Exhibit 99.1
Dolby Laboratories Reports Financial Results for Third Quarter of
Fiscal Year 2005
SAN FRANCISCO--(BUSINESS WIRE)--July 28, 2005--Dolby Laboratories
(NYSE:DLB) today announced the Company's financial results for the
third quarter of fiscal 2005 ended July 1, 2005. For the third
quarter, Dolby reported total revenue of $79.7 million, compared to
$76.1 million for the third quarter of fiscal 2004, an increase of 5%.
Third quarter net income was $14.8 million, or $0.13 per diluted
share, compared to $12.0 million, or $0.13 per diluted share, in the
same period a year ago. Per share calculations are based on 112.8
million diluted shares in the third quarter of fiscal 2005 compared
with 95.3 million diluted shares in the comparable year-ago quarter.
The increase in shares is principally attributable to the shares sold
by the Company in its February 2005 initial public offering (IPO).
In connection with the Company's IPO, Ray Dolby contributed to the
Company all of his intellectual property rights related to the
Company's business, which he had previously licensed to the Company in
exchange for royalty payments. As a result of the contribution, the
Company's royalty obligations to Ray Dolby terminated in February
2005. As such, net income for the third quarter of fiscal 2005 did not
include any royalty obligations to Ray Dolby, while the third quarter
of fiscal 2004 included $9.2 million of such obligation payments. Pro
forma net income, which excludes royalty payments to Ray Dolby and
thus gives effect to the asset contribution as though such
transactions had been completed prior to the beginning of fiscal 2004,
was $14.8 million, or $0.13 per diluted share, for the third quarter
of fiscal 2005, compared to $17.6 million, or $0.18 per diluted share,
for the third quarter of fiscal 2004.
Net income for the third quarter of fiscal 2005 also included
stock-based compensation charges of $3.2 million, compared to $2.3
million for the third quarter of fiscal 2004. Net income excluding
both the Ray Dolby royalty obligations and stock-based compensation
charges was $18.4 million, or $0.16 per diluted share, for the third
quarter of fiscal 2005, compared to $19.7 million, or $0.21 per
diluted share, for the third quarter of fiscal 2004.
"The growth in quarterly revenue on a year-over-year basis was
driven primarily by higher licensing revenue attributable to the PC,
broadcast, and gaming markets. While we did note a slowdown in the
growth of sales of traditional consumer DVD players, the overall DVD
market is still growing," said Bill Jasper, President and Chief
Executive Officer, Dolby Laboratories. "We are pleased by this
quarter's key achievements, which we believe lay the groundwork for
the Company's future and enhance the overall entertainment
experience."
Highlights from the quarter include the following:
-- Dolby launched Dolby(R) Digital Cinema in select cinemas
around the world with Star Wars: Episode III -- Revenge of the
Sith.
-- Together Dolby and Disney announced their collaboration for
the first studio-supported digital cinema rollout plan to
install Dolby Digital Cinema in 100 select cinemas nationwide
in time for Disney's fall 2005 release of Chicken Little in
digital 3-D.
-- Shanghai Media Entertainment Group announced the first
television channel in China's broadcasting history to offer
5.1 programming, for which Dolby Digital 5.1 surround sound
was selected.
-- Three leading motherboard manufacturers, Abit, ASUSTeK, and
Gigabyte, launched motherboards built on the Intel(R) Express
Chipset with Intel High Definition Audio implementations that
meet the Designed for Dolby Master Studio(TM) requirements,
making it possible for PC enthusiasts to build PCs with audio
performance and surround sound capabilities typically found in
consumer electronics.
-- In Europe, broadcasters continue to add 5.1 surround sound to
new and existing services. Most recently, Premiere, the
dominant pay-TV broadcaster in Germany, launched video-on-
demand services using Dolby Digital 5.1. M6, one of France's
leading broadcasters, also added Dolby Digital 5.1 surround
sound for programming on both its new digital terrestrial
television network and its network satellite service.
-- Dolby's subsidiary, Via Licensing Corporation, announced final
licensing terms and availability of a license for the IEEE
802.11 standard, making Via the only group to run a joint
patent licensing program for the most widely used wireless
networking standard.
Fiscal Year 2005: Year-To-Date
For the nine-month period ended July 1, 2005, Dolby reported total
revenue of $249.0 million, compared to $220.2 million for the
nine-month period ended June 25, 2004. Net income for the nine-month
period ended July 1, 2005 was $35.5 million, or $0.34 per diluted
share, compared to $36.6 million, or $0.40 per diluted share, for the
nine-month period ended June 25, 2004. The Company had 105.0 million
diluted shares outstanding for the nine-month period ended July 1,
2005, compared with 91.1 million diluted shares for the nine-month
period ended June 25, 2004.
Net income also included $18.7 million in now-discontinued royalty
obligations paid to Ray Dolby for the nine-month period ended July 1,
2005, and $28.0 million in royalty obligations paid to Ray Dolby for
the nine-month period ended June 25, 2004. Pro forma net income, which
excludes these royalty obligations, was $46.6 million, or $0.44 per
diluted share, for the nine-month period ended July 1, 2005, compared
to $53.8 million, or $0.59 per diluted share, for the nine-month
period ended June 25, 2004.
Net income also included $11.4 million of stock-based compensation
for the nine-month period ended July 1, 2005, compared with a $4.4
million charge for the nine-month period ended June 25, 2004. Net
income excluding both royalty obligations payable to Ray Dolby and the
stock-based compensation charges was $57.5 million, or $0.55 per
diluted share, for the nine-month period ended July 1, 2005, compared
to $57.5 million, or $0.63 per diluted share, for the nine-month
period ended June 25, 2004.
Guidance
The Company currently expects revenue for fiscal 2005 to be at the
low end of its previously forecasted range of $335 million to $350
million. Net income for fiscal 2005 is still expected to be between
$49 million and $55 million. Pro forma net income, which excludes
royalty obligations to Ray Dolby, for fiscal 2005 is still expected to
be between $60 million and $67 million. Earnings per diluted share for
the full fiscal year 2005 are still expected to be in the range of
$0.45 to $0.51 and, on a pro forma basis, $0.55 to $0.62. Stock-based
compensation expense for the full year is still expected to be between
$14 million and $15 million. Net income excluding the royalty
obligations to Ray Dolby and stock-based compensation expense for
fiscal 2005 is expected to be in the range of $73 million and $80
million, or between $0.67 and $0.74 per diluted share.
Pro Forma Information and Non-GAAP Measures
Prior to the Company's IPO, Ray Dolby retained ownership of the
intellectual property he created related to the Company's business and
licensed those rights to the Company in exchange for royalty payments.
In connection with the Company's IPO, Ray Dolby contributed to the
Company all of these intellectual property rights. The pro forma
financial information included in this release gives effect to the
asset contribution as though such transactions had been completed
prior to the beginning of fiscal 2004. In addition, the Company
provides net income excluding royalties payable to Ray Dolby and
stock-based compensation, which is a non-GAAP measure. The Company
believes these are important metrics as they represent how profitable
the Company is exclusive of charges that have been eliminated in the
future or that resulted largely from the revaluation of the Company in
connection with its IPO. The Company uses these metrics internally to
measure its performance and believes these metrics may be meaningful
for investors in analyzing the Company's results of operations. A
reconciliation of the Company's actual results to these additional
metrics is included in this release.
Conference Call Information
Today, beginning at 2 p.m. Pacific Daylight Time, Bill Jasper,
President and Chief Executive Officer, and Marty Jaffe, Executive Vice
President, Business and Finance, will lead a conference call open to
all interested parties to discuss the quarterly results, provide
annual guidance, and answer analysts' and portfolio managers'
questions.
Access to the teleconference will be available over the Internet
from http://investor.dolby.com/medialist.cfm or by dialing
800-289-0572 (international callers can access the call by dialing
913-981-5543).
A replay of the call will be available until August 5 by dialing
888-203-1112 (international callers can access the replay by dialing
719-457-0820) and entering confirmation code #9747704. An archived
version of the teleconference will also be available on Dolby
Laboratories' website, www.dolby.com.
About Dolby Laboratories
Dolby Laboratories (NYSE:DLB) develops and delivers products and
technologies that make the entertainment experience more realistic and
immersive. For four decades, Dolby has been at the forefront of
defining high-quality audio and surround sound in cinema, broadcast,
home audio systems, cars, DVDs, headphones, games, televisions, and
personal computers. Based in San Francisco with European headquarters
in England, the company has entertainment industry liaison offices in
New York and Los Angeles, and licensing liaison offices in London,
Shanghai, Beijing, Hong Kong, and Tokyo. 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. Master Studio is a trademark of Dolby Laboratories.
Intel is a registered trademark of Intel Corporation. S05/16490 DLB-F
Certain statements in this press release, including statements
relating to Dolby's expectations regarding revenue, net income,
earnings per share, and stock-based compensation for the fiscal year
ending September 30, 2005, 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. These risks and uncertainties include, without
limitation, the following: risks associated with Dolby's ability to
maintain and strengthen the Dolby brand; the growth in sales by
manufacturers of consumer electronics products that incorporate
Dolby's technologies; the timing of Dolby's receipt of royalty reports
and/or payments from its licensees; Dolby's ability to develop and
deliver innovative technologies in response to changes in the
entertainment industry; risks associated with Dolby's ability to have
its products and technologies adopted as industry standards; Dolby's
ability to enforce its intellectual property rights; Dolby's ability
to develop, maintain, and strengthen relationships with industry
participants; Dolby's ability to have semiconductor manufacturers
incorporate Dolby's technologies into their ICs; the growth of markets
for surround sound technologies; competition risks; pricing pressures;
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
operating Dolby's business internationally; risks associated with
licensing certain of Dolby's technologies in patent pools; Dolby's
ability to develop proprietary technology in markets in which open
standards are adopted; risks associated with the health of the motion
picture industry generally; the growth of the market for digital
cinema; Dolby's ability to expand its business into non-sound
technologies; and other risks detailed in Dolby's Securities and
Exchange Commission filings and reports, including its Quarterly
Report on Form 10-Q filed with the SEC on May 13, 2005. Dolby
disclaims any obligation to update information contained in these
forward-looking statements whether as a result of new information,
future events, or otherwise.
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Fiscal Year-To-Date
Ended Ended
------------------- -------------------
June 25, July 1, June 25, July 1,
2004 2005 2004 2005
--------- --------- --------- ---------
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $55,487 $ 60,775 $162,234 $187,683
Product sales 15,355 13,486 43,133 44,780
Production services 5,208 5,418 14,797 16,580
- ----------------------------------------------------------------------
Total revenue 76,050 79,679 220,164 249,043
Cost of revenue:
Cost of licensing 13,441 5,156 41,327 35,367
Cost of product sales (1) 7,822 6,754 22,435 23,038
Cost of production services
(1) 1,935 2,246 5,453 6,442
- ----------------------------------------------------------------------
Total cost of revenue 23,198 14,156 69,215 64,847
Gross margin 52,852 65,523 150,949 184,196
Operating expenses:
Selling, general and
administrative (1) 28,182 33,372 74,575 101,839
Research and development (1) 6,186 6,885 16,820 22,914
Settlements (2,000) - (2,000) (2,000)
In-process research and
development - - 1,540 -
- ----------------------------------------------------------------------
Total operating expenses 32,368 40,257 90,935 122,753
- ----------------------------------------------------------------------
Operating income 20,484 25,266 60,014 61,443
Other income, net 370 2,062 750 3,100
- ----------------------------------------------------------------------
Income before provision for
income taxes and controlling
interest 20,854 27,328 60,764 64,543
Provision for income taxes 8,392 12,332 23,341 28,075
- ----------------------------------------------------------------------
Income before controlling
interest 12,462 14,996 37,423 36,468
Controlling interest in net
income (494) (218) (850) (983)
- ----------------------------------------------------------------------
Net income $11,968 $ 14,778 $ 36,573 $ 35,485
======================================================================
Basic net income per share $ 0.14 $ 0.14 $ 0.43 $ 0.37
Diluted net income per share $ 0.13 $ 0.13 $ 0.40 $ 0.34
- ----------------------------------------------------------------------
Basic shares outstanding 85,707 103,410 85,383 94,796
Diluted shares outstanding 95,306 112,750 91,149 104,954
- ----------------------------------------------------------------------
(1) Stock-based compensation included in net income above was
classified as follows:
Cost of product sales $ 52 $ 56 $ 52 $ 166
Cost of production services 18 27 18 83
Selling, general and
administrative 1,814 2,674 3,948 9,464
Research and development 405 471 405 1,722
- ----------------------------------------------------------------------
Total stock-based
compensation $ 2,289 $ 3,228 $ 4,423 $ 11,435
======================================================================
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
September 24, July 1,
2004 2005
------------- -------------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 78,711 $361,551
Restricted cash - 175
Accounts receivable, net 18,257 17,730
Accounts receivable from related parties 1,927 -
Inventories 7,163 9,143
Income tax receivable 4,246 1,767
Deferred income taxes 30,813 38,394
Prepaid expenses and other current assets 3,640 2,775
- ----------------------------------------------------------------------
Total current assets 144,757 431,535
Property, plant and equipment, net 72,333 76,563
Intangible assets, net 6,778 17,593
Goodwill 22,030 23,200
Long-term deferred income taxes 6,669 6,812
Other assets 9,299 8,299
- ----------------------------------------------------------------------
Total assets $261,866 $564,002
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 56,540 $ 62,207
Accounts payable and accrued royalties
due to related parties 291 -
Income taxes payable 3,793 9,064
Current portion of debt 1,290 1,329
Deferred revenue 2,562 2,865
- ----------------------------------------------------------------------
Total current liabilities 64,476 75,465
Long-term debt 13,580 12,471
Other non-current liabilities 23,283 22,179
- ----------------------------------------------------------------------
Total liabilities 101,339 110,115
Controlling interest 17,200 17,573
Stockholders' equity:
Class A common stock - 32
Class B common stock 87 72
Additional paid-in capital 48,731 301,329
Deferred stock-based compensation (33,728) (29,367)
Retained earnings 125,076 160,561
Accumulated other comprehensive income 3,161 3,687
- ----------------------------------------------------------------------
Total stockholders' equity 143,327 436,314
- ----------------------------------------------------------------------
Total liabilities and stockholders'
equity $261,866 $564,002
======================================================================
DOLBY LABORATORIES, INC.
REGULATION G:
RECONCILIATION OF PRO FORMA NET INCOME AND NET INCOME EXCLUDING
ROYALTIES PAYABLE TO RAY DOLBY AND STOCK-BASED COMPENSATION TO
GAAP FINANCIAL MEASURES
Fiscal Quarter Fiscal Year-To-Date
Ended Ended
------------------- -------------------
June 25, July 1, June 25, July 1,
2004 2005 2004 2005
--------- --------- --------- ---------
(unaudited)
(in thousands, except per share amounts)
Net income $11,968 $ 14,778 $36,573 $ 35,485
Add:
Royalties payable to Ray
Dolby (net of taxes) 5,637 - 17,180 11,123
- ----------------------------------------------------------------------
Pro forma net income (a) $17,605 $ 14,778 $53,753 $ 46,608
======================================================================
Add:
Stock-based compensation
(net of taxes) 2,109 3,651 3,786 10,863
- ----------------------------------------------------------------------
Net income excluding royalties
payable to Ray Dolby and
stock-based compensation (a) $19,714 $ 18,429 $57,539 $ 57,471
======================================================================
Basic shares outstanding 85,707 103,410 85,383 94,796
Diluted shares outstanding 95,306 112,750 91,149 104,954
- ----------------------------------------------------------------------
Basic net income per share $ 0.14 $ 0.14 $ 0.43 $ 0.37
Diluted net income per share $ 0.13 $ 0.13 $ 0.40 $ 0.34
- ----------------------------------------------------------------------
Basic pro forma net income per
share $ 0.21 $ 0.14 $ 0.63 $ 0.49
Diluted pro forma net income
per share $ 0.18 $ 0.13 $ 0.59 $ 0.44
- ----------------------------------------------------------------------
Basic net income per share
excluding royalties payable
to Ray Dolby and stock-based
compensation $ 0.23 $ 0.18 $ 0.67 $ 0.61
Diluted net income per share
excluding royalties payable
to Ray Dolby and stock-based
compensation $ 0.21 $ 0.16 $ 0.63 $ 0.55
- ----------------------------------------------------------------------
GUIDANCE FY 2005 Diluted Earnings
Net Income Per Share
------------------- -------------------
(unaudited)
(in millions, except per share amounts)
GAAP guidance $ 49 to 55 $ 0.45 to 0.51
Add:
Royalties payable to Ray 11 to 12 0.10 to 0.11
Dolby (net of taxes)
- ----------------------------------------------------------------------
Pro forma guidance 60 to 67 0.55 to 0.62
Add:
Stock-based compensation 13 to 13 0.12 to 0.12
(net of taxes)
- ----------------------------------------------------------------------
Net income excluding royalties $ 73 to 80 $ 0.67 to 0.74
payable to Ray Dolby and
stock-based compensation
guidance
======================================================================
(a) Prior to the Company's IPO, Ray Dolby retained ownership of the
intellectual property he created related to the Company's business
and licensed those rights to the Company in exchange for royalty
payments. In connection with the Company's IPO, Ray Dolby
contributed to the Company all of these intellectual property
rights. The pro forma financial information included in this
release gives effect to the asset contribution as though such
transactions had been completed prior to the beginning of fiscal
2004. In addition, the Company provides net income excluding
royalties payable to Ray Dolby and stock-based compensation, which
is a non-GAAP measure. The Company believes these are important
metrics as they represent how profitable the Company is exclusive
of charges that have been eliminated in the future or that
resulted largely from the revaluation of the Company in connection
with its IPO. The Company uses these metrics internally to measure
its performance and believes these metrics may be meaningful for
investors in analyzing the Company's results of operations. A
reconciliation of the Company's actual results to these additional
metrics is included in this release.
CONTACT: Dolby Laboratories
Paula Dunn, 415-645-4100
investor@dolby.com
or
Kalt Rosen & Co.
Pierre Hirsch, 415-397-2686
hirsch@krc-ir.com