Character-based entertainment company Marvel Entertainment(MVL), which agreed to be bought by Walt Disney (DIS) over the summer, reported Tuesday a large drop in profit for the third quarter, hurt by a decline in feature film activity and related licensing.
Earnings per share for the quarter dropped nearly 60%, but topped analysts' expectations by two cents. Quarterly net sales also dropped and missed consensus estimate.
Marvel Entertainment has created at least 5,000 characters, including Spider-Man, Iron Man, Captain America, Hulk, X-Men. Marvel is part of a joint venture with Sony Pictures Entertainment Inc., called Spider-Man Merchandising L.P. related to Spider-Man movie related licensed products.
The global economic downturn that uprooted several businesses has also hurt the entertainment business. Meanwhile, Marvel is now trying to be more vibrant in the company of Paramount Pictures, which would now distribute five of its movies including Iron Man 2 on May 7, 2010.
On August 31, Walt Disney Co. (DIS) agreed to acquire Marvel, subject to Marvel shareholder approval and other customary closing conditions, in a stock and cash transaction valued at about $4 billion. The company continues to anticipate closure of the deal by calendar year end. Under the deal, Disney will acquire ownership of more than 5,000 Marvel comic-book characters, including Iron Man, Spider-Man, X-Men and Captain America. The boards of directors of both Disney and Marvel have each approved the transaction.
The company added that Disney is the ideal home to nurture and further develop the distinctive Marvel brands because of its ability to extend the breadth, diversity and global reach of Marvel-branded entertainment and consumer products.
In statement, chairman, Morton Handel said, "Despite the absence of any Marvel Studios feature film releases in 2009, Marvel continued to deliver solid operating performance across all our operating segments. Anticipation for the high profile Iron Man 2 feature film continues to build, and we are focusing our efforts on the film's May 2010 release and the related licensing opportunities."
Third Quarter Results
The New York-based creator of superhero movies reported net income of $20.42 million or $0.26 per share for the third quarter, sharply lower than $50.63 million or $0.64 per share in the prior-year quarter.
On average, nineteen analysts polled by Thomson Reuters expected earnings of $0.24 per share for the third quarter. Analysts' estimate typically excludes one-time items.
Net sales for the quarter dropped to $105.66 million from $182.50 million in the same quarter last year, and missed sixteen Wall Street analysts' consensus estimate of $92.51 million.
The results for the latest quarter reflect about $65 million decline in film revenues from the prior-year quarter, as well as lower licensing segment net sales related to last year's Iron Man and The Incredible Hulk feature films as well as the Spider-Man merchandising joint venture.
Segmental Details
Licensing segment net sales for the third quarter decreased to $48.9 million from $58.1 million in the year-ago quarter. The decline was attributable to the year-ago strong merchandise licensing revenue related to the Iron Man and The Incredible Hulk feature films. Segment operating income also declined to $37.5 million from $42.5 million, principally reflecting the lower sales level.
Net sales for publishing segment totaled $32.0 million, a 6% decline from $34.0 million in the prior-year quarter, reflecting lower custom publishing and advertising revenue. Operating income declined year-over-year to $10.2 million from $12.7 million, due to an increase in talent costs and the decrease in custom publishing which carries a higher margin.
Film production segment net sales for the quarter plunged to $24.8 million fro $90.2 million in the same quarter last year., primarily reflecting revenues for the Iron Man international pay TV window and domestic pay TV window for The Incredible Hulk as well as contributions from DVD sales for both. Against these revenues, Marvel amortized capitalized film production costs of $20.5 million. Operating loss was $2.3 million, compared to operating income of $40.4 million last year.
Other Metrics
Operating income for the third quarter plunged to $36.64 million from $88.20 million in the year-ago quarter. Total costs and expenses were $69.88 million, down from $96.35 million in the same quarter last year.
The company ended the third quarter with cash and cash equivalents of $109.60 million, compared to $125.81 million at end of the prior-year quarter.
Nine Month Highlights
For the nine-month period, Marvel reported net income of $93.92 million or $1.20 per share, lower than $142.53 million or $1.83 per share in the prior-year period.
Net sales for the year-to-date period increased to $418.89 million from $451.93 million in the year-ago period.
iphone
Marvel comics are now available to US iPhone users through three iPhone applications - Panelfly, iVerse and Comixology. These applications support in-app download of Marvel Comics at $1.99 per comic download.
Stock Quote
MVL closed Monday's regular trading session at $50.01, up $0.14 on a volume of 0.82 million shares, lower than the three-month average volume of 1.66 million shares. In the past 52-week period, the stock has been trading in a range of $22.82 to $51.86.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.