Dolby Laboratories Reports Third Quarter Fiscal 2013 Financial Results

Dolby Laboratories Reports Third Quarter Fiscal 2013 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)-- Dolby Laboratories, Inc. (NYS: DLB) today announced the Company's financial results for the third quarter of fiscal year 2013. For the third quarter, Dolby reported total revenue of $207.1 million, compared to $210.3 million for the third quarter of fiscal year 2012.

Third quarter GAAP net income was $30.2 million, or $0.29 per diluted share, compared to $51.5 million, or $0.48 per diluted share, for the third quarter of fiscal 2012. On a non-GAAP basis, third quarter net income was $48.5 million, or $0.47 per diluted share, compared to $60.8 million, or $0.57 per diluted share, for the third quarter of fiscal 2012. Dolby's non-GAAP measures are described and reconciled to the corresponding GAAP measures at the end of this release.


"Licensing revenue increased year over year, with growth in our mobile and broadcast businesses offsetting weaker demand for PCs and consumer electronics this quarter," said Kevin Yeaman, President and CEO, Dolby Laboratories. "While the current consumer-spending environment is weak, we continue to make solid progress on our long-term growth initiatives."

Financial Outlook

Q4 2013

Dolby anticipates total revenue for the fourth quarter (Q4) of fiscal year 2013 to range from $205 million to $215 million. Gross margin percentages are projected to be approximately 90% on a GAAP basis and 91% on a non-GAAP basis.

Dolby anticipates that operating expenses will be approximately $142 million on a GAAP basis and $124 million on a non-GAAP basis.

Dolby expects diluted earnings per share to be between $0.30 and $0.36 on a GAAP basis and between $0.45 and $0.51 on a non-GAAP basis.

The Company estimates that its fiscal Q4 2013 effective tax rate will range from 27% to 28% on both a GAAP and non-GAAP basis.

FISCAL YEAR 2013

Dolby now anticipates that total revenue for fiscal year 2013 will range from $900 million to $910 million.

Dolby now anticipates that operating expenses will be approximately $574 million on a GAAP basis and $496 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' third quarter fiscal 2013 financial results at 2:00 p.m. PT (5:00 p.m. ET) on Thursday, July 25, 2013. Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 1-888-329-8903. International callers can access the conference call at 1-719-457-2601.

A replay of the call will be available from 5:00 p.m. PT on Thursday, July 25, 2013, until 9:00 p.m. PT on Thursday, August 1, 2013, by dialing 1-877-870-5176 (international callers can access the replay by dialing 1-858-384-5517) and entering the confirmation code 3172721. An archived version of the teleconference will also be available on the Dolby Laboratories website, 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, net income, and diluted earnings per share. These measures are adjusted to exclude amounts related to stock-based compensation, expense associated with dividend equivalents paid on restricted stock units, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. Dolby presents 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 both GAAP and non-GAAP measures 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 non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever Dolby uses 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 Q4 2013 and fiscal 2013 and Dolby's long-term growth initiatives 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 original equipment manufacturers (OEMs) include optical disc playback in Windows® 8 devices and the rate of consumer adoption of Windows operating systems; risks that a 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, including trends in consumer spending; risks relating to the expiration of patents; the timing of Dolby's receipt of royalty reports and 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 (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 in environments 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. Blu-ray Disc is a trademark of the Blu-ray Disc Association. Windows is a registered trademark of Microsoft Corporation. S13 /27158DLB-F

 
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 
 Fiscal Quarter Ended Fiscal Year-to-Date Ended
June 28,
2013
 June 29,
2012
 June 28,
2013
 June 29,
2012
Revenue:  
Licensing$184,707 $180,886$616,038$609,159
Products17,38122,13260,60575,760
Services4,986  7,304  16,379  22,340 
Total revenue207,074  210,322  693,022  707,259 
Cost of revenue:
Cost of licensing4,0532,89213,5429,523
Cost of products16,26914,52947,96446,052
Cost of services4,018  3,610  11,722  9,458 
Total cost of revenue24,340  21,031  73,228  65,033 
Gross margin182,734  189,291  619,794  642,226 
Operating expenses:
Research and development42,91535,123127,299102,185
Sales and marketing58,52849,269175,079138,779
General and administrative38,41336,859123,324109,605
Restructuring charges / (credits)5,930  (85) 5,930  1,193 
Total operating expenses145,786  121,166  431,632  351,762 
Operating income36,94868,125188,162290,464
Interest income8201,5133,0634,664
Interest expense(77)(26)(504)(57)
Other income, net156  709  1,057  969 
Income before income taxes37,84770,321191,778296,040
Provision for income taxes(7,345) (18,915) (47,560) (82,951)
Net income including controlling interest30,50251,406144,218213,089
Less: net (income) / loss attributable to controlling interest(286) 123  (742) (281)
Net income attributable to Dolby Laboratories, Inc.$30,216  $51,529  $143,476  $212,808 
Net income per share:
Basic$0.30$0.48$1.41$1.97
Diluted$0.29$0.48$1.39$1.96
Weighted-average shares outstanding:
Basic101,751106,328101,917107,876
Diluted103,031107,202102,999108,493
 

 
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 
 June 28,
2013
 September 28,
2012
ASSETS 
Current assets:
Cash and cash equivalents$408,561$492,600
Short-term investments109,342302,693
Accounts receivable, net74,52843,495
Inventories12,79516,700
Deferred taxes79,11480,966
Prepaid expenses and other current assets30,200  33,832
Total current assets714,540970,286
Long-term investments335,371361,614
Property, plant and equipment, net245,667254,676
Intangible assets, net44,73656,526
Goodwill278,718281,375
Deferred taxes36,59122,634
Other non-current assets11,827  13,687
Total assets$1,667,450  $1,960,798
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$8,845$14,831
Accrued liabilities119,154116,092
Income taxes payable1,0122,424
Deferred revenue23,233  23,493
Total current liabilities152,244156,840
Long-term deferred revenue19,07318,192
Deferred taxes2,696
Other non-current liabilities46,271  39,837
Total liabilities217,588217,565
Stockholders' equity:
Class A common stock4746
Class B common stock5557
Additional paid-in capital17,111
Retained earnings1,408,5871,709,479
Accumulated other comprehensive income5,812  10,687
Total stockholders' equity - Dolby Laboratories, Inc.1,431,6121,720,269
Controlling interest18,250  22,964
Total stockholders' equity1,449,862  1,743,233
Total liabilities and stockholders' equity$1,667,450  $1,960,798
 

 
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
 Fiscal Quarter Ended Fiscal Year-to-Date Ended
June 28,
2013
 June 29,
2012
 June 28,
2013
 June 29,
2012
Operating activities:     
Net income including controlling interest$30,502 $51,406 $144,218 $213,089
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization13,19511,08639,61531,189
Stock-based compensation17,28310,74149,93234,243
Amortization of premium on investments2,1483,9748,10113,280
Excess tax benefit from exercise of stock options(17)(516)(621)(941)
Provision for doubtful accounts(359)317(89)449
Deferred income taxes(2,396)2,955(12,973)(7,075)
Other non-cash items affecting net income72(2,199)(800)38
Changes in operating assets and liabilities:
Accounts receivable17,11911,256(30,829)15,359
Inventories6,3904,3995,6365,275
Prepaid expenses and other assets4,0231,7106,924582
Accounts payable and other liabilities1,302
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