Dolby Laboratories Reports FY 2009 Fourth Quarter and Year-End Financial Results

Dolby Laboratories, 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 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