New York, New York – May 4, 2004 -- Marvel Enterprises, Inc. (NYSE: MVL), a global provider and licensor of entertainment content, today reported financial results for its first quarter ended March 31, 2004, initiated financial guidance for the second quarter of 2004, and raised financial guidance for the full year 2004.  Marvel’s condensed consolidated results appear in the table below.

Marvel Enterprises, Inc. Condensed Consolidated Financial Results
	Three Months Ended
(In millions, except per share data)	3/31/04	3/31/03
	(Unaudited)	(Unaudited)
Net sales	$122.3	$87.4
Operating income	$57.3	$54.7
Income tax expense (1)	$22.1	$ 8.2
Net income attributable to common stock	$31.2	$41.0
Net income attributable to common stock per share (2)	$0.27	$0.38

(1) As anticipated, Marvel’s effective tax rate increased to 41% in Q1 2004 from 16% in Q1 2003.

(2) Reflects the effects of the Company’s March 2004 3-for-2 stock split.

Marvel’s Q1 2004 results continue to reflect the strength of the Company’s entertainment licensing model and growing demand for Marvel-branded products and entertainment across all of its divisions. Net sales increased 40% over last year to $122.3 million, fueled predominantly by increases in the toy and publishing divisions.  Consolidated SG&A increased to $32.1 million compared to the prior-year period, predominantly due to higher sharing of license revenues with motion picture studios.  Operating income increased roughly 5% to $57.3 million compared to the prior-year period with expanding margins in the publishing and toy divisions off-setting a year-over-year decline in the licensing division due to a substantial video game license renewal in the first quarter of 2003.  Operating margins improved from 31% in Q4 2003 to 47% in the current quarter, which is in-line with the 48% level obtained for the full year 2003 and above the guidance of 40%, which was provided in the Q4 2003 earnings release.  This sequential improvement is primarily due to the increase in operating margins for the licensing division to 77% in the Q1 2004 period from 47% in the Q4 2003 period.   As noted in previous public disclosures, the Company’s effective tax rate has risen from 16% in Q1 2003 to a normalized rate of 41% in Q1 2004.  Despite an increase in pre-tax income in Q1 2004 versus the prior-year period, due to the higher effective tax rate net income was roughly 24% lower in Q1 2004 compared to the prior-year period.  

Marvel’s President and CEO, Allen Lipson, commented, "The continued success of feature films based on our portfolio of characters has generated strong demand for properties from prospective studio and other partners.  At the same time, we are experiencing demand from potential licensees at levels that continue to exceed prior-year periods.  International licensing activities continue to gain momentum, fueled by the global brand awareness of the Marvel Universe and our new organization that is exploiting this opportunity.  Given the new business opportunities we are currently reviewing in a variety of entertainment media and in consumer product licensing worldwide, we remain confident that we can generate operating income increases of 10-20% on an annualized basis."

Marvel Enterprises, Inc. Divisional Net Sales/Operating income
(in millions)	Three Months Ended 3/31/04               3/31/03 (Unaudited)           (Unaudited)
Licensing:     Net Sales	$ 50.1		$ 49.9
Operating Income	$ 38.5	77%	$ 48.7	98%
Publishing:    Net Sales	$ 19.6		$ 15.2
Operating Income	$   7.3	37%	$   5.1	33%
Toys:              Net Sales	$ 52.6		$ 22.3
Operating Income	$ 15.6	30%	$   5.9	27%
Corporate Overhead:	($  4.1)		($  5.0)
TOTAL NET SALES	$ 122.3		$ 87.4
TOTAL OPERATING INCOME	$   57.3	47%	$ 54.7	63%

Divisional Review:
Licensing Division - net sales in the first quarter of 2004 increased slightly to $50.1 million from $49.9 million in Q1 2003.  Marvel’s brand consolidation strategy generated significant annual sales growth in the Apparel, Domestics and Food categories during the quarter.  In addition, toy licenses in new categories generated annual growth in the toy royalty category versus the prior year period.  Toy royalty and service fees from Toy Biz Worldwide, Ltd. declined to approximately $3 million in Q1 2004 as net sales of Spider-Man 2 movie toys are recorded in the Toy division.

Net sales in the first quarter of 2003 included roughly $18 million from the renewal and extension of a major video game license.  In addition, toy royalty and service fees from Toy Biz Worldwide Ltd, a major toy licensee, were approximately $12 million in Q1 2003 due to strong sales of toys based on the Hulk movie.  The table below reflects these trends.

Licensing Division Categories
(in millions)	Three Months Ended
	3/31/04		3/31/03
Apparel and accessories	$19.7	$4.9
Entertainment (including studios, themed attractions and electronic games)	5.4	27.9
Toy Biz Worldwide Ltd.:
- Toy Royalties	2.1	5.7
- Toy Service Fees	1.2	6.7
Other Toy Royalties	6.3	3.2
Other (Domestics, food and other)	15.4	1.5
Total	$50.1	$49.9

Overages (license revenues in excess of minimum guarantees) were approximately $7.9 million in the current quarter, compared to $7.5 million in the prior-year period.  International licensing generated net sales of $3.8 million in Q1 2004 compared with net sales of $1.9 million in the prior-year period.  International sales are expected to double in Q2 2004 when key contracts are anticipated to close.  Q1 2004 licensing division results include approximately $8.1 million in operating income, compared to $4.8 million in Q1 2003, from Marvel’s equity interest in net income from the joint venture with Sony for Spider-Man movie merchandise licensing.  As previously noted, licensing division operating margins returned to a more normalized level of 77% in Q1 2004 versus 47% in Q4 2003 and 98% in the prior-year period.  The decrease in the Q1 2004 operating margin versus the year-ago period is due to higher revenue sharing payments to Marvel’s studio partners, resulting from a higher percentage of net sales that required a share the studio partners.  The studio revenue share was roughly $15 million in Q1 2004 versus $3 million in the year-ago period.  

Marvel’s Publishing Division - net sales rose due to increased strength in the direct and mass markets primarily driven by a higher title count and greater demand for Marvel brands, coupled with a higher level of advertising sales.  Roughly 61 comic titles per month were printed in Q1 2004 with an average circulation of over 56,500 units versus 51 titles per month at an average circulation of 55,750 units in the year-ago period.  Operating margins in the division increased to 37% in Q1 2004 compared to operating margins of 33% in the prior-year period.  The year-over-year margin increase reflects a higher portion of advertising income in the revenue mix in the current quarter, coupled with a lower cost structure due to improvements in distribution costs.

Marvel’s Toy Division - sales increased from the prior-year period due to strong shipments of action figures and accessories based on the Spider-Man 2 movie as retailers began to put products on shelves ahead of the film’s June 30 release.  Sales for this product line were $44.7 million in Q1 2004 compared with sales of $8.4 million in Q1 2003.  Toy division results also benefited from stronger than anticipated sales of action figures and accessories based on the Lord of the Rings film franchise, which amounted to $6.5 million in Q1 2004 compared with sales of $5.2 million in the year-ago period.  Toy division operating margins for Q1 2004 improved to approximately 30% versus 27% in Q1 2003, fueled by strong sales of all product lines and limited advertising spending.  The company expects operating margins to decline slightly in Q2 2004 due to a ramp up of planned advertising ahead of the release of the Spider-Man 2 movie.

Corporate Overhead - decreased to $4.1 million in Q1 2004 versus $5.0 million in the prior-year period.  The company expects corporate overhead to remain consistent with the Q1 level for the remainder of 2004.

Increasing Net Cash Position:
Marvel had $292 million in cash, certificates of deposit and commercial paper at March 31, 2004, compared to $247 million at December 31, 2003.  Net cash was $141 million at March 31, 2004, based on the current cash position less the $151.0 million owed to holders of 12% Senior Notes as of March 31, 2004.  This compares to net cash of $96.0 million at December 31, 2003.  The Company plans to call its Senior Notes in mid-June for a total consideration of approximately $160 million, eliminating this high-cost debt.  Following the retirement of its Senior Notes, Marvel expects cash levels at December 31, 2004 will approximate $200 million.  The Company expects to begin paying cash taxes in Q2 2004 as has been previously noted.

 

Marvel Character Feature Film Line-Up For 2004 (Release dates are controlled by Studio partners)
Film/Character	Studio/Distributor	Targeted Release Date
The Punisher	Lions Gate	Released April 16, 2004
Spider-Man 2	Sony/Columbia	June 30, 2004
Man-Thing	Fierce/Lions Gate	October 2004
Blade: Trinity	New Line Cinema	December 10, 2004 (1)
Marvel Character Feature Film Line-Up For 2005 (Release timing is controlled by Studio partners)
Film/Character	Studio/Distributor	Status
Elektra	New Regency / Fox	Script, Director, Filming starts May ’04, Feb. 18, 2005 release
Fantastic Four	Fox	Script, Director, Filming starts August ’04, July 2, 2005 release
Iron Man	New Line Cinema	Script, Slated for November 2005 release
Luke Cage	Sony/Columbia	Script
The Punisher 2	Lions Gate	Writer, Director (1)
Marvel Character Entertainment Projects in Development For 2006 & Beyond (Development and release timing is controlled by Studio partners)
Film/Character	Studio/Distributor	Status
X-Men 3	Fox	Director, May 3, 2006 release
Namor	Universal Pictures	Script, Slated for Summer ‘06
Ghost Rider	Sony	Script, Director, Pre-production, Summer ’06 (1)
Black Widow	Lions Gate	Writer, Director, Slated for 2006 release
The Hulk 2	Universal Pictures	Contract
Deathlok	Crystal Sky/Paramount	Script
Spider-Man 3	Sony/Columbia	Director, May 4, 2007 release
Black Panther	TBD
Captain America	TBD
Dr. Strange	Dimension	Contract
Iron Fist	Lions Gate	Contract
Nick Fury	TBD
Thor	TBD

(1)   Represents a change from the previously supplied schedule

Financial Guidance: Marvel Enterprises, Inc.
(in millions –  except per share amounts)	Initial Q2 2004 Guidance	2Q 2003 Results (Unaudited)	Updated 2004 Guidance	Previous 2004 Guidance (3)	2003  Results
Net sales	$143 - $148	$89.9	$448 - $468	$420 - $440	$348
Operating income	$50 - $55	$42.8	$195 - $205	$185 - $195	$167
Net income (1) (5)	$19 - $22	$32.7	$102 - $108	$95 - $105	$152
EPS attributable to common stock (1) (2) (4)	$0.16 - $0.19	$0.28	$0.89 – $0.94	$0.83 – $0.91	$1.34
Weighted average diluted common shares (4)	115.1	115.7	115.1	115.1	113.4
Effective tax rate	41%	16%	41%	41%	-1%

(1) 2003 Net income and EPS attributable to common stock includes a $31.5 million ($0.29 per diluted share) one-time, non-cash benefit from the valuation of deferred tax assets (principally net operating loss (NOL) carry-forwards). 

(2) 2003 EPS attributable to common stock is net of approximately $1.2 million in preferred stock dividends.

(3) Previous 2004 guidance ranges were provided in the Company’s March 2, 2004 release.

(4) 2003 EPS and shares outstanding data have been adjusted for the March 2004 3-for-2 stock split.

(5) 2004 Guidance reflects an early redemption premium of approximately $9 million and write-off of previously unamortized deferred debt costs of approximately $3 million associated with the planned early retirement of the senior notes in June 2004.

Updated FY 2004 financial guidance:  Marvel continues to expect that primary drivers for 2004 will include Spider-Man consumer product merchandise, increased penetration in international licensing and the on-going renewal or replacement, on improved terms, of existing licensing contracts.  Year-to-date shipments of Spider-Man 2 movie toys occurred earlier and were stronger than expected.  The Company believes it is premature to assume a continuance of that trend in the second half until it can assess the performance of sell-thru at retail.  Second-half results should benefit from the receipt of Marvel’s share of royalties derived from Spider-Man 2 box office receipts.  For the year, operating margins are expected to fall in a range of 40% - 45% with margins skewing toward the higher end of this range in the second half of 2004.  Net sales derived from the licensing division for the full year are expected to approximate 35% - 40% of total net sales with operating margins ranging from 70% to 80%.

Q2 2004 financial guidance: Marvel anticipates that the majority of the increase in total revenues versus the first quarter of 2004 will occur in the toy division as retailers have recently increased near-term orders of Spider-Man 2 movie toys.  Operating margins for the company should decrease slightly versus the first quarter of 2004 due to higher SG&A levels in the toy and licensing divisions and then operating margins should increase in subsequent quarters towards the 40% - 45% normalized range.  Marvel’s initial Q2 2004 operating income guidance also includes approximately $4 million from the licensing joint venture with Sony for Spider-Man 2 movie-related consumer product merchandise. 

Second quarter guidance includes roughly $16 million in net interest expense, which includes $4 million in interest expense, an early redemption premium of roughly $9 million, and $3 million of previously unamortized deferred debt costs.

Marvel cautions investors that inherent variability in the timing of license opportunities and entertainment events, the timing of their revenue recognition, and their relative success contributes to sequential and year-over-year variability in its interim financial results and could have a material impact on quarterly results as well as Marvel’s ability to achieve the financial performance included in its financial guidance.