Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for the second quarter of fiscal 2009.
For the second quarter, Dolby reported total revenue of $204.1 million, compared to $172.6 million for the second quarter of fiscal 2008, an increase of eighteen percent. Total revenue benefited from the recognition of $23.6 million in revenue related to digital cinema, which was deferred in prior quarters.
Second quarter net income was $69.5 million, or $0.60 per diluted share, compared to $56.8 million, or $0.49 per diluted share, for the second quarter of fiscal 2008.
Net income for the second quarter of fiscal 2009 reflects stock-based compensation expense of $4.8 million compared to $6.1 million for the second quarter of fiscal 2008 and charges related to the amortization of intangibles of $4.7 million for the second quarter of fiscal 2009 compared to $4.1 million for the second quarter of fiscal 2008. Fiscal second quarter net income also reflects $1.9 million in restructuring charges primarily related to the consolidation of manufacturing operations.
“We are very pleased with our second quarter performance,” said Kevin Yeaman, President and Chief Executive Officer, Dolby Laboratories. “We continue to diversify our revenue streams while increasing the adoption of our technologies in many of the world’s most popular entertainment devices.”
Guidance
Dolby now expects fiscal 2009 revenue to be $650 million to $700 million. Net income is now expected to be $204 million to $222 million. Earnings per diluted share are now expected to be $1.76 to $1.91. Reflected in Dolby’s fiscal 2009 earnings guidance is a $20 million gain in the first quarter resulting from an amendment to a license agreement with an unrelated patent licensor, and approximately $6 million in estimated restructuring charges primarily related to the consolidation of manufacturing operations to be recognized in fiscal 2009. The net impact of the $20 million gain and the $6 million in restructuring charges in the fiscal year are approximately $13 million and $4 million, respectively, or $0.11 and $0.03 per diluted share, respectively. 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 $23 million. In addition, Dolby now expects charges related to the amortization of intangibles for fiscal 2009 to be approximately $16 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’ second quarter of fiscal 2009 financial results at 2:00 p.m. PT/5:00 p.m. ET, Thursday, April 30, 2009.
Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 888-256-9119. International callers can access the conference call at 913-312-1277.
A replay of the call will be available beginning at 5:00 p.m. PT on Thursday, April 30, 2009, until 9:00 p.m. PT on May 7, 2009 at 888-203-1112 (international callers can access the replay by dialing 719-457-0820) using confirmation code 1222784. 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, Dolby’s continued diversification of revenues and the adoption of Dolby technologies into many of the world’s most popular entertainment devices and the benefits 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 Blu-ray Disc, broadcast, personal computer, consumer electronic, gaming, mobile and automobile markets; 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 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) 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. S09/21268 DLB-F
| DOLBY LABORATORIES, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| Fiscal Quarter Ended | Fiscal Year-to-Date Ended | |||||||||||||||
| March 28, 2008 | March 27, 2009 | March 28, 2008 | March 27, 2009 | |||||||||||||
| (unaudited) | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Revenue: | ||||||||||||||||
| Licensing | $ | 149,619 | $ | 159,879 | $ | 272,049 | $ | 313,935 | ||||||||
| Product sales | 15,628 | 36,008 | 35,638 | 53,954 | ||||||||||||
| Services | 7,310 | 8,237 | 15,097 | 16,493 | ||||||||||||
| Total revenue | 172,557 | 204,124 | 322,784 | 384,382 | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| Cost of licensing | 5,555 | 4,613 | 8,818 | 7,861 | ||||||||||||
| Cost of product sales (1) | 8,540 | 24,275 | 20,188 | 33,634 | ||||||||||||
Cost of services (1) | 3,151 | 3,094 | 6,206 | 6,300 | ||||||||||||
| Gain from amended patent licensing agreement | - | - | - | (20,041 | ) | |||||||||||
| Total cost of revenue | 17,246 | 31,982 | 35,212 | 27,754 | ||||||||||||
| Gross margin | 155,311 | 172,142 | 287,572 | 356,628 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative (1) | 55,310 | 53,420 | 106,296 | 107,400 | ||||||||||||
| Research and development (1) | 15,725 | 16,244 | 29,632 | 31,409 | ||||||||||||
| Restructuring charges, net | - | 1,866 | - | 2,734 | ||||||||||||
| Gain on settlements | (249 | ) | (4,900 | ) | (249 | ) | (4,900 | ) | ||||||||
| Total operating expenses | 70,786 | 66,630 | 135,679 | 136,643 | ||||||||||||
| Operating income | 84,525 | 105,512 | 151,893 | 219,985 | ||||||||||||
| Other income, net | 2,404 | 2,707 | 7,608 | 5,194 | ||||||||||||
| Income before provision for income taxes and controlling interest | 86,929 | 108,219 | 159,501 | 225,179 | ||||||||||||
| Provision for income taxes | (29,792 | ) | (38,430 | ) | (54,399 | ) | (77,053 | ) | ||||||||
| Income before controlling interest | 57,137 | 69,789 | 105,102 | 148,126 | ||||||||||||
| Controlling interest in net income | (359 | ) | (338 | ) | (651 | ) | (580 | ) | ||||||||
| Net income | $ | 56,778 | $ | 69,451 | $ | 104,451 | $ | 147,546 | ||||||||
| Basic earnings per share | $ | 0.51 | $ | 0.62 | $ | 0.94 | $ | 1.31 | ||||||||
| Diluted earnings per share | $ | 0.49 | $ | 0.60 | $ | 0.91 | $ | 1.28 | ||||||||
| Weighted-average shares outstanding (basic) | 111,192 | 112,852 | 110,892 | 112,730 | ||||||||||||
| Weighted-average shares outstanding (diluted) | 114,736 | 115,059 | 114,579 | 114,981 | ||||||||||||
| (1) Stock-based compensation included above was classified as follows: | ||||||||||||||||
| Cost of product sales | $ | 262 | $ | 222 | $ | 503 | $ | 378 | ||||||||
| Cost of services | 38 | 29 | 78 | 56 | ||||||||||||
| Selling, general and administrative | 4,600 | 3,605 | 8,895 | 7,068 | ||||||||||||
| Research and development | 1,229 | 984 | 2,119 | 1,918 | ||||||||||||
| DOLBY LABORATORIES, INC. | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| September 26, 2008 | March 27, 2009 | ||||||
| (unaudited) | |||||||
| (in thousands) | |||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 394,761 | $ | 372,528 | |||
| Short-term investments | 119,667 | 193,543 | |||||
| Accounts receivable, net | 27,650 | 45,245 | |||||
| Inventories | 18,133 | 14,113 | |||||
| Deferred taxes | 91,824 | 70,714 | |||||
| Prepaid expenses and other current assets | 39,834 | 29,344 | |||||
| Total current assets | 691,869 | 725,487 | |||||
| Property, plant and equipment, net | 87,915 | 86,895 | |||||
| Intangible assets, net | 83,060 | 79,218 | |||||
| Goodwill | 250,356 | 225,548 | |||||
| Long-term investments | 180,996 | 244,535 | |||||
| Deferred taxes | 24,900 | 38,033 | |||||
| Other assets | 17,050 | 24,184 | |||||
| Total assets | $ | 1,336,146 | $ | 1,423,900 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued liabilities | $ | 156,925 | $ | 119,636 | |||
| Income taxes payable | 4,811 | 1,384 | |||||
| Current portion of long-term debt | 1,593 | 1,540 | |||||
| Deferred revenue | 37,344 | 25,372 | |||||
| Total current liabilities | 200,673 | 147,932 | |||||
| Long-term debt | 7,782 | 6,453 | |||||
| Deferred revenue | 6,171 | 7,363 | |||||
| Deferred taxes | 16,755 | 14,341 | |||||
| Other liabilities | 33,414 | 32,542 | |||||
| Total liabilities | 264,795 | 208,631 | |||||
| Controlling interest | 22,098 | 20,174 | |||||
| Stockholders' equity: | |||||||
| Class A common stock | 52 | 53 | |||||
| Class B common stock | 60 | 60 | |||||
| Additional paid-in capital | 434,907 | 449,914 | |||||
| Retained earnings | 609,495 | 757,030 | |||||
| Accumulated other comprehensive income (loss) | 4,739 | (11,962 | ) | ||||
| Total stockholders' equity | 1,049,253 | 1,195,095 | |||||
| Total liabilities and stockholders' equity | $ | 1,336,146 | $ | 1,423,900 | |||
| DOLBY LABORATORIES, INC. | |||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| Fiscal Year-to-Date Ended | |||||||||
| March 28, 2008 | March 27, 2009 | ||||||||
| (unaudited) | |||||||||
| (in thousands) | |||||||||
| Operating activities: | $ | 104,451 | $ | 147,546 | |||||
| Net income | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 12,238 | 14,585 | |||||||
| Stock-based compensation expense | 11,527 | 9,180 | |||||||
| Accretion of discounts/amortization of premium on investments | 212 | 2,265 | |||||||
| Excess tax benefit from exercise of stock options | (11,552 | ) | (1,483 | ) | |||||
| Provision for doubtful accounts | 485 | 1,382 | |||||||
| Deferred taxes | (15,735 | ) | 16,957 | ||||||
| Gain on Put Rights | - | (9,220 | ) | ||||||
| Unrealized losses on auction rate certificates | - | 10,622 | |||||||
| Gain from amended patent licensing agreement | - | (20,041 | ) | ||||||
| Other non-cash items affecting net income | 1,500 | (609 | ) | ||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable | (13,521 | ) | (21,217 | ) | |||||
| Inventories | (6,117 | ) | (3,710 | ) | |||||
| Prepaid expenses and other assets | (5,313 | ) | 7,693 | ||||||
| Accounts payable and accrued liabilities | 7,341 | (15,575 | ) | ||||||
| Income taxes, net | 12,454 | 1,268 | |||||||
| Deferred revenue | 11,147 | (6,972 | ) | ||||||
| Other liabilities | 1,657 | (2,604 | ) | ||||||
| Net cash provided by operating activities | 110,774 | 130,067 | |||||||
| Investing activities: | |||||||||
Purchases of available-for-sale securities | (163,424 | ) | (195,253 | ) | |||||
| Proceeds from sale of available-for-sale and trading securities | 269,376 | 53,986 | |||||||
| Purchases of property, plant and equipment | (4,631 | ) | (3,552 | ) | |||||
| Purchase of intangible assets | - | (8,321 | ) | ||||||
| Acquisitions, net of cash acquired | (253,176 | ) | - | ||||||
| Other | 40 | - | |||||||
| Net cash used in investing activities | (151,815 | ) | (153,140 | ) | |||||
| Financing activities: | |||||||||
| Payments on debt | (759 | ) | (734 | ) | |||||
| Proceeds from exercise of stock options | 8,001 | 3,161 | |||||||
| Issuance of Class A commons stock (ESPP) | 505 | 1,635 | |||||||
| Excess tax benefit from exercise of stock options | 11,552 | 1,483 | |||||||
| Net cash provided by financing activities | 19,299 | 5,545 | |||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | 777 | (4,705 | ) | ||||||
| Net decrease in cash and cash equivalents | (20,965 | ) | (22,233 | ) | |||||
| Cash and cash equivalents at beginning of period | 368,467 | 394,761 | |||||||
| Cash and cash equivalents at end of period | $ | 347,502 | $ | 372,528 | |||||
Contacts:
Investor Contact:
Alex Hughes,
415-645-4572
investor@dolby.com
Media
Contact:
Jeanne Alford, 415-645-5000
news@dolby.com
