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Dolby Laboratories Reports First Quarter Fiscal 2014 Financial Results
First quarter GAAP net income was
"We're pleased to report that 2014 is off to a strong start with first
quarter revenues higher than originally projected and a great reception
to the introduction of Dolby Vision at the Consumer Electronics Show,"
said
Financial Outlook
Q2 2014
Dolby estimates that total revenue will range from
Dolby anticipates that operating expenses will be between approximately
Dolby expects diluted earnings per share to be between
The Company estimates that its fiscal Q2 2014 effective tax rate will be between approximately 27% and 28% on both a GAAP and non-GAAP basis.
FISCAL YEAR 2014
Dolby anticipates that total revenue will range from
Dolby anticipates that operating expenses will be between approximately
The Company's Conference Call Information
Members of Dolby management will lead a conference call open to all
interested parties to discuss Dolby Laboratories' first quarter fiscal
2014 financial results at
Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 1-800-829-9048. International callers can access the conference call at 1-913-312-0845.
A replay of the call will be available from
Non-GAAP Financial Information
To supplement Dolby's financial statements presented on a GAAP basis,
Dolby provides certain non-GAAP financial measures. These measures are
adjusted to exclude amounts related to stock-based compensation, expense
associated with dividend equivalents paid on restricted stock units, the
amortization of intangibles from business combinations, restructuring
charges, and the related tax impact of these items. Dolby presents
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 both GAAP and non-GAAP
measures 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 non-GAAP
financial measures in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. Whenever Dolby uses
non-GAAP financial measures, it provides a reconciliation of the
non-GAAP financial measures to the most closely applicable GAAP
financial measures. 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 measures as
detailed above. Investors are also encouraged to review Dolby's GAAP
financial statements as reported in its filings with the
Forward-Looking Statements
Certain statements in this press release, including, but not limited to,
statements relating to Dolby's expected financial results for the second
quarter of 2014 and fiscal year 2014 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 personal computer,
DVD, and Blu-ray Disc™, broadcast, consumer electronics, gaming, mobile,
and automobile markets; the loss of, or reduction in sales by, a key
customer or licensee; pricing pressures; risks associated with the rate
at which OEMs include optical disc playback in Windows® 8
devices and the rate of consumer adoption of Windows operating systems;
risks that a shift from disc-based media to online media content could
result in fewer devices with Dolby technologies; risks associated with
the effects of macroeconomic conditions, including trends in consumer
spending; risks relating to the expiration of patents; the timing of
Dolby's receipt of royalty reports and 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
About
Dolby and the double-D symbol are registered trademarks of
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CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||
(in thousands, except per share amounts) |
||||||||||
(unaudited) |
||||||||||
Fiscal Quarter Ended | ||||||||||
|
|
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2013 | 2012 | |||||||||
Revenue: | ||||||||||
Licensing | $ | 205,660 | $ | 204,876 | ||||||
Products | 18,104 | 25,498 | ||||||||
Services | 7,513 | 6,228 | ||||||||
Total revenue | 231,277 | 236,602 | ||||||||
Cost of revenue: | ||||||||||
Cost of licensing | 4,001 | 3,080 | ||||||||
Cost of products | 13,788 | 18,489 | ||||||||
Cost of services | 3,593 | 4,036 | ||||||||
Total cost of revenue | 21,382 | 25,605 | ||||||||
Gross margin | 209,895 | 210,997 | ||||||||
Operating expenses: | ||||||||||
Research and development | 44,463 | 42,436 | ||||||||
Sales and marketing | 60,379 | 58,421 | ||||||||
General and administrative | 41,908 | 43,108 | ||||||||
Restructuring charges | 3,215 | — | ||||||||
Total operating expenses | 149,965 | 143,965 | ||||||||
Operating income | 59,930 | 67,032 | ||||||||
Interest income | 654 | 1,339 | ||||||||
Interest expense | (112 | ) | (25 | ) | ||||||
Other income, net | 229 | 713 | ||||||||
Income before income taxes | 60,701 | 69,059 | ||||||||
Provision for income taxes | (15,455 | ) | (17,582 | ) | ||||||
Net income including controlling interest | 45,246 | 51,477 | ||||||||
Less: net (income) attributable to controlling interest | (731 | ) | (128 | ) | ||||||
Net income attributable to |
$ | 44,515 | $ | 51,349 | ||||||
Net income per share: | ||||||||||
Basic | $ | 0.44 | $ | 0.50 | ||||||
Diluted | $ | 0.43 | $ | 0.50 | ||||||
Weighted-average shares outstanding: | ||||||||||
Basic | 101,750 | 102,361 | ||||||||
Diluted | 103,192 | 103,523 | ||||||||
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CONSOLIDATED BALANCE SHEETS |
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(in thousands, except share and per share amounts) |
||||||||
(unaudited) |
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2013 | 2013 | |||||||
ASSETS |
(unaudited) |
|||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 484,640 | $ | 454,397 | ||||
Restricted cash | 3,349 | 3,175 | ||||||
Short-term investments | 179,406 | 140,267 | ||||||
Accounts receivable, net | 75,949 | 97,460 | ||||||
Inventories | 8,253 | 10,093 | ||||||
Deferred taxes | 81,630 | 84,238 | ||||||
Prepaid expenses and other current assets | 25,584 | 28,949 | ||||||
Total current assets | 858,811 | 818,579 | ||||||
Long-term investments | 293,719 | 306,338 | ||||||
Property, plant and equipment, net | 243,712 | 242,917 | ||||||
Intangible assets, net | 37,996 | 41,315 | ||||||
Goodwill | 279,059 | 279,724 | ||||||
Deferred taxes | 41,265 | 37,434 | ||||||
Other non-current assets | 11,063 | 11,638 | ||||||
Total assets | $ | 1,765,625 | $ | 1,737,945 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 7,490 | $ | 10,695 | ||||
Accrued liabilities | 124,964 | 137,795 | ||||||
Income taxes payable | 2,412 | 3,394 | ||||||
Deferred revenue | 15,165 | 20,931 | ||||||
Total current liabilities | 150,031 | 172,815 | ||||||
Long-term deferred revenue | 19,532 | 19,663 | ||||||
Other non-current liabilities | 46,292 | 45,441 | ||||||
Total liabilities | 215,855 | 237,919 | ||||||
Stockholders' equity: | ||||||||
Class A common stock | 49 | 47 | ||||||
Class B common stock | 54 | 55 | ||||||
Additional paid-in capital | 23,594 | 18,812 | ||||||
Retained earnings | 1,498,897 | 1,454,382 | ||||||
Accumulated other comprehensive income | 7,385 | 7,814 | ||||||
Total stockholders' equity - |
1,529,979 | 1,481,110 | ||||||
Controlling interest | 19,791 | 18,916 | ||||||
Total stockholders' equity | 1,549,770 | 1,500,026 | ||||||
Total liabilities and stockholders' equity | $ | 1,765,625 | $ | 1,737,945 | ||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(in thousands) |
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(unaudited) |
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Fiscal Quarter Ended | ||||||||||
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2013 | 2012 | |||||||||
Operating activities: | ||||||||||
Net income including controlling interest | $ | 45,246 | $ | 51,477 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 12,409 | 13,129 | ||||||||
Stock-based compensation | 15,054 | 17,704 | ||||||||
Amortization of premium on investments | 2,266 | 3,794 | ||||||||
Excess tax benefit from exercise of stock options | (1,010 | ) | (469 | ) | ||||||
Provision for doubtful accounts | 374 | (179 | ) | |||||||
Deferred income taxes |
(1,322 |
) | (2,627 | ) | ||||||
Other non-cash items affecting net income | 105 | (691 | ) | |||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable |
21,148 |
(8,064 | ) | |||||||
Inventories | 2,225 | (6,173 | ) | |||||||
Prepaid expenses and other assets |
(1,631 |
) | 8,916 | |||||||
Accounts payable and other liabilities |
(16,696 |
) | (19,898 | ) | ||||||
Income taxes, net |
3,607 |
9,512 | ||||||||
Deferred revenue |
(5,897 |
) | (143 | ) | ||||||
Other non-current liabilities | 1,404 | 1,012 | ||||||||
Net cash provided by operating activities |
77,282 |
67,300 | ||||||||
Investing activities: | ||||||||||
Purchases of available-for-sale securities | (102,717 | ) | (204,135 | ) | ||||||
Proceeds from sales of available-for-sale securities | 27,426 | 389,068 | ||||||||
Proceeds from maturities of available-for-sale securities | 46,739 | 51,325 | ||||||||
Purchases of property, plant and equipment | (8,967 | ) | (6,717 | ) | ||||||
Other investments | — | (3,000 | ) | |||||||
Purchases of intangible assets | — | (4,048 | ) | |||||||
Proceeds from sale of property, plant and equipment and assets held for sale | 42 | 19 | ||||||||
Change in restricted cash |
(174 |
) | (291 | ) | ||||||
Net cash provided by/(used in) investing activities |
(37,651 |
) | 222,221 | |||||||
Financing activities: | ||||||||||
Proceeds from issuance of common stock | 8,127 | 4,502 | ||||||||
Repurchase of common stock | (11,660 | ) | (53,956 | ) | ||||||
Payment of cash dividend | — | (408,206 | ) | |||||||
Distribution to controlling interest | — | (5,039 | ) | |||||||
Excess tax benefit from the exercise of stock options | 1,010 | 469 | ||||||||
Shares repurchased for tax withholdings on vesting of restricted stock | (6,727 | ) | (3,636 | ) | ||||||
Net cash used in financing activities | (9,250 | ) | (465,866 | ) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
(138 |
) | (62 | ) | ||||||
Net increase/(decrease) in cash and cash equivalents | 30,243 | (176,407 | ) | |||||||
Cash and cash equivalents at beginning of period | 454,397 | 492,600 | ||||||||
Cash and cash equivalents at end of period | $ | 484,640 | $ | 316,193 | ||||||
Supplemental disclosure: | ||||||||||
Cash paid for income taxes, net of refunds received | $ | 11,593 | $ | 11,734 | ||||||
Cash paid for interest | $ | 1 | $ | 1 | ||||||
GAAP to Non-GAAP Reconciliations | ||||||||
(In millions, except per share data) | ||||||||
The following tables present the Company's GAAP financial measures reconciled to the non-GAAP financial measures included in this release for the first quarter of fiscal 2014 and 2013: | ||||||||
Net income: | Fiscal Quarter Ended | |||||||
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|
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2013 | 2012 | |||||||
GAAP net income | $ | 44.5 | $ | 51.3 | ||||
Stock-based compensation | 15.1 | 17.7 | ||||||
RSU dividend equivalent | 0.8 | — | ||||||
Amortization of acquired intangibles | 2.8 | 3.4 | ||||||
Restructuring charges, net | 3.2 | — | ||||||
Income tax adjustments | (5.8 | ) | (6.0 | ) | ||||
Non-GAAP net income | $ | 60.6 | $ | 66.4 | ||||
Diluted earnings per share: | Fiscal Quarter Ended | |||||||
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|
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2013 | 2012 | |||||||
GAAP diluted earnings per share |
$ | 0.43 | $ | 0.50 | ||||
Stock-based compensation | 0.15 | 0.17 | ||||||
RSU dividend equivalent | 0.01 | — | ||||||
Amortization of acquired intangibles | 0.03 | 0.03 | ||||||
Restructuring charges, net | 0.03 | — | ||||||
Income tax adjustments | (0.06 | ) | (0.06 | ) | ||||
Non-GAAP diluted earnings per share | $ | 0.59 | $ | 0.64 | ||||
Shares used in computing diluted earnings per share (in millions) | 103 | 104 | ||||||
The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial amounts for the second quarter of fiscal 2014 and fiscal year 2014 included in this release: | ||||||||
Gross margin: | Q2 2014 | |||||||
GAAP gross margin (low - high end of range) |
90 - 91 |
% |
||||||
Stock-based compensation | 0.2 | % | ||||||
Amortization of acquired intangibles | 0.8 | % | ||||||
Non-GAAP gross margin (low - high end of range) |
91 - 92 |
% |
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Operating expenses: | Q2 2014 | Fiscal 2014 | ||||||
GAAP operating expenses (low - high end of range) | $ |
153 - |
$ |
600 - |
||||
Stock-based compensation | (16 | ) | (65 | ) | ||||
RSU dividend equivalent | (1 | ) | (3 | ) | ||||
Amortization of acquired intangibles | (1 | ) | (4 | ) | ||||
Restructuring charges, net | — | (3 | ) | |||||
Non-GAAP operating expenses (low - high end of range) | $ |
135 - |
$ |
525 - |
||||
Diluted earnings per share: | Q2 2014 | |||||||
Low | High | |||||||
GAAP diluted earnings per share | $ | 0.45 | $ | 0.52 | ||||
Stock-based compensation | 0.16 | 0.16 | ||||||
RSU dividend equivalent | 0.01 | 0.01 | ||||||
Amortization of acquired intangibles | 0.02 | 0.02 | ||||||
Income tax adjustments | (0.05 | ) | (0.05 | ) | ||||
Non-GAAP diluted earnings per share | $ | 0.59 | $ | 0.66 | ||||
Shares used in computing diluted earnings per share (in millions) | 103 | 103 |
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