Exhibit 99.1
Dolby Laboratories Reports FY 2006 Fourth Quarter and Year-End Results
Fiscal 2006 Revenue Grows 19 Percent Year-Over-Year
SAN FRANCISCO--(BUSINESS WIRE)--Nov. 9, 2006--Dolby Laboratories, Inc.
(NYSE:DLB) today announced the Company's financial results for the fourth
quarter and fiscal year ended September 29, 2006.
For the fourth quarter, Dolby reported total revenue of $102.1 million,
compared to $78.9 million for the fourth quarter of fiscal 2005, an increase of
29 percent. Fourth quarter net income was $25.2 million, or $0.22 per diluted
share, compared to $16.8 million, or $0.15 per diluted share, for the fourth
quarter of fiscal 2005.
For fiscal year 2006, Dolby reported total revenue of $391.5 million,
compared to $328.0 million for fiscal year 2005. Net income for fiscal year 2006
was $89.5 million, or $0.80 per diluted share, compared to $52.3 million, or
$0.50 per diluted share, for fiscal year 2005.
Net income for the fourth quarter of fiscal 2006 reflected stock-based
compensation expense of $4.2 million compared to $2.7 million for the fourth
quarter of fiscal 2005. Net income for fiscal 2006 reflected $19.1 million of
stock-based compensation expense, compared with $14.2 million for fiscal 2005.
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 fiscal 2006 did not
include any royalty payments to Ray Dolby, while net income for fiscal 2005
reflected $11.1 million of royalty payments to Ray Dolby, net of taxes. Pro
forma net income, which excludes these royalty payments, was $89.5 million, or
$0.80 per diluted share, for the 2006 fiscal year, compared to $63.4 million, or
$0.61 per diluted share, for fiscal 2005.
In its third quarter fiscal 2006 report on Form 10-Q, Dolby disclosed that
approximately $10 million in royalties were expected from two existing licensees
and that the Company would not recognize this estimated revenue until resolution
of certain contractual matters with the licensees. In the fourth quarter of
fiscal 2006, the Company resolved the contractual matters with one of the
licensees and recognized revenue of $6.7 million related to prior quarters.
"We saw good growth for our core technologies in fiscal 2006, and we now go
into fiscal 2007 focused on extending these technologies across additional
markets, driving the adoption of newer Dolby technologies, and capitalizing on
the Dolby brand, reputation, and business model to generate additional long-term
growth opportunities," said Bill Jasper, President and Chief Executive Officer
of Dolby.
Guidance
For fiscal 2007, revenue is currently expected to be $420 million to $450
million. Net income is expected to be $95 million to $105 million. Earnings per
diluted share are expected to be $0.83 to $0.92. 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 $20 million to $22 million.
Pro Forma Information
Prior to the Company's IPO in February of 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 beginning of fiscal
2005. Specifically, the Company provides net income and earnings per diluted
share 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
Members of Dolby management will lead a conference call open to all
interested parties to discuss Dolby Laboratories' fourth quarter and fiscal 2006
financial results at 2:00 p.m. PT/5:00 p.m. ET, Thursday, November 9, 2006.
Access to the teleconference will be available over the Internet from
http://investor.dolby.com/medialist.cfm or by dialing 800-289-0493.
International callers can access the conference call at 913-981-5510.
A replay of the call will be available beginning at 5:00 p.m. PT on
November 9, 2006 until 9 p.m. PT on November 16, 2006, at 888-203-1112
(international callers can access the replay by dialing 719-457-0820) and
entering confirmation code 5722471. 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 expense for the fiscal year ending September 28,
2007 and Dolby's expectations concerning extending its technologies into
additional markets and driving the adoption of newer Dolby(R) technologies, and
the benefits, including long-term growth opportunities, 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 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 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 and 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 (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. S06/17683 DLB-F
DOLBY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Ended Fiscal Year Ended
-------------------- -------------------
September September September September
30, 2005 29, 2006 30, 2005 29, 2006
---------- --------- --------- ---------
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing $ 58,615 $ 80,360 $246,298 $301,663
Product sales 15,241 14,839 60,021 65,413
Production services 5,068 6,944 21,648 24,466
- -------------------------------------------------- -------------------
Total revenue 78,924 102,143 327,967 391,542
- -------------------------------------------------- -------------------
Cost of revenue:
Cost of licensing 5,191 7,101 40,558 26,887
Cost of product sales (1) 8,143 8,733 31,181 38,487
Cost of production services
(1) 2,037 2,755 8,479 10,668
- -------------------------------------------------- -------------------
Total cost of revenue 15,371 18,589 80,218 76,042
- -------------------------------------------------- -------------------
Gross margin 63,553 83,554 247,749 315,500
- -------------------------------------------------- -------------------
Selling, general and
administrative (1) 33,316 40,567 135,155 154,165
Research and development
(1) 7,618 9,964 30,532 35,377
Gain on settlements - (3,625) (2,000) (3,625)
- -------------------------------------------------- -------------------
Total operating expenses 40,934 46,906 163,687 185,917
- -------------------------------------------------- -------------------
Operating income 22,619 36,648 84,062 129,583
Other income, net 4,056 4,741 7,156 17,054
- -------------------------------------------------- -------------------
Income before provision for
income taxes and controlling
interest 26,675 41,389 91,218 146,637
Provision for income taxes 9,255 15,917 37,330 55,833
- -------------------------------------------------- -------------------
Income before controlling
interest 17,420 25,472 53,888 90,804
Controlling interest in net
income (612) (255) (1,595) (1,255)
- -------------------------------------------------- -------------------
Net income $ 16,808 $ 25,217 $ 52,293 $ 89,549
================================================== ===================
Basic earnings per share $ 0.16 $ 0.24 $ 0.54 $ 0.85
Diluted earnings per share $ 0.15 $ 0.22 $ 0.50 $ 0.80
- -------------------------------------------------- -------------------
Basic shares outstanding 103,655 106,964 96,969 105,688
Diluted shares outstanding 110,499 112,150 104,220 111,658
- -------------------------------------------------- -------------------
(1) Stock-based compensation
included in net income above
was as follows:
Cost of product sales $ 56 $ 201 $ 222 $ 800
Cost of production services 20 128 103 513
Selling, general and
administrative 2,245 3,146 11,709 15,087
Research and development 428 723 2,150 2,738
- -------------------------------------------------- -------------------
Total stock-based
compensation $ 2,749 $ 4,198 $ 14,184 $ 19,138
================================================== ===================
DOLBY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
September September
30, 2005 29, 2006
--------- -----------
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $372,403 $412,487
Short-term investments - 73,212
Restricted cash 205 210
Accounts receivable, net 25,221 23,550
Inventories 11,722 11,104
Income tax receivable 8,021 8,956
Deferred income taxes 31,183 44,568
Prepaid expenses and other current assets 5,433 6,130
- ----------------------------------------------------------------------
Total current assets 454,188 580,217
Property, plant and equipment, net 76,462 76,995
Intangible assets, net 17,184 14,954
Goodwill 23,865 23,188
Long-term investments - 32,909
Long-term deferred income taxes 6,781 11,100
Other assets 7,797 7,510
- ----------------------------------------------------------------------
Total assets $586,277 $746,873
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 65,126 $ 79,336
Income taxes payable 3,054 13,304
Current portion of debt 1,346 1,441
Deferred revenue 3,268 6,358
- ----------------------------------------------------------------------
Total current liabilities 72,794 100,439
Long-term debt 12,124 10,893
Other non-current liabilities 21,956 21,342
- ----------------------------------------------------------------------
Total liabilities 106,874 132,674
Controlling interest 18,264 19,911
Stockholders' equity:
Class A common stock 33 37
Class B common stock 71 70
Additional paid-in capital 308,354 323,449
Deferred stock-based compensation (26,422) -
Retained earnings 177,369 266,918
Accumulated other comprehensive income 1,734 3,814
- ----------------------------------------------------------------------
Total stockholders' equity 461,139 594,288
- ----------------------------------------------------------------------
Total liabilities and stockholders' equity $586,277 $746,873
======================================================================
DOLBY LABORATORIES, INC.
RECONCILIATION OF PRO FORMA NET INCOME TO ACTUAL NET INCOME
Fiscal Quarter
Ended Fiscal Year Ended
- -------------------------------------------------- -------------------
September September September September
30, 2005 29, 2006 30, 2005 29, 2006
--------- --------- --------- ---------
(unaudited)
(in thousands, except per share
amounts)
Net income $ 16,808 $ 25,217 $ 52,293 $ 89,549
Add:
Royalties payable to Ray
Dolby (net of taxes) - - 11,123 -
- -------------------------------------------------- -------------------
Pro forma net income $ 16,808 $ 25,217 $ 63,416 $ 89,549
================================================== ===================
Basic shares outstanding 103,655 106,964 96,969 105,688
Diluted shares outstanding 110,499 112,150 104,220 111,658
- -------------------------------------------------- -------------------
Basic net income per share $ 0.16 $ 0.24 $ 0.54 $ 0.85
Diluted net income per share $ 0.15 $ 0.22 $ 0.50 $ 0.80
- -------------------------------------------------- -------------------
Basic pro forma net income per
share $ 0.16 $ 0.24 $ 0.65 $ 0.85
Diluted pro forma net income
per share $ 0.15 $ 0.22 $ 0.61 $ 0.80
- -------------------------------------------------- -------------------
CONTACT: Dolby Laboratories
Alex Hughes, Investor Relations, 415-645-4572
(Investors)
investor@dolby.com
Paula Dunn, Corporate Communications, 415-645-5000
(Media)
news@dolby.com