel's exclusive distributor, depending on
their prior purchases of certain comic book issues. The parties have tendered
that settlement to the Court for approval. It is not known when the Court will
act on this matter or how long it will take for final approval of the
settlement. In the event the matter does not settle, Marvel intends to defend
vigorously against the claims made in this action on their merits.
Stan Lee v. Marvel. On November 12, 2002, Stan Lee commenced an action in
the United States District Court for the Southern District of New York, alleging
claims for breach of his November 1, 1998 employment agreement. Mr. Lee claims
the right to a 10% profit participation in connection with the Spider-Man movie
and other film and television productions that utilize Marvel characters.
Pursuant to the terms of the Employment Agreement, the Company is currently
paying Mr. Lee a salary of $1.0 million per year and believes that Mr. Lee's
claim is without merit. Marvel has answered the complaint and denied all of its
material allegations. The action is currently in the discovery phase and no
trial date has been set.
Marvel Characters, Inc. v. Sony Pictures Entertainment Inc. et al. On
February 25, 2003, Marvel Characters, Inc. ("MCI"), a wholly owned subsidiary of
Marvel Enterprises, Inc., filed suit against Sony Pictures Entertainment Inc.
("SPE") and related entities, in California Superior Court for Los Angeles
County, alleging, among other things, that the 1999 license agreement for
Spider-Man between MCI and SPE should be dissolved based on SPE's fraudulent
representations to MCI during the negotiation of the license agreement. As the
Company has previously announced, the suit is not an attempt to stop production
of the Spider-Man movie sequel or to change or upset any of the merchandising
deals that are in place for the sequel. On April 21, 2003, in response to
Marvel's complaint, SPE filed a cross-complaint in which SPE alleges, among
other things, that MCI has breached the licensing agreement with respect to the
licensing of Spider-Man merchandise unrelated to Spider-Man: The Movie to SPE's
financial detriment. Marvel believes that SPE's claims are without merit and
intends to defend vigorously against those claims. The action is currently in
the discovery phase and no trial date has been set.
Tribune Entertainment Company v. Marvel Enterprises, Inc. On October 30,
2003, Tribune Entertainment Company ("Tribune") filed a complaint against the
Company in New York State Supreme Court, New York County. The complaint alleges
three causes of action: fraud, negligent misrepresentation, and breach of
warranty, all in connection with the license from the Company under which
Tribune produced the Mutant X television series (the "Tribune License"). Prior
to release of the Mutant X television series in 2001, both the Company and
Tribune were sued by Twentieth Century Fox Film Corporation ("Fox"), the
licensee of the X-Men properties for motion pictures, among other rights. That
suit, which alleged breach of the 1993 X-Men movie license, unfair competition,
copyright infringement and tortious interference with contract, all arising from
the Tribune License, was settled between the Company and Fox in February 2003.
According to the action filed by Tribune on October 30, 2003, Tribune settled
with Fox on October 3, 2003. Tribune's October 30, 2003 complaint against the
Company alleges that the Company misrepresented the rights it was granting to
Tribune in the Tribune License, and that the Company breached its warranty in
the Tribune License that the Mutant X property did not conflict with the rights
of any third party. On December 11, 2003, the Company filed its answer, denying
19
all material allegations of Tribune's complaint and asserting two counterclaims.
First, the Company asserted a claim for breach of contract, alleging that
Tribune has failed to pay the Company any monies under a provision of the
Tribune License that grants the Company a portion of Tribune's receipts from the
Mutant X series, as defined in the Tribune License. Second, the Company alleged
that the 2001 Fox litigation was due to Tribune's actions and therefore the
Company is owed indemnification for its costs and expenses incurred in its
defense of that litigation. The current action is in the discovery phase and no
trial date has been set.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
31.1 Certification by Chief Executive Officer pursuant to Rule
13a-14(a) under the Exchange Act.
31.2 Certification by Chief Financial Officer pursuant to Rule
13a-14(a) under the Exchange Act.
32 Certification by Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) under the Exchange Act.
b) Reports on Form 8-K
The Registrant filed the following report on Form 8-K during the
quarter ended March 31, 2004:
1. Current Report on Form 8-K filed March 9, 2004, reporting Items 7
and 12.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARVEL ENTERPRISES, INC.
(Registrant)
Dated: May 5, 2004 By: /s/ Allen S. Lipson
---------------------------------
Allen S. Lipson
President and Chief Executive Officer
Dated: May 5, 2004 By: /s/ Kenneth P. West
----------------------------------
Kenneth P. West
Chief Financial Officer
21