Marvel Delivers Robust Third Quarter Results

INITIATES 2005 EPS GUIDANCE RANGE OF $1.07 TO $1.12 AND RAISES 2004 EPS GUIDANCE TO RANGE OF $0.96 TO $0.98


New York, New York – October 28, 2004 -- Marvel Enterprises, Inc. (NYSE: MVL), a global entertainment licensing company, today reported robust financial results for its third quarter ended September 30, 2004 and initiated financial guidance for FY 2005.

Net sales for the third quarter of 2004 rose 60% to $135.2 million compared with Q3 2003 net sales of $84.5 million. Q3 2004 operating income rose 44% to $62.1 million versus the prior year’s results due to growth in licensing income from the Spider-Man JV and Marvel Studios. A higher mix of toy segment sales, as a percentage of total sales, year-over-year, led to a shift in consolidated operating margins to 46% in Q3 2004, from 51% in Q3 2003. As a result of a $45.8 million tax swing, Marvel’s Q3 2004 net income of $34.4 million was lower than last years’ $63.2 million.

Marvel’s President and CEO, Allen Lipson, commented, “Our robust Q3 and year-to-date operating results continue to benefit from the expanding brand awareness of the Marvel Universe. The recent agreement with Antefilms for animated Fantastic Four programming is part of Marvel’s continuing strategy to support brands through multiple exposures in feature films, animated TV series, direct-to-video projects, video games, and other merchandising opportunities. This strategy is focused on developing a recurring stream of entertainment exposure fueling sales of Marvel-branded products.”

· Licensing Segment net sales in Q3 2004 increased 66% to $69.2 million from $41.6 million in Q3 2003 as revenues from the Spider-Man JV, Marvel Studios and international licensing more than off-set the expected shift in the toy licensing category. Q3 2004 net licensing sales include approximately $28.3 million in gross sales recognized as a result of the consolidation of the Spider-Man JV, compared to the year ago period in which Marvel’s portion of the JV results of $1.5 million were not consolidated but were booked as equity in net income of the joint venture. Fees generated from our studio partners increased significantly compared to the prior-year period as Marvel received additional income for the Spider-Man 2 theatrical release. In total, Marvel Studios received fees associated with six separate character properties in the Q3 2004 period.

International licensing net sales, excluding JV activity, increased more than 75% year-over-year to $7.1 million in Q3 2004 as Marvel’s international offices continued to leverage global marketing momentum. As expected, there was a shift in sales from the Hulk toys to Spider-Man movie toys that resulted in toy royalty and service fees from Toy Biz Worldwide, Ltd. changing from $19.6 million in Q3 2003 to $5.0 million in Q3 2004.

Total licensing operating expenses increased to $16.0 million in Q3 2004 compared to $13.5 million in the prior-year period as the higher costs of operating expanded global operations outweighed a lower studio share expense. Operating margins were 77% in Q3 2004 and 73% in Q3 2003. Accounting for Sony’s minority interest in the Spider-Man joint venture as royalty expense, licensing operating income in the quarter would have been $46.3 million and operating margins for the licensing segment would have been 67% compared to 73% in Q3 2003.

· Marvel’s Publishing Segment net sales rose 15% to $22.6 million due to strength in core comic sales, advertising and custom projects. In total, there was an approximate 5% increase in total circulation to 12.4 million units compared to the prior year period, reflecting success in the Company’s title management strategy. Excluding one-time gains of $1.0 million related to pre-bankruptcy claims, operating income in Q3 2004 would have been $8.4 million with an operating margin of 37%, compared to an operating margin of 36% in the prior-year period.

· Marvel’s Toy Segment net sales increased 86% to $43.4 million from the prior-year period due to strong shipments of action figures and accessories based on the Spider-Man 2 movie. Spider-Man movie toy sales were $36.6 million in Q3 2004 compared with sales of $5.9 million in Q3 2003. Due to a planned increase in advertising and promotions heading into the competitive holiday season, operating margins in the toy segment declined year-over-year from 35% in Q3 2003 to 18% in Q3 2004. Through September 30, 2004, sales of Spider-Man movie toys were $161.2 million, in-line with Marvel’s previous guidance of $160 million to $170 million for the year.

· Corporate Overhead increased compared to the prior year period due to higher reserves and compensation for new and existing employees.

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