Marvel Enterprises announced results for the fourth quarter of 2004 that beat analysts' expectations as its net income for the quarter rose to $30.1 million (27 cents per share) from $13.5 million (12 cents per share) in 2003.  With 56% of its sales during the quarter coming from licensing, the company-wide operating margin soared to 41% compared with 31% the previous year.  Licensing sales were up by 89% due in part to the company's joint venture with Sony for Spider-Man movie merchandising and a substantial growth in videogame licensing revenues.  Publishing sales grew by 16% vs. Q4 2003 to $22.1 million due in part to growth in mass-market retail chains, and strength in the core comic book market.  Marvel experienced slight increases in both the number of comic book titles shipped and the average circulation in Q4.  Toys sales were the company's sore spot with sales down 41% due to the decrease in sales of action figures and accessories based on Lord of the Rings.  Sales of Spider-Man movie toys for the entire year were $175.3 million, slightly more than anticipated.


Marvel's Avi Arad also announced that X-Men 3 was currently scheduled for a May 22nd, 2006 release, which would provide Marvel with a tent-pole film for next year -- fulfilling a promise Arad talked about in his Bear Stearns presentation last week (see 'Marvel Widens Distribution') to present a major Marvel-based movie every year.  Other Marvel projects for 2006 include: Ghost Rider, Iron Man, Luke Cage, The Punisher 2 and Deathlok.  Spider-Man 3 is the designated tent-pole for 2007 and has already staked out May 4th as its opening date -- and such is the power of the Spider-Man franchise that the early announcement of its debut should provide a considerable window of opportunity for the film to do its box office damage before being faced with major action film competition.  Namor, The Hulk 2, and Wolverine are also potential 2007 releases.


Marvel will also launch its direct-to-video animation line, produced in conjunction with Lions Gate, in Q1 of 2006 with The Avengers.  Subsequent projects in this line of OAVs include a second Avengers film and Iron Man.  For this series of 60-minute animated features Lions Gate provides the financing and oversees production with Marvel providing the creative input.


Marvel is also partnering with the French animation studio Antefilms to produce an original animated TV series based on the Fantastic Four (see 'Marvel Licenses Fantastic Four for Animated Series').  The 26-episode series will debut in 2006.  Marvel also has two live action projects for the small screen in development -- Blade and Brother Voodoo. 


Marvel's guidance for 2005 calls for net income and earnings per share which are very close to those in 2004, in spite of a considerable decline in net sales from $513 million in 2004 to between $370-$390 million in 2005.  The secret to making all this work is an increase in licensing, which Marvel estimates will make up 65-70% of the net sales for Q1 2005 and will result in a substantial increase in operating margin.  Keys to this strategy include the Fantastic Four film's tie-in toyline, which Marvel estimates will rack up $80 million in sales with an unprecedented number of skus, continuing revenues from the Spider-Man line, continued growth of foreign licensing revenues and a continuation of the 'overages' (extra fees paid by licensees whose sales exceed the amount covered by their initial payment to Marvel), which contributed $37 million to 2004's bottom line.