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For the fourth quarter, Dolby reported total revenue of $163.9 million, compared to $163.1 million for the fourth quarter of fiscal 2008.
Fourth quarter net income was $44.3 million, or $0.38 per diluted share, compared to $48.6 million, or $0.42 per diluted share, for the fourth quarter of fiscal 2008.
For fiscal year 2009, Dolby reported total revenue of $719.5 million, compared to $640.2 million for fiscal year 2008, an increase of 12 percent. Net income for fiscal year 2009 was $243.0 million, or $2.11 per diluted share, compared to $199.5 million, or $1.74 per diluted share, for fiscal year 2008.
Reflected in Dolby's fiscal 2009 earnings was a $20.0 million gain in the first quarter resulting from an amendment to a license agreement with an unrelated patent licensor, and $4.8 million in restructuring charges primarily related to the consolidation of our manufacturing operations.
"We had a solid fourth quarter and fiscal year," said Kevin Yeaman, President and Chief Executive Officer, Dolby Laboratories. "In fiscal 2009, we made excellent progress with new wins in many of our markets, including broadcast, mobile, and personal computer, and we remain focused on growing the adoption of our surround sound solutions globally while bringing new technologies to market."
Guidance
For fiscal 2010, Dolby is targeting revenue of $720 million to $750 million, total gross margin of approximately 88 percent on a GAAP basis, and 89 percent on a non-GAAP basis. In addition, Dolby is targeting fiscal 2010 operating expenses of $313 million to $324 million on a GAAP basis and $280 million to $290 million on a non-GAAP basis, and a tax rate of approximately 35 percent on a GAAP basis and non-GAAP basis. Dolby's non-GAAP measures exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, and restructuring charges.
These targets lead to a fiscal 2010 diluted earnings per share target range of $1.85 to $1.96 on a GAAP basis and $2.07 to $2.20 on a non-GAAP basis.
A reconciliation between GAAP and non-GAAP financial targets is provided at the end of this press release.
The Company's Conference Call Information
Members of Dolby management will lead a conference call open to all interested parties to discuss Dolby Laboratories' Q4 and year-end fiscal 2009 financial results at 2:00 p.m. PT/5:00 p.m. ET on Tuesday, November 3, 2009.
Access to the teleconference will be available over the Internet at http://investor.dolby.com/medialist.cfm or by dialing 888-797-3001. International callers can access the conference call at 913-312-0684.
A replay of the call will be available beginning at 5:00 p.m. PT on Tuesday, November 3, 2009, until 9:00 p.m. PT on November 10, 2009 at 888-203-1112 (international callers can access the replay at 719-457-0820) and entering the confirmation code 4818739. An archived version of the teleconference will also be available on 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 acquired intangible assets through business combinations, restructuring charges, and the related tax impact of all of these items on the provision for income taxes, 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.
Forward-Looking Statements
Certain statements in this press release, including statements relating to Dolby's expectations regarding revenue, gross margin, operating expense, tax rate, and diluted earnings per share for fiscal 2010, the progress Dolby is making in its markets, the further adoption of Dolby surround sound solutions and other technologies, 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 the effects of the economic recession both domestically and internationally; risks associated with trends in the markets in which Dolby operates, including the DVD and Blu-ray Disc(TM), broadcast, personal computer, consumer electronics, gaming, mobile, and automobile markets; 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. Blu-ray Disc is a trademark of Blu-ray Disc Association. S09/22074 DLB-F
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Ended Fiscal Year-to-Date Ended
September 26, September 25, September 26, September 25,
2008 2009 2008 2009
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $ 137,756 $ 138,621 $ 537,363 $ 594,697
Product sales 18,586 20,223 72,284 95,967
Services 6,788 5,033 30,584 28,839
Total revenue 163,130 163,877 640,231 719,503
Cost of revenue:
Cost of licensing 3,623 3,580 15,802 14,803
Cost of product sales (1) 9,806 10,444 39,455 57,220
Cost of services (1) 3,120 3,240 12,520 12,786
Gain from amended patent licensing agreement - - - (20,041 )
Total cost of revenue 16,549 17,264 67,777 64,768
Gross margin 146,581 146,613 572,454 654,735
Operating expenses:
Selling, general and administrative (1) 62,815 62,514 224,090 225,489
Research and development (1) 17,082 18,079 62,080 66,710
Restructuring charges, net - 835 - 4,847
Gain on settlements - (77 ) (499 ) (5,977 )
Total operating expenses 79,897 81,351 285,671 291,069
Operating income 66,684 65,262 286,783 363,666
Other income, net 4,750 1,959 15,019 7,753
Income before provision for income taxes and controlling interest 71,434 67,221 301,802 371,419
Provision for income taxes (22,254 ) (22,518 ) (100,770 ) (127,073 )
Income before controlling interest 49,180 44,703 201,032 244,346
Controlling interest in net income (621 ) (404 ) (1,574 ) (1,355 )
Net income $ 48,559 $ 44,299 $ 199,458 $ 242,991
Basic earnings per share $ 0.43 $ 0.39 $ 1.79 $ 2.15
Diluted earnings per share $ 0.42 $ 0.38 $ 1.74 $ 2.11
Weighted-average shares outstanding (basic) 112,342 113,684 111,492 113,101
Weighted-average shares outstanding (diluted) 115,010 115,845 114,781 115,367
(1) Stock-based compensation included above was classified as
follows:
Cost of product sales $ 183 $ 93 $ 853 $ 564
Cost of services 51 30 177 115
Selling, general and administrative 4,110 5,076 17,267 17,309
Research and development 1,136 1,248 4,413 4,434
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 26, 2008 September 25, 2009
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 394,761 $ 451,678
Short-term investments 119,667 283,808
Accounts receivable, net 27,650 22,981
Inventories 18,133 12,975
Deferred taxes 91,824 83,438
Prepaid expenses and other current assets 39,834 45,958
Total current assets 691,869 900,838
Property, plant and equipment, net 87,915 92,178
Intangible assets, net 83,060 82,035
Goodwill 250,356 261,121
Long-term investments 180,996 205,938
Deferred taxes 24,900 23,755
Other assets 17,050 15,450
Total assets $ 1,336,146 $ 1,581,315
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 156,925 $ 113,822
Income taxes payable 4,811 3,934
Current portion of long-term debt 1,593 1,624
Deferred revenue 37,344 37,204
Total current liabilities 200,673 156,584
Long-term debt 7,782 5,825
Deferred revenue 6,171 10,759
Deferred taxes 16,755 13,573
Other liabilities 33,414 31,469
Total liabilities 264,795 218,210
Controlling interest 22,098 21,997
Stockholders' equity:
Class A common stock 52 53
Class B common stock 60 60
Additional paid-in capital 434,907 478,979
Retained earnings 609,495 852,475
Accumulated other comprehensive income 4,739 9,541
Total stockholders' equity 1,049,253 1,341,108
Total liabilities and stockholders' equity $ 1,336,146 $ 1,581,315
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Quarter Ended Fiscal Year-to-Date Ended
September 26, September 25, September 26, September 25,
2008 2009 2008 2009
(unaudited)
(in thousands)
Operating activities:
Net income $ 48,559 $ 44,299 $ 199,458 $ 242,991
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,407 7,231 24,814 28,732
Stock-based compensation expense 5,102 6,207 22,332 21,758
Accretion of discounts/amortization of premium on investments 2,037 1,647 1,904 5,589
Excess tax benefit from exercise of stock options (3,229 ) (2,279 ) (21,746 ) (5,827 )
Provision for doubtful accounts 168 244 935 1,392
Deferred taxes (1,265 ) (14,595 ) (21,750 ) 5,237
Gain on Put Rights - (56 ) - (9,508 )
Unrealized losses on auction rate certificates - 15 - 10,869
Gain from amended patent licensing agreement - - - (20,041 )
Other non-cash items affecting net income (43 ) 761 2,273 3,506
Changes in operating assets and liabilities:
Accounts receivable 17,268 26,491 987 1,797
Inventories 1,307 (3,783 ) (7,567 ) (3,638 )
Prepaid expenses and other assets (9,105 ) (3,310 ) (18,640 ) (147 )
Accounts payable and accrued liabilities 14,297 2,882 33,874 (21,362 )
Income taxes, net 23,678 8,354 29,825 8,602
Deferred revenue 7,679 2,700 25,962 7,488
Other liabilities (9,399 ) 1,153 (5,187 ) (1,213 )
Payment on litigation settlement - - (3,000 ) (3,000 )
Net cash provided by operating activities 102,461 77,961 264,474 273,225
Investing activities:
Purchases of available-for-sale securities (91,069 ) (68,500 ) (304,097 ) (373,223 )
Proceeds from sale of available-for-sale and trading securities 16,244 78,923 299,376 176,908
Purchases of property, plant and equipment (5,944 ) (4,758 ) (13,610 ) (13,994 )
Purchases of intangible assets - (1,250 ) - (9,571 )
Acquisitions, net of cash acquired 129 - (253,047 ) (16,621 )
Other - - 40 -
Net cash (used in) provided by investing activities (80,640 ) 4,415 (271,338 ) (236,501 )
Financing activities:
Payments on debt (390 ) (401 ) (1,536 ) (1,522 )
Proceeds from exercise of stock options 2,637 4,306 13,553 13,716
Issuance of Class A common stock (ESPP) - 37 1,133 3,502
Excess tax benefit from exercise of stock options 3,229 2,279 21,746 5,827
Net cash provided by financing activities 5,476 6,221 34,896 21,523
Effect of foreign exchange rate changes on cash and cash equivalents (2,443 ) (295 ) (1,738 ) (1,330 )
Net increase in cash and cash equivalents 24,854 88,302 26,294 56,917
Cash and cash equivalents at beginning of period 369,907 363,376 368,467 394,761
Cash and cash equivalents at end of period $ 394,761 $ 451,678 $ 394,761 $ 451,678
Fiscal Year 2010 Non-GAAP Financial Targets
(In millions, except per share data)
The following tables show the Company's fiscal year 2010 non-GAAP
financial targets reconciled to GAAP financial targets included in
this release.
Gross margin: Fiscal Year
2010
GAAP gross margin 88%
Stock-based compensation 0
Amortization of acquired intangibles 1
Non-GAAP gross margin 89%
Operating expenses: Fiscal Year 2010
Low High
GAAP operating expenses $313 $324
Stock-based compensation (30) (31)
Amortization of acquired intangibles (3) (3)
Non-GAAP operating expenses $280 $290
Diluted earnings per share: Fiscal Year 2010
Low High
GAAP diluted earnings per share $1.85 $1.96
Stock-based compensation 0.26 0.27
Amortization of acquired intangibles 0.09 0.10
Income tax adjustments (0.13) (0.13)
Non-GAAP diluted earnings per share $2.07 $2.20
Shares used in computing diluted earnings per share 116 115
SOURCE: Dolby Laboratories
Dolby Laboratories Alex Hughes, 415-645-4572 (Investor) investor@dolby.com David Yang, 415-645-5679 (Media) dyang@dolby.com
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