Dolby Laboratories Reports First Quarter Fiscal 2013 Financial Results

Dolby Laboratories Reports First Quarter Fiscal 2013 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)-- Dolby Laboratories, Inc. (NYS: 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 dialing 1-877-870-5176 (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 (NYS: 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,
2012

December 30,
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 interest

(128

)

(207

)

Net income attributable to Dolby Laboratories, Inc.

$

51,349

$

73,159

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,
2012

September 28,
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 Laboratories, Inc.

1,327,777

1,720,269

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,
2012

December 30,
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 options

(469

)

(57

)

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 securities

389,068

51,488

Proceeds from maturities of available-for-sale securities

51,325

47,645

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 equipment and assets held for sale

19

335

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 options

469

57

Shares repurchased for tax withholdings on vesting of restricted stock

(3,636

)

970

Net cash used in financing activities

(465,866

)

(24,228

)

Effect of foreign exchange rate changes on cash and cash equivalents

(62

)

(263

)

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,
2012

December 30,
2011