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Dolby Laboratories Reports Third Quarter Fiscal 2011 Results
For the third quarter,
Third quarter GAAP net income was
"Fiscal third quarter licensing growth was led by broadcast and mobile,
where we experienced the continued adoption of our formats globally,"
said
Financial Targets
For fiscal 2011,
GAAP
For fiscal 2011,
Non-GAAP
For fiscal 2011,
Diluted Earnings per Share
The Company's Conference Call Information
Members of
Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 1-888-539-3679. International callers can access the conference call at 1-719-457-2662.
A replay of the call will be available from
Non-GAAP Financial Information
To supplement Dolby's financial statements presented on a GAAP basis,
Forward-Looking Statements
Certain statements in this press release, including statements relating
to
About
DOLBY LABORATORIES, INC. | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
Fiscal Quarter Ended | Fiscal Year-to-Date Ended | ||||||||||||||||
June 25, 2010 |
July 1, |
June 25, 2010 |
July 1, |
||||||||||||||
(unaudited) | |||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||
Revenue: | |||||||||||||||||
Licensing | $ | 170,326 | $ | 181,790 | $ | 532,045 | $ | 584,593 | |||||||||
Product sales | 52,651 | 28,395 | 140,147 | 100,769 | |||||||||||||
Services | 7,292 | 8,814 | 22,714 | 26,375 | |||||||||||||
Total revenue | 230,269 | 218,999 | 694,906 | 711,737 | |||||||||||||
Cost of revenue: | |||||||||||||||||
Cost of licensing | 3,719 | 4,095 | 13,282 | 13,827 | |||||||||||||
Cost of products (1) | 23,336 | 20,320 | 72,042 | 62,549 | |||||||||||||
Cost of services (1) | 3,407 | 3,518 | 10,554 | 9,153 | |||||||||||||
Impairment of products provided under operating leases | 9,594 | - | 9,594 | - | |||||||||||||
Total cost of revenue | 40,056 | 27,933 | 105,472 | 85,529 | |||||||||||||
Gross margin | 190,213 | 191,066 | 589,434 | 626,208 | |||||||||||||
Operating expenses: | |||||||||||||||||
Research and development (1) | 27,513 | 34,086 | 75,561 | 90,812 | |||||||||||||
Sales and marketing (1) | 36,527 | 36,726 | 93,635 | 112,488 | |||||||||||||
General and administrative (1) | 29,165 | 32,397 | 86,677 | 104,594 | |||||||||||||
Restructuring charges, net | 1,068 | (48 | ) | 1,371 | 737 | ||||||||||||
Total operating expenses | 94,273 | 103,161 | 257,244 | 308,631 | |||||||||||||
Operating income | 95,940 | 87,905 | 332,190 | 317,577 | |||||||||||||
Other income, net | 2,142 | 2,546 | 6,200 | 6,434 | |||||||||||||
Income before provision for income taxes | 98,082 | 90,451 | 338,390 | 324,011 | |||||||||||||
Provision for income taxes | (34,394 | ) | (28,404 | ) | (118,890 | ) | (92,717 | ) | |||||||||
Net income including controlling interest | 63,688 | 62,047 | 219,500 | 231,294 | |||||||||||||
Less: net income attributable to controlling interest | (236 | ) | (299 | ) | (1,064 | ) | (1,098 | ) | |||||||||
Net income attributable to Dolby Laboratories, Inc. | $ | 63,452 | $ | 61,748 | $ | 218,436 | $ | 230,196 | |||||||||
Earnings per share attributable to Dolby Laboratories, Inc. (basic) | $ | 0.56 | $ | 0.55 | $ | 1.92 | $ | 2.06 | |||||||||
Earnings per share attributable to Dolby Laboratories, Inc. (diluted) | $ | 0.55 | $ | 0.55 | $ | 1.89 | $ | 2.03 | |||||||||
Weighted-average shares outstanding (basic) | 113,254 | 111,494 | 113,775 | 111,893 | |||||||||||||
Weighted-average shares outstanding (diluted) | 115,282 | 112,349 | 115,780 | 113,165 | |||||||||||||
(1) Stock-based compensation included above was classified as follows: | |||||||||||||||||
Cost of products | $ | 126 | $ | 169 | $ | 305 | $ | 483 | |||||||||
Cost of services | 36 | 47 | 99 | 129 | |||||||||||||
Research and development | 1,869 | 2,632 | 4,613 | 7,566 | |||||||||||||
Sales and marketing | 2,573 | 3,429 | 6,522 | 9,792 | |||||||||||||
General and administrative | 3,540 | 4,639 | 9,476 | 14,946 |
DOLBY LABORATORIES, INC. |
||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
September 24, 2010 |
July 1, |
|||||
(unaudited) | ||||||
(in thousands) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 545,861 | $ | 594,604 | ||
Short-term investments | 302,269 | 309,067 | ||||
Accounts receivable, net | 54,257 | 39,370 | ||||
Inventories | 28,338 | 23,416 | ||||
Deferred taxes | 102,758 | 91,401 | ||||
Prepaid expenses and other current assets | 26,930 | 36,058 | ||||
Total current assets | 1,060,413 | 1,093,916 | ||||
Long-term investments | 190,837 | 280,380 | ||||
Property, plant and equipment, net | 94,097 | 108,334 | ||||
Intangible assets, net | 67,019 | 55,463 | ||||
Goodwill | 264,580 | 268,009 | ||||
Deferred taxes | 19,948 | 18,811 | ||||
Other non-current assets | 14,878 | 6,314 | ||||
Total assets | $ | 1,711,772 | $ | 1,831,227 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 148,214 | $ | 119,965 | ||
Income taxes payable | 7,895 | 3,675 | ||||
Deferred revenue | 9,647 | 12,976 | ||||
Total current liabilities | 165,756 | 136,616 | ||||
Long-term deferred revenue | 12,775 | 14,850 | ||||
Deferred taxes | 11,547 | 621 | ||||
Other non-current liabilities | 27,015 | 23,274 | ||||
Total liabilities | 217,093 | 175,361 | ||||
Stockholders' equity: | ||||||
Class A common stock | 53 | 53 | ||||
Class B common stock | 59 | 58 | ||||
Additional paid-in capital | 329,902 | 255,575 | ||||
Retained earnings | 1,135,922 | 1,366,118 | ||||
Accumulated other comprehensive income | 7,801 | 11,895 | ||||
Total stockholders' equity - Dolby Laboratories, Inc. | 1,473,737 | 1,633,699 | ||||
Controlling interest | 20,942 | 22,167 | ||||
Total stockholders' equity | 1,494,679 | 1,655,866 | ||||
Total liabilities and stockholders' equity | $ | 1,711,772 | $ | 1,831,227 |
DOLBY LABORATORIES, INC. | |||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||
Fiscal Quarter Ended | Fiscal Year-to-Date Ended | ||||||||||||||||||
June 25, |
July 1, |
June 25, |
July 1, |
||||||||||||||||
(unaudited) | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Operating activities: | |||||||||||||||||||
Net income including controlling interest | $ | 63,688 | $ | 62,047 | $ | 219,500 | $ | 231,294 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||||||||||
Depreciation and amortization | 8,151 | 12,930 | 25,545 | 33,975 | |||||||||||||||
Stock-based compensation | 8,144 | 10,916 | 21,015 | 32,916 | |||||||||||||||
Amortization of premium on investments | 2,406 | 4,570 | 6,384 | 12,375 | |||||||||||||||
Excess tax benefit from exercise of stock options | (6,606 | ) | (1,338 | ) | (16,890 | ) | (12,643 | ) | |||||||||||
Provision for doubtful accounts | 27 | (28 | ) | (181 | ) | 828 | |||||||||||||
Losses on Put Rights | 3,755 | - | 6,506 | - | |||||||||||||||
Gains on auction rate certificates | (4,687 | ) |
- |
(7,601 | ) | - | |||||||||||||
Deferred income taxes | (11,352 | ) | 2,045 | (21,782 | ) | 1,573 | |||||||||||||
Impairment of products provided under operating leases |
9,594 |
- |
9,594 |
- |
|||||||||||||||
Payment on litigation settlement | (3,000 | ) | (3,000 | ) | (3,000 | ) | (3,000 | ) | |||||||||||
Other non-cash items affecting net income | 1,241 | 18 | 2,007 | 175 | |||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||
Accounts receivable | (3,148 | ) | 34,283 | (24,595 | ) | 14,065 | |||||||||||||
Inventories | (6,504 | ) | 7,965 | (4,087 | ) | 4,927 | |||||||||||||
Prepaid expenses and other assets | 2,467 | (3,003 | ) | 15,730 | (6,718 | ) | |||||||||||||
Accounts payable and accrued liabilities | 17,461 | (13,738 | ) | 23,759 | (27,789 | ) | |||||||||||||
Income taxes, net | (1,609 | ) | 5,766 | 31,903 | 6,386 | ||||||||||||||
Deferred revenues | (4,744 | ) | 3,412 | (24,282 | ) | 5,400 | |||||||||||||
Other non-current liabilities | (315 | ) | (278 | ) | (74 | ) | 395 | ||||||||||||
Net cash provided by operating activities | 74,969 | 122,567 | 259,451 | 294,159 | |||||||||||||||
Investing activities: | |||||||||||||||||||
Purchases of available-for-sale securities | (179,439 | ) | (86,788 | ) | (556,172 | ) | (454,795 | ) | |||||||||||
Proceeds from sales and maturities of available-for-sale securities |
287,159 | 107,243 | 519,857 | 345,619 | |||||||||||||||
Purchases of property, plant and equipment | (6,989 | ) | (10,782 | ) | (24,882 | ) | (30,334 | ) | |||||||||||
Acquisitions, net of cash acquired | - | - | - | (3,350 | ) | ||||||||||||||
Other investments | (700 | ) | - | (825 | ) | - | |||||||||||||
Proceeds from sales of property, plant and equipment and assets held for sale |
- | 280 | - | 3,077 | |||||||||||||||
Net cash used in investing activities | 100,031 | 9,953 | (62,022 | ) | (139,783 | ) | |||||||||||||
Financing activities: | |||||||||||||||||||
Repayment of long-term debt |
(402 | ) | - | (1,192 | ) | - | |||||||||||||
Proceeds from issuance of Class A common stock (Employee Stock Purchase Plan) |
2,139 | 2,893 | 4,060 | 5,429 | |||||||||||||||
Net proceeds from exercise of stock options | 13,790 | 4,812 | 32,948 | 17,491 | |||||||||||||||
Repurchase of common stock | (94,524 | ) | (67,376 | ) | (177,648 | ) | (142,500 | ) | |||||||||||
Excess tax benefit from exercise of stock options |
6,606 | 1,338 | 16,890 | 12,643 | |||||||||||||||
Net cash used in financing activities | (72,391 | ) | (58,333 | ) | (124,942 | ) | (106,937 | ) | |||||||||||
Effect of foreign exchange rate changes on cash | (860 | ) | 149 | (5,067 | ) | 1,304 | |||||||||||||
Net decrease in cash and cash equivalents | 101,749 | 74,336 | 67,420 | 48,743 | |||||||||||||||
Cash and cash equivalents at beginning of period | 417,349 | 520,268 | 451,678 | 545,861 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 519,098 | $ | 594,604 | $ | 519,098 | $ | 594,604 |
GAAP to Non-GAAP Reconciliations |
||||||||
(In millions, except per share data) | ||||||||
The following tables show the Company's third quarter of fiscal years 2010 and 2011 GAAP financial measures reconciled to non-GAAP financial measures included in this release: | ||||||||
Net income: | Fiscal Quarter Ended | |||||||
June 25, |
July 1, |
|||||||
GAAP net income | $ | 63.5 | $ | 61.7 | ||||
Stock-based compensation | 8.1 | 10.9 | ||||||
Amortization of acquired intangibles | 2.5 | 5.2 | ||||||
Restructuring charges, net | 1.1 | - | ||||||
Income tax adjustments | (4.1 | ) | (5.0 | ) | ||||
Non-GAAP net income | $ | 71.1 | $ | 72.8 | ||||
Diluted earnings per share: | Fiscal Quarter Ended | |||||||
June 25, 2010 |
July 1, |
|||||||
GAAP diluted earnings per share | $ | 0.55 | $ | 0.55 | ||||
Stock-based compensation | 0.07 | 0.10 | ||||||
Amortization of acquired intangibles | 0.02 | 0.05 | ||||||
Restructuring charges, net | 0.01 | - | ||||||
Income tax adjustments | (0.03 | ) | (0.05 | ) | ||||
Non-GAAP diluted earnings per share | $ | 0.62 | $ | 0.65 | ||||
Shares used in computing diluted earnings per share | 115 | 112 | ||||||
The following tables show the Company's fiscal year 2011 GAAP financial targets reconciled to non-GAAP financial targets included in this release (numbers are approximate): | ||||||||
Gross margin: | ||||||||
Fiscal Year 2011 | ||||||||
GAAP gross margin | 88 | % | ||||||
Stock-based compensation | 0 | % | ||||||
Amortization of acquired intangibles | 1 | % | ||||||
Non-GAAP gross margin | 89 | % | ||||||
Products gross margin: | Fiscal Year 2011 | |||||||
Low | High | |||||||
GAAP products gross margin | 37 | % | 38 | % | ||||
Stock-based compensation | 1 | % | 1 | % | ||||
Amortization of acquired intangibles | 1 | % | 1 | % | ||||
Non-GAAP products gross margin | 39 | % | 40 | % | ||||
Operating expenses: | Fiscal Year 2011 | |||||||
Low | High | |||||||
GAAP operating expenses | $ | 410 | $ | 417 | ||||
Stock-based compensation | (43 | ) | (44 | ) | ||||
Amortization of acquired intangibles | (6 | ) | (6 | ) | ||||
Restructuring charges, net | (1 | ) | (2 | ) | ||||
Non-GAAP operating expenses | $ | 360 | $ | 365 | ||||
Diluted earnings per share: | Fiscal Year 2011 | |||||||
Low | High | |||||||
GAAP diluted earnings per share | $ | 2.61 | $ | 2.70 | ||||
Stock-based compensation | 0.39 | 0.40 | ||||||
Amortization of acquired intangibles | 0.14 | 0.14 | ||||||
Restructuring charges, net | 0.01 | 0.01 | ||||||
Income tax adjustments | (0.28 | ) | (0.29 | ) | ||||
Non-GAAP diluted earnings per share | $ | 2.87 | $ | 2.96 | ||||
Shares used in computing diluted earnings per share | 113 | 113 |
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investor@dolby.com
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