Exhibit 99.1
Dolby Laboratories Reports FY 2005 Fourth Quarter and Year-End Results;
Fourth Quarter Revenue Grows 15% Year-Over-Year
SAN FRANCISCO--(BUSINESS WIRE)--Nov. 17, 2005--Dolby Laboratories
(NYSE:DLB) today announced the Company's financial results for the
fourth quarter and fiscal year ended September 30, 2005.
For the fourth quarter, Dolby reported total revenue of $78.9
million, compared to $68.9 million for the fourth quarter of fiscal
2004, an increase of 15%. Fourth quarter net income was $16.8 million,
or $0.15 per diluted share, compared to $3.3 million, or $0.03 per
diluted share, for the fourth quarter of fiscal 2004.
Per share calculations are based on 110.5 million diluted shares
in the fourth quarter of fiscal 2005 compared with 96.8 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).
Net income for the fourth quarter 2005 includes a foreign exchange
gain of approximately $1.4 million. This gain is primarily the result
of an increase in US dollars held in Dolby's UK branch, and is
reflected under "Other Income." For the foreseeable future, the
Company intends to hold the majority of its cash generated at its UK
office in the local currency and therefore does not expect to incur
significant foreign exchange gains or losses.
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 payments to Ray Dolby terminated in February 2005.
Consequently, net income for the fourth quarter of fiscal 2005 did not
include any royalty payments to Ray Dolby, while the fourth quarter of
fiscal 2004 included $6.3 million of royalty payments to Ray Dolby,
net of taxes. Pro forma net income, which excludes royalty payments to
Ray Dolby, was $16.8 million, or $0.15 per diluted share, for the
fourth quarter of fiscal 2005, compared to $9.6 million, or $0.10 per
diluted share, for the fourth quarter of fiscal 2004.
Net income for the fourth quarter of fiscal 2005 also included
stock-based compensation charges of $2.7 million, compared to $2.4
million for the fourth quarter of fiscal 2004.
Fiscal Year 2005
For fiscal year 2005, Dolby reported total revenue of $328
million, compared to $289 million for fiscal year 2004. Net income for
the same period was $52.3 million, or $0.50 per diluted share,
compared to $39.8 million, or $0.43 per diluted share, for fiscal
2004. The Company had 104.2 million diluted shares outstanding for the
full year fiscal 2005, compared with 92.8 million diluted shares for
the full year fiscal 2004.
Net income also included $11.1 million in now-discontinued royalty
payments to Ray Dolby, net of taxes, for fiscal year 2005, and $23.5
million in royalty payments to Ray Dolby, net of taxes, for fiscal
year 2004. Pro forma net income, which excludes these royalty
payments, net of taxes, was $63.4 million, or $0.61 per diluted share,
for the 2005 fiscal year, compared to $63.3 million, or $0.68 per
diluted share, for fiscal 2004.
Net income also included $14.2 million of stock-based compensation
charges for fiscal year 2005, compared with a $6.8 million charge for
fiscal 2004.
"I am very proud of the hard work and dedication that the Dolby
team showed this year. As a new public company, we achieved record
revenue in fiscal 2005," said Bill Jasper, President and Chief
Executive Officer. "In the fourth quarter, we continued to lay the
groundwork for the Company's future. We expanded our technology and
brand into the digital cinema arena; we further extended into new and
growing consumer markets; and we broadened our management team with
the addition of Kevin Yeaman as our new Chief Financial Officer."
Guidance
For fiscal 2006, revenue is currently expected to be $335 million
to $360 million. Net income is expected to be between $53 million and
$65 million. Earnings per diluted share are expected to be in the
range of $0.46 to $0.56. While under FAS 123R, stock based
compensation may vary based on factors such as stock price or
volatility, Dolby currently expects stock compensation for the full
year to be between $19 million and $21 million.
Pro Forma Information
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. Specifically, the Company
provides net income and EPS excluding royalties paid to Ray Dolby. The
Company believes these are important metrics as they represent
profitability exclusive of the charges that have now been eliminated.
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.
The Company's Conference Call Information
Today, beginning at 2 p.m. Pacific Standard Time, Bill Jasper,
President and Chief Executive Officer, Marty Jaffe, Executive Vice
President, Business Affairs, and Kevin Yeaman, Chief Financial
Officer, will lead a conference call open to all interested parties to
discuss the quarterly and annual 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
800-565-5442. International callers can access the conference call at
913-312-1298.
A replay of the call will be available beginning at 5 p.m. PST on
November 17, 2005 until 9 p.m. PST on November 24, 2005, at
888-203-1112 (international callers can access the replay by dialing
719-457-0820) and entering confirmation code 1605481. An archived
version of the teleconference will also be available on Dolby
Laboratories' website, www.dolby.com.
Forward Looking Statements
Certain statements in this press release, including statements
relating to Dolby's expectations regarding revenue, net income,
earnings per diluted share, and stock-based compensation for the
fiscal year ending September 29, 2006, 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 could cause actual results to differ
materially from those in the forward-looking statements: risks
associated with trends in DVD markets; pricing pressures; the
development of the markets for PCs, broadcast, gaming, automotive, and
AAC based music device 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, maintain, and strengthen
relationships with industry participants; 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 Dolby's ability to successfully
penetrate this market; and other risks detailed in Dolby's Securities
and Exchange Commission filings and reports, including the risks
identified under the section captioned "Risk Factors That Could Affect
Future Results" in its Quarterly Report on Form 10-Q for the quarter
ended July 1, 2005 and filed with the SEC on August 11, 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.
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. S05/16836
DLB-F
Financial Schedules Attached
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Fiscal Year-To-Date
Ended Ended
---------------------- ---------------------
Sept. 24, Sept. 30, Sept. 24, Sept. 30,
2004 2005 2004 2005
---------- ---------- ---------- ----------
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $49,161 $ 58,615 $211,395 $246,298
Product sales 14,848 15,241 57,981 60,021
Production
services 4,868 5,068 19,665 21,648
- ----------------------------------------------------------------------
Total revenue 68,877 78,924 289,041 327,967
Cost of revenue:
Cost of licensing 12,511 5,191 53,838 40,558
Cost of product
sales (1) 7,608 8,143 30,043 31,181
Cost of production
services (1) 2,171 2,037 7,624 8,479
- ----------------------------------------------------------------------
Total cost of
revenue 22,290 15,371 91,505 80,218
Gross margin 46,587 63,553 197,536 247,749
Operating expenses:
Selling, general
and
administrative (1) 31,881 33,316 106,456 135,155
Research and
development (1) 6,659 7,618 23,479 30,532
Settlements - - (2,000) (2,000)
In-process
research and
development 198 - 1,738 -
- ----------------------------------------------------------------------
Total
operating
expenses 38,738 40,934 129,673 163,687
- ----------------------------------------------------------------------
Operating income 7,849 22,619 67,863 84,062
Other income
(expense), net (521) 4,056 229 7,156
- ----------------------------------------------------------------------
Income before
provision for income
taxes and controlling
interest 7,328 26,675 68,092 91,218
Provision for income
taxes 3,980 9,255 27,321 37,330
- ----------------------------------------------------------------------
Income before
controlling interest 3,348 17,420 40,771 53,888
Controlling interest
in net income (79) (612) (929) (1,595)
- ----------------------------------------------------------------------
Net income $ 3,269 $ 16,808 $ 39,842 $ 52,293
- ----------------------------------------------------------------------
Basic net income per
share $ 0.04 $ 0.16 $ 0.47 $ 0.54
Diluted net income per
share $ 0.03 $ 0.15 $ 0.43 $ 0.50
- ----------------------------------------------------------------------
Shares used in the
calculation of basic
net income per share 86,072 103,655 85,556 96,969
Shares used in the
calculation of
diluted net income
per share 96,812 110,499 92,783 104,220
- ----------------------------------------------------------------------
(1) Stock-based compensation included in net income above was
classified as follows:
Cost of product
sales $ 52 $ 56 $ 104 $ 222
Cost of production
services 18 20 36 103
Selling, general
and
administrative 1,895 2,245 5,843 11,709
Research and
development 405 428 810 2,150
- ----------------------------------------------------------------------
Total stock-
based
compensation $ 2,370 $ 2,749 $ 6,793 $ 14,184
- ----------------------------------------------------------------------
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
Sept. 24, Sept. 30,
2004 2005
---------- ----------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 78,711 $ 372,403
Restricted cash - 205
Accounts receivable, net 18,257 25,221
Accounts receivable from related
parties 1,927 -
Inventories 7,163 11,722
Income tax receivable 4,246 8,021
Deferred income taxes 30,813 31,183
Prepaid expenses and other current
assets 3,640 5,433
- ----------------------------------------------------------------------
Total current assets 144,757 454,188
Property, plant and equipment, net 72,333 76,462
Intangible assets, net 6,778 17,184
Goodwill 22,030 23,865
Long-term deferred income taxes 6,669 6,781
Other assets 9,299 7,797
- ----------------------------------------------------------------------
Total assets $ 261,866 $ 586,277
- ----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 56,540 $ 65,126
Accounts payable and accrued royalties
due to related parties 291 -
Income taxes payable 3,793 3,054
Current portion of debt 1,290 1,346
Deferred revenue 2,562 3,268
- ----------------------------------------------------------------------
Total current liabilities 64,476 72,794
Long-term debt 13,580 12,124
Other non-current liabilities 23,283 21,956
- ----------------------------------------------------------------------
Total liabilities 101,339 106,874
Controlling interest 17,200 18,264
Stockholders' equity:
Class A common stock - 33
Class B common stock 87 71
Additional paid-in capital 48,731 308,354
Deferred stock-based compensation (33,728) (26,422)
Retained earnings 125,076 177,369
Accumulated other comprehensive income 3,161 1,734
- ----------------------------------------------------------------------
Total stockholders' equity $ 143,327 $ 461,139
- ----------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 261,866 $ 586,277
- ----------------------------------------------------------------------
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA NET INCOME TO ACTUAL NET INCOME
Fiscal
Fiscal Quarter Year-To-Date
Ended Ended
- ----------------------------------------------------------------------
Sept. 24, Sept. 30, Sept. 24, Sept. 30,
2004 2005 2004 2005
- ----------------------------------------------------------------------
(unaudited)
(in thousands, except per share amounts)
Net income $ 3,269 $ 16,808 $ 39,842 $ 52,293
Add:
Royalties payable to Ray
Dolby (net of taxes) 6,322 - 23,502 11,123
- ----------------------------------------------------------------------
Pro forma net income $ 9,591 $ 16,808 $ 63,344 $ 63,416
- ----------------------------------------------------------------------
Basic shares outstanding 86,072 103,655 85,556 96,969
Diluted shares outstanding 96,812 110,499 92,783 104,220
- ----------------------------------------------------------------------
Basic net income per share $ 0.04 $ 0.16 $ 0.47 $ 0.54
Diluted net income per
share $ 0.03 $ 0.15 $ 0.43 $ 0.50
- ----------------------------------------------------------------------
Basic pro forma net income
per share $ 0.11 $ 0.16 $ 0.74 $ 0.65
Diluted pro forma net
income per share $ 0.10 $ 0.15 $ 0.68 $ 0.61
- ----------------------------------------------------------------------
CONTACT: Dolby Laboratories
Paula Dunn, 415-645-5000 (Media Contact)
news@dolby.com
Alex Hughes, 415-645-4572 (Investor Relations)
investor@dolby.com