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Article by DailyStocks_admin    (01-12-09 03:50 AM)

The Daily Magic Formula Stock for 01/11/2009 is Marvel Entertainment Inc. According to the Magic Formula Investing Web Site, the ebit yield is 11% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.

BUSINESS OVERVIEW

Unless the context otherwise requires, the term “we,” “us,” “our,” “Marvel” or “the Company” each refer to Marvel Entertainment, Inc., a Delaware corporation, and its subsidiaries. Some of the characters and properties referred to in this report are subject to copyright and/or trademark protection.


General

Marvel Entertainment, Inc. and its subsidiaries constitute one of the world’s most prominent character-based entertainment companies, with a proprietary library of over 5,000 characters. Our library of characters is one of the oldest and most recognizable collections of characters in the entertainment industry, and includes Spider-Man, Iron Man, The Incredible Hulk, Captain America, Thor, Ghost Rider, The Fantastic Four, X-Men, Blade, Daredevil, The Punisher, Namor the Submariner, Nick Fury, The Avengers, Silver Surfer and Ant-Man.

Our growth strategy has been to increase exposure of our characters by licensing them to third parties for development as movies and television shows. The increased exposure can then create revenue opportunities for us through increased sales of toys and other licensed merchandise. Our self-produced movies, the first two of which ( Iron Man and The Incredible Hulk ) are scheduled for release in 2008, represent an expansion of that strategy that also increases our level of control in developing and launching character brands. In addition, our self produced movies will offer us an opportunity to participate in the films’ financial performance to a greater extent than we could as a licensor.

We operate in four integrated and complementary operating segments: Licensing, Publishing, Toys and Film Production. The expansion of our studio operations to include feature films that we produce ourselves began in late 2005 with our entering into a $525 million film facility (the “Film Facility”) to fund the production of our films. This expansion resulted in the creation of a new segment, the Film Production segment, during 2006. Previously, Marvel Studios’ operations related solely to the licensing of our characters to third-party motion picture and television producers. Those licensing activities were included, and are still included, in the Licensing segment. The operations of developing and producing our own theatrical releases are reported in our Film Production segment.

We are party to a joint venture with Sony Pictures Entertainment Inc., called Spider-Man Merchandising L.P. (the “Joint Venture”), for the purpose of pursuing licensing opportunities relating to characters based upon movies or television shows featuring Spider-Man and produced by Sony. The Joint Venture is consolidated in our accompanying financial statements as a result of our having control of all significant decisions relating to the ordinary course of business of the Joint Venture and our receiving the majority of the financial interest of the Joint Venture. The operations of the Joint Venture are included in our Licensing segment.

Licensing

Our Licensing segment licenses our characters for use in a wide variety of products and media, the most significant of which are described below.

Consumer Products

We license our characters for use in a wide variety of consumer products, including toys, apparel, interactive games, electronics, homewares, stationery, gifts and novelties, footwear, food and beverages and collectibles. Revenues from these activities are classified in our Licensing segment, other than revenues from Hasbro, Inc., which are classified in our Toy segment.

Studio Licensing

Feature Films. We have licensed some of our characters to major motion picture studios for use in motion pictures. For example, we currently have a license with Sony to produce motion pictures featuring the Spider-Man family of characters. We also have outstanding licenses with studios for a number of our other characters, including The Fantastic Four, X-Men, Daredevil/Elektra, Ghost Rider, Namor the Submariner and The Punisher. Under these licenses, we retain control over merchandising rights and retain more than 50% of merchandising-based royalty revenue.

Television Programs. We license our characters for use in television programs. Several live-action and animated television shows based on our characters are in various stages of development including live-action television programming based on Moon Knight and animated programming based on Iron Man, X-Men and the Incredible Hulk.

Made-for-DVD Animated Feature Films . We have licensed some of our characters to an entity controlled by Lions Gate Entertainment Corp. to produce up to ten feature-length animated films for distribution directly to the home video market. Releases, to date, have included Ultimate Avengers, Ultimate Avengers 2 , The Invincible Iron Man and Doctor Strange .

Destination-Based Entertainment

We license our characters for use at theme parks, shopping malls and special events. For example, we have licensed some of our characters for use at Marvel Super Hero Island, part of the Islands of Adventure theme park at Universal Orlando in Orlando, Florida, and for use in a Spider-Man attraction at the Universal Studios theme park in Osaka, Japan. We have also licensed our characters for the development of a major theme park in Dubai.

Promotions

We license our characters for use in short-term promotions of other companies’ products and services. Recent examples are a license to Proctor and Gamble for the appearance of Spider-Man on Pampers-brand training pants and swim pants and a license to Philips Consumer Electronics BV for the appearance of The Incredible Hulk in a television commercial and in-store advertisements for Philips television sets.

Publications

Our Licensing segment licenses our characters to publishers located outside the United States for use in foreign-language comic books and trade paperbacks and to publishers worldwide for novelizations and a range of coloring and activity books.

Publishing

The Publishing segment creates and publishes comic books and trade paperbacks principally in North America. Trade paperbacks are compilations of previously printed periodicals collected to tell a “complete” story. Marvel has been publishing comic books since 1939 and has developed a roster of more than 5,000 Marvel characters. Our titles include Spider-Man, X-Men, Fantastic Four, Iron Man, The Incredible Hulk, Captain America and Ghost Rider.

The Publishing segment's approach to our characters is to present a contemporary drama suggestive of real people with real problems. This enables the characters to evolve, remain fresh, and, therefore, attract new and retain old readers in each succeeding generation. Our characters exist in the “Marvel Universe,” a fictitious universe that provides a unifying historical and contextual background for the characters and storylines. The “Marvel Universe” concept permits us to use the popularity of our characters to more fully develop existing but lesser-known characters. In this manner, formerly lesser-known characters such as Ghost Rider, Black Panther and Wolverine have been developed and are now popular characters in their own right and are featured in their own comic books. The “Marvel Universe” concept also allows us to use our more popular characters to make “guest appearances” in the comic books of lesser-known characters to attempt to increase the circulation of a particular issue or issues.

Customers, Marketing and Distribution

Our comic book and trade paperback publications are distributed through three channels: (i) to comic book specialty stores on a non-returnable basis (the “direct market”), (ii) to traditional retail outlets, including bookstores and newsstands, on a returnable basis (the “mass market”) and (iii) on a subscription sales basis.

In 2007, the Publishing segment continued to be the comic industry leader, with 40% of the dollar share and 45% of the unit share of the direct market channel. In 2007, approximately 68% of the Publishing segment's net sales were derived from sales to the direct market. We distribute our publications to the direct market through an unaffiliated entity (Diamond Comic Distributors, Inc.). We print periodicals to order for the direct market, thus minimizing the cost of printing and marketing excess inventory.

For the years ended December 31, 2007, 2006 and 2005, approximately 17%, 15% and 13%, respectively, of the Publishing segment’s net sales were derived from sales to the mass market.

In addition to revenues from the sale of comic books and trade paperbacks to the direct market and the mass market, the Publishing segment derives revenues from sales of advertising and subscriptions and from other publishing activities, such as custom comics. For the years ended December 31, 2007, 2006 and 2005, approximately 15%, 15% and 17%, respectively, of the Publishing segment's net sales were derived from these sources. In most of our comic publications, three cover pages and ten interior pages are allocated for advertising. We permit advertisers to advertise in a broad range of our comic book publications or to advertise in specific groups of titles whose readership’s age is suited to the advertiser.

Our Marvel Online business has had a small but growing impact on Publishing segment revenues, mostly through online advertising and comic subscription sales. Our website, www.marvel.com , has also proven to be an effective means to market various Marvel products and events. In 2007, we launched a digital comic subscription service, making over 2,700 previously published Marvel comic books available for viewing online in a proprietary viewer. We also completed a major re-design of our website and added more content including videos, news and character biographies. In early 2008, we launched a separate website, www.marvelkids.com , featuring Marvel characters and content for children ages 6-11. We expect strong growth and diversification in Marvel Online revenues as we continue to increase our online presence.

Toys

In January 2006, we entered into a license agreement with Hasbro, Inc. under which Hasbro has the exclusive right to make action figures, plush toys and role-play toys, and the non-exclusive right to make several other types of toys, featuring our characters. The license gives Hasbro the right to sell those toys at retail from January 1, 2007 through December 31, 2011. In some cases, however, Hasbro was permitted to sell toys at retail at the end of 2006. The license is subject to extension in the event that entertainment productions featuring our characters are not released according to an agreed-upon schedule. We also entered into a services agreement with Hasbro under which we have agreed to provide brand expertise, marketing support and other services in connection with the licensed toys. In 2006, royalty and service fee income recognized from Hasbro aggregated $5.2 million. Most of the Toy segment’s 2006 sales, however, came from toys that we produced and sold ourselves.

During 2007, our Toy segment’s sales consisted primarily of royalties and service fees from Hasbro, which aggregated $70.9 million. The Toy segment also generates revenue from sales of licensed-in properties such as Curious George.

Film Production

Our Film Production segment develops, produces and distributes films that are primarily financed with our $525 million film facility and our Iron Man and Hulk facilities, all of which are described below. The first two films under production by the Film Production segment, Iron Man and The Incredible Hulk , are scheduled for release in May and June 2008, respectively.

The cast of Iron Man includes Robert Downey, Jr. as Tony Stark (a.k.a. Iron Man), Gwyneth Paltrow as Virginia “Pepper” Potts, Terrence Howard as Jim “Rhodey” Rhodes and Jeff Bridges as Obadiah Stane. All four actors have received or been nominated for Academy Awards for their past work. Jon Favreau is the director. The cast of The Incredible Hulk includes Edward Norton as Bruce Banner (a.k.a. The Incredible Hulk), Liv Tyler as Betty Ross, William Hurt as General Thaddeus “Thunderbolt” Ross and Tim Roth as Emil Blonsky (a.k.a. Abomination). The Incredible Hulk is being directed by Louis Leterrier. Three of these four actors have received or been nominated for Academy Awards for their past work.

The film facility enables us to independently finance the development and production of up to ten feature films, including films that may feature the following Marvel characters, whose theatrical film rights are pledged as collateral to secure the film facility:
-Ant-Man
-Black Panther
-Captain America
-Cloak & Dagger
-Doctor Strange
-Hawkeye
-Iron Man
-Nick Fury
-Power Pack
-Shang-Chi
-The Avengers
-The Incredible Hulk

Also included as collateral for the film facility are the theatrical film rights to many of the supporting characters that would be most closely associated with the featured characters and character families. For example, the theatrical film rights to The Incredible Hulk’s girlfriend, Betty Ross, and his nemesis, Abomination, are both pledged as collateral to the film facility.

We fund, from working capital and other sources, the incremental overhead expenses and costs of developing each film to the stage at which the conditions for an initial borrowing for the film are met under the film facility. If the film’s initial funding conditions are met, we are able to borrow under the film facility an amount equal to the incremental overhead expenses incurred by us related to that film in an amount not exceeding 2% of the budget for that film under the film facility, plus development costs. If the initial funding conditions are not met, we will be unable to borrow these amounts under the film facility. In February 2007 and June 2007, Iron Man and The Incredible Hulk , respectively, met their initial funding conditions and funding of these productions began.

While theatrical films featuring the characters listed above may be financed and produced by us only through the film facility, we retain all other rights associated with those characters. In addition, we may continue to license our other characters for movie productions by third parties, obtain financing to produce movies based on those other characters ourselves or with others or, with the consent of the film facility lenders, finance and produce films based on those other characters through the film facility.

In connection with the film facility, we formed the following wholly-owned subsidiaries: MVL Rights LLC, MVL Productions LLC, Incredible Productions LLC, Iron Works Productions LLC, MVL Iron Works Productions Canada, Inc., MVL Incredible Productions Canada, Inc. and MVL Film Finance LLC (collectively, the “Film Slate Subsidiaries”). The assets of the Film Slate Subsidiaries, other than MVL Productions LLC, are not available to satisfy debts or other obligations of any of our other subsidiaries or any other persons.

Terms of the Film Facility

Financing Available; Rate of Interest; Borrowings Outstanding

The film facility expires on September 1, 2016, or sooner if the films produced under the facility fail to meet certain defined performance measures. The film facility consists of $465 million in revolving senior bank debt and $60 million in mezzanine debt, which is subordinated to the senior bank debt. Both Standard & Poor’s, a division of the McGraw-Hill Companies, Inc., and Moody’s Investor Rating Service, Inc. have given the senior bank debt an investment grade rating. In addition, Ambac Assurance Corporation has insured repayment of the senior bank debt, raising its rating to AAA. In exchange for the repayment insurance, we pay Ambac a fee calculated as a percentage of senior bank debt. The interest rates for outstanding senior bank debt, and the fees payable on unused senior bank debt capacity, both described below, include the percentage fee owed to Ambac.

The interest rate for outstanding senior bank debt is LIBOR or the commercial paper rate, as applicable, plus 1.635% in either case. The film facility also requires us to pay a fee on any senior bank debt capacity that we are not using. This fee is 0.60%, and is applied on $465 million reduced by the amount of any outstanding senior bank debt.

If Ambac’s rating by either S&P or Moody’s falls below AAA, the interest rate for outstanding senior bank debt would increase by 1.30% and the fee payable on any unused senior bank debt capacity would increase by 0.30%. If the senior bank debt’s rating (without giving effect to Ambac’s insurance) by either S&P or Moody’s falls below investment grade, the interest rate for the outstanding senior bank debt could increase by up to an additional 0.815%. In addition, if we become more leveraged, the interest rate for outstanding senior bank debt could increase by up to an additional 0.50%.

The interest rate for the mezzanine debt is LIBOR plus 7.0%. The mezzanine debt was drawn on first and will remain outstanding for the life of the film facility.

As of December 31, 2007, MVL Film Finance LLC had $246.9 million in total outstanding borrowings through the film facility. In 2005, we incurred transaction costs of $21.3 million related to the creation of the film facility and we paid $3.2 million for an interest rate cap that effectively limits LIBOR to 6.0% when computing our interest rate for outstanding debt, up to certain varying amounts, under the film facility. Our first borrowings under the film facility were used to fund the transaction costs and the interest rate cap. Later borrowings have been used to fund the production, still in process, of Iron Man and The Incredible Hulk . Additional borrowings under the film facility are used to fund the facility’s interest costs.

Limitations on Recourse under Film Facility

The borrowings under the film facility are non-recourse to us and our affiliates, other than MVL Film Finance LLC. In other words, only MVL Film Finance LLC, and not its parent companies, will be responsible for paying back amounts borrowed under the film facility. MVL Film Finance LLC has pledged, as collateral for the borrowings, the theatrical film rights to the characters included in the film facility. While the borrowings are non-recourse to us, we have agreed to instruct our subsidiaries involved in the film facility to maintain operational covenants. If those covenants are not maintained, we may be liable for any actual damages caused by the failure, although our liability would be subject to limitations, including the exclusion of consequential damages.

Funds under the film facility will be used for the production of up to ten films featuring characters included in the film facility. Funds may be used to produce more than one film based on a single character or character family, so even if ten films are produced using the funds from the film facility, not all characters and character families included in the facility will necessarily be the subject of a film financed under the facility.

Initial Funding Conditions

For any film included in the film facility, an initial funding may be made only if certain conditions are met. The conditions include obtaining a satisfactory completion bond, production insurance and distribution for the film, and compliance with representations, warranties and covenants. The distribution requirements, described in detail below, require us to pre-sell the distribution rights to each film in Australia and New Zealand, Japan, Germany, France and Spain (the “Reserved Territories”) and to obtain an agreement with a major studio to distribute the film in all other territories. The proceeds from the Reserved Territory pre-sales will be used to fund the film in development. To obtain a completion bond, we will need to have in place the main operational pieces to producing a film, including approved production, cash flow and delivery schedules, an approved budget, an approved screenplay and the key members of the production crew, including the director and producer.

In February 2007 and June 2007, Iron Man and The Incredible Hulk , respectively, met their initial funding conditions and funding of these productions began.

Additional Initial Funding Conditions for Fifth Film and each Film Thereafter

There are additional conditions to the initial funding for the fifth film and for each film thereafter, including (i) a minimum ratio of the assets of MVL Film Finance LLC to its liabilities and (ii) a minimum percentage of the aggregate production budgets for each film covered by pre-sale of the distribution rights to the Reserved Territories, the proceeds of any government rebate, subsidy or tax incentive program and any other source of co-financing. In the event either of these conditions are not satisfied after the funding of our first four films, funding for the fifth and all remaining productions may not be funded under the film facility.

Unrestricted Proceeds of the Film Facility

In connection with each film released under the film facility, we are entitled to retain a producer fee of five percent of any gross receipts and of any amounts received in connection with the sale of the Reserved Territories or other co-financing sources. We will also retain, after the payment of miscellaneous third party agency fees and participations, all film-related merchandising revenues, such as revenues from toy sales and product licensing based on the movies. These merchandising revenues and the producer fee are neither pledged as collateral nor subject to cash restrictions under the film facility.

Restricted Proceeds of the Film Facility

MVL Film Finance LLC will receive and retain funds from revenue streams such as our share of box office receipts, DVD/VHS sales and television. Any sums remaining after payments of residuals and participations to talent, distribution fees and expenses (including marketing costs), interest expense and production costs will be placed into a blocked account maintained by MVL Film Finance LLC. Sums in that account may be used only for the production of films and repayment of indebtedness under the film facility. After the release of the third film, funds may be withdrawn from the blocked account for our general corporate purposes if we have met conditions including compliance with financial coverage tests and a minimum balance requirement. After three films, funds may be withdrawn for our general purpose only if the balance in the blocked account is at least $350 million. For each film thereafter until film nine, the balance requirement is reduced by $50 million.

Ability to Refinance or Discontinue Film Facility

The film facility allows MVL Film Finance LLC to either refinance or simply discontinue the financing at any time without penalty by prepaying all outstanding indebtedness.

Development and Distribution of the Films Financed through the Film Facility

As a film development company, MVL Productions LLC, a wholly-owned consolidated subsidiary of ours, engages in a broad range of pre-production services. Those services include developing film concepts and screenplays, preparing budgets and production schedules, obtaining production insurance and completion bonds and forming special-purpose, bankruptcy-remote subsidiaries to produce each film as a work-made-for-hire for MVL Film Finance LLC. MVL Productions LLC has also entered into studio distribution agreements with Paramount Pictures Corporation and Universal Pictures, a division of Universal City Studios, LLLP.

Distribution: Worldwide Excluding Reserved Territories

MVL Productions LLC’s studio distribution agreement with Paramount requires Paramount, at the request of MVL Productions LLC, to distribute up to ten films financed and produced under the film facility. Paramount is required to release each film during one of two prime release periods each year: the Spring/Summer and Fall/Holiday seasons. Under the studio distribution agreement, Paramount has guaranteed MVL Productions LLC wide distribution outside of the Reserved Territories with commensurate advertising and marketing efforts for each film. Included in Paramount’s distribution rights are exclusive theatrical and non-theatrical (e.g., exhibition on airplanes, schools and military installations), home video, pay television and international television distribution rights. Excluded are all distribution rights with respect to the Reserved Territories and free television distribution in the United States. As compensation for its services under the studio distribution agreement, after remitting to us 5% of the film’s gross receipts, Paramount is permitted to recoup its distribution costs and expenses (including print and advertising costs and payments of residuals and participation costs owed to talent) for each film from the gross receipts of each film and to receive its distribution fee before we receive our share of gross receipts.

Universal Studios has agreed to distribute Marvel’s film The Incredible Hulk and sequels on essentially the same terms as those on which Paramount has agreed to distribute the other films financed and produced under the film facility.

Distribution: Reserved Territories

MVL Productions LLC is required to pre-sell the distribution rights for each film in the Reserved Territories. The proceeds of these pre-sale arrangements will provide a source of funding for the direct costs of the films in addition to the film facility. Obtaining a cumulative, minimum target budget percentage from such pre-sales, the proceeds of any government rebate, subsidy or tax incentive program and any other source of co-financing is a condition to the initial funding for the fifth film and for each film thereafter.

Iron Man Facility

On February 27, 2007, we closed a $32.0 million financing with Comerica Bank (the “Iron Man Facility”) through our wholly-owned consolidated subsidiary, Iron Works Productions LLC. The proceeds of this financing may only be used to fund the production of our Iron Man feature film. Borrowings under this facility are non-recourse to us and our affiliates other than with respect to the collateral pledged to this facility, which consists of various affiliated film companies’ rights to distribute the Iron Man film in the Reserved Territories and the contracts that MVL Productions LLC has entered into with third-party distributors to distribute Iron Man in the Reserved Territories. This facility, which expires on July 25, 2008 or sooner if an event of default occurs, consists of $32.0 million in bank debt but contains a $2.5 million interest reserve that will prevent us from borrowing the full amount. The rate for borrowings under this facility is the bank’s prime rate or LIBOR (4.70% at December 31, 2007) plus 1%, at our election. The facility contains customary event-of-default provisions and covenants regarding our film-related affiliates, the production of the Iron Man movie and our ownership of the intellectual property underlying the Iron Man movie. As of December 31, 2007, the Iron Man Facility had $25.5 million in outstanding borrowings.

Hulk Facility

On June 29, 2007, we closed a $32.0 million financing with HSBC Bank USA, National Association (the “Hulk Facility”) through our wholly-owned consolidated subsidiary, Incredible Productions LLC. The proceeds of this financing may only be used to fund the production of our The Incredible Hulk feature film. Borrowings under this facility are non-recourse to us and our affiliates other than with respect to the collateral pledged to this facility, which consists of various affiliated film companies’ rights to distribute The Incredible Hulk film in the Reserved Territories and the contracts that MVL Productions LLC has entered into with third-party distributors to distribute The Incredible Hulk in the Reserved Territories. This facility, which expires on September 30, 2008 or sooner if an event of default occurs, consists of $32.0 million in bank debt but contains a $2.3 million interest reserve that will prevent us from borrowing the full amount. The rate for borrowings under this facility is the bank’s prime rate or LIBOR plus 1%, at our election. The facility contains customary event-of-default provisions and covenants regarding our film-related affiliates, the production of The Incredible Hulk movie and our ownership of the intellectual property underlying The Incredible Hulk movie. As of December 31, 2007, the Hulk Facility had $16.8 million in outstanding borrowings.

CEO BACKGROUND

Richard L. Solar was elected (along with Avi Arad, who later resigned) at the 2006 annual meeting of stockholders as a Class II director to serve a three-year term. James W. Breyer replaced Mr. Arad in June 2006 and is serving out the remainder of Mr. Arad’s term. On July 10, 2007, Marvel’s Board of Directors elected Laurence N. Charney to serve as a Class II director until the 2009 annual meeting.

Sid Ganis and James F. Halpin were elected at the 2005 annual meeting as Class I directors to serve a three-year term, and have been nominated for re-election to a new three-year term at this annual meeting.

Set forth below is each nominee’s name, age as of March 10, 2008, principal occupation for the last five years, selected biographical information and period of service as a director.

Nominees for Election as Directors

Sid Ganis (Class I), 68, has been a Marvel director since October 1999. Mr. Ganis is the President of the Academy of Motion Picture Arts and Sciences, the organization that awards the Oscars ® . Mr. Ganis has been President of Out of the Blue...Entertainment, a company that he founded, since September 1996. Out of the Blue...Entertainment is a provider of motion pictures, television and musical entertainment for Sony Pictures Entertainment and others. From January 1991 until September 1996, Mr. Ganis held various executive positions with Sony Pictures Entertainment, including Vice Chairman of Columbia Pictures and President of Worldwide Marketing for Columbia/TriStar Motion Picture Companies.

James F. Halpin (Class I), 57, has been a Marvel director since March 1995. Mr. Halpin retired in March 2000 as President and Chief Executive Officer and a director of CompUSA Inc., a retailer of computer hardware, software, accessories and related products, with which he had been employed since May 1993. Mr. Halpin is a director of Life Time Fitness, Inc.

For each member of the Board of Directors whose term of office as a director continues after the annual meeting, set forth below is the director’s name, age as of March 10, 2008, principal occupation for the last five years, selected biographical information and period of service as a director.

James W. Breyer (Class II), 46, has been a Marvel director since June 2006. Mr. Breyer has served as a partner of the Silicon Valley-based venture capital firm, Accel Partners, since 1995. Mr. Breyer is a director of Wal-Mart Stores, Inc. and RealNetworks, Inc. Mr. Breyer also serves on the boards of various privately held companies. Mr. Breyer is a member of the Board of Dean’s Advisors to Harvard Business School and is Chairman of the Stanford Engineering Venture Fund.

Laurence N. Charney (Class II), 60, has been a Marvel director since July 10, 2007. Mr. Charney retired from his position as a Partner of Ernst & Young LLP in 2007, having served that firm for over thirty-five years. At Ernst & Young, Mr. Charney most recently served as the Americas Director of Conflict Management. In that role he had oversight and responsibility in ensuring compliance with global and local conflict of interest policies for client and engagement acceptance across all service lines. Mr. Charney previously served as an audit partner and was Marvel’s audit partner for its 1999 through 2003 audits.

F. Peter Cuneo (Class III), 63, was Marvel’s President and Chief Executive Officer from July 1999 through December 2002 and served as the part-time Special Advisor to Marvel’s Chief Executive Officer from January 2003 through December 2004. Mr. Cuneo has been a Marvel director since July 1999, and since June 2003 he has served as a non-executive Vice Chairman of the Board of Directors. Mr. Cuneo is a senior advisor to Plainfield Asset Management LLC, a hedge fund based in Greenwich, CT that specializes in special and distressed situations. Mr. Cuneo is a director of Iconix Brands, Inc.

Morton E. Handel (Class III), 72, has been the Chairman of the Board of Directors of Marvel since October 1998 and was first appointed as a director in June 1997. Mr. Handel is a director of Trump Entertainment Resorts, Inc. and served from 2000 until February 2006 as a director of Linens ‘N Things, Inc. Mr. Handel is also a Regent of the University of Hartford and is active on the boards of several not-for-profit organizations in the Hartford, CT area.

Isaac Perlmutter (Class III), 65, has been Marvel’s Chief Executive Officer since January 1, 2005, has been employed by Marvel as Vice Chairman of the Board of Directors since November 2001, has been a director since April 1993 and served as Chairman of the Board of Directors until March 1995.

Richard L. Solar (Class II), 68, has been a Marvel director since December 2002. Since February 2003, Mr. Solar has been a management consultant and investor. From June 2002 to February 2003, Mr. Solar acted as a consultant for Gerber Childrenswear, Inc., a marketer of popular-priced licensed apparel sold under the Gerber name, as well as under licenses from Baby Looney Tunes, Wilson, Converse and Coca-Cola. From 1996 to June 2002 (when Gerber Childrenswear was acquired by the Kellwood Company), Mr. Solar was Senior Vice President, Director and Chief Financial Officer of Gerber Childrenswear. Mr. Solar is also Vice President and Treasurer of Barrington Stage Company, Inc., which produces plays, develops experimental musicals and provides a program for at-risk high school students in the Berkshires.

MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion should be read in conjunction with our financial statements and the related notes thereto, and the other financial information included elsewhere in this Report.

Set forth below is a discussion of our financial condition and our results of operations for the three fiscal years in the period ended December 31, 2007.

Overview

Management Overview of Business Trends

We operate in four integrated and complementary operating segments: Licensing, Publishing, Toys and Film Production. The expansion of our studio operations to include feature films that we produce ourselves began in late 2005 with our entering into a $525 million film facility to fund the production of our films. This expansion has resulted in the creation of our Film Production segment, which we began to present separately in the fourth quarter of 2006. Previously, Marvel Studios’ operations related solely to the licensing of our characters to third-party motion picture and television producers. Those licensing activities were included, and are still included, in the Licensing segment. However, the operations of developing, producing and distributing our own theatrical releases are reported in our Film Production segment, as these operations are inherently different than that of licensing our characters. While we expect continued benefit from current movie licenses, our current plans are to self-produce all future films based on our characters that are not licensed to third parties. The film facility is described below.

The increased exposure of Marvel characters in movies and television shows can create revenue opportunities through increased sales of publishing materials and licensed merchandise. Prior to 2006, we expanded our character brands principally through licensing them to third parties for developing movie and television shows. This media licensing strategy, however, has inherent limitations, both in terms of profit potential and control over items such as content, release dates, advertising and merchandising support. Accordingly, on September 1, 2005, MVL Film Finance LLC, a newly formed, special-purpose, bankruptcy-remote, wholly-owned consolidated Marvel subsidiary, closed a $525 million financing facility that has enabled us to begin producing our own slate of feature films. The film facility provides us with another vehicle for potential growth. Films produced by the Film Production segment through the film facility could provide us with a meaningful source of profits and more control over our film projects. It will also give us greater flexibility to coordinate the timing of licensing programs around Marvel-branded theatrical releases. We expect to benefit in 2008 from a level of coordination between licensing and film production activities that would not have been possible if those activities were not all performed under one roof.

Licensing

Our Licensing segment is responsible for the licensing, promotion and brand management for all of our characters worldwide. We pursue a strategy of concentrating our licensee relationships with fewer, larger licensees who demonstrate the financial and merchandising capability to manage our portfolio of both classic and movie properties. A key focus is negotiating strong minimum guarantees while keeping royalty rates competitive.

Another strategy of the Licensing segment’s consumer products program is to create new revenue opportunities by further segmenting our properties to appeal to new demographic profiles. Initiatives such as Spider-Man and Friends, Marvel Retro and Marvel Juniors have all helped the licensing business expand beyond its traditional classic and event-driven properties.

Major entertainment events play an important role in driving sales of licensed products, and a significant portion of the Licensing segment’s 2006 initiatives were focused on the movie Spider-Man 3 , which was released worldwide in May 2007. In 2007, our licensing segment revenue reflects the benefit of the release of Spider-Man 3. The Licensing segment’s 2007 initiatives were focused on our self-produced Iron Man and The Incredible Hulk movies, which are scheduled for release in May and June 2008, respectively. We expect that our 2008 Licensing segment revenue will benefit from the release of the Iron Man and The Incredible Hulk movies, but not as significantly as 2007 Licensing segment revenue benefited from the release of Spider-Man 3 .

We typically enter into multi-year merchandise license agreements that specify minimum royalty payments and include a significant down payment upon signing. We recognize license revenue when the earnings process is complete, including, for instance, the determination that the credit-worthiness of the licensee reasonably assures collectibility of any outstanding minimum royalty payments. If the earnings process is complete with respect to all required minimum royalty payments, then we record as revenue the present value of those payments.

The earnings process is not complete if, among other things, we have significant continuing involvement under the license, we have placed restrictions on the licensee’s ability to exploit the rights conveyed under the contract or we owe a performance obligation to the licensee. In the case where we have significant continuing involvement or where any restrictions remain on the licensee’s rights (e.g., no sales of products based on a specific character allowed until a future date), we recognize revenue as the licensee reports its sales and corresponding royalty obligation to us. Where we have a performance obligation, minimum royalty collections are not recognized until our performance obligation has been satisfied. Minimum payments collected in advance of recognition are recorded as deferred revenue. In any case where we are unable to determine that the licensee is sufficiently creditworthy, we recognize revenue only to the extent of cash collections. When cumulative reported royalties exceed the minimum royalty payments, the excess royalties are recorded as revenue when collected and are referred to as “overages”.

Publishing

We experienced continued growth from the direct market and bookstores in 2007. The Publishing segment is focused on expanding distribution to channels such as the mass market, and expanding its product line to a younger demographic. We are in the process of expanding our advertising and promotions business with an increased emphasis on custom publishing. In the second quarter of 2006, the Publishing segment began publishing Civil War , a limited edition comic book series with tie-ins to certain established comic book series. The five issues of Civil War published in 2006 were the year’s five top-selling comic books in the U.S. and the last two issues of Civil War were the second and third top-selling comic books of 2007. As expected, we experienced continued momentum from Civil War and its tie-ins during 2007, and the release of trade paperbacks related to Civil War and the release of the related series, The Death of Captain America . The single issue featuring the death of Captain America was the top-selling comic book of 2007. In addition, during 2007, we released the Stephen King series Dark Tower: The Gunslinger Born and released World War Hulk , a limited edition comic book series with tie-ins to other established comic book series. A hardcover collected edition of the Dark Tower series was a best-seller among bookstores and in the direct market. The One More Day/Brand New Day storyline featuring Spider-Man that began in late 2007 led to Marvel consolidating the three monthly Spider-Man titles into one Spider-Man title that will be published three times a month. In Spring 2008, Marvel plans to publish another major series titled Secret Invasion that will involve many of the Marvel characters and feature tie-ins to many of the Marvel publications, similar to the Civil War series. The second volume of the Dark Tower series is also planned. We expect the momentum from the Dark Tower series and One More Day/Brand New Day to continue into 2008 and that Secret Invasions will provide additional momentum.

Toys

In January 2006, we entered into a license agreement with Hasbro under which Hasbro has the exclusive right to make action figures, plush toys and role-play toys, and the non-exclusive right to make several other types of toys, featuring our characters. The license gives Hasbro the right to sell those toys at retail from January 1, 2007 through December 31, 2011. In some cases, however, Hasbro was permitted to sell toys at retail at the end of 2006. The license is subject to extension in the event that entertainment productions featuring our characters are not released according to an agreed-upon schedule. We also entered into a services agreement with Hasbro under which we have agreed to provide brand expertise, marketing support and other services in connection with the licensed toys. In 2006, royalty and service fee income recognized from Hasbro aggregated $5.2 million. Most of the Toy segment’s 2006 sales, however, came from toys that we produced and sold ourselves.

During 2007, our Toy segment’s sales consisted primarily of royalties and service fees from Hasbro, which aggregated $70.9 million. The Toy segment also generates revenue from sales of licensed-in properties such as Curious George.

Film Production

The expansion of our studio operations to include feature films that we are producing ourselves resulted in the creation of a new segment commencing in 2006, the Film Production segment. Previously, Marvel Studios’ operations related solely to the licensing of our characters to third-party motion picture and television producers. Those licensing activities were included, and are still included, in the Licensing segment. However, the operations of developing and producing our own theatrical releases are reported in our Film Production segment, as these operations are inherently different than that of licensing our characters. Our self-produced films are financed primarily with our $525 million film facility and our Iron Man and Hulk facilities, which are described below.

We expect the Film Production segment’s 2008 operations to look very different from its 2007 operations. In 2008, we will release our first self-produced films, and begin to recognize revenue and to amortize our film inventory as described below.

Film Inventory

In general, we are responsible for all of the costs of developing and producing our feature films. The film’s distributor is responsible for the out-of-pocket costs, charges and expenses (including contingent compensation and residual costs, to a defined limit) incurred in the distribution, manufacturing, printing and advertising, marketing, publicizing and promotion of the film in all media. After remitting to us five percent of the film’s gross receipts, the distributor is entitled to retain a fee based upon the film’s gross receipts and to recoup all of its costs on a film-by-film basis prior to our receiving any additional cash proceeds. Any of the distributor’s costs for a film that are not recouped against receipts for that film are borne by the distributor.

In accordance with the AICPA Statement of Position 00-2, “Accounting by Producers or Distributors of Films” (SOP 00-2), we capitalize all direct film production costs, such as salaries, visual effects and set construction. Those capitalized costs, along with capitalized overhead and capitalized interest costs, appear on our balance sheet as an asset called film inventory. Capitalization of film production overhead and interest costs commences upon completion of the initial funding requirements of the production and ceases upon completion of the production. Production overhead includes allocable costs, including salaries and benefits (including stock compensation), of individuals or departments with exclusive or significant responsibility for the production of films. Capitalized production overhead does not include other selling, general and administrative expenses.

In accordance with SOP 00-2, we also capitalize, into film inventory, the costs of projects in development. Those costs consist primarily of script development. In the event that a film is not scheduled for production within three years from the time of the first capitalized transaction, or if an earlier decision is made to abandon the project, all capitalized costs will be expensed.

Once a film is released, in accordance with SOP 00-2, the amount of film inventory relating to that film is amortized and included in each period’s costs of revenue in the proportion that the film’s revenue during the period (“Current Revenue”) bears to the film’s then-estimated total revenue over a period not to exceed ten years (“Ultimate Revenue”). The amount of film inventory amortized into costs of revenue as a percentage of film revenue may vary from period to period due to several factors, including changes in the mix of films earning revenue, and changes in any film’s Ultimate Revenue and costs.

The first two films under production by the Film Production segment, Iron Man and The Incredible Hulk , are scheduled for release in May and June 2008, respectively. As of December 31, 2007, our Film Production segment had film inventory of $264.8 million, primarily for these productions. In addition, for the year ended December 31, 2007, the Film Production segment incurred $8.7 million in selling, general and administrative expenses, consisting primarily of non-capitalized employee compensation and the segment’s share of the expenses associated with our California office.

Revenue

The amount of revenue recognized from our films in any given period depends on the timing, accuracy and sufficiency of the information we receive from our distributors.

Revenue from the theatrical distribution of our films in most territories will begin to be recognized when theatrical receipts are reported to us by the film’s distributor. In these territories, we will recognize revenue from each film in the amount of five percent of gross receipts and, beyond that, to the extent that gross receipts exceed the distributor’s fee and the costs payable by the distributor. There are five territories in which we have received minimum guaranties from local distributors. In those territories, we will begin to recognize revenue when the film is available for exhibition in theaters.

Revenue from the sale of home video units will be recognized when video sales to customers are reported by our distributors. We will follow the practice of providing for future returns of home entertainment product at the time the products are sold. We will calculate an estimate of future returns of product by analyzing a combination of our distributors’ historical returns, our distributors’ estimates of returns of our home video units, current economic trends, projections of consumer demand for our home video units and point-of-sale data available from retailers. Based on this information, a percentage of each sale will be reserved for possible returns, provided that the customer has the right of return. Generally, customer payment terms are expected to be within 90 days from the end of the month in which the product will be shipped. Actual returns will be charged against the reserve.

Revenue from both free and pay television licensing agreements will be recognized at the time the production is made available for exhibition in those markets.

Changes in estimates of future Ultimate Revenues from feature films could result in the write-off or the acceleration of the amortization of film inventory. Unamortized film inventory is evaluated for impairment each reporting period on a film-by-film basis. If estimated remaining revenue is not sufficient to recover the unamortized film inventory, the unamortized film inventory will be written down to fair value. In any given quarter, if the Film Production segment lowers its forecast of Ultimate Revenue for any individual film, we will accelerate the amortization of the film inventory related to that film.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements that we or our representatives make. Statements that are not statements of historical fact, including comments about our business strategies and objectives, growth prospects and future financial performance, are forward-looking statements. The words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “guidance,” “forecast,” “plan,” “outlook” and similar expressions, in filings with the SEC, in our press releases and in written and oral statements made by our representatives, also identify forward-looking statements. The forward-looking statements in this report speak only as of the date of this report. We do not intend to update or revise any forward-looking statements to reflect events or circumstances after the date on which the statements are made, even if new information becomes available.
The following risk factors, among others, could cause our actual results to differ significantly from what is expressed in our forward-looking statements:
-A decrease in the level of media exposure or popularity of our characters
-Financial difficulties of licensees
-Changing consumer preferences
-Movie and television-production delays and cancellations
-Concentration of our toy licensing in one licensee
-Uncertainties to do with the film production business, such as:
-We might be unable to attract and retain creative talent
-Our films might be less successful economically than we anticipate
-Our films might be more expensive to make than we anticipate
-Our film productions might be disrupted or delayed
-We might be disadvantaged by changes or disruptions in the way films are distributed
-We might lose potential sales because of piracy of films and related products
-We will be primarily dependent on a single distributor for each film
-We will depend on our studio distributors for revenue information related to the accounting for film-production activities
-We might fail to meet the conditions set by the lenders for the funding of films
-We might fail to meet the tests imposed by the lenders for the funding of films beyond the first four
-Accounting related to the production of our films may result in significant fluctuations in our reported income or loss
-If one of the banks in our film facility’s lending consortium were to default in making a required funding and if we were unable to arrange for a replacement bank, the amount available to us under the film facility would drop by the amount of the defaulting bank’s commitment and our film productions could be disrupted as a result.
The risk factors above are discussed more fully in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Management Overview of Business Trends
We operate in three integrated and complementary operating segments: Licensing, Publishing and Film Production. We no longer have an operating Toy segment. During the first quarter of 2008, we substantially completed our exit from toy manufacturing activities as planned. We also completed a change in the focus of the support that we provide to Hasbro, which resulted in changes to our internal organizational structure and staff reductions. These events altered our internal reporting of segment performance, with the result that we are now including revenues earned from Hasbro (associated with toys manufactured and sold by Hasbro) and related expenses (associated with royalties that we owe on our Hasbro revenue) within our Licensing segment. Those revenues and expenses were formerly included in our Toy segment. Our remaining activities related to our terminated toy manufacturing business are now included with Corporate overhead in “All Other”. We have reclassified prior-period segment information to conform to the current-year presentation.

The increased exposure of Marvel characters in movies and television shows can create revenue opportunities for us through increased sales of licensed merchandise. Producing films ourselves provides us with more control of our film projects, gives us greater flexibility to coordinate the timing of licensing programs around Marvel-branded theatrical releases and provides us with the opportunity for a meaningful source of profits. The operations of developing and producing our own theatrical releases are reported in our Film Production segment, the funding for which comes primarily from our $525 million film facility. Our current plans are to self-produce all future films based on our characters that have not already been licensed to third parties.
Licensing
Our Licensing segment is responsible for the licensing, promotion and brand management for all of our characters worldwide. We pursue a strategy, where feasible, of concentrating our licensee relationships with fewer, larger licensees who demonstrate the financial and merchandising capability to manage our portfolio of both classic and movie properties. A key focus is negotiating strong minimum guarantees while keeping royalty rates competitive.
Another strategy of the Licensing segment’s consumer products program is to create new revenue opportunities by further segmenting our properties to appeal to new demographic profiles. Initiatives such as Marvel Super Hero Squad, Marvel Extreme, Marvel Heroes and Marvel Comics (our retro program) have all helped the licensing business expand beyond its traditional classic and event-driven properties.
Major entertainment events play an important role in driving sales of our licensed products. In 2007, our Licensing segment revenue reflected the benefit of the May 2007 release of the movie Spider-Man 3. The Licensing segment’s 2007 initiatives were focused on merchandising our self-produced movies Iron Man , which was released on May 2, 2008, and The Incredible Hulk , which was released on June 13, 2008. Our 2008 Licensing segment revenue is benefitting from the release of those movies, beginning in the second quarter of 2008, but not as significantly as 2007 Licensing segment revenue benefited from the release of Spider-Man 3 .
We typically enter into multi-year merchandise license agreements that specify minimum royalty payments and include a significant down payment upon signing. We recognize license revenue when the earnings process is complete, including, for instance, the determination that the credit-worthiness of the licensee reasonably assures collectibility of any outstanding minimum royalty payments. If the earnings process is complete with respect to all required minimum royalty payments, then we record as revenue the present value of those payments.
The earnings process is not complete if, among other things, we have significant continuing involvement under the license, we have placed restrictions on the licensee’s ability to exploit the rights conveyed under the contract or we owe a performance obligation to the licensee. In the case where we have significant continuing involvement or where any restrictions remain on the licensee’s rights (e.g., no sales of products based on a specific character allowed until a future date), we recognize revenue as the licensee reports its sales and corresponding royalty obligation to us. Where we have a performance obligation, minimum royalty collections are not recognized until our performance obligation has been satisfied. Minimum payments collected in advance of recognition are recorded as deferred revenue. In any case where we are unable to determine that the licensee is sufficiently creditworthy, we recognize revenue only to the extent of cash collections. When cumulative reported royalties exceed the minimum royalty payments, the excess royalties are recorded as revenue when collected and are referred to as “overages”.
As discussed above, beginning in 2008 we are including revenue earned from Hasbro, and related expenses, in our Licensing segment.

Publishing
The Publishing segment is focused on expanding distribution channels such as the direct and mass market, and expanding its presence in the book markets and to a broader demographic. In 2007, the single issue featuring the death of Captain America was the top-selling comic book of the year. Also, the last two issues of Civil War , a limited-edition comic book series with tie-ins to established comic book series, were the second and third top-selling comic books of 2007. In the direct market and bookstores, a hardcover collected edition of the Dark Tower series was the best-seller in 2007. The World War Hulk crossover series, featuring the Incredible Hulk, was published in mid 2007. In April 2008, Marvel launched another major comic book crossover series, Secret Invasion , which involves many of the Marvel characters and features tie-ins to many other Marvel publications, similar to the Civil War series. This series will run through the end of 2008. The third volume of the Dark Tower series and the first volume of The Stand series were released in October 2008. We expect that the Dark Tower, Secret Invasion and The Stand series, and hardcover collections that were released in the third quarter of 2008, will continue to generate momentum for the remainder of 2008. Additionally, the Publishing segment has been developing and investing in digital media as seen with the launch of the Marvel Digital Comics Unlimited subscription service.
Film Production
In the second quarter of 2008, we released our first two self-produced films: Iron Man on May 2 and The Incredible Hulk on June 13. We are currently developing four films for release in 2010 and 2011: Iron Man 2, Thor, The First Avenger: Captain America and The Avengers . The scheduled release dates of those films are, respectively, May 7, 2010, July 16, 2010, May 16, 2011 and July 15, 2011. After the release of each film, we begin to recognize revenue and to amortize our film inventory as described below.

Film Inventory
In general, we are responsible for all of the costs of developing and producing our feature films. The film’s distributor is responsible for the out-of-pocket costs, charges and expenses (including contingent compensation and residual costs, to a defined limit) incurred in the distribution, manufacturing, printing and advertising, marketing, publicizing and promotion of the film in all media (referred to in the aggregate as the distributor’s costs). The distributor’s costs are not included in film inventory.
In accordance with the AICPA Statement of Position 00-2, “Accounting by Producers or Distributors of Films” (“SOP 00-2”), we capitalize all direct film production costs, such as labor costs, visual effects and set construction. Those capitalized costs, along with capitalized production overhead and capitalized interest costs, appear on our balance sheet as an asset called film inventory. Production overhead includes allocable costs, including cash and stock compensation and benefits, of individuals or departments with exclusive or significant responsibility for the production of films. Capitalization of production overhead and interest costs commences upon completion of the requirements for funding the production under the film facility and ceases upon completion of the production. Because of the completion of the Iron Man and The Incredible Hulk productions during the second quarter of 2008, we began in that quarter to expense, rather than capitalize, our production overhead associated with personnel formerly dedicated to those productions and our interest costs related to those productions. Our Film Production SG&A expenses and our interest expense therefore began, in that quarter, to increase.
In accordance with SOP 00-2, we also capitalize the costs of projects in development into film inventory. Those costs consist primarily of script development. In the event that a film does not begin pre-production within three years from the time of the first capitalized transaction, or if an earlier decision is made to abandon the project, all capitalized costs related to these projects are expensed.
Once a film is released, in accordance with SOP 00-2 using the individual-film-forecast computation method, the amount of film inventory relating to that film is amortized and included in each period’s costs of revenue in the proportion that the film’s revenue during the period bears to the film’s then-estimated total revenue, net of the distributor’s costs, over a period not to exceed ten years (ultimate revenues). Estimates of ultimate revenues for each film are regularly reviewed and revised as necessary based on the latest available information. Reductions in those revenue estimates could result in the write- off, or the acceleration of the amortization, of film inventory in that reporting period; increases in those revenue estimates could result in reduced amortization in that period.

As of September 30, 2008, our Film Production segment had film inventory, net of amortization, of $246.4 million, primarily for the Iron Man and The Incredible Hulk productions. For the three and nine-months ended September 30, 2008, the Film Production segment incurred $45.2 million and $66.4 million in cost of revenue, respectively, consisting of amortization of film inventory costs. In addition, for the three and nine-months ended September 30, 2008, the Film Production segment incurred $4.5 million and $12.6 million, respectively, in selling, general and administrative expenses, consisting primarily of employee compensation and the segment’s share of the expenses associated with our California office.
Film Revenue
The amount of revenue recognized from our films in any given period depends on the timing, accuracy and sufficiency of the information we receive from our distributors.
After remitting to us five percent of the film’s gross receipts, the distributor is entitled to retain a fee based upon the film’s gross receipts and to recoup all of its costs on a film-by-film basis prior to our receiving any additional share of film receipts. Any of the distributor’s costs for a film that are not recouped against receipts for that film are borne by the distributor. Our share of the film’s receipts, as described above, is recognized as revenue when reported due to us by the distributor. There are five territories in which we have received minimum guarantees from local distributors. In those territories, we began to recognize revenue when the film was made available for exhibition in theaters.

Critical Accounting Policies
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a common definition for fair value to be applied to GAAP requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS 157 is effective for financial assets and financial liabilities for fiscal years beginning after November 15, 2007. FSP 157-2 “Partial Deferral of the Effective Date of Statement 157”, deferred the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. We do not expect the adoption of FSP 157-2 to have a material impact on our consolidated financial statements. In October 2008, the FASB issued FSP FAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.” The FSP clarifies the application of SFAS No. 157, “Fair Value Measurements,” when the market for a financial asset is not active. The FSP was effective upon issuance, including reporting for prior periods for which financial statements have not been issued. The adoption of the FSP for reporting as of September 30, 2008 did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Standards
In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 became effective for the fiscal year beginning January 1, 2008. We did not elect the fair value option for any items under SFAS 159.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, the goodwill acquired and any noncontrolling interest in the acquiree. This statement also establishes disclosure requirements to enable the evaluation of the nature and financial effect of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of this statement to have a material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51,” (“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. We do not expect the adoption of this statement to have a material impact on our consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. We do not expect the adoption of this statement to have a material impact on our consolidated financial statements.

CONF CALL


F. Peter Cuneo

Thank you, Operator and good morning, everyone. Welcome to Marvel's third quarter 2008 conference call. With us in New York as speakers today we have in addition to myself David Maisel, who is the Chairman of Marvel Studios; John Turitzin, who is Executive Vice President of Marvel and our General Counsel; and Ken West, who is our Chief Financial Officer.

As is typical, we’ll today with our Safe Harbor announcement. We will then have some prepared comments from Ken West. He will be followed by a few prepared comments from David Maisel and then we will open the floor to questions and answers.

John Turitzin

Some of the statements that the company will make on this conference call, such as statements of the company’s plans, expectations, and financial guidance, are forward-looking. While forward-looking statements reflect the company’s good faith beliefs, they are not guarantees of future performance and involve risks and uncertainties, and the company’s actual results could differ materially from those discussed on this phone call.

Some of these risks and uncertainties are described in today’s news announcement and the company’s filings with the Securities and Exchange Commission, including the company’s reports on Form 8-K, 10-K, and 10-Q. Marvel assumes no obligation to publicly update or revise any forward-looking statements.

Kenneth West

Good morning, everyone. Marvel's third quarter results issued this morning included a lot of detail in the press release, so I’ll just review the highlights with you now. Net income rose 39% to $50.6 million in Q308, on a 48% increase in net sales, yielding earnings per share of $0.64 versus earnings per share of $0.45 last year’s Q3.

Turning now to our segments, as anticipated, licensing segment net sales declined year over year despite improvements in both domestic and international licensing activity. The decrease in licensing was principally related to a $16.1 million decline in net sales from our Spider-man merchandise joint venture as we move further and further from the May 2007 release of the Spider-man 3 movie.

In addition, year-ago third quarter licensing net sales benefited from settlements of various audit claims which totaled $16.8 million, the majority of which was recorded within studio licensing and was the primary reason for the year-over-year decline in studio licensing.

Our operating margin for the licensing segment was 73% compared with 72% in the prior year period, in line with targeted ranges.

Q3 2008 licensing segment net sales reflect a total contribution of $12 million from Hasbro, $7 million of which was recorded within domestic consumer products and $5 million in international. We anticipate generating overage collections under the Hasbro license beginning some time in 2011.

Results from the publishing segment were modestly behind the prior year period, principally due to lower net sales of high margin custom publishing programs and trade paperbacks.

Operating margins within the publishing segment was 37%, in line with the expected range of full-year publishing segment operating margin of 37% to 40%. The year-over-year decrease in margin reflects higher spending related to our online initiative, which amounted to approximately $1 million in the quarter and lower custom publishing.

Film production segment net sales of $90 million in Q308 represents a second quarter of revenues from our Marvel produced feature film slate. Net sales in the segment included an earlier-than-expected recognition of $60 million related to the theatrical box office of the Iron Man feature film. Film production net sales also reflect our producer fees to date for Iron Man and The Incredible Hulk as well as the DVD component of the foreign pre-sales for Iron Man.

Gross profit in the film production segment was $45 million and operating income was $40.4 million, which is net of this segment’s SG&A.

Cash generation remains strong in the quarter and net of the $13.3 million spend on the repurchase of the remaining film facility mezzanine debt, cash and equivalents, restricted cash and short-term investments amount to $145.4 million at September 30, 2008, up from $122 million as of June 30, 2008.

Additionally, we continued to have no borrowings under our $100 million HSBC line of credit and have a share repurchase authorization for a total availability of $128.2 million as of September 30.

As indicated on our balance sheet, total non-recourse film borrowings decreased during the quarter to $182 million at September 30, 2008, compared to $262 million at June 30. This decrease principally reflects the repayment of borrowings using our film proceeds and the buy-back of our mezzanine film debt.

Now for guidance -- this morning we updated our full-year 2008 financial guidance and initiated 2009 full-year guidance. Specifically, our updated 2008 guidance now reflects additional film production segment revenues and associated expenses principally related to proceeds from the Iron Man feature film and DVD release. We expect the majority of Iron Man DVD revenues in 2008. Although this rise in earnings expectation is merely moving revenue and profits from 2009 into 2008, we are of course pleased to receive cash earlier to repay debt sooner. For 2008, contributions from The Incredible Hulk will consist of Marvel's 5% gross participation as well as the recognition of the theatrical and home video portions of the guarantees on the five pre-sold territories.

Our revised 2008 diluted earnings per share outlook has risen to the range of $2.45 to $2.65 per share, which is discussed in detail in the guidance section of today’s press release.

Now turning to our 2009 financial guidance -- there will be no Marvel Studios produced films and licensing contributions related to the Wolverine feature film, which will be released in May 2009, are expected to be lower than contributions from both Iron Man and Hulk in 2008. Further, there will be minimal Spider-man joint venture income, roughly a $45 million decrease in 2008, as we have already recognized revenue of $51 million for the nine month period ended September 30, 2008.

Our view on 2009 performance has also been tempered somewhat by the uncertain economic outlook. Since we expect the majority of Iron Man’s DVD revenues in 2008, The Incredible Hulk home video revenues will be the major driver for the film production segment in 2009. As The Incredible Hulk’s percentage contribution is significantly lower than that of Iron Man, gross margins in the film production segment are expected to decrease from 45% in 2008 to roughly 20% in 2009, due to the higher weighting of The Incredible Hulk related revenue.

As we did last year, we have provided the primary assumptions for each segment’s contribution to our 2009 guidance in today’s press release. At a macro level, the low-end of the 2009 range assumes there is an approximately 10% to 15% negative impact to all of our businesses related to the challenging consumer environment. The high-end assumes business as usual with no negative impact. As a result of all of these factors, we anticipate revenues of $415 million to $460 million in 2009 and net income of $80 million to $105 million, with earnings per share of $1.00 to $1.35.

With the need to find one-third of the production budget of the Iron Man 2 and Thor feature films, as well as finding the pre-production costs of both Captain American and the Avengers during 2009, aggregating approximately $175 million, and without [giving affect] to any further stock repurchases, we expect to end 2009 with cash in excess of $100 million and still no borrowings under our corporate credit facility. Based on anticipated film proceeds from both Iron Man and The Incredible Hulk, and borrowings to produce Thor and Iron Man 2, we estimate interest expense to approximate $14 million in 2009.

As we have often stated, we run our company to maximize profitability and cash flow over the long-term and do not expect smooth year-over-year progression.

Let me now turn the call over to David Maisel to provide an update on our studio activities and successes to date.

David Maisel

Thanks, Ken. We are obviously very happy with the successful launch of the new Marvel Studios in 2008. Our first two films, Iron Man and The Incredible Hulk, have now surpassed $840 million in worldwide box office and are two of the leading DVDs of the year with close to $250 million in worldwide revenues to date. Iron Man itself is currently the 21st biggest domestic movie of all time and the number one DVD of the year so far, and as Ken mentioned, helped to create the high level of profits we are seeing in 2008.

However, perhaps even more importantly, this successful launch of the Marvel Studios sets the foundation for the future growth. 2010 is scheduled to bring Iron Man 2 and Thor, while 2011 has The First Avenger: Captain America and The Avengers movie. We’ve announced Robert Downey Jr. will star in both Iron Man 2 and The Avengers, and Jon Favreau will direct Iron Man 2 and executive produce The Avengers. We will be making other talent and director announcements as these deals are finalized.

On one other note, by 2010 we also expect that our Spider-man Broadway musical will premiere on Broadway. This is the musical directed by Julie Taymor, the director of The Lion King, with music written by Bone and The Edge from the rock band, U2.

In keeping with our conservative fiscal approach, we are not funding the show but we are co-producing it and have a meaningful first dollar gross participation, which could create significant upside if the show is successful and spawns multiple touring companies around the world.

With that, I turn it over to Peter for Q&A.

F. Peter Cuneo

Thank you, David. Operator, we are ready to start.


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livermore 
newbie
Posts: 2

Reg: 02-22-09

02-18-09 01:00 PM - Post#2074    
    In response to DailyStocks_admin

Wedbush Morgan Securities analyst Michael Pachter upgraded Marvel Entertainment to buy on Feb 18. Target price is 31. When is the exact date of earnings?

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bearish 
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Posts: 0

Reg: 02-22-09

02-18-09 06:01 PM - Post#2080    
    In response to livermore

Nice work pumping, dude. Caris and Company analyst downgraded Marvel Entertainment yesterday.

After Iron Man, what other movies can they really make? Plus Barron's has written several negative pieces on this company.

http://online.barrons.com/article/SB12146136900 581...

The Rage Offstage at Marvel
By BILL ALPERT | MORE ARTICLES BY AUTHOR
Lawsuits raise questions about Marvel Entertainment's title to its billion-dollar character franchises, which include The Incredible Hulk.

THE COMIC BOOK'S SPLASH page would show a close-up of Peter F. Paul brooding about Marvel Entertainment , its creative force Stan Lee and the Clintons. The next panel would reveal the electronic ankle bracelet that's kept Paul under house arrest for three years.

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livermore 
newbie
Posts: 2

Reg: 02-22-09

02-18-09 06:05 PM - Post#2081    
    In response to bearish

  • bearish Said:
Nice work pumping, dude. Caris and Company analyst downgraded Marvel Entertainment yesterday.

After Iron Man, what other movies can they really make? Plus Barron's has written several negative pieces on this company.

http://online.barrons.com/article/SB12146136900 581...

The Rage Offstage at Marvel
By BILL ALPERT | MORE ARTICLES BY AUTHOR
Lawsuits raise questions about Marvel Entertainment's title to its billion-dollar character franchises, which include The Incredible Hulk.

THE COMIC BOOK'S SPLASH page would show a close-up of Peter F. Paul brooding about Marvel Entertainment , its creative force Stan Lee and the Clintons. The next panel would reveal the electronic ankle bracelet that's kept Paul under house arrest for three years.





The date of the Barron's article is June 30, 2008.

The analyst at Caris has a target price of $45. Cover, shorty.

Oh yeah, you forget to mention the other Barron's Article on December 4, 2008.

http://online.barrons.com/article/SB12283484284 647...

NSIDE SCOOP
Marvel Exec's Hulking Purchase
By TERESA RIVAS | MORE ARTICLES BY AUTHOR
The chairman of the studio that produced Iron Man and The Incredible Hulk took down $2.4 million in stock.

Tables: Buyers | Sellers

INVESTORS WONDERING IF Marvel Entertainment (ticker: MVL) can recreate its Iron Man success should be heartened by a recent purchase by the head of the company's film division.

On Nov. 20, David Maisel, executive vice president and chairman of Marvel Studios, bought 100,000 shares for $2.4 million, an average of $24.39 a share. He now owns 237,933 shares directly and 175,000 options.

The buy was Maisel's first, and reverses a personal history of selling in years' past. Maisel's buy was the largest at Marvel in five years, according to Thomson Reuters.

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dailystock_admin 
Administrator
Posts: 249

Reg: 09-24-07

02-18-09 10:47 PM - Post#2093    
    In response to livermore

Marvel's licensee Hasbro Takes on the Toy Fair 2/12/2009

The toy industry is gearing up for its biggest trade show of the year under the clouds of the economic recession. Hasbro Chief Executive Brian Goldner talks to MarketWatch's Andria Cheng about his view of the business. (Feb. 13)

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livermore 
newbie
Posts: 2

Reg: 02-22-09

02-22-09 02:32 PM - Post#2192    
    In response to dailystock_admin

New York-based Marvel Entertainment Inc. (NYSE: MVL), comic book publisher and licensee of characters such as Spider-Man and the X-Men to moviemakers and toy developers, is expected to be one of the biggest earnings gainers of the week. For the fourth quarter, analysts expect to see a profit of $0.71 per share, 50.7% higher than a year ago, and revenue of $214.7 million, up 96.5%. For the full year, their forecast is $2.54 per share (+33.1%) on $663.7 million (+37.4%). Marvel has topped estimates in recent quarters, by as much as 61.9%. Though the long-term EPS growth forecast is 16.0%, much better than the industry average and the S&P 500, the consensus recommendation has been on the fence between buying or holding MVL over the past quarter. BloggingStocks contributor Steven Mallas remarked on a recent upgrade of Marvel. The company's PE (ttm) is about 10.9. The share price has fallen 22.6% since the beginning of the year, bringing it close to the 52-week low of $23.28. Marvel recently announced that it was extending its license agreement with Hasbro Inc. (NYSE: HAS) until 2017.

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