Exhibit 99.1
Dolby Laboratories Reports FY 2006 Second Quarter Results;
Second Quarter Revenue Reaches $105 Million
SAN FRANCISCO--(BUSINESS WIRE)--April 27, 2006--Dolby
Laboratories, Inc. (NYSE:DLB) today announced the Company's financial
results for the second quarter of fiscal 2006.
For the second quarter, Dolby reported total revenue of $104.7
million, compared to $85.1 million for the second quarter of fiscal
2005, an increase of 23 percent. Second quarter net income was $28.0
million, or $0.25 per diluted share, compared to $10.3 million, or
$0.10 per diluted share, for the second quarter of fiscal 2005.
In connection with the Company's IPO in February 2005, 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 second quarter of
fiscal 2006 did not include any royalty payments to Ray Dolby, while
the second quarter of fiscal 2005 included $4.6 million of royalty
payments to Ray Dolby, net of taxes. Pro forma net income, which
excludes royalty payments to Ray Dolby, was $28.0 million, or $0.25
per diluted share, for the second quarter of fiscal 2006, compared to
$14.9 million, or $0.14 per diluted share, for the second quarter of
fiscal 2005.
Net income for the second quarter of fiscal 2006 also included
stock-based compensation charges of $5.1 million compared to $5.3
million in the second quarter of fiscal 2005.
"This was a strong quarter for Dolby as we continued to make
progress towards our long-term objective of becoming an essential
element in the best entertainment technologies available," said Bill
Jasper, President and Chief Executive Officer, Dolby Laboratories.
Guidance
For fiscal 2006, the Company now expects revenue to be between
$350 million and $365 million. Net income is expected to be between
$65 million and $72 million. Earnings per diluted share are expected
to be in the range of $0.58 to $0.64. 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 in February 2005, 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 second quarter of fiscal
2005. Specifically, the Company provides net income and earnings per
diluted share excluding royalties paid to Ray Dolby. The Company
believes that net income and earnings per diluted share excluding
royalties paid to Ray Dolby 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 2:00 p.m. Pacific Daylight 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 questions.
Access to the teleconference will be available over the Internet
from http://investor.dolby.com/medialist.cfm or by dialing
877-704-5386. International callers can access the conference call at
913-312-1302.
A replay of the call will be available beginning at 5:00 p.m. PDT
on April 27, 2006 until 9 p.m. PDT on May 4, 2006, at 888-203-1112
(international callers can access the replay by dialing 719-457-0820)
and entering confirmation code 1547944. 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 and Dolby's expectations
concerning its long-term focus on becoming an essential element in the
best entertainment 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 Quarterly Report on Form
10-Q for the fiscal quarter ended December 30, 2005 and filed with the
SEC on February 8, 2006. 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. S06/17254 DLB-F
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Fiscal Year-to-Date
Ended Ended
-------------------- -------------------
April 1, March 31, April 1, March 31,
2005 2006 2005 2006
--------- ---------- --------- ---------
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $64,717 $83,183 $126,908 $152,165
Product sales 14,807 15,708 31,294 31,712
Production services 5,577 5,833 11,162 11,872
- -------------------------------------------------- -------------------
Total revenue 85,101 104,724 169,364 195,749
- -------------------------------------------------- -------------------
Cost of revenue:
Cost of licensing 14,062 7,177 30,211 13,778
Cost of product sales (1) 7,472 6,883 16,284 19,564
Cost of production services(1) 2,181 2,338 4,196 5,227
- -------------------------------------------------- -------------------
Total cost of revenue 23,715 16,398 50,691 38,569
- -------------------------------------------------- -------------------
Gross margin 61,386 88,326 118,673 157,180
- -------------------------------------------------- -------------------
Operating expenses:
Selling, general and
administrative (1) 35,610 38,584 68,467 75,121
Research and development (1) 7,740 8,363 16,029 16,305
Settlements - - (2,000) -
- -------------------------------------------------- -------------------
Total operating expenses 43,350 46,947 82,496 91,426
- -------------------------------------------------- -------------------
Operating income 18,036 41,379 36,177 65,754
Other income, net 751 4,594 1,038 8,293
- -------------------------------------------------- -------------------
Income before provision for
income taxes and controlling
interest 18,787 45,973 37,215 74,047
Provision for income taxes 8,000 17,652 15,743 28,138
- -------------------------------------------------- -------------------
Income before controlling
interest 10,787 28,321 21,472 45,909
Controlling interest in net
income (457) (342) (765) (661)
- -------------------------------------------------- -------------------
Net income $10,330 $27,979 $20,707 $45,248
- -------------------------------------------------- -------------------
Basic net income per share $0.11 $0.27 $0.23 $0.43
Diluted net income per share $0.10 $0.25 $0.20 $0.41
- -------------------------------------------------- -------------------
Shares used in the calculation of
basic net income per share 94,806 105,254 90,649 104,774
Shares used in the calculation of
diluted net income per share 105,544 111,387 101,573 111,056
- -------------------------------------------------- -------------------
(1) Stock-based compensation included in net income above was
classified as follows:
Cost of product sales $56 $196 $110 $398
Cost of production services 30 126 56 256
Selling, general and
administrative 4,603 4,106 6,790 8,210
Research and development 570 663 1,251 1,336
- -------------------------------------------------- -------------------
Total stock-based
compensation $5,259 $5,091 $8,207 $10,200
- -------------------------------------------------- -------------------
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
2005 2006
--------------- --------------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $372,403 $450,583
Restricted cash 205 243
Accounts receivable, net 25,221 22,737
Inventories 11,722 13,146
Income tax receivable 8,021 7,843
Deferred income taxes 31,183 33,230
Prepaid expenses and other current
assets 5,433 3,919
- ----------------------------------------------------------------------
Total current assets 454,188 531,701
Property, plant and equipment, net 76,462 75,037
Intangible assets, net 17,184 16,043
Goodwill 23,865 22,669
Long-term deferred income taxes 6,781 9,208
Other assets 7,797 7,038
- ----------------------------------------------------------------------
Total assets $586,277 $661,696
- ----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $65,126 $71,779
Income taxes payable 3,054 4,019
Current portion of debt 1,346 1,375
Deferred revenue 3,268 4,558
- ----------------------------------------------------------------------
Total current liabilities 72,794 81,731
Long-term debt 12,124 11,437
Other non-current liabilities 21,956 21,686
- ----------------------------------------------------------------------
Total liabilities 106,874 114,854
Controlling interest 18,264 18,795
Stockholders' equity:
Class A common stock 33 36
Class B common stock 71 70
Additional paid-in capital 308,354 304,559
Deferred stock-based compensation (26,422) -
Retained earnings 177,369 222,617
Accumulated other comprehensive
income 1,734 765
- ----------------------------------------------------------------------
Total stockholders' equity 461,139 528,047
- ----------------------------------------------------------------------
Total liabilities and
stockholders' equity $586,277 $661,696
- ----------------------------------------------------------------------
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA NET INCOME TO ACTUAL NET INCOME
Fiscal Quarter Fiscal Year-to-Date
Ended Ended
- ------------------------------------------------ --------------------
April 1, March 31, April 1, March 31,
2005 2006 2005 2006
--------- --------- -------- ----------
(unaudited)
(in thousands, except per share amounts)
Net income $10,330 $27,979 $20,707 $45,248
Add:
Royalties payable to Ray
Dolby (net of taxes) 4,587 - 11,123 -
- ------------------------------------------------ --------------------
Pro forma net income $14,917 $27,979 $31,830 $45,248
- ------------------------------------------------ --------------------
Basic shares outstanding 94,806 105,254 90,649 104,774
Diluted shares outstanding 105,544 111,387 101,573 111,056
- ------------------------------------------------ --------------------
Basic net income per share $0.11 $0.27 $0.23 $0.43
Diluted net income per share $0.10 $0.25 $0.20 $0.41
- ------------------------------------------------ --------------------
Basic pro forma net income
per share $0.16 $0.27 $0.35 $0.43
Diluted pro forma net income
per share $0.14 $0.25 $0.31 $0.41
- ------------------------------------------------ --------------------
CONTACT: Dolby Laboratories
Alex Hughes, CFA, 415-645-4572 (Investors)
investor@dolby.com
Paula Dunn, 415-645-5000 (Media)
news@dolby.com