Dolby Investor Relations

Dolby Laboratories Reports Second-Quarter Fiscal 2008 Results

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May 1, 2008

Dolby Laboratories Reports Second-Quarter Fiscal 2008 Results

SAN FRANCISCO, May 01, 2008 (BUSINESS WIRE) -- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for its second quarter of fiscal 2008.

For the second quarter, Dolby reported total revenue of $172.6 million, compared to $129.0 million for the second quarter of fiscal 2007, an increase of 34 percent. Second-quarter net income was $56.8 million, or $0.49 per diluted share, compared to $39.1 million, or $0.34 per diluted share, for the second quarter of fiscal 2007.

Net income for the second quarter of fiscal 2008 reflects stock-based compensation expense of $6.1 million compared to $4.8 million for the second quarter of fiscal 2007. Net income for the second quarter of fiscal 2008 also reflects charges related to the amortization of intangibles of $4.1 million, compared to $0.6 million for the second quarter of fiscal 2007.

"We experienced another strong quarter across many of our global markets, including PC, gaming, and broadcast," said Bill Jasper, President and Chief Executive Officer, Dolby Laboratories. "With our position in entertainment technology, we remain focused on developing and delivering innovations that improve the digital media experience."

Guidance

Dolby now expects fiscal 2008 revenue to be $585 million to $615 million. Net income is now expected to be $170 million to $182 million. Earnings per diluted share is now expected to be $1.47 to $1.57. 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 $22 million. In addition, Dolby now expects charges related to the amortization of intangibles for fiscal 2008 to be approximately $13 million.

As part of Dolby's updated fiscal 2008 guidance, Dolby now expects increased licensing revenue and lower products and services revenue compared to its prior expectations. The higher licensing revenue expectations are the result of expected increased revenue from the PC market, while the lower products and services revenue expectations are due to the expectation that product revenue related to digital cinema will be deferred through fiscal 2008. Since licensing revenue carries a significantly higher margin than products and services revenue, Dolby now expects profitability to be higher in fiscal 2008 than its prior guidance.

The Company's Conference Call Information

Members of Dolby management will lead a conference call open to all interested parties to discuss Dolby Laboratories' Q2 fiscal 2008 financial results at 2:00 p.m. PT/5:00 p.m. ET, Thursday, May 1, 2008.

Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 888-713-3588. International callers can access the conference call at 913-981-4903.

A replay of the call will be available beginning at 5:00 p.m. PT on May 1 until 9:00 p.m. PT on May 8, 2008; dial 888-203-1112 (international callers can access the replay by dialing 719-457-0820) and enter confirmation code 9142240. An archived version of the teleconference will also be available on Dolby Laboratories' website, www.dolby.com.

Forward-Looking Statements

Certain statements in this press release, including statements relating to Dolby's expectations regarding revenue, including licensing revenue and products and services revenue, net income, earnings per diluted share, margin, stock-based compensation expense, charges relating to the amortization of intangibles, the licensing revenue related to the performance of the PC market and the deferral of product revenue related to digital cinema for the fiscal year ending September 26, 2008, Dolby's strength across its global markets, Dolby's position in entertainment technology and focus on developing and delivering innovations that improve the digital media experience, including long-term growth opportunities, 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 the markets in which Dolby operates, including the DVD and next-generation DVD, broadcast, personal computer, gaming, mobile, or portable device markets, and trends relating to the development of additional and newer markets for Dolby technologies; the timing and effects of economic downturns in the United States and abroad; 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, including countries that have historically limited recognition and enforcement of intellectual property and contractual rights; risks associated with 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, including 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 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 around the world that make the entertainment experience more realistic and immersive. For more than 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. For more information about Dolby Laboratories or Dolby(R) technologies, please visit www.dolby.com.

Dolby and the double-D symbol are registered trademarks of Dolby Laboratories. S08/19736 DLB-F

                       DOLBY LABORATORIES, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                 Fiscal Quarter    Fiscal Year-to-Date
                                      Ended               Ended
                               ------------------- -------------------
                               March 30, March 28, March 30, March 28,
                                  2007      2008      2007      2008
                               --------- --------- --------- ---------
                                             (unaudited)
                                  (in thousands, except per share
                                               amounts)
Revenue:
  Licensing                    $106,642  $149,619  $189,017  $272,049
  Product sales                  15,469    15,628    30,679    35,638
  Services                        6,899     7,310    13,756    15,097
                               --------- --------- --------- ---------
      Total revenue             129,010   172,557   233,452   322,784
                               --------- --------- --------- ---------

Cost of revenue:
  Cost of licensing              10,149     5,555    17,809     8,818
  Cost of product sales (1)       7,714     8,540    16,400    20,188
  Cost of services (1)            2,824     3,151     5,507     6,206
                               --------- --------- --------- ---------
      Total cost of revenue      20,687    17,246    39,716    35,212
                               --------- --------- --------- ---------
Gross margin                    108,323   155,311   193,736   287,572
                               --------- --------- --------- ---------
Operating expenses:
  Selling, general and
   administrative (1)            42,525    55,310    79,836   106,296
  Research and development (1)   10,960    15,725    19,796    29,632
  Gain on settlements            (1,500)     (249)   (1,500)     (249)
                               --------- --------- --------- ---------
      Total operating expenses   51,985    70,786    98,132   135,679
                               --------- --------- --------- ---------
Operating income                 56,338    84,525    95,604   151,893
Other income, net                 5,932     2,404    11,359     7,608
                               --------- --------- --------- ---------
Income before provision for
 income taxes and controlling
 interest                        62,270    86,929   106,963   159,501
Provision for income taxes      (22,776)  (29,792)  (37,228)  (54,399)
                               --------- --------- --------- ---------
Income before controlling
 interest                        39,494    57,137    69,735   105,102
Controlling interest in net
 income, net of tax                (399)     (359)     (747)     (651)
                               --------- --------- --------- ---------
Net income                     $ 39,095  $ 56,778  $ 68,988  $104,451
                               ========= ========= ========= =========


Basic earnings per share       $   0.36  $   0.51  $   0.64  $   0.94
Diluted earnings per share     $   0.34  $   0.49  $   0.61  $   0.91

Weighted-average shares
 outstanding (basic)            109,055   111,192   108,501   110,892
Weighted-average shares
 outstanding (diluted)          113,412   114,736   113,165   114,579


(1) Stock-based compensation
 included above was classified
 as follows:
  Cost of product sales        $    192  $    262  $    410  $    503
  Cost of services                   31        38        68        78
  Selling, general and
   administrative                 3,762     4,600     7,621     8,895
  Research and development          772     1,229     1,519     2,119

                       DOLBY LABORATORIES, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS

                                            September 28,  March 28,
                                                 2007         2008
                                            ------------- ------------
                                                   (unaudited)
                                                  (in thousands)
                  ASSETS
Current assets:
  Cash and cash equivalents                 $     368,467 $    347,502
  Short-term investments                          231,217       28,905
  Accounts receivable, net                         28,165       43,399
  Inventories                                      14,883       20,153
  Deferred income taxes                            73,686       81,874
  Prepaid expenses and other current assets        17,000       27,596
                                            ------------- ------------
      Total current assets                        733,418      549,429

Property, plant and equipment, net                 85,552       84,565
Intangible assets, net                             35,389       93,863
Goodwill                                           39,364      272,542
Long-term investments                              73,224      165,880
Long-term deferred income taxes                    12,393       11,956
Other assets                                       12,357       13,033
                                            ------------- ------------
      Total assets                          $     991,697 $  1,191,268
                                            ============= ============

   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities  $     119,068 $    131,006
  Income taxes payable                              9,051        2,069
  Current portion of long-term debt                 1,563        1,591
  Deferred revenue                                 13,522       24,594
                                            ------------- ------------
      Total current liabilities                   143,204      159,260

Long-term debt                                      9,691        8,810
Long-term deferred revenue                          5,073        5,221
Deferred income tax liability                           -       19,001
Other non-current liabilities                      14,294       28,914
                                            ------------- ------------
        Total liabilities                         172,262      221,206

Controlling interest                               22,279       22,392
Stockholders' equity:
  Class A common stock                                 49           51
  Class B common stock                                 61           61
  Additional paid-in capital                      375,830      407,599
  Retained earnings                               409,749      514,488
  Accumulated other comprehensive income           11,467       25,471
                                            ------------- ------------
      Total stockholders' equity                  797,156      947,670
                                            ------------- ------------
      Total liabilities and stockholders'
       equity                               $     991,697 $  1,191,268
                                            ============= ============

SOURCE: Dolby Laboratories, Inc.

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

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