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Dolby Laboratories Reports FY 2009 Fourth Quarter and Year-End Financial Results
SAN FRANCISCO --(Business Wire)--
Dolby Laboratories (News - Alert), Inc. (NYSE:DLB) today announced the Company's financial results for the fourth quarter and fiscal year ended September 25, 2009.
For the fourth quarter, Dolby reported total revenue of $163.9 million, compared to $163.1 million for the fourth quarter of fiscal 2008.
Fourth quarter net income was $44.3 million, or $0.38 per diluted share, compared to $48.6 million, or $0.42 per diluted share, for the fourth quarter of fiscal 2008.
For fiscal year 2009, Dolby reported total revenue of $719.5 million, compared to $640.2 million for fiscal year 2008, an increase of 12 percent. Net income for fiscal year 2009 was $243.0 million, or $2.11 per diluted share, compared to $199.5 million, or $1.74 per diluted share, for fiscal year 2008.
Reflected in Dolby's fiscal 2009 earnings was a $20.0 million gain in the first quarter resulting from an amendment to a license agreement with an unrelated patent licensor, and $4.8 million in restructuring charges primarily related to the consolidation of our manufacturing operations.
"We had a solid fourth quarter and fiscal year," said Kevin Yeaman, President and Chief Executive Officer, Dolby Laboratories. "In fiscal 2009, we made excellent progress with new wins in many of our markets, including broadcast, mobile, and personal computer, and we remain focused on growing the adoption of our surround sound solutions globally while bringing new technologies to market."
Guidance
For fiscal 2010, Dolby is targeting revenue of $720 million to $750 million, total gross margin of approximately 88 percent on a GAAP basis, and 89 percent on a non-GAAP basis. In addition, Dolby is targeting fiscal 2010 operating expenses of $313 million to $324 million on a GAAP basis and $280 million to $290 million on a non-GAAP basis, and a tax rate of approximately 35 percent on a GAAP basis and non-GAAP basis. Dolby's non-GAAP measures exclude expenses related to stock-based compensation, the amortization of intangibles from business combinations, and restructuring charges.
These targets lead to a fiscal 2010 diluted earnings per share target range of $1.85 to $1.96 on a GAAP basis and $2.07 to $2.20 on a non-GAAP basis.
A reconciliation between GAAP and non-GAAP financial targets is provided at the end of this press 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' Q4 and year-end fiscal 2009 financial results at 2:00 p.m. PT/5:00 p.m. ET on Tuesday, November 3, 2009.
Access to the teleconference will be available over the Internet at http://investor.dolby.com/medialist.cfm
or by dialing 888-797-3001. International callers can access the conference call at 913-312-0684.
A replay of the call will be available beginning at 5:00 p.m. PT on Tuesday, November 3, 2009, until 9:00 p.m. PT on November 10, 2009 at 888-203-1112 (international callers can access the replay at 719-457-0820) and entering the confirmation code 4818739. An archived version of the teleconference will also be available on www.dolby.com.
Non-GAAP Financial Information
To supplement Dolby's financial statements presented on a GAAP basis, Dolby provides non-GAAP financial measures of gross margin, operating expense, tax rate, and diluted earnings per share. These measures are adjusted to exclude the charges and expenses discussed above. Dolby presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Dolby's operating results in a manner that focuses on what Dolby's management believes to be its ongoing business operations. Dolby's management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the impact of stock-based compensation expense, amortization of acquired intangible assets through business combinations, restructuring charges, and the related tax impact of all of these items on the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of Dolby's business for planning and forecasting in subsequent periods. Dolby's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever Dolby uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above. Investors are also encouraged to review Dolby's GAAP financial statements as reported in its SEC (News - Alert) filings.
Forward-Looking Statements
Certain statements in this press release, including statements relating to Dolby's expectations regarding revenue, gross margin, operating expense, tax rate, and diluted earnings per share for fiscal 2010, the progress Dolby is making in its markets, the further adoption of Dolby surround sound solutions and other 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 the effects of the economic recession both domestically and internationally; risks associated with trends in the markets in which Dolby operates, including the DVD and Blu-ray Disc™, broadcast, personal computer, consumer electronics, gaming, mobile, and automobile markets; pricing pressures; 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 digital 3D and Dolby's ability to successfully penetrate this market; Dolby's ability to expand its business generally, and to expand its business beyond sound technologies to other technologies related to digital entertainment delivery, by acquiring and successfully integrating businesses or technologies; 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 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) is the global leader in technologies that are essential elements in the best entertainment experiences. Founded in 1965 and best known for high-quality audio and surround sound, Dolby creates innovations that enrich entertainment at the movies, at home, or on the go. Visit www.dolby.com for more information.
Dolby and the double-D symbol are registered trademarks of Dolby Laboratories. Blu-ray Disc is a trademark of Blu-ray Disc Association. S09/22074 DLB-F
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Ended
Fiscal Year-to-Date Ended
September 26,2008
September 25,2009
September 26,2008
September 25,2009
(unaudited)
(in thousands, except per share amounts)
Revenue:
Licensing
$
137,756
$
138,621
$
537,363
$
594,697
Product sales
18,586
20,223
72,284
95,967
Services
6,788
5,033
30,584
28,839
Total revenue
163,130
163,877
640,231
719,503
Cost of revenue:
Cost of licensing
3,623
3,580
15,802
14,803
Cost of product sales (1)
9,806
10,444
39,455
57,220
Cost of services (1)
3,120
3,240
12,520
12,786
Gain from amended patent licensing agreement
-
-
-
(20,041
)
Total cost of revenue
16,549
17,264
67,777
64,768
Gross margin
146,581
146,613
572,454
654,735
Operating expenses:
Selling, general and administrative (1)
62,815
62,514
224,090
225,489
Research and development (1)
17,082
18,079
62,080
66,710
Restructuring charges, net
-
835
-
4,847
Gain on settlements
-
(77
)
(499
)
(5,977
)
Total operating expenses
79,897
81,351
285,671
291,069
Operating income
66,684
65,262
286,783
363,666
Other income, net
4,750
1,959
15,019
7,753
Income before provision for income taxes and controlling interest
71,434
67,221
301,802
371,419
Provision for income taxes
(22,254
)
(22,518
)
(100,770
)
(127,073
)
Income before controlling interest
49,180
44,703
201,032
244,346
Controlling interest in net income
(621
)
(404
)
(1,574
)
(1,355
)
Net income
$
48,559
$
44,299
$
199,458
$
242,991
Basic earnings per share
$
0.43
$
0.39
$
1.79
$
2.15
Diluted earnings per share
$
0.42
$
0.38
$
1.74
$
2.11
Weighted-average shares outstanding (basic)
112,342
113,684
111,492
113,101
Weighted-average shares outstanding (diluted)
115,010
115,845
114,781
115,367
(1) Stock-based compensation included above was classified as follows:
Cost of product sales
$
183
$
93
$
853
$
564
Cost of services
51
30
177
115
Selling, general and administrative
4,110
5,076
17,267
17,309
Research and development
1,136
1,248
4,413
4,434
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 26, 2008
September 25, 2009
(unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
$
394,761
$
451,678
Short-term investments
119,667
283,808
Accounts receivable, net
27,650
22,981
Inventories
18,133
12,975
Deferred taxes
91,824
83,438
Prepaid expenses and other current assets
39,834
45,958
Total current assets
691,869
900,838
Property, plant and equipment, net
87,915
92,178
Intangible assets, net
83,060
82,035
Goodwill
250,356
261,121
Long-term investments
180,996
205,938
Deferred taxes
24,900
23,755
Other assets
17,050
15,450
Total assets
$
1,336,146
$
1,581,315
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
156,925
$
113,822
Income taxes payable
4,811
3,934
Current portion of long-term debt
1,593
1,624
Deferred revenue
37,344
37,204
Total current liabilities
200,673
156,584
Long-term debt
7,782
5,825
Deferred revenue
6,171
10,759
Deferred taxes
16,755
13,573
Other liabilities
33,414
31,469
Total liabilities
264,795
218,210
Controlling interest
22,098
21,997
Stockholders' equity:
Class A common stock
52
53
Class B common stock
60
60
Additional paid-in capital
434,907
478,979
Retained earnings
609,495
852,475
Accumulated other comprehensive income
4,739
9,541
Total stockholders' equity
1,049,253
1,341,108
Total liabilities and stockholders' equity
$
1,336,146
$
1,581,315
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Quarter Ended
Fiscal Year-to-Date Ended
September 26,2008
September 25,2009
September 26,2008
September 25,2009
(unaudited)
(in thousands)
Operating activities:
Net income
$
48,559
$
44,299
$
199,458
$
242,991
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
5,407
7,231
24,814
28,732
Stock-based compensation expense
5,102
6,207
22,332
21,758
Accretion of discounts/amortization of premium on investments
2,037
1,647
1,904
5,589
Excess tax benefit from exercise of stock options
(3,229
)
(2,279
)
(21,746
)
(5,827
)
Provision for doubtful accounts
168
244
935
1,392
Deferred taxes
(1,265
)
(14,595
)
(21,750
)
5,237
Gain on Put Rights
-
(56
)
-
(9,508
)
Unrealized losses on auction rate certificates
-
15
-
10,869
Gain from amended patent licensing agreement
-
-
-
(20,041
)
Other non-cash items affecting net income
(43
)
761
2,273
3,506
Changes in operating assets and liabilities:
Accounts receivable
17,268
26,491
987
1,797
Inventories
1,307
(3,783
)
(7,567
)
(3,638
)
Prepaid expenses and other assets
(9,105
)
(3,310
)
(18,640
)
(147
)
Accounts payable and accrued liabilities
14,297
2,882
33,874
(21,362
)
Income taxes, net
23,678
8,354
29,825
8,602
Deferred revenue
7,679
2,700
25,962
7,488
Other liabilities
(9,399
)
1,153
(5,187
)
(1,213
)
Payment on litigation settlement
-
-
(3,000
)
(3,000
)
Net cash provided by operating activities
102,461
77,961
264,474
273,225
Investing activities:
Purchases of available-for-sale securities
(91,069
)
(68,500
)
(304,097
)
(373,223
)
Proceeds from sale of available-for-sale and trading securities
16,244
78,923
299,376
176,908
Purchases of property, plant and equipment
(5,944
)
(4,758
)
(13,610
)
(13,994
)
Purchases of intangible assets
-
(1,250
)
-
(9,571
)
Acquisitions, net of cash acquired
129
-
(253,047
)
(16,621
)
Other
-
-
40
-
Net cash (used in) provided by investing activities
(80,640
)
4,415
(271,338
)
(236,501
)
Financing activities:
Payments on debt
(390
)
(401
)
(1,536
)
(1,522
)
Proceeds from exercise of stock options
2,637
4,306
13,553
13,716
Issuance of Class A common stock (ESPP)
-
37
1,133
3,502
Excess tax benefit from exercise of stock options
3,229
2,279
21,746
5,827
Net cash provided by financing activities
5,476
6,221
34,896
21,523
Effect of foreign exchange rate changes on cash and cash equivalents
(2,443
)
(295
)
(1,738
)
(1,330
)
Net increase in cash and cash equivalents
24,854
88,302
26,294
56,917
Cash and cash equivalents at beginning of period
369,907
363,376
368,467
394,761
Cash and cash equivalents at end of period
$
394,761
$
451,678
$
394,761
$
451,678
Fiscal Year 2010 Non-GAAP Financial Targets
(In millions, except per share data)
The following tables show the Company's fiscal year 2010 non-GAAP financial targets reconciled to GAAP financial targets included in this release.
Gross margin:
Fiscal Year2010
GAAP gross margin
88%
Stock-based compensation
0
Amortization of acquired intangibles
1
Non-GAAP gross margin
89%
Operating expenses:
Fiscal Year 2010
Low
High
GAAP operating expenses
$313
$324
Stock-based compensation
(30)
(31)
Amortization of acquired intangibles
(3)
(3)
Non-GAAP operating expenses
$280
$290
Diluted earnings per share:
Fiscal Year 2010
Low
High
GAAP diluted earnings per share
$1.85
$1.96
Stock-based compensation
0.26
0.27
Amortization of acquired intangibles
0.09
0.10
Income tax adjustments
(0.13)
(0.13)
Non-GAAP diluted earnings per share
$2.07
$2.20
Shares used in computing diluted earnings per share
116
115
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