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SAN FRANCISCO, Aug 02, 2006 (BUSINESS WIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for the third quarter of fiscal 2006.
For the third quarter, Dolby reported total revenue of $93.7 million, compared to $79.7 million for the third quarter of fiscal 2005, an increase of 18 percent. Third quarter net income was $19.1 million, or $0.17 per diluted share, compared to $14.8 million, or $0.13 per diluted share, for the third quarter of fiscal 2005.
Net income for the third quarter included stock-based compensation charges of $4.7 million compared to $3.2 million in the third quarter of fiscal 2005.
"We continued to make progress extending our technology and brand globally," said Bill Jasper, President and Chief Executive Officer of Dolby. "In the third quarter, broadcasters in China, Europe, Japan, Korea and the US chose Dolby(R) technologies to broadcast the highly anticipated FIFA World Cup games and Dolby Digital was selected by the first HD channel in China to offer 100 percent of its programming in surround sound."
Guidance
For fiscal 2006, the Company now expects revenue to be in the range of $370 million to $375 million. Net income is expected to be in the range of $74 million to $77 million. Earnings per diluted share are expected to be in the range of $0.66 to $0.69. While under FAS 123R stock-based compensation expense may vary based on factors such as stock price or volatility, Dolby continues to expect stock-based compensation expense for the full year to be between $19 million and $21 million.
Pro Forma Information
Prior to the Company's IPO in February 2005, Ray Dolby retained ownership of the intellectual property he created related to the Company's business and licensed those rights to the Company in exchange for royalty payments. In connection with the Company's IPO, Ray Dolby contributed to the Company all of these intellectual property rights. The pro forma financial information included in this release gives effect to the asset contribution as though such contribution had been completed prior to the second quarter of fiscal 2005. Specifically, the Company provides net income and earnings per diluted share excluding royalties paid to Ray Dolby. The Company believes that net income and earnings per diluted share excluding royalties paid to Ray Dolby are important metrics as they represent profitability exclusive of the charges that have now been eliminated. The Company uses these metrics internally to measure its performance and believes these metrics may be meaningful for investors in analyzing the Company's results of operations. A reconciliation of the Company's actual results to these additional metrics is included in this release.
The Company's Conference Call Information
Today, beginning at 2:00 p.m. Pacific Daylight Time, members of Dolby management will lead a conference call open to all interested parties to discuss the quarterly results and answer questions.
Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 800-289-0494. International callers can access the conference call at 913-981-5520.
A replay of the call will be available beginning at 5:00 p.m. PDT on August 2, 2006 until 9 p.m. PDT on August 9, 2006, at 888-203-1112 (international callers can access the replay by dialing 719-457-0820) and entering confirmation code 9645591. An archived version of the teleconference will also be available on Dolby's website, www.dolby.com.
Forward-Looking Statements
Certain statements in this press release, including statements relating to Dolby's expectations regarding revenue, net income, earnings per diluted share, and stock-based compensation for the fiscal year ending September 29, 2006 and Dolby's expectations concerning extensions of its technology and brand and the benefits that may be derived therefrom are "forward-looking statements" that are subject to risks and uncertainties. These forward-looking statements are based on management's current expectations, and as a result of certain risks and uncertainties actual results may differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: risks associated with trends in DVD markets; pricing pressures; the development of the markets for PCs, broadcast, gaming, automotive, and AAC-based music device products that incorporate Dolby's technologies; the timing of Dolby's receipt of royalty reports and/or payments from its licensees; Dolby's accuracy of calculation of royalties due to its licensors; Dolby's ability to develop, maintain, and strengthen relationships with industry participants; competitive risks; risks associated with conducting business in China and other countries that have historically limited recognition and enforcement of intellectual property and contractual rights; risks associated with the health of the motion picture industry generally; the development and growth of the market for digital cinema and Dolby's ability to successfully penetrate this market; and other risks detailed in Dolby's Securities and Exchange Commission filings and reports, including the risks identified under the section captioned "Risk Factors" in its Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q. Dolby disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.
About Dolby Laboratories
Dolby Laboratories (NYSE:DLB) develops and delivers products and technologies that make the entertainment experience more realistic and immersive. For four decades, Dolby has been at the forefront of defining high-quality audio and surround sound in cinema, broadcast, home audio systems, cars, DVDs, headphones, games, televisions, and personal computers. Based in San Francisco with European headquarters in England, the Company has entertainment industry liaison offices in New York and Los Angeles, and licensing liaison offices in London, Shanghai, Beijing, Hong Kong, and Tokyo. For more information about Dolby Laboratories or Dolby technologies, please visit www.dolby.com.
Dolby and the double-D symbol are registered trademarks of Dolby Laboratories. S06/17429 DLB-F
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Fiscal Year-to-Date
Ended Ended
----------------------- -----------------------
July 1, June 30, July 1, June 30,
2005 2006 2005 2006
----------- ----------- ----------- -----------
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $ 60,775 $ 69,138 $ 187,683 $ 221,303
Product sales 13,486 18,862 44,780 50,574
Production services 5,418 5,650 16,580 17,522
---------------------------------------------- -----------------------
Total revenue 79,679 93,650 249,043 289,399
---------------------------------------------- -----------------------
Cost of revenue:
Cost of licensing 5,156 6,008 35,367 19,786
Cost of product
sales (1) 6,754 10,190 23,038 29,754
Cost of production
services (1) 2,246 2,686 6,442 7,913
---------------------------------------------- -----------------------
Total cost of
revenue 14,156 18,884 64,847 57,453
---------------------------------------------- -----------------------
Gross margin 65,523 74,766 184,196 231,946
---------------------------------------------- -----------------------
Operating expenses:
Selling, general and
administrative (1) 33,372 38,477 101,839 113,598
Research and
development (1) 6,885 9,108 22,914 25,413
Settlements - - (2,000) -
---------------------------------------------- -----------------------
Total operating
expenses 40,257 47,585 122,753 139,011
---------------------------------------------- -----------------------
Operating income 25,266 27,181 61,443 92,935
Other income, net 2,062 4,020 3,100 12,313
---------------------------------------------- -----------------------
Income before
provision for income
taxes and controlling
interest 27,328 31,201 64,543 105,248
Provision for income
taxes 12,332 11,778 28,075 39,916
---------------------------------------------- -----------------------
Income before
controlling interest 14,996 19,423 36,468 65,332
Controlling interest
in net income (218) (339) (983) (1,000)
---------------------------------------------- -----------------------
Net income $ 14,778 $ 19,084 $ 35,485 $ 64,332
============================================== =======================
Basic net income per
share $ 0.14 $ 0.18 $ 0.37 $ 0.61
Diluted net income per
share $ 0.13 $ 0.17 $ 0.34 $ 0.58
---------------------------------------------- -----------------------
Basic shares
outstanding 103,410 106,238 94,796 105,262
Diluted shares
outstanding 112,750 111,983 104,954 111,446
---------------------------------------------- -----------------------
(1) Stock-based compensation included in net income above was
classified as follows:
Cost of product
sales $ 56 $ 201 $ 166 $ 599
Cost of production
services 27 129 83 385
Selling, general and
administrative 2,674 3,731 9,464 11,941
Research and
development 471 679 1,722 2,015
---------------------------------------------- -----------------------
Total stock-based
compensation $ 3,228 $ 4,740 $ 11,435 $ 14,940
============================================== =======================
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
2005 2006
------------- -------------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 372,403 $ 373,421
Short-term investments - 74,176
Restricted cash 205 208
Accounts receivable, net 25,221 23,597
Inventories 11,722 11,957
Income tax receivable 8,021 13,865
Deferred income taxes 31,183 36,425
Prepaid expenses and other current
assets 5,433 4,834
----------------------------------------------------------------------
Total current assets 454,188 538,483
Property, plant and equipment, net 76,462 76,801
Intangible assets, net 17,184 15,512
Goodwill 23,865 23,188
Long-term investments - 23,767
Long-term deferred income taxes 6,781 8,790
Other assets 7,797 7,319
----------------------------------------------------------------------
Total assets $ 586,277 $ 693,860
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 65,126 $ 71,764
Income taxes payable 3,054 4,026
Current portion of debt 1,346 1,416
Deferred revenue 3,268 5,701
----------------------------------------------------------------------
Total current liabilities 72,794 82,907
Long-term debt 12,124 11,270
Other non-current liabilities 21,956 19,121
----------------------------------------------------------------------
Total liabilities 106,874 113,298
Controlling interest 18,264 19,761
Stockholders' equity:
Class A common stock 33 37
Class B common stock 71 70
Additional paid-in capital 308,354 315,327
Deferred stock-based compensation (26,422) -
Retained earnings 177,369 241,701
Accumulated other comprehensive income 1,734 3,666
----------------------------------------------------------------------
Total stockholders' equity 461,139 560,801
----------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 586,277 $ 693,860
======================================================================
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA NET INCOME TO ACTUAL NET INCOME
Fiscal Quarter Fiscal Year-to-Date
Ended Ended
----------------------- -----------------------
July 1, June 30, July 1, June 30,
2005 2006 2005 2006
----------- ----------- ----------- -----------
(unaudited)
(in thousands, except per share amounts)
Net income $ 14,778 $ 19,084 $ 35,485 $ 64,332
Add:
Royalties payable
to Ray Dolby (net
of taxes) - - 11,123 -
---------------------------------------------- -----------------------
Pro forma net income $ 14,778 $ 19,084 $ 46,608 $ 64,332
============================================== =======================
Basic shares
outstanding 103,410 106,238 94,796 105,262
Diluted shares
outstanding 112,750 111,983 104,954 111,446
---------------------------------------------- -----------------------
Basic net income per
share $ 0.14 $ 0.18 $ 0.37 $ 0.61
Diluted net income per
share $ 0.13 $ 0.17 $ 0.34 $ 0.58
---------------------------------------------- -----------------------
Basic pro forma net
income per share $ 0.14 $ 0.18 $ 0.49 $ 0.61
Diluted pro forma net
income per share $ 0.13 $ 0.17 $ 0.44 $ 0.58
---------------------------------------------- -----------------------
SOURCE: Dolby Laboratories, Inc.
Dolby Laboratories, Inc. Alex Hughes, CFA, 415-645-4572 (Investors) investor@dolby.com Paula Dunn, 415-645-5000 (Media) news@dolby.com
Copyright Business Wire 2006
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