Dolby Investor Relations

SAN FRANCISCO--(BUSINESS WIRE)-- Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for its first quarter of fiscal 2012.

For the first quarter, Dolby reported total revenue of $233.4 million, compared to $242.7 million for the first quarter of fiscal 2011.

First quarter GAAP net income was $73.2 million, or $0.67 per diluted share, compared to $86.4 million, or $0.76 per diluted share, for the first quarter of fiscal 2011. On a non-GAAP basis, first quarter net income was $83.1 million, or $0.76 per diluted share, compared to $85.0 million, or $0.75 per diluted share, for the first quarter of fiscal 2011. Dolby's non-GAAP measures exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. In addition, the non-GAAP measures exclude a one-time benefit resulting from the release of a deferred tax liability in the first quarter of fiscal 2011.

"In the first quarter, we grew licensing revenue year over year on the strength of our broadcast and mobile markets," said Kevin Yeaman, President and Chief Executive Officer, Dolby Laboratories. "We continue to enhance the entertainment experience in online content with the addition of services such as HBO Go®, which recently announced the adoption of Dolby® Digital Plus."

Financial Targets

For fiscal 2012, Dolby continues to target revenue of $910 million to $970 million.

GAAP

For fiscal 2012, Dolby continues to target total gross margin of approximately 90 percent, operating expenses of $465 million to $475 million, and other income of approximately $5 million. In addition, Dolby continues to target a tax rate of approximately 29 percent to 30 percent for fiscal 2012. While stock-based compensation expense may vary based on factors such as stock price or volatility, Dolby continues to target stock-based compensation expense for fiscal 2012 of approximately $51 million. In addition, Dolby continues to target charges related to the amortization of acquired intangibles for fiscal 2012 of approximately $10 million and restructuring charges of approximately $2 million.

Non-GAAP

For fiscal 2012, Dolby continues to target total gross margin of approximately 91 percent, operating expenses of $410 million to $420 million, and other income of approximately $5 million. In addition, Dolby continues to target a tax rate of approximately 29 percent to 30 percent for fiscal 2012. Dolby's non-GAAP targets exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. In addition, the non-GAAP measures exclude a one-time benefit resulting from the release of a deferred tax liability in the first quarter of fiscal 2011.

Diluted Earnings per Share

Dolby continues to target diluted shares outstanding of approximately 110 million. These targets lead to a fiscal 2012 diluted earnings per share target range of $2.31 to $2.61 on a GAAP basis and $2.71 to $3.02 on a non-GAAP basis.

The Company's Conference Call Information

Members of Dolby Laboratories' management will lead a conference call open to all interested parties to discuss the Company's first quarter fiscal 2012 financial results at 2:00 p.m. PT (5:00 p.m. ET) on Tuesday, January 31, 2012.

Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 1-888-437-9274 from within the United States or 1-719-325-2297 from outside the country.

A replay of the call will be available from 5:00 p.m. PT on Tuesday, January 31, 2012, until 9:00 p.m. PT on Tuesday, February 7, 2012. Callers can dial 1-877-870-5176 from within the United States or 1-858-384-5517 from outside the country, and then enter the confirmation code 5824012. An archived version of the teleconference will also be available on the Dolby Laboratories website, www.dolby.com.

Non-GAAP Financial Information

To supplement Dolby's financial statements presented on a GAAP basis, Dolby provides non-GAAP financial measures of gross margin, operating expense, tax rate, and diluted earnings per share. These measures are adjusted to exclude the charges and expenses discussed above. Dolby presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Dolby's operating results in a manner that focuses on what Dolby's management believes to be its ongoing business operations. Dolby's management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the impact of stock-based compensation expense, amortization of intangible assets acquired through business combinations, restructuring charges, the related tax impact of all of these items on the provision for income taxes, and a one-time benefit resulting from the release of a deferred tax liability in the first quarter of fiscal 2011, and the non-GAAP measures that exclude such information in order to assess the performance of Dolby's business for planning and forecasting in subsequent periods. Dolby's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever Dolby uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above. Investors are also encouraged to review Dolby's GAAP financial statements as reported in its SEC filings. A reconciliation between GAAP and non-GAAP financial measures is provided at the end of this press release and on Dolby's investor relations website at http://investor.dolby.com/medialist.cfm.

Forward-Looking Statements

Certain statements in this press release, including statements relating to Dolby's expectations regarding revenue, gross margin, operating expense, other income, tax rate, stock-based compensation, amortization of intangibles, restructuring charges, and diluted earnings per share for fiscal 2012, and its statements regarding the strength of its broadcast and mobile markets, its opportunities with respect to online content, and the benefits that may be derived from them 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 that Dolby technologies may not be included in future PC operating systems; risks associated with trends in the markets in which Dolby operates, including the personal computer, DVD, and Blu-ray Disc™, broadcast, consumer electronics, gaming, mobile, and automobile markets; pricing pressures; risks that shifts from disc-based media to online media content could result in fewer devices with Dolby technologies; risks associated with the effects of macroeconomic conditions; 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 annual report on Form 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. 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. HBO Go is a registered trademark of Home Box Office, Inc. Blu-ray Disc is a trademark of Blu-ray Disc Association. S12/25293 DLB-F

DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		Fiscal Quarter Ended
		December 31, 2010				December 30, 2011
		(unaudited) (in thousands, except per share amounts)
Revenue:
Licensing		$	188,176			$	199,624
Products			46,027				26,400
Services			8,509				7,354
Total revenue			242,712				233,378
Cost of revenue:
Cost of licensing			3,961				3,328
Cost of products			22,198				13,888
Cost of services			2,980				3,194
Total cost of revenue			29,139				20,410
Gross margin			213,573				212,968
Operating expenses:
Research and development			28,327				32,826
Sales and marketing			38,217				43,016
General and administrative			37,042				35,465
Restructuring charges, net			785				368
Total operating expenses			104,371				111,675
Operating income			109,202				101,293
Other income, net			1,864				1,911
Income before provision for income taxes			111,066				103,204
Provision for income taxes			(24,301	)			(29,838	)
Net income including controlling interest			86,765				73,366
Less: net (income) / loss attributable to controlling interest			(378	)			(207	)
Net income attributable to Dolby Laboratories, Inc.		$	86,387			$	73,159
Basic earnings per share		$	0.77			$	0.67
Diluted earnings per share		$	0.76			$	0.67
Weighted-average shares outstanding (basic)			112,035				108,884
Weighted-average shares outstanding (diluted)			113,713				109,443

DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
		September 30, 2011			December 30, 2011
		(unaudited)
		(in thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	551,512		$	654,414
Short-term investments			391,281			367,412
Accounts receivable, net			61,815			54,211
Inventories			26,244			33,515
Deferred taxes			90,869			92,582
Prepaid expenses and other current assets			36,877			26,916
Total current assets			1,158,598			1,229,050
Long-term investments			272,797			247,273
Property, plant and equipment, net			117,107			123,536
Intangible assets, net			51,573			47,922
Goodwill			263,260			263,780
Deferred taxes			14,779			20,390
Other non-current assets			6,273			7,169
Total assets		$	1,884,387		$	1,939,120
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	127,922		$	106,558
Income taxes payable			4,762			18,662
Deferred revenue			26,701			24,412
Total current liabilities			159,385			149,632
Long-term deferred revenue			15,526			17,124
Deferred taxes			671			639
Other non-current liabilities			23,455			27,637
Total liabilities			199,037			195,032
Stockholders' equity:
Class A common stock			52			52
Class B common stock			58			57
Additional paid-in capital			210,681			196,545
Retained earnings			1,445,189			1,518,348
Accumulated other comprehensive income			7,533			7,108
Total stockholders' equity - Dolby Laboratories, Inc.			1,663,513			1,722,110
Controlling interest			21,837			21,978
Total stockholders' equity			1,685,350			1,744,088
Total liabilities and stockholders' equity		$	1,884,387		$	1,939,120

DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Fiscal Quarter Ended
		December 31, 2010				December 30, 2011
		(unaudited)
		(in thousands)
Operating activities:
Net income including controlling interest		$	86,765			$	73,366
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			9,539				9,929
Stock-based compensation expense			11,260				11,439
Amortization of premium on investments			3,235				4,920
Excess tax benefit from exercise of stock options			(9,386	)			(57	)
Provision for doubtful accounts			333				(52	)
Deferred taxes			(6,640	)			(7,643	)
Other non-cash items affecting net income			(476	)			1,227
Changes in operating assets and liabilities:
Accounts receivable			(14,789	)			7,531
Inventories			536				(7,271	)
Prepaid expenses and other assets			(1,450	)			1,101
Accounts payable and accrued liabilities			(27,815	)			(22,860	)
Income taxes, net			20,510				24,431
Deferred revenues			(843	)			(661	)
Other non-current liabilities			(127	)			392
Net cash provided by operating activities			70,652				95,792
Investing activities:
Purchases of available-for-sale securities			(309,660	)			(54,726	)
Proceeds from sales and maturities of available-for-sale securities			159,825				99,133
Purchases of property, plant and equipment			(9,646	)			(12,566	)
Acquisitions, net of cash acquired			(3,350	)			(575	)
Proceeds from sales of property, plant and equipment and assets held for sale			621				335
Net cash provided by/(used in) investing activities			(162,210	)			31,601
Financing activities:
Proceeds from issuance of common stock, net of shares withheld for taxes			15,749				1,783
Repurchase of common stock			(45,966	)			(26,068	)
Excess tax benefit from exercise of stock options			9,386				57
Net cash used in financing activities			(20,831	)			(24,228	)
Effect of foreign exchange rate changes on cash and cash equivalents			166				(263	)
Net increase/(decrease) in cash and cash equivalents			(112,223	)			102,902
Cash and cash equivalents at beginning of period			545,861				551,512
Cash and cash equivalents at end of period		$	433,638			$	654,414

GAAP to Non-GAAP Reconciliations
(In millions, except per share data)
The following tables show the Company's first quarter of fiscal years 2011 and 2012 GAAP financial measures reconciled to non-GAAP financial measures included in this release:
Net income:		Fiscal Quarter Ended				Fiscal Quarter Ended
		December 31, 2010				December 30, 2011
GAAP net income		$	86.4			$	73.2
Stock-based compensation			11.3				11.4
Amortization of acquired intangibles			2.9				2.7
Restructuring charges, net			0.8				0.4
Income tax adjustments			(16.4	)			(4.6	)
Non-GAAP net income		$	85.0			$	83.1
Diluted earnings per share:		Fiscal Quarter Ended				Fiscal Quarter Ended
		December 31, 2010				December 30, 2011
GAAP diluted earnings per share		$	0.76			$	0.67
Stock-based compensation			0.10				0.10
Amortization of acquired intangibles			0.02				0.03
Restructuring charges, net			0.01				-
Income tax adjustments			(0.14	)			(0.04	)
Non-GAAP diluted earnings per share		$	0.75			$	0.76
Shares used in computing diluted earnings per share			114				109
The following tables show the Company's fiscal year 2012 GAAP financial targets reconciled to non-GAAP financial targets included in this release (numbers are approximate):
Gross margin:
		Fiscal Year 2012
GAAP gross margin			90	%
Stock-based compensation			0	%
Amortization of acquired intangibles			1	%
Non-GAAP gross margin			91	%
Product gross margin:		Fiscal Year 2012
		Low				High
GAAP products gross margin			37	%			39	%
Stock-based compensation			1	%			1	%
Amortization of acquired intangibles			2	%			2	%
Non-GAAP products gross margin			40	%			42	%
Operating expenses:		Fiscal Year 2012
		Low				High
GAAP operating expenses		$	465			$	475
Stock-based compensation			(50	)			(50	)
Amortization of acquired intangibles			(3	)			(3	)
Restructuring charges, net			(2	)			(2	)
Non-GAAP operating expenses		$	410			$	420
Diluted earnings per share:		Fiscal Year 2012
		Low				High
GAAP diluted earnings per share		$	2.31			$	2.61
Stock-based compensation			0.46				0.46
Amortization of acquired intangibles			0.09				0.09
Restructuring charges, net			0.02				0.02
Income tax adjustments			(0.17	)			(0.16	)
Non-GAAP diluted earnings per share		$	2.71			$	3.02
Shares used in computing diluted earnings per share			110				110

Dolby Laboratories
Investor Contact:
Alex Hughes, 415-645-4572
investor@dolby.com
Media Contact:
Sean Durkin, 415-645-5000
Dolby Laboratories
news@dolby.com

Source: Dolby Laboratories, Inc.

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