Dolby Laboratories Reports Second Quarter Fiscal 2010 Results.pdf

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Dolby Laboratories Reports Second Quarter Fiscal
2010 Results 
April 29, 2010 04:08 PM Eastern Daylight Time   
SAN FRANCISCO--(EON: Enhanced Online News)--Dolby Laboratories, Inc. (NYSE:DLB) today announced 
the Company's financial results for its second quarter of fiscal 2010.  
For the second quarter, Dolby reported total revenue of $243.4 million, compared to $204.1 million for the second 
quarter of fiscal 2009, an increase of 19 percent.  
Second quarter GAAP net income was $85.9 million, or $0.74 per diluted share, compared to $69.5 million, or 
$0.60 per diluted share, for the second quarter of fiscal 2009. On a non-GAAP basis, second quarter net income 
was $93.1 million, or $0.80 per diluted share, compared to $76.1 million, or $0.66 per diluted share, for the second
quarter of fiscal 2009. Dolby’s non-GAAP measures exclude expenses related to stock-based compensation, the 
amortization of intangibles from business combinations, restructuring charges, a gain from an amended patent 
licensing agreement, and the related tax impact of these items.  
“We had a strong second quarter,” said Kevin Yeaman, President and Chief Executive Officer, Dolby Laboratories. 
“We continued to benefit from the inclusion of our technologies in many of the world’s most popular entertainment 
devices while making significant progress in our mobile initiative. This week Nokia announced that it will begin 
adopting Dolby Digital Plus in certain handset models.”  
Financial Targets 
For fiscal 2010, Dolby is now targeting revenue of $865 million to $895 million, total gross margin of approximately 
86 percent on a GAAP basis, and 87 percent on a non-GAAP basis. In addition, Dolby is now targeting fiscal 2010
operating expenses of $350 million to $362 million on a GAAP basis and $315 million to $325 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 targets exclude expenses related to stock-based compensation, the amortization of intangibles from business 
combinations, restructuring charges, and the related tax impact of these items.  
These targets lead to a fiscal 2010 diluted earnings per share target range of $2.23 to $2.32 on a GAAP basis and 
$2.47 to $2.57 on a non-GAAP basis.  
The Company's Conference Call Information 
Members of Dolby management will lead a conference call open to all interested parties to discuss Dolby 
Laboratories’ fiscal second quarter 2010 financial results at 2:00 p.m. PT, 5:00 p.m. ET on April 29, 2010.  
Access to the teleconference will be available over the Internet at http://investor.dolby.com/medialist.cfm or by 
phone by dialing 888-206-4836. International callers can access the conference call by dialing 913-312-0834.  
A replay of the call will be available beginning at 5:00 p.m. PT on April 29, 2010 until 9:00 p.m. PT on May 6, 2010
by dialing 888-203-1112 (international callers can access the replay by dialing 719-457-0820) and entering the 
confirmation code 4516208. 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, a gain from an amended patent licensing agreement, 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 filings. A reconciliation between GAAP and non-GAAP financial measures is provided at the 
end of this press release and on our investor relations website at http://investor.dolby.com/medialist.cfm.  
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 continued adoption of Dolby technologies, and the benefits that may be derived from them 
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 macroeconomic 
conditions; 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. S10/22798 DLB-F  
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Quarter Ended
Fiscal Year-to-Date Ended
March 27, 
2009
March 26, 
2010
March 27, 
2009
March 26, 
2010
(unaudited)
(in thousands, except per share amounts)
Revenue: 
Licensing 
$ 159,879 
$ 195,944 
$ 313,935 
$ 361,719 
Products 
36,008 
39,839 
53,954 
87,496 
Services 
8,237 
7,638 
16,493 
15,422 
Total revenue 
204,124 
243,421 
384,382 
464,637 
Cost of revenue: 
Cost of licensing 
4,613 
5,537 
7,861 
9,563 
Cost of products (1)
24,275 
20,622 
33,634 
48,706 
Cost of services (1)
3,094 
3,464 
6,300 
7,147 
Gain from amended patent licensing agreement 
- 
- 
(20,041 
)
- 
Total cost of revenue 
31,982 
29,623 
27,754 
65,416 
Gross margin 
172,142 
213,798 
356,628 
399,221 
Operating expenses: 
Research and development (1)
20,302 
25,248 
38,960 
48,048 
Sales and marketing (1)
20,073 
26,724 
44,560 
57,108 
General and administrative (1)
24,389 
29,630 
50,389 
57,512 
Restructuring charges, net 
1,866 
118 
2,734 
303 
Total operating expenses 
66,630 
81,720 
136,643 
162,971 
Operating income 
105,512 
132,078 
219,985 
236,250 
Other income, net 
2,707 
1,851 
5,194 
4,058 
Income before provision for income taxes 
108,219 
133,929 
225,179 
240,308 
Provision for income taxes 
(38,430 
)
(47,610 
)
(77,053 
)
(84,496 
) 
Net income including controlling interest 
69,789 
86,319 
148,126 
155,812 
Less: net income attributable to controlling 
interest 
(338 
)
(421 
)
(580 
)
(828 
) 
Net income attributable to Dolby 
Laboratories, Inc.
$ 69,451
$ 85,898
$ 147,546
$ 154,984
Earnings per share attributable to Dolby 
Laboratories, Inc. (basic) 
$ 0.62 
$ 0.75 
$ 1.31 
$ 1.36 
Earnings per share attributable to Dolby 
Laboratories, Inc. (diluted) 
$ 0.60 
$ 0.74 
$ 1.28 
$ 1.34 
Weighted-average shares outstanding (basic) 
112,852 
113,985 
112,730 
114,035 
Weighted-average shares outstanding (diluted) 
115,059 
115,995 
114,981 
116,065 
(1) Stock-based compensation included above 
was classified as follows: 
Cost of products 
$ 222 
$ 101 
$ 378 
$ 179 
Cost of services 
29 
38 
56 
63 
Research and development 
1,168 
1,548 
2,341 
2,744 
Sales and marketing 
1,488 
2,217 
2,740 
3,949 
General and administrative 
1,933 
3,258 
3,905 
5,936 
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 25, 2009 March 26, 2010
(unaudited)
(in thousands)
ASSETS
Current assets: 
Cash and cash equivalents 
$ 451,678 
$ 417,349 
Short-term investments 
283,808 
382,097 
Accounts receivable, net 
22,981 
44,427 
Inventories 
12,975 
10,446 
Deferred taxes 
83,438 
92,851 
Prepaid expenses and other current assets 
45,958 
27,864 
Total current assets 
900,838 
975,034 
Long-term investments 
205,938 
249,633 
Property, plant, and equipment, net 
92,178 
100,880 
Intangible assets, net 
82,035 
72,297 
Goodwill 
261,121 
259,514 
Deferred taxes 
23,755 
26,606 
Other non-current assets 
15,450 
15,496 
Total assets
$ 1,581,315
$ 1,699,460
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: 
Accounts payable and accrued liabilities 
$ 113,822 
$ 120,279 
Income taxes payable 
3,934 
24,489 
Current portion of long-term debt 
1,624 
1,647 
Deferred revenue 
37,204 
17,290 
Total current liabilities 
156,584 
163,705 
Long-term debt, net of current portion 
5,825 
4,880 
Long-term deferred revenue 
10,759 
11,095 
Deferred taxes 
13,573 
12,919 
Other non-current liabilities 
31,469 
32,470 
Total liabilities 
218,210 
225,069 
Stockholders' equity: 
Class A common stock 
53 
53 
Class B common stock 
60 
60 
Additional paid-in capital 
478,979 
439,328 
Retained earnings 
852,475 
1,007,459 
Accumulated other comprehensive income 
9,541 
5,568 
Total stockholders' equity - Dolby Laboratories, Inc.
1,341,108 
1,452,468 
Controlling interest 
21,997 
21,923 
Total stockholders' equity 
1,363,105 
1,474,391 
Total liabilities and stockholders' equity
$ 1,581,315
$ 1,699,460
DOLBY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Quarter Ended
Fiscal Year-to-Date Ended
March 27, 
2009
March 26, 
2010
March 27, 
2009
March 26, 
2010
(unaudited)
(in thousands)
Operating activities:
Net income including controlling interest 
$ 69,789 
$ 86,319 
$ 148,126 
$ 155,812 
Adjustments to reconcile net income to net 
cash provided by operating activities: 
Depreciation and amortization 
8,066 
9,588 
14,585 
17,394 
Stock-based compensation expense 
4,649 
7,111 
9,180 
12,438 
Amortization of premium on investments 
1,291 
2,110 
2,265 
3,978 
Excess tax benefit from exercise of stock 
options 
(691 
)
(5,631 
)
(1,483 
)
(10,284 
)
Provision for doubtful accounts 
531 
(97 
)
1,382 
(208 
)
Deferred taxes 
10,039 
(4,801 
)
16,957 
(10,430 
)
Unrealized losses/(gains) on Put Rights 
(2,614 
)
1,452 
(9,220 
)
2,751 
Unrealized losses/(gains) on auction rate 
certificates 
2,600 
(1,607 
)
10,622 
(2,914 
)
Gain from amended patent licensing agreement 
- 
- 
(20,041 
)
- 
Other non-cash items affecting net income 
(363 
)
178 
(1,189 
)
766 
Changes in operating assets and liabilities: 
Accounts receivable 
(22,442 
)
(1,047 
)
(21,217 
)
(21,447 
)
Inventories 
(1,322 
)
(1,073 
)
(3,710 
)
2,417 
Prepaid expenses and other assets 
9,752 
6,336 
7,693 
13,263 
Accounts payable and accrued liabilities 
(9,119 
)
(1,728 
)
(15,575 
)
6,731 
Income taxes, net 
(22,867 
)
(1,279 
)
1,268 
33,512 
Deferred revenue 
(13,174 
)
(10,042 
)
(6,972 
)
(19,538 
)
Other liabilities 
(1,482 
)
229 
(2,604 
)
241 
Net cash provided by operating activities 
32,643 
86,018 
130,067 
184,482 
Investing activities:
Purchases of available-for-sale securities 
(98,452 
)
(111,820 )
(195,253 )
(376,733 )
Proceeds from sale of available-for-sale 
securities 
36,936 
97,914 
53,986 
232,698 
Purchases of property, plant, and equipment 
(2,556 
)
(7,445 
)
(3,552 
)
(18,064 
)
Purchases of intangible assets 
- 
- 
(8,321 
)
(125 
)
Other 
- 
171 
- 
171 
Net cash used in investing activities 
(64,072 
)
(21,180 
)
(153,140 )
(162,053 )
Financing activities:
Payments on debt 
(366 
)
(392 
)
(734 
)
(790 
)
Proceeds from exercise of stock options 
1,826 
11,821 
3,161 
19,158 
Issuance of Class A common stock (ESPP) 
- 
- 
1,635 
1,921 
Repurchase of common stock 
- 
(67,463 
)
- 
(83,124 
)
Excess tax benefit from exercise of stock 
options 
691 
5,631 
1,483 
10,284 
Net cash provided by/(used in) financing 
activities 
2,151 
(50,403 
)
5,545 
(52,551 
)
Effect of foreign exchange rate changes on 
cash and cash equivalents 
(628 
)
(3,324 
)
(4,705 
)
(4,207 
)
Net increase/(decrease) in cash and cash 
equivalents 
(29,906 
)
11,111 
(22,233 
)
(34,329 
)
Cash and cash equivalents at beginning of 
period 
402,434 
406,238 
394,761 
451,678 
Cash and cash equivalents at end of 
period
$ 372,528
$ 417,349
$ 372,528
$ 417,349
GAAP to Non-GAAP Reconciliations
(In millions, except per share data) 
The following tables show the Company’s second quarter of fiscal years 2009 and 2010 GAAP financial measures 
reconcilied to non-GAAP financial measures included in this release: 
Net income: 
Fiscal Quarter Ended
March 27,
2009 
March 26,
2010 
GAAP net income 
$ 69 
$ 86 
Stock-based compensation 
5 
7 
Amortization of acquired intangibles 
4 
4 
Restructuring charges, net 
2 
0 
Income tax adjustments 
(4 
) 
(4 
) 
Non-GAAP net income 
$ 76 
$ 93 
Diluted earnings per share: 
Fiscal Quarter Ended
March 27,
March 26,
Contacts  
Dolby Laboratories 
Investor Contact: 
Alex Hughes, 415-645-4572 
investor@dolby.com 
or 
Media Contact: 
Sean Durkin, 415-645-5176 
news@dolby.com 
Permalink: http://eon.businesswire.com/news/eon/20100429006619/en 
2009 
2010 
GAAP diluted earnings per share 
$ 0.60 
$ 0.74 
Stock-based compensation 
0.04 
0.06 
Amortization of acquired intangibles 
0.03 
0.04 
Restructuring charges, net 
0.02 
0.00 
Income tax adjustments 
(0.03 
) 
(0.04 
) 
Non-GAAP diluted earnings per share 
$ 0.66 
$ 0.80 
Shares used in computing diluted earnings per share 
115 
116 
The following tables show the Company’s fiscal year 2010 GAAP financial targets reconciled to non-GAAP 
financial targets included in this release: 
Gross margin: 
Fiscal Year
2010
GAAP gross margin 
86 
% 
Stock-based compensation 
0 
% 
Amortization of acquired intangibles 
1 
% 
Non-GAAP gross margin 
87 
% 
Operating expenses: 
Fiscal Year 2010
Low
High
GAAP operating expenses 
$ 350 
$ 362 
Stock-based compensation 
(31 
) 
(32 
) 
Amortization of acquired intangibles 
(4 
) 
(5 
) 
Restructuring charges, net 
(0 
) 
(0 
) 
Non-GAAP operating expenses 
$ 315 
$ 325 
Diluted earnings per share: 
Fiscal Year 2010
Low
High
GAAP diluted earnings per share 
$ 2.23 
$ 2.32 
Stock-based compensation 
0.27 
0.28 
Amortization of acquired intangibles 
0.10 
0.11 
Restructuring charges, net 
0.00 
0.00 
Income tax adjustments 
(0.13 
) 
(0.14 
) 
Non-GAAP diluted earnings per share 
$ 2.47 
$ 2.57 
Shares used in computing diluted earnings per share 
116 
116