Marvel Enterprises
Toy Sales, Publishing & Cash

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By Wheelco
October 29, 2004

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I started reviewing some of the numbers looking to update my model. I see toys sales were not as bad as suggested, looks like they meet their revised yearly target for S2 toys by 3rd quarter. They caused a lot of people to lose sleep between 2nd and 3rd Quarter. Whether this was intentional or not, I am not sure and this may have been the straw that broke the camel back for Lipson.

I am also interested in the publishing number and whether this is real growth or a president dressing up his division, just in case they are looking for a new CEO?

Cash, nice numbers, showing approximately 180 million in cash on the balance sheet. Still looks to me that they will be close to 200 million by year-end and probably spend the other 42 million. Also, they did laid out on the CC either they will be buying someone or more stock buyback may be in our future. Unless they find some very good fit with their current business, I would rather see the stock buyback and them concentrate on expanding abroad. I did like their focus on expanding abroad, would have like a little less "fufu" and more details on their plans by geographical area (China, Europe, South America).

2005 guidance was ok. I really think there is some serious sandbagging going on here. With S2 DVD and punisher DVD being pushed into 05, also sounded like S2 international box office sales were being pushed into 05 (this may be good, new tax law change on US sale abroad changes in 05) they have a very serious start on 05 numbers. My number for 2005 shows at least .20 to .25 cents higher in 2005 than their 2005 guidance, and I still have not included the tax effects for the new tax law.

One thing I did not like was their talk of reserves. Not sure what that was all about and would like to hear folks thoughts as to what they are up to. In some instances, reserves are ok, however, I have also seem instances were folks were trying to manage earnings from year to year. My memory was that the SEC and FASB did limit this type activity about 5 or 6 years ago. They were not very open on this subject. I am not as concerned about earnings as cash; depending on how the reserve is setup it may limit what they can do with their cash. Right now just don't know.

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