Dolby Investor Relations

Dolby Laboratories Reports First Quarter Fiscal 2009 Results

All Press Releases

Feb 4, 2009

Dolby Laboratories Reports First Quarter Fiscal 2009 Results

SAN FRANCISCO, Feb 04, 2009 (BUSINESS WIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for the first quarter of fiscal 2009.

For the first quarter, Dolby reported total revenue of $180.3 million, compared to $150.2 million for the first quarter of fiscal 2008, an increase of 20 percent. First quarter net income was $78.1 million, or $0.68 per diluted share, compared to $47.7 million, or $0.42 per diluted share, for the first quarter of fiscal 2008.

Net income for the first quarter of fiscal 2009 reflects a gain of $20 million resulting from an amendment to a license agreement with an unrelated patent licensor. This gain contributed $0.12 to fiscal first quarter 2009 diluted earnings per share.

Net income for the first quarter of fiscal 2009 also reflects stock-based compensation expense of $4.6 million compared to $5.5 million for the first quarter of fiscal 2008 and charges related to the amortization of intangibles of $3.3 million compared to $2.3 million for the first quarter of fiscal 2008.

"We are pleased with our first quarter performance," said Bill Jasper, President and Chief Executive Officer, Dolby Laboratories, "and we continue to position ourselves for the long-term by pursuing new innovations and opportunities. However, we are also very mindful of the worldwide economic slowdown, and have adjusted our outlook in light of reduced consumer spending."

Guidance

Dolby now expects fiscal 2009 revenue to be $630 million to $700 million. Net income is now expected to be $193 million to $222 million. Earnings per diluted share are now expected to be $1.66 to $1.91. Included in Dolby's fiscal 2009 earnings guidance is the $20 million gain in the first quarter resulting from an amendment to the license agreement with an unrelated patent licensor, and $5 million in estimated restructuring charges for the consolidation of manufacturing operations expected in fiscal 2009. The combined net impact of the gain and restructuring charge on net income is approximately $10 million, or $0.09 per diluted share. While under FAS 123R, stock-based compensation expense may vary based on factors such as stock price or volatility, Dolby now expects stock-based compensation expense for the full year to be approximately $25 million. In addition, Dolby now expects charges related to the amortization of intangibles for fiscal 2009 to be approximately $15 million.

The Company's Conference Call Information

Members of Dolby management will lead a conference call open to all interested parties to discuss Dolby Laboratories' Q1 fiscal 2009 financial results at 2:00 p.m. PT/5:00 p.m. ET, Wednesday, February 4, 2009.

Access to the teleconference will be available over the Internet from http://investor.dolby.com/events.cfm or by dialing 1-888-663-2259. International callers can access the conference call at 1-913-312-0707.

A replay of the call will be available beginning at 5:00 p.m. PT on February 4, 2009 until 9:00 p.m. PT on February 11, 2009 at 1-888-203-1112 (international callers can access the replay by dialing 1-719-457-0820) using confirmation code 4287093. An archived version of the teleconference will also be available on www.dolby.com.

Forward-Looking Statements

Certain statements in this press release, including statements relating to Dolby's expectations regarding revenue, including net income, earnings per diluted share, future restructuring charges, stock-based compensation expense and charges relating to the amortization of intangibles for the fiscal year ending September 25, 2009, the potential effects of the worldwide economic slowdown on Dolby's future financial results, Dolby's long-term positioning and the benefits that may be derived therefrom and from new innovations and opportunities 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 the markets in which Dolby operates, including the DVD and Blu-ray Disc(TM), broadcast, personal computer, consumer electronic, broadcast, gaming, mobile and automobile markets, and trends relating to the development of additional and newer markets for Dolby technologies; the effects of the economic recession both domestically and internationally; pricing pressures; 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; Dolby's ability to develop and deliver innovative technologies in response to new and growing markets in the entertainment industry; 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 digital 3D and Dolby's ability to successfully penetrate this market; Dolby's ability to expand its business generally, and to expand its business beyond sound technologies to other technologies related to digital entertainment delivery, by acquiring and successfully integrating businesses or technologies; 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 most recent Periodic Report on Form 10-Q or 10-K. 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) is the global leader in technologies that are essential elements in the best entertainment experiences. Founded in 1965 and best known for high-quality audio and surround sound, Dolby creates innovations that enrich entertainment at the movies, at home, or on the go. Visit www.dolby.com for more information.

Dolby and the double-D symbol are registered trademarks of Dolby Laboratories. S09/20923 DLB-F

DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   
 
Fiscal Quarter Ended

December 28,
2007

December 26,
2008

(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $ 122,430 $ 154,056
Product sales 20,010 17,946
Services   7,787     8,256  
Total revenue   150,227     180,258  
 
Cost of revenue:
Cost of licensing 3,263 3,248

Cost of product sales (1)

11,648 9,359
Cost of services (1) 3,055 3,206
Gain from amended patent licensing agreement   -     (20,041 )
Total cost of revenue   17,966     (4,228 )
Gross margin   132,261     184,486  
Operating expenses:
Selling, general and administrative (1) 50,986 54,467
Research and development (1)   13,907     15,546  
Total operating expenses   64,893     70,013  
Operating income 67,368 114,473
Other income, net   5,204     2,487  
Income before provision for income taxes and controlling interest 72,572 116,960
Provision for income taxes   (24,607 )   (38,623 )
Income before controlling interest 47,965 78,337
Controlling interest in net income   (292 )   (242 )
Net income$47,673   $78,095  
 
 
Basic earnings per share $ 0.43 $ 0.69
Diluted earnings per share $ 0.42 $ 0.68
 
Weighted-average shares outstanding (basic) 110,592 112,608
Weighted-average shares outstanding (diluted) 114,700 114,870
 
 
(1) Stock-based compensation included above was classified as follows:
Cost of product sales $ 241 $ 156
Cost of services 40 27
Selling, general and administrative 4,295 3,463
Research and development 890 934
 
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
   

September 26, 2008

December 26, 2008

(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents

$

394,761

 

$ 402,434
Short-term investments 119,667 181,123
Accounts receivable, net 27,650 23,667
Inventories 18,133 16,316
Deferred taxes 91,824 81,536
Prepaid expenses and other current assets   39,834     34,236  
Total current assets 691,869 739,312
Property, plant and equipment, net 87,915 84,809
Intangible assets, net 83,060 86,714
Goodwill 250,356 236,687
Long-term investments 180,996 198,371
Deferred taxes 24,900 32,048
Other assets   17,050     23,271  
Total assets$1,336,146   $1,401,212  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 156,925 $ 129,088
Income taxes payable 4,811 21,151
Current portion of long-term debt 1,593 1,527
Deferred revenue   37,344     39,481  
Total current liabilities 200,673 191,247
Long-term debt 7,782 6,887
Deferred revenue 6,171 6,808
Deferred taxes 16,755 15,227
Other liabilities   33,414     33,807  
Total liabilities 264,795 253,976
Controlling interest 22,098 20,088
Stockholders' equity:
Class A common stock 52 52
Class B common stock 60 60
Additional paid-in capital 434,907 443,235
Retained earnings 609,495 687,579

Accumulated other comprehensive income (loss)

  4,739     (3,778 )
Total stockholders' equity   1,049,253     1,127,148  
Total liabilities and stockholders' equity$1,336,146   $1,401,212  
 
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   
Fiscal Quarter Ended

December 28, 2007

December 26, 2008

(unaudited)
(in thousands)
Operating activities: $ 47,673 $ 78,095
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,168 6,519
Stock-based compensation expense 5,119 4,531
Accretion of discounts/amortization of premium on investments (37 ) 974
Excess tax benefit from exercise of stock options (6,309 ) (792 )
Provision for doubtful accounts 192 851
Deferred taxes (7,035 ) 6,918
Gain on Put Rights - (6,606 )
Unrealized losses on auction rate certificates - 8,022
Gain from amended patent licensing agreement - (20,041 )
Other non-cash items affecting net income 229 (584 )
Changes in operating assets and liabilities:
Accounts receivable (8,123 ) 1,225
Inventories (462 ) (2,388 )
Prepaid expenses and other assets (300 ) (2,059 )
Accounts payable and accrued liabilities 10,425 (6,456 )
Income taxes, net 24,076 24,135
Deferred revenue 4,678 6,202
Other liabilities   972     (1,122 )
Net cash provided by operating activities   76,266     97,424  
Investing activities:

Purchases of available-for-sale securities

(66,255 ) (96,801 )
Proceeds from sale of available-for-sale securities 140,610 17,050
Purchases of property, plant and equipment (1,477 ) (996 )
Purchase of intangible assets - (8,321 )
Acquisitions, net of cash acquired (248,715 ) -
Other   7     -  
Net cash used in investing activities   (175,830 )   (89,068 )
Financing activities:
Payments on debt (379 ) (368 )
Proceeds from exercise of stock options 5,134 1,335

Issuance of Class A common stock (ESPP)

505 1,635
Excess tax benefit from exercise of stock options   6,309     792  
Net cash provided by financing activities   11,569     3,394  
Effect of foreign exchange rate changes on cash and cash equivalents   (226 )   (4,077 )
Net (decrease)/increase in cash and cash equivalents (88,221 ) 7,673
Cash and cash equivalents at beginning of period   368,467     394,761  
Cash and cash equivalents at end of period$280,246   $402,434  

SOURCE: Dolby Laboratories, Inc.

Dolby Laboratories
Alex Hughes, 415-645-4572 (Investors)
investor@dolby.com
Jeanne Alford, 415-645-5000 (Media)
news@dolby.com

Copyright Business Wire 2009