Dolby Laboratories Reports First Quarter Fiscal 2013 Financial Results

  Dolby Laboratories Reports First Quarter Fiscal 2013 Financial Results

Business Wire

SAN FRANCISCO -- January 29, 2013

Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial
results for the first quarter of fiscal year 2013. For the first quarter,
Dolby reported total revenue of $236.6 million, compared to $234.2 million for
the first quarter of fiscal year 2012.

First quarter GAAP net income was $51.3 million, or $0.50 per diluted share,
compared to $73.2 million, or $0.67 per diluted share, for the first quarter
of fiscal year 2012. On a non-GAAP basis, first quarter net income was $66.4
million, or $0.64 per diluted share, compared to $83.1 million, or $0.76 per
diluted share, for the first quarter of fiscal year 2012. Dolby's non-GAAP
measures are described and reconciled to the corresponding GAAP measures at
the end of this release.

“We had a solid first quarter,” said Kevin Yeaman, President and Chief
Executive Officer, Dolby Laboratories. “More mobile devices than ever feature
Dolby sound, and the rapidly growing number of movie titles in Dolby Atmos
shows that the industry has embraced our new, more immersive cinema sound
format.”

Financial Outlook

Q2 2013

Dolby anticipates total revenue to range from $240 million to $250 million.
Gross margin percentages are projected to be comparable to what they were in
the first quarter of fiscal 2013.

Dolby anticipates that operating expenses will be approximately $145 million
on a GAAP basis and $127 million on a non-GAAP basis.

Dolby expects diluted earnings per share to be between $0.53 and $0.60 on a
GAAP basis and between $0.68 and $0.75 on a non-GAAP basis.

The Company estimates that its fiscal Q2 2013 effective tax rate will range
from 26 percent to 27 percent.

FISCAL YEAR 2013

Dolby now anticipates total revenue will range from $910 million to $950
million.

Dolby now anticipates that operating expenses will be approximately $572
million on a GAAP basis and $500 million on a non-GAAP basis.

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 2013 financial
results at 2:00 p.m. PT (5:00 p.m. ET) on Tuesday, January 29, 2013.

Access to the teleconference will be available over the Internet from
http://investor.dolby.com/medialist.cfm or by dialing 1-888-430-8690.
International callers can access the conference call at 1-719-457-2659.

A replay of the call will be available from 5:00 p.m. PT on Tuesday,January
29, 2013, until 9:00 p.m. PT on February 5, 2013 by dialing1-877-870-5176
(international callers can access the replay by dialing 1-858-384-5517) and
entering the confirmation code 6647713. An archived version of the
teleconference will also be available on the Dolby Laboratories website at
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 operating expense, net income, and
diluted earnings per share. These measures are adjusted to exclude amounts
related to stock-based compensation, the amortization of intangibles from
business combinations, restructuring charges, and the related tax impact of
these items. 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,
expense associated with dividend equivalents paid on restricted stock units,
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 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
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 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, but not limited to,
statements relating to Dolby's expected financial results for Q2 2013 and
fiscal 2013, and its statements regarding the growing use and anticipated
benefits of its technologies and products 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; 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 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; 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 from the cinema to the
living room to mobile devices, 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.
Dolby Atmos is a trademark of Dolby Laboratories. Blu-ray Disc is a trademark
of the Blu-ray Disc Association. Windows is a registered trademark of
Microsoft Corporation. S13/26539 DLB-F


DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

                                                  Fiscal Quarter Ended
                                                   December 28,  December 30,
                                                   2012           2011
Revenue:                                                        
Licensing                                          $  204,876     $  200,424
Products                                           25,498         26,400
Services                                           6,228        7,354      
Total revenue                                      236,602      234,178    
                                                                  
Cost of revenue:
Cost of licensing                                  3,080          3,328
Cost of products                                   18,489         13,888
Cost of services                                   4,036        3,194      
Total cost of revenue                              25,605       20,410     
Gross margin                                       210,997      213,768    
Operating expenses:
Research and development                           42,436         32,826
Sales and marketing                                58,421         43,816
General and administrative                         43,108         35,465
Restructuring charges, net                         -            368        
Total operating expenses                           143,965      112,475    
Operating income                                   67,032         101,293
Other income, net                                  2,027        1,911      
Income before income taxes                         69,059         103,204
Provision for income taxes                         (17,582    )  (29,838    )
Net income including controlling interest          51,477         73,366
Less: net (income) attributable to controlling     (128       )  (207       )
interest
Net income attributable to Dolby Laboratories,     $  51,349    $  73,159  
Inc.
Net income per share:
Basic                                              $  0.50        $  0.67
Diluted                                            $  0.50        $  0.67
Weighted-average shares outstanding:
Basic                                              102,361        108,884
Diluted                                            103,523        109,443

DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
                                                              
                                                 December 28,   September 28,
                                                 2012            2012
ASSETS                                                         
Current assets:
Cash and cash equivalents                        $ 316,193       $  492,600
Short-term investments                           118,681         302,693
Accounts receivable, net                         51,797          43,495
Inventories                                      21,023          16,700
Deferred taxes                                   82,661          80,966
Prepaid expenses and other current assets        28,203        33,832
Total current assets                             618,558         970,286
Long-term investments                            308,277         361,614
Property, plant and equipment, net               254,361         254,676
Intangible assets, net                           52,913          56,526
Goodwill                                         281,763         281,375
Deferred taxes                                   24,362          22,634
Other non-current assets                         11,716        13,687
Total assets                                     $ 1,551,950   $  1,960,798
                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                 $ 9,900         $  14,831
Accrued liabilities                              99,019          116,092
Income taxes payable                             12,890          2,424
Deferred revenue                                 22,656        23,493
Total current liabilities                        144,465         156,840
Long-term deferred revenue                       18,893          18,192
Deferred taxes                                   2,714           2,696
Other non-current liabilities                    40,078        39,837
Total liabilities                                206,150         217,565
Stockholders’ equity:
Class A common stock                             47              46
Class B common stock                             55              57
Additional paid-in capital                       -               -
Retained earnings                                1,316,461       1,709,479
Accumulated other comprehensive income           11,214        10,687
Total stockholders’ equity – Dolby               1,327,777       1,720,269
Laboratories, Inc.
Controlling interest                             18,023        22,964
Total stockholders’ equity                       1,345,800     1,743,233
Total liabilities and stockholders’ equity       $ 1,551,950   $  1,960,798

DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

                                                  Fiscal Quarter Ended
                                                   December 28,  December 30,
                                                   2012           2011
Operating activities:                                           
Net income including controlling interest          $  51,477      $  73,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                      13,129         9,929
Stock-based compensation                           17,704         11,439
Amortization of premium on investments             3,794          4,920
Excess tax benefit from exercise of stock          (469       )   (57        )
options
Provision for doubtful accounts                    (179       )   (52        )
Deferred income taxes                              (2,627     )   (7,643     )
Other non-cash items affecting net income          (691       )   1,227
Changes in operating assets and liabilities:
Accounts receivable                                (8,064     )   7,531
Inventories                                        (6,173     )   (7,271     )
Prepaid expenses and other assets                  8,625          1,101
Accounts payable and other liabilities             (19,898    )   (22,860    )
Income taxes, net                                  9,512          24,431
Deferred revenue                                   (143       )   (661       )
Other non-current liabilities                      1,012        392        
Net cash provided by operating activities          67,009       95,792     
Investing activities:
Purchases of available-for-sale securities         (204,135   )   (54,726    )
Proceeds from sales of available-for-sale          389,068        51,488
securities
Proceeds from maturities of available-for-sale     51,325         47,645
securities
Purchases of property, plant and equipment         (6,717     )   (12,566    )
Acquisitions, net of cash acquired                 —              (575       )
Other investments                                  (3,000     )   —
Purchases of intangible assets                     (4,048     )   —
Proceeds from sales of property, plant and         19           335        
equipment and assets held for sale
Net cash provided by investing activities          222,512      31,601     
Financing activities:
Proceeds from issuance of common stock             4,502          813
Repurchase of common stock                         (53,956    )   (26,068    )
Payment of cash dividend                           (408,206   )   —
Distribution to controlling interest               (5,039     )   —
Excess tax benefit from the exercise of stock      469            57
options
Shares repurchased for tax withholdings on         (3,636     )  970        
vesting of restricted stock
Net cash used in financing activities              (465,866   )  (24,228    )
Effect of foreign exchange rate changes on cash    (62        )  (263       )
and cash equivalents
Net increase in cash and cash equivalents          (176,407   )   102,902
Cash and cash equivalents at beginning of period   492,600      551,512    
Cash and cash equivalents at end of period         $  316,193   $  654,414 
Supplemental disclosure:
Cash paid for income taxes                         $  11,734      $  13,047
Cash paid for interest                             $  1           $  36

GAAP to Non-GAAP Reconciliations
(In millions, except per share data)

The following tables show the Company’s first quarter of fiscal years 2013 and
2012 GAAP financial measures reconciled to Non-GAAP financial measures
included in this release:
                                                  
Net income:                     Fiscal Quarter Ended
                                December 28,           December 30,
                                2012                    2011
GAAP net income                 $     51.3              $       73.2
Stock-based compensation        17.7                    11.4
Amortization of acquired        3.4                     2.7
intangibles
Restructuring charges, net      —                       0.3
Income tax adjustments          (6.0          )        (4.5             )
Non-GAAP net income             $     66.4            $       83.1     
                                                        
Diluted earnings per            Fiscal Quarter Ended
share:
                                December 28,           December 30,
                                2012                    2011
GAAP diluted earnings per       $     0.50              $       0.67
share
Stock-based compensation        0.17                    0.10
Amortization of acquired        0.03                    0.03
intangibles
Restructuring charges, net      —                       —
Income tax adjustments          (0.06         )        (0.04            )
Non-GAAP diluted earnings       $     0.64            $       0.76     
per share
                                                        
Shares used in computing
diluted earnings per share      104                     109
(in millions)
                                                        
The following tables show the Company’s second quarter and fiscal year 2013
GAAP financial targets reconciled to non-GAAP financial targets included in
this release (numbers are approximate):
                                                        
Operating expenses:             Q2 2013                Fiscal Year 2013
GAAP operating expenses         $     145               $       572
Stock-based compensation        (15           )         (63              )
RSU Dividend Equivalent         (2            )         (5               )
Amortization of acquired        (1            )        (4               )
intangibles
Non-GAAP operating              $     127             $       500      
expenses
                                                        
Diluted earnings per            Q2 2013
share:
                                Low                    High
GAAP diluted earnings per       $     0.53              $       0.60
share
Stock-based compensation        0.14                    0.15
RSU Dividend Equivalent         0.02                    0.02
Amortization of acquired        0.03                    0.03
intangibles
Income tax adjustments          (0.04         )        (0.05            )
Non-GAAP diluted earnings       $     0.68            $       0.75     
per share
                                                        
Shares used in computing        103                     103
diluted earnings per share

Contact:

Dolby Laboratories
Investor Contact:
Alex Hughes, 415-645-4572
investor@dolby.com
Media Contact:
Sean Durkin, 415-645-5176
news@dolby.com
 
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