Marvel Entertainment has reported increased net sales for its third quarter, thanks to earlier than expected recognition of $60 million in film revenues associated with the box office performance of Iron Man.
However, despite this good news, licensing segment net sales declined to $58.1 million in Q3 compared to $82.2 million in Q3 2007, reflecting the decreases from Spider-man LP, Marvel's Spider-man feature film merchandising joint venture, and $16.8 million in the 2007 period from unusually high audit settlements recorded predominantly in Studio licensing.
Operating income in the segment declined to $42.5 million in Q3 2008 from $59.0 million in Q3 2007. However, Q3 did benefit from licensing activity related to Iron Man and The Incredible Hulk franchises.
"We're very pleased with the success that we've achieved thus far in 2008 and that we anticipate for the remainder of the year," said Marvel's chairman Morton Handel. "Reflecting our financial strength, for the first nine months of 2008 Marvel has generated cash flow from operating activities of $172 million, and we remain optimistic regarding our long-term prospects across all of our businesses.
"However, we anticipate only a modest performance in 2009 for revenues and net income.
"The 2009 decline reflects an expected substantial reduction in Spider-man LP revenue, the absence of any new Marvel Studios feature film releases during the year and a related decrease in licensing activity, as well as the expectation that the economic environment may affect the performance of retailers and licensees.
"Additionally, the increase announced today in our financial guidance for 2008 as a result of earlier-than-expected revenue from Iron Man box office and DVD sales causes an offset in our expected 2009 revenue.
"Looking ahead to 2010 and 2011, we expect to return to releasing two tent-pole summer movies per year with their related licensing and marketing programs to drive our company-wide performance," Handel continued.
"While Marvel's core licensing business continues to grow, global visibility and consumer demand created by tent-pole feature films based on our characters, as well as the timing of related revenues, creates variability in our year-over-year operating income. As an organisation, we take a multi-year view in managing our business. We believe such a perspective is both prudent and beneficial for our shareholders."
Iron Man 2 is due for release at the box office on May 7th 2010, followed by Thor on July 16th 2010. The First Avenger: Captain America is then due on May 6th 2011 and The Avengers on July 15th 2011.