Exhibit 99.1
Dolby Laboratories Reports FY 2006
First Quarter Results; First Quarter Revenue Reaches $91 Million
SAN FRANCISCO--(BUSINESS WIRE)--Jan. 26, 2006--Dolby Laboratories,
Inc. (NYSE:DLB) today announced the Company's financial results for
the first quarter of fiscal year 2006.
For the first quarter, Dolby reported total revenue of $91.0
million, compared to $84.3 million for the first quarter of fiscal
2005, an increase of 8 percent. First quarter net income was $17.3
million, or $0.16 per diluted share, compared to $10.4 million, or
$0.11 per diluted share, for the first quarter of fiscal 2005.
Per-share calculations are based on 110.2 million diluted shares
in the first quarter of fiscal 2006 compared with 97.8 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 first quarter 2006 includes a $6.4 million
charge for the funding and installation of digital cinema equipment
related to the release of Walt Disney's Chicken Little in digital 3D,
of which $5.7 million is reflected in Cost of Products Sales and $0.7
million is reflected in Cost of Production Services.
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 first quarter of fiscal 2006 did not
include any royalty payments to Ray Dolby, while the first quarter of
fiscal 2005 included $6.5 million of royalty payments to Ray Dolby,
net of taxes. Pro forma net income, which excludes royalty payments to
Ray Dolby, was $17.3 million, or $0.16 per diluted share, for the
first quarter of fiscal 2006, compared to $16.9 million, or $0.17 per
diluted share, for the first quarter of fiscal 2005.
Net income for the first quarter of fiscal 2006 also included
stock-based compensation charges of $5.1 million compared to $2.9
million in the first quarter of fiscal 2005.
"I am very pleased with Dolby's performance this quarter, as our
strategy to leverage our technology, brand and strong industry
position into new markets is paying off," said Bill Jasper, President
and Chief Executive Officer, Dolby Laboratories.
Guidance
For fiscal 2006, revenue is currently expected to be between $335
million and $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 $0.47 to $0.58. Fiscal 2006 diluted number of shares
is expected to be between 112 million and 113 million. While under FAS
123R stock-based compensation expense may vary based on factors such
as stock price or volatility, Dolby currently expects stock-based
compensation expense 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 first quarter of fiscal 2005. 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 1:30 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 results 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 4:30 p.m. PST
on January 26, 2006 until 5 p.m. PST on February 3, 2006 at
888-203-1112 (international callers can access the replay by dialing
719-457-0820) and entering confirmation code 9223734. 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,
diluted number of shares, earnings per diluted share, and stock-based
compensation for the fiscal year ending September 29, 2006 and Dolby's
strategy and expectations regarding expansion into new markets and
consumer technologies and the benefits that may be derived therefrom
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 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" in its Annual Report on Form 10-K
for the fiscal year ended September 30, 2005 and filed with the SEC on
December 20, 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
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Ended
-----------------------------------
December 31, 2004 December 30, 2005
----------------- -----------------
(unaudited)
(in thousands, except per
share amounts)
Revenue:
Licensing $ 62,191 $ 68,982
Product sales 16,487 16,004
Production services 5,585 6,039
- ----------------------------------------------------------------------
Total revenue 84,263 91,025
Cost of revenue:
Cost of licensing 16,149 6,601
Cost of product sales (1) 8,812 12,681
Cost of production services (1) 2,015 2,889
- ----------------------------------------------------------------------
Total cost of revenue 26,976 22,171
Gross margin 57,287 68,854
Operating expenses:
Selling, general and
administrative (1) 32,857 36,537
Research and development (1) 8,289 7,942
Settlements (2,000) -
- ----------------------------------------------------------------------
Total operating expenses 39,146 44,479
- ----------------------------------------------------------------------
Operating income 18,141 24,375
Other income, net 287 3,699
- ----------------------------------------------------------------------
Income before provision for income
taxes and controlling interest 18,428 28,074
Provision for income taxes 7,743 10,486
- ----------------------------------------------------------------------
Income before controlling interest 10,685 17,588
Controlling interest in net income (308) (319)
- ----------------------------------------------------------------------
Net income $ 10,377 $ 17,269
======================================================================
Basic net income per share $ 0.12 $ 0.17
Diluted net income per share $ 0.11 $ 0.16
- ----------------------------------------------------------------------
Shares used in the calculation of
basic net income per share 86,788 104,295
Shares used in the calculation of
diluted net income per share 97,819 110,190
- ----------------------------------------------------------------------
(1) Stock-based compensation
included in net income above
was classified as follows:
Cost of product sales $ 54 $ 202
Cost of production services 26 130
Selling, general and
administrative 2,187 4,104
Research and development 681 673
- ----------------------------------------------------------------------
Total stock-based
compensation $ 2,948 $ 5,109
======================================================================
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2005 December 30, 2005
------------------ ------------------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 372,403 $ 404,502
Restricted cash 205 185
Accounts receivable, net 25,221 30,381
Inventories 11,722 10,409
Income tax receivable 8,021 1,244
Deferred income taxes 31,183 33,238
Prepaid expenses and other
current assets 5,433 3,336
- ----------------------------------------------------------------------
Total current assets 454,188 483,295
Property, plant and equipment,
net 76,462 75,258
Intangible assets, net 17,184 16,576
Goodwill 23,865 23,245
Long-term deferred income taxes 6,781 7,282
Other assets 7,797 8,115
- ----------------------------------------------------------------------
Total assets $ 586,277 $ 613,771
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 65,126 $ 65,487
Income taxes payable 3,054 1,579
Current portion of debt 1,346 1,352
Deferred revenue 3,268 5,121
- ----------------------------------------------------------------------
Total current liabilities 72,794 73,539
Long-term debt 12,124 11,679
Other non-current liabilities 21,956 22,390
- ----------------------------------------------------------------------
Total liabilities 106,874 107,608
Controlling interest 18,264 18,144
Stockholders' equity:
Class A common stock 33 34
Class B common stock 71 71
Additional paid-in capital 308,354 293,174
Deferred stock-based
compensation (26,422) -
Retained earnings 177,369 194,638
Accumulated other
comprehensive income 1,734 102
- ----------------------------------------------------------------------
Total stockholders'
equity 461,139 488,019
- ----------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 586,277 $ 613,771
======================================================================
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA NET INCOME TO ACTUAL NET INCOME
Fiscal Quarter Ended
- ----------------------------------------------------------------------
December 31, 2004 December 30, 2005
----------------- -----------------
(unaudited)
(in thousands, except per
share amounts)
Net income $ 10,377 $ 17,269
Add:
Royalties payable to Ray Dolby
(net of taxes) 6,536 -
- ----------------------------------------------------------------------
Pro forma net income $ 16,913 $ 17,269
======================================================================
Basic shares outstanding 86,788 104,295
Diluted shares outstanding 97,819 110,190
- ----------------------------------------------------------------------
Basic net income per share $ 0.12 $ 0.17
Diluted net income per share $ 0.11 $ 0.16
- ----------------------------------------------------------------------
Basic pro forma net income per
share $ 0.19 $ 0.17
Diluted pro forma net income per
share $ 0.17 $ 0.16
- ----------------------------------------------------------------------
CONTACT: Dolby Laboratories, Inc.
Alex Hughes, 415-645-4572 (Investors)
investor@dolby.com
Paula Dunn, 415-645-5000 (Media)
news@dolby.com