Dolby Laboratories Reports First Quarter Fiscal 2008 Results

Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's financial results for its first quarter of fiscal 2008. For the first quarter, Dolby reported total revenue of $150.2 million, compared to $104.4 million for the first quarter of fiscal 2007, an increase of 44 percent. First quarter net income was $47.7 million, or $0.42 per diluted share, compared to $29.9 million, or $0.27 per diluted share, for the first quarter of fiscal 2007. Net income for the first quarter of fiscal 2008 reflected stock-based compensation expense of $5.5 million compared to $4.9 million for the first quarter of fiscal 2007. Net income for the first quarter of fiscal 2008 includes charges related to the amortization of intangibles of $2.3 million compared to $0.5 million for the first quarter of fiscal 2007. "Our first quarter results demonstrate Dolby’s strength across a broad range of entertainment platforms including DVD, PC, broadcast, cinema, and gaming,” said Bill Jasper, President and Chief Executive Officer, Dolby Laboratories. "We remain focused on innovation and being an essential element in the best entertainment technologies used by professionals and consumers." Guidance Dolby now expects fiscal 2008 revenue to be $575 million to $615 million. Net income is now expected to be $157 million to $167 million. Earnings per diluted share are now expected to be $1.34 to $1.44. While under FAS 123R, stock-based compensation expense may vary based on factors such as stock price or volatility, Dolby now expects stock-based compensation expense for the full year to be $19 million to $21 million. In addition, Dolby expects charges related to the amortization of intangibles for fiscal 2008 to be approximately $12 million, compared to $3.3 million in fiscal 2007. The Company's Conference Call Information Members of Dolby management will lead a conference call open to all interested parties to discuss Dolby Laboratories’ Q1 fiscal 2008 financial results at 2:00 p.m. PT/5:00 p.m. ET, Thursday, January 31, 2008. Access to the teleconference will be available over the Internet from http://investor.dolby.com/medialist.cfm or by dialing 800-762-8779. International callers can access the conference call at 480-629-9041. A replay of the call will be available beginning at 5:00 p.m. PT on January 31 until 9:00 p.m. on February 7, 2008; dial 800-406-7325 (international callers can access the replay by dialing 303-590-3030) and enter confirmation code 3832223. 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, including net income, earnings per diluted share, stock-based compensation expense and charges relating to the amortization of intangibles for the fiscal year ending September 26, 2008, Dolby’s strength across a broad range of entertainment platforms, Dolby’s focus on innovation and having its technologies included as an essential element in entertainment technologies used by professionals and consumers, 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 the markets in which Dolby operates, including the DVD and next-generation DVD, broadcast, personal computer, gaming, mobile, or portable device markets, and trends relating to the development of additional and newer markets for Dolby technologies; the timing of a potential US or foreign economic recession; 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 Periodic Report on Form 10-Q or 10-K. 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 more than 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. 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. S08/19197 DLB-F DOLBY LABORATORIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS       Fiscal Quarter Ended December 29,2006 December 28,2007 (unaudited) (in thousands, except per share amounts) Revenue: Licensing $ 82,375 $ 122,430 Product sales 15,210 20,010 Services   6,857     7,787   Total revenue   104,442     150,227     Cost of revenue: Cost of licensing 7,660 3,263 Cost of product sales (1) 8,686 11,648 Cost of services (1)   2,683     3,055   Total cost of revenue   19,029     17,966   Gross margin   85,413     132,261   Operating expenses: Selling, general and administrative (1) 37,311 50,986 Research and development (1)   8,836     13,907   Total operating expenses   46,147     64,893   Operating income 39,266 67,368 Other income, net   5,427     5,204   Income before provision for income taxes and controlling interest 44,693 72,572 Provision for income taxes   14,452     24,607   Income before controlling interest 30,241 47,965 Controlling interest in net income   (348 )   (292 ) Net income $ 29,893   $ 47,673       Earnings per share (basic) $ 0.28 $ 0.43 Earnings per share (diluted) $ 0.27 $ 0.42   Weighted-average shares outstanding (basic) 107,947 110,592 Weighted-average shares outstanding (diluted) 112,767 114,700     (1) Stock-based compensation included above was classified as follows:   Cost of product sales $ 218 $ 241 Cost of services 37 40 Selling, general and administrative 3,859 4,295 Research and development 747 890 DOLBY LABORATORIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS     September 28,2007 December 28,2007 (unaudited) (in thousands) ASSETS Current assets: Cash and cash equivalents $ 368,467 $ 280,246 Short-term investments 231,217 200,727 Accounts receivable, net 28,165 37,955 Inventories 14,883 14,585 Deferred income taxes 73,686 76,086 Prepaid expenses and other current assets   17,000   19,585 Total current assets 733,418 629,184 Property, plant and equipment, net 85,552 85,079 Intangible assets, net 35,389 93,672 Goodwill 39,364 258,967 Long-term investments 73,224 29,301 Long-term deferred income taxes 12,393 17,887 Other assets   12,357   12,541 Total assets $ 991,697 $ 1,126,631   LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 119,068 $ 138,488 Income taxes payable 9,051 15,155 Current portion of debt 1,563 1,571 Deferred revenue   13,522   18,358 Total current liabilities 143,204 173,572 Long-term debt 9,691 9,209 Long-term deferred revenue 5,073 4,932 Other non-current liabilities   14,294   49,709 Total liabilities 172,262 237,422 Controlling interest 22,279 22,031 Stockholders' equity: Class A common stock 49 50 Class B common stock 61 61 Additional paid-in capital 375,830 392,999 Retained earnings 409,749 457,710 Accumulated other comprehensive income   11,467   16,358 Total stockholders' equity   797,156   867,178 Total liabilities and stockholders' equity $ 991,697 $ 1,126,631