What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-11-17 compared with 2020-11-16 · 288 added, 295 removed, 1206 unchanged (33% of the section changed)

2 unchanged sentences

As of September 24, 2021, we had cash and cash equivalents of $1,225.4 million, which consisted of cash and highly liquid money market funds.

In addition, we had both short and long-term investments of $99.1 million, which consisted primarily of municipal debt securities, corporate bonds, government bonds, and U.S.

agency securities.

investment policy is focused on the preservation of capital and support for our liquidity requirements.

In addition, we had both short and long-term investments of $101.7 million, which consisted primarily of corporate bonds, municipal debt securities, government bonds, commercial paper, U.S.

agency securities, and certificates of deposit.

Our investment policy is focused on the preservation of capital and support for our liquidity requirements.

Under the policy, we invest in highly rated securities with a minimum credit rating of A- while limiting the amount of credit exposure to any one issuer other than the U.S.

At September 25, 2020, the weighted-average credit quality of our investment portfolio was AA, with a weighted-average maturity of approximately fourteen months.

As of September 24, 2021, the weighted-average credit quality of our investment portfolio was AA, with a weighted-average maturity of approximately fourteen months.

We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments.

3 unchanged sentences

Foreign Currency Exchange Risk

We maintain business operations in foreign countries, most significantly in Australia, China, Germany, the Netherlands, Poland and the United Kingdom.

We maintain business operations in foreign countries, most significantly in Australia, China, Germany, the Netherlands, Poland, and the U.K.

Additionally, a portion of our business is conducted outside of the U.S.

13 unchanged sentences

Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains or losses that are reflected in our consolidated statements of operations.

Our foreign operations are subject to the same risks present when conducting business internationally, including, but not limited to, changes in economic and geopolitical climate, differing tax structures, foreign exchange rate volatility and other regulations and restrictions.

In fiscal 2019, we implemented a cash flow hedge program using forward currency contracts to reduce the impact of currency volatility on U.S.

Our foreign operations are subject to the same risks present when conducting business internationally, including, but not limited to, changes in economic conditions and geopolitical climate, differing tax structures, foreign exchange rate volatility and other regulations and restrictions.

We also enter into forward currency contracts exclusively designated as cash flow hedges, which have a maturity of thirteen months or less, to reduce the impact of currency volatility on U.S.

dollar operating expenses and margins.

The effective portions of cash flow hedges are recorded at fair value with changes in the fair value as a component in AOCI, until the hedged item is recognized in earnings.

Amounts in AOCI are expected to be released to the same line item in the consolidated statements of operations concurrently with the hedged costs, within the next twelve months.

The gains and losses from the effective portions of cash flow hedges are recorded at fair value as a component of AOCI, until the hedged item is subsequently reclassified into earnings in the same period in which the hedged transaction affects earnings, with the corresponding hedged item.

Amounts reclassified are recorded to the same line item in the consolidated statements of operations as the impact of the hedge transaction, concurrently with the hedged costs.

The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $12.7 million in fiscal 2021.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $5.3 million in fiscal 2020.

The pre-tax effective portion of the gain reclassified to the consolidated statements of operations was $9.0 million in fiscal 2021, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $0.9 million in fiscal 2020.

We also enter into foreign currency forward contracts to hedge against assets and liabilities for which we have foreign currency exchange rate exposure and selected anticipated expenses.

1 unchanged sentence

The contracts hedging foreign currency denominated operating expenses are carried at fair value with changes in the fair value recorded to other comprehensive income until the hedged expenses are reported in our consolidated statements of operations.

As of September 25, 2020 and September 27, 2019, the outstanding derivative instruments had maturities of equal to or less than 13 months, and the total notional amounts of outstanding contracts were $93.8 million and $29.0 million, respectively.

As of September 24, 2021, the outstanding derivative instruments had maturities of equal to or less than 3 months.

As of September 24, 2021 and September 25, 2020, the total notional amounts of outstanding contracts were $51.0 million and $93.8 million, respectively.

For additional information related to our foreign currency forward contracts, see Note 2 " Summary of Significant Accounting Policies " to our consolidated financial statements.

1 unchanged sentence

This sensitivity analysis was based on a modeling technique that measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S.

For these forward contracts, duration modeling was used where hypothetical changes are made to the spot rates of the currency.

For these forward contracts, duration modeling was used where hypothetical changes were made to the spot rates of the currency.

A 10% increase in the value of the U.S.

17 unchanged sentences

We have audited the accompanying consolidated balance sheets of Dolby Laboratories, Inc.

and subsidiaries (the Company) as of September 25, 2020 and September 27, 2019, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended September 25, 2020 and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of September 24, 2021 and September 25, 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended September 24, 2021 and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of September 24, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

2 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 24, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of September 28, 2019 due to the adoption of the FASB Accounting Standards Codification No.

842, Leases .

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

12 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

3 unchanged sentences

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Revenue estimate related to sales-based licensing arrangements

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of revenue estimate related to sales-based licensing arrangements

As discussed in Note 3 to the consolidated financial statements, revenue is derived principally from the licensing of technologies and patents to various types of licensees.

2 unchanged sentences

After receiving the royalty statements from the licensees, which is generally in the quarter after those shipments have occurred, the Company will record an adjustment based on the difference between the estimated and actual sales-based licensing revenue.

We identified the assessment of the revenue estimate related to sales-based licensing arrangements as a critical audit matter.

Auditor judgment was required to evaluate the Company’s estimation of sales-based licensing revenue, which included the use of historical data, industry estimates of expected shipments, market penetration, and average sales prices.

We identified the assessment of the revenue estimates related to the Company’s sales-based licensing arrangements as a critical audit matter.

Auditor judgement was required to evaluate the Company’s estimation of sales-based licensing revenue, which included the use of historical data, industry estimates of expected shipments, market penetration, and average sales prices.

The following are the primary procedures we performed to address this critical audit matter.

17 unchanged sentences

Short-term investments 38,839 46,948

Accounts receivable, net of allowance for doubtful accounts of $ 15,908 and $ 9,775

Accounts receivable, net of allowance for credit losses of $ 8,744 and $ 15,908

232,609 180,340

Contract assets 161,357 195,651

Contract assets, net of allowance for credit losses of $ 208 and $ 0

182,316 161,357

Inventories, net 10,965 25,550

53 unchanged sentences

General and administrative 224,161 219,753 205,425

Restructuring charges/(credits) 1,821 36,558 ( 446 )

Gain on sale of assets ( 13,871 ) — —

Restructuring charges 10,240 1,821 36,558

Total operating expenses 806,841 796,552 823,689

3 unchanged sentences

Interest expense ( 479 ) ( 186 ) ( 170 )

Other income/(expense), net 8,434 481 ( 5,903 )

Other income, net 7,108 8,434 481

Total other income 10,122 20,973 25,230

26 unchanged sentences

Other comprehensive income:

Currency translation adjustments, net of tax of $ 22 , $( 439 ), and $ 106

Currency translation adjustments, net of tax benefit/(expense) of ($ 501 ), $ 22 , and ($ 439 )

5,510 7,552 ( 10,166 )

Unrealized gains/(losses) on investments, net of tax of $( 926 ), $ 58 , and $ 89

Unrealized gains/(losses) on investments, net of tax benefit/(expense) of $ 108 , ($ 926 ), and $ 58

( 598 ) ( 1,380 ) 5,146

Unrealized gains on cash flow hedges, net of tax of $( 407 ), $ 0 , and $ 0

Unrealized gains/(losses) on cash flow hedges, net of tax expense of ($ 419 ), ($ 407 ), and $ 0

( 4,091 ) 3,969 —

Total other comprehensive income/(loss), net of tax 821 10,141 ( 5,020 )

24 unchanged sentences

Net income — — — — — 231,363 — 231,363 256 231,619

Other comprehensive (loss), net of tax — — — — — — ( 4,793 ) ( 4,793 ) ( 227 ) ( 5,020 )

Other comprehensive income, net of tax — — — — — — 10,031 10,031 110 10,141

Distributions to controlling interest — — — — — — — — ( 283 ) ( 283 )

29 unchanged sentences

Stock-based compensation 99,698 86,628 76,580

Amortization of operating lease right-of-use assets 16,897 21,006 —

Amortization of premium on investments 1,373 800 358

Provision for doubtful accounts 7,689 4,523 2,413

Provision for/(benefit from) credit losses ( 2,889 ) 7,689 4,523

Deferred income taxes ( 37,048 ) ( 5,274 ) ( 40,191 )

Restructuring charge for exit of leased facility 1,640 33,251 —

Gain on sale of assets ( 13,871 ) — —

Other non-cash items affecting net income ( 5,452 ) 10,920 6,952

16 unchanged sentences

Purchases of property, plant, and equipment ( 54,454 ) ( 66,347 ) ( 96,281 )

Payments for business acquisitions, net of cash acquired — ( 14,919 ) ( 22,852 )

Proceeds from sale of assets 16,365 — —

Payments for business combinations, net of cash acquired ( 4,500 ) — ( 14,919 )

Purchase of intangible assets — ( 2,640 ) ( 17,255 )

7 unchanged sentences

Payment related to prior purchases of intangible assets — ( 91 ) —

Payment of deferred consideration for prior business combination ( 4,671 ) ( 743 ) —

Payment of deferred consideration for prior business combinations — ( 4,671 ) ( 743 )

Net cash used in financing activities ( 252,515 ) ( 207,775 ) ( 385,281 )

7 unchanged sentences

Change in property, plant, and equipment purchased, unpaid at period-end $ 2,772 $ ( 3,417 ) $ ( 324 )

Purchase consideration payable for acquisition $ — $ 1,700 $ 3,750

Purchase consideration payable for intangibles $ 260 $ 1,881 $ 200

Purchase consideration payable for business combinations $ 500 $ — $ 1,700

Purchase consideration payable for intangible assets $ 30 $ 260 $ 1,881

See accompanying notes to consolidated financial statements

14 unchanged sentences

Our estimates of royalty-based revenue also take into consideration the macroeconomic effect of global events, such as the COVID-19 pandemic or other natural disasters which may impact our licensees' supply chain activities as well as demand for shipments.

Additional significant items subject to such estimates and assumptions include estimated selling prices for performance obligations within revenue arrangements;

valuation allowances for accounts receivable;

carrying values of inventories and certain property, plant, and equipment, goodwill and intangible assets;

Additional significant items subject to such estimates and assumptions include ESPs for performance obligations within revenue arrangements;

allowance for credit losses for accounts receivable;

carrying values of inventories and certain PP&E, goodwill and intangible assets;

fair values of investments;

3 unchanged sentences

The fiscal years presented herein include the 52 week periods ended September 24, 2021 (fiscal 2021), September 25, 2020 (fiscal 2020), and September 27, 2019 (fiscal 2019).

Our fiscal year ending September 30, 2022 (fiscal 2022) will consist of 53 weeks.

Reclassifications

16 unchanged sentences

Restricted Cash

Restricted cash on our consolidated balance sheets consists of cash contributed by Dolby and third-party licensors to Via Licensing Corporation, our wholly-owned subsidiary, that may only be used for licensor enforcement actions or licensee compliance activities related to certain Via-administered patent pools, as well as to disperse costs associated with any audit of Via Licensing Corporation for the Wideband Code Division Multiple Access (W-CDMA) patent pool .

All of our investments are classified as available-for-sale securities, with the exception of our mutual fund investments held in our supplemental retirement plan, which are classified as trading securities.

Restricted cash on our consolidated balance sheets consists of cash contributed by Dolby and third-party licensors to Via, our wholly-owned subsidiary, that may only be used for licensor enforcement actions or licensee compliance activities related to certain Via-administered patent pools, as well as to disperse costs associated with any audit of Via for the Wideband Code Division Multiple Access (W-CDMA) patent pool .

All of our investments are classified as AFS, with the exception of our mutual fund investments held in our supplemental executive retirement plan, which are classified as trading securities.

Investments that have an original maturity of 91 days or more at the date of purchase and a current maturity of less than one year are classified as short-term investments, while investments with a current maturity of more than one year are classified as long-term investments.

6 unchanged sentences

If we deem it probable that we will not recover the full cost basis of the security, the security is other-than-temporarily impaired, and the impairment loss is recognized as a component of net income.

Allowance for Doubtful Accounts

We maintain a provision for estimated losses on receivables resulting from our customers' inability to make required payments.

In determining the provision, we evaluate the collectability of our accounts receivable based upon a variety of factors.

In cases where we are aware of circumstances that may impair a specific customer’s ability to meet its financial obligations, we record a specific allowance against amounts due, and thereby reduce the net recognized receivable to the amount reasonably believed to be collectible.

For all other customers, we recognize allowances for doubtful accounts based on our actual historical write-off experience in conjunction with the length of time the receivables are past due, geographic risk and the current business environment.

Allowance for Credit Losses

We maintain a provision for estimated credit losses on receivables resulting from our customers' inability to make required payments.

In determining the provision, we pool receivables with similar risk characteristics to evaluate the collectability of our accounts receivable.

Risk characteristics considered in creating these risk pools include assessing historical or expected loss patterns, credit ratings, current economic conditions that could impact collectability of cash flows (such as the macroeconomic effects of COVID-19), and structure of customer agreements.

In cases where circumstances have changed such that specific customers no longer share similar risk characteristics, customers are excluded from their current pool and their risk profiles are evaluated separately.

We recognize allowances for credit losses based on our actual historical loss information, the current business environment, and reasonable and supportable forecasts.

Actual future losses from uncollectible accounts may differ from our estimates.

26 unchanged sentences

Goodwill, Intangible Assets, and Long-Lived Assets

We test goodwill for impairment annually during our third fiscal quarter and whenever events or changes in circumstances indicate that the carrying amount may be impaired.

We perform a qualitative assessment as a determinant for whether the two-step annual goodwill impairment test should be performed.

We perform an assessment of goodwill for potential impairment annually during our third fiscal quarter and whenever events or changes in circumstances indicate that the carrying amount may be impaired.

We perform a qualitative assessment as a determinant for whether the annual goodwill impairment test should be performed.

For fiscal 2021, we completed our annual goodwill impairment assessment in the fiscal quarter ended June 25, 2021.

We determined in our qualitative review that it is more likely than not that the fair value of our reporting unit is substantially in excess of the respective carrying amount.

Accordingly, there was no impairment, and the two-step goodwill impairment test was not required.

Accordingly, there was no impairment, and the goodwill impairment test was not required.

We did not incur any goodwill impairment losses in any of the periods presented.

7 unchanged sentences

We recognize revenue when we satisfy a performance obligation by transferring control over the use of a license, product, or service to a customer.

For additional financial information and a summary our accounting policy, refer to Note 3.

For additional financial information and a summary of our accounting policy, refer to Note 3.

"Revenue Recognition" to our consolidated financial statements.

23 unchanged sentences

dollars using exchange rates in effect at the end of each period.

Revenues and expenses of these subsidiaries are translated using the average rates for the period.

Revenue and expenses of these subsidiaries are translated using the average rates for the period.

Gains and losses from these translations are included in AOCI within stockholders’ equity.

15 unchanged sentences

As of September 24, 2021 and September 25, 2020, the outstanding derivative instruments had maturities of equal to or less than 38 days and 31 days, respectively, and the total notional amounts of outstanding contracts were $ 35.3 million and $ 26.8 million, respectively.

The fair values of these contracts were nominal as of September 25, 2020 and September 27, 2019, and were included within prepaid expenses and other current assets and within accrued liabilities in our consolidated balance sheets.

The fair values of these contracts are included within prepaid expenses and other current assets and within accrued liabilities in our consolidated balance sheets.

Cash Flow Hedges.

1 unchanged sentence

dollar operating expenses and margins.

Our cash flow hedge program was entered into in fiscal 2019.

Amounts reclassified are recorded to the same line item in the consolidated statements of operations as the impact of the hedge transaction, concurrently with the hedged costs.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $ 5.3 million in fiscal 2020, and was immaterial in fiscal 2019.

The pre-tax effective portion of gains or losses reclassified to the consolidated statements of income was not material during fiscal 2020 and fiscal 2019.

The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $ 12.7 million in fiscal 2021.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $ 5.3 million in fiscal 2020.

The pre-tax effective portion of the gain reclassified to the consolidated statements of operations was $ 9.0 million in fiscal 2021, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $ 0.9 million in fiscal 2020.

We use the asset and liability method, under which deferred income tax assets and liabilities are determined based upon the difference between the financial statement carrying amounts and the tax bases of assets and liabilities, and NOL carryforwards are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The realization of deferred tax assets is additionally dependent upon the generation of future taxable income during the

periods in which those temporary differences become deductible.

The realization of deferred tax assets is additionally dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

We consider the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment, and we record a valuation allowance to reduce our deferred tax assets when it's more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

3 unchanged sentences

Repatriation of Undistributed Foreign Earnings.

The Tax Cuts and Jobs Act of 2017 ("the Tax Act"), provides an exemption from federal income taxes for distributions by foreign subsidiaries made after December 31, 2017 that were not subject to the transition tax.

The Tax Act provides an exemption from federal income taxes for distributions by foreign subsidiaries made after December 31, 2017 that were not subject to the Transition Tax.

Therefore, we have provided for U.S.

6 unchanged sentences

Adopted Standards

In the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (ASC 842 ) along with all subsequent applicable ASU clarifications and improvements , which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements.

We adopted ASC 842 using the modified retrospective transition method and used the effective date as the date of initial application.

Consequently, financial information is not updated and the disclosures required under ASC 842 are not provided for dates and periods prior to implementation.

ASC 842 provides a number of optional practical expedients in transition.

We elected the “package of practical expedients,” which permits us not to reassess under ASC 842 our prior conclusions about lease identification, lease classification and initial direct costs.

In addition, we account for lease and non-lease components as a single lease component.

Operating leases are included in operating lease right-of-use assets and in current and non-current operating lease liabilities on our consolidated balance sheets.

As a lessee, the adoption of ASC 842 resulted in the recording of Operating lease right-of-use ("ROU") assets and Operating lease liabilities of $ 62.1 million and $ 64.6 million, respectively, as of September 28, 2019.

The difference between the operating lease assets and liabilities was recorded as an adjustment to Other non-current liabilities, primarily related to deferred rent and other lease incentives.

As a lessor, the adoption of ASC 842 did not have a material impact.

The adoption of ASC 842 did not impact Retained Earnings.

Income Taxes:

Comprehensive Income.

In the first quarter of fiscal 2020, we adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act.

We elected to not reclassify the stranded tax effects to retained earnings as they were not material to Dolby's consolidated financial statements.

Standards Not Yet Adopted

Collaborative Arrangements.

1 unchanged sentence

Clarifying the Interaction between Topic 808 and Topic 606 , which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer.

In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that

This standard will be effective for Dolby beginning September 26, 2020.

While we have a number of collaborative arrangements, we do not believe that this standard will have a material impact on our consolidated financial statements.

We adopted this standard in the first quarter of fiscal 2021 and it did not have a material impact on our consolidated financial statements.

Financial Instruments.

1 unchanged sentence

Measurement of Credit Losses on Financial Instruments , which modifies the measurement of expected credit losses of certain financial instruments, including trade receivables, contract assets, and lease receivables.

This standard will be effective for Dolby beginning September 26, 2020.

We do not believe that this standard will have a material impact on our consolidated financial statements.

provides guidance regarding methodologies and disclosures for expected credit losses on financial instruments, resulting in immediate recognition of estimated credit losses over the remaining life of financial assets at initiation or purchase date.

We adopted this standard in the first quarter of fiscal 2021, using the modified retrospective method.

The adoption of this standard did not have a material impact on our consolidated financial statements.

Standards Not Yet Adopted

Income Taxes.

1 unchanged sentence

Simplifying the Accounting for Income Taxes , which modifies and eliminates certain exceptions to the general principles of ASC 740, Income Taxes.

This standard will be effective for Dolby beginning September 25, 2021.

We are currently evaluating the impact of the standard on our consolidated financial statements.

This standard is effective for Dolby beginning September 25, 2021.

We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

Revenue Recognition

5 unchanged sentences

Identification of Performance Obligations in a Contract

We generate revenues principally from the following sources, which represent performance obligations in our contracts with customers:

We generate revenue principally from the following sources, which represent performance obligations in our contracts with customers:

We license our technologies, including patents, to a range of customers who incorporate them into their products for enhanced audio, imaging and voice functionality across broadcast, mobile, CE, PC, gaming, and other markets.

4 unchanged sentences

• Equipment Leases.

We collaborate with established cinema exhibitors to offer Dolby Cinema, a branded premium cinema offering for movie audiences by leasing equipment and licensing our intellectual property.

We collaborate with established cinema exhibitors to offer Dolby Cinema, a branded premium cinema offering for movie audiences by leasing equipment and licensing our IP.

We also lease hardware that facilitates the Dolby conferencing experience, including the Dolby Conference Phone, and the Dolby Voice Room solution.

• Licensing Administration Fees.

We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation.

We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via.

Some of our revenue arrangements include multiple performance obligations, such as hardware, software, support and maintenance, and extended warranty services.

15 unchanged sentences

Allocation of Transaction Price to Distinct Performance Obligations in a Contract

For our sales-based royalties where the license is the predominant item to which the royalties relate, we present all revenues as licensing.

For our sales-based royalties where the license is the predominant item to which the royalties relate, we present all revenue as licensing.

For revenue arrangements that include multiple performance obligations, we determine the stand-alone selling price for each distinct performance obligation based on the actual selling prices made to customers.

8 unchanged sentences

Implementation licensees only pay us a nominal initial fee on contract execution as consideration for the ongoing services that we provide to assist in their implementation process.

Revenues from these initial fees are recognized ratably over the contractual term as a component of licensing revenue.

Revenue from these initial fees are recognized ratably over the contractual term as a component of licensing revenue.

Sales-based licensing fees.

11 unchanged sentences

Additionally and separate from initial fees from implementation licensees, our sales- and usage-based licensing agreements include a nominal fee, which is also recognized at a point in time in which control of the IP has been transferred.

Revenues from these arrangements are included as a component of licensing revenue.

Through compliance efforts, we identify under-reported licensed activity related to non-current periods.

Revenue from these arrangements is included as a component of licensing revenue.

Through compliance efforts, we identify misreported licensed activity related to non-current periods.

We may record a favorable or unfavorable revenue adjustment in connection with the findings from these compliance efforts generally upon resolution with the licensee through agreement of the findings, or upon receipt of the licensee’s correction statement.

Revenues from these arrangements are included as a component of licensing revenue.

Revenue from these arrangements is included as a component of licensing revenue.

We undertake activities aimed at identifying potential unauthorized uses of our technologies, which when successful result in the recognition of revenue.

1 unchanged sentence

In these scenarios, a legally binding contract did not exist at time of use of our technology, and therefore, we recognize revenue recoveries upon execution of the agreement as that is the point in time to which a contract exists and control is transferred.

These revenues are classified as licensing revenue.

This revenue is classified as licensing revenue.

In general, we classify legal costs associated with activities aimed at identifying potential unauthorized uses of our technologies, auditing existing licensees, and on occasion, pursuing litigation as S&M in our consolidated statements of operations.

6 unchanged sentences

Most of these services are of a short duration and are recognized as control of the performance obligations are transferred which is when the related services are performed.

Cloud Services.

We provide access to media processing and interactivity APIs through our developer platform as well as cloud encoding services, generally, on either a consumption or subscription basis.

Revenue related to cloud services provided on a consumption basis is recognized when the customer utilizes the services, based on the quantity of services consumed.

Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract term as the customer receives and consumes the benefits of the cloud services.

Collaborative Arrangements.

3 unchanged sentences

The use of our product solution meets the definition of a lease, and for the related portion of Dolby's share of revenue, we apply ASC 842, Leases , and recognize revenue based on monthly box office reports from exhibitors.

Our revenue share is recognized as licensing revenue in our consolidated statements of operations.

In addition, we also enter into hybrid agreements where a portion involves guaranteed payments, which in some cases result in classifying the arrangement as a sales-type lease.

Our revenue share is recognized as licensing revenue in our

consolidated statements of operations.

In addition, we also enter into hybrid agreements where a portion of our revenue share involves guaranteed payments, which in some cases result in classifying the arrangement as a sales-type lease.

In such arrangements, we consider control to transfer at the point in time to which we have installed and tested the equipment, at which point we record such guaranteed payments as product revenue.

Via Administration Fee.

We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via Licensing Corporation.

We generate service fees for managing patent pools on behalf of third party patent owners through our wholly-owned subsidiary, Via.

As an agent to licensors in the patent pool, Via receives a share of the sales-based royalty that the patent pool licensors earn from licensees.

7 unchanged sentences

The following table presents a summary of the composition of our revenue for all periods presented:

Fiscal Year-To-Date Ended

September 25, 2020 September 27, 2019

Fiscal Year Ended

Revenue September 24, 2021 September 25, 2020 September 27, 2019

Licensing $ 1,214,147 95 % $ 1,078,577 93 % $ 1,107,280 89 %

2 unchanged sentences

The following table presents the composition of our licensing revenue for all periods presented:

Fiscal Year-To-Date Ended

September 25, 2020 September 27, 2019

Revenue By Market

Fiscal Year Ended

Licensing Revenue By Market September 24, 2021 September 25, 2020 September 27, 2019

Broadcast $ 475,648 39 % $ 439,415 41 % $ 474,147 43 %

5 unchanged sentences

We license our technologies in approximately 60 countries, and our licensees distribute products that incorporate our technologies throughout the world.

As shown in the table below, we generate the majority of our revenue from outside the United States.

As shown in the table below, we generate the majority of our revenue from outside the U.S.

Geographic data for our licensing revenue is based on the location of our licensees’ headquarters, products revenue is based on the destination to which we ship our products, and services revenue is based on the location where services are performed.

Fiscal Year-To-Date Ended

September 25, 2020 September 27, 2019

Revenue By Geographic Location

Fiscal Year Ended

Revenue By Geographic Location September 24, 2021 September 25, 2020 September 27, 2019

United States $ 419,901 33 % $ 460,972 40 % $ 449,203 36 %

4 unchanged sentences

These estimates reflect our best judgment at that time, and are developed using a number of inputs, including historical data, industry estimates of expected shipments, anticipated sales price and performance, and third-party data supporting the percentage of markets using our technologies.

In the event that our estimates differ from actual amounts reported, we record an adjustment in the quarter in which the report is received which is typically the quarter following our estimate.

amounts reported are typically paid within sixty days following the end of the quarter of shipment.

In the event that our estimates differ from actual amounts reported, we record an

adjustment in the quarter in which the royalty statement is received which is typically the quarter following our estimate.

Actual amounts reported are typically paid within 60 days following the end of the quarter of shipment.

The main drivers for change in the contract assets account are variances in quarterly estimates, and to a lesser degree, timing of receipt of actual royalty statements.

11 unchanged sentences

The following tables present detailed information from our consolidated balance sheets as of September 24, 2021 and September 25, 2020 (amounts displayed in thousands).

Accounts Receivable

Accounts Receivable, Net September 25,

Accounts Receivable and Contract Assets

September 24,

2021 September 25,

Trade accounts receivable $ 160,112 $ 147,618

Accounts receivable from patent administration program licensees 81,241 48,630

Accounts receivable, gross 196,248 198,890

allowance for doubtful accounts ( 15,908 ) ( 9,775 )

Total $ 180,340 $ 189,115

Contract assets 182,524 161,357

Accounts receivable, gross and contract assets, gross 423,877 357,605

allowance for credit losses ( 8,952 ) ( 15,908 )

Total accounts receivable and contract assets, net $ 414,925 $ 341,697

Accounts receivable, gross includes unbilled accounts receivable balances of $ 97.5 million and $ 62.1 million as of September 24, 2021 and September 25, 2020, respectively, related to amounts that are contractually owed.

The unbilled balance represents our unconditional right to consideration related to fixed fee contracts which we are entitled to as a result of satisfying, or partially satisfying, performance obligations, as well as Via's unconditional right to consideration related to their patent administration programs.

Allowance for Doubtful Accounts Beginning Balance Charged to

G&A Deductions Ending Balance

Allowance for Credit Losses Beginning Balance Charges/(Credits)

to G&A Deductions Ending Balance

For fiscal year ended:

2 unchanged sentences

September 24, 2021 15,908 ( 2,889 ) ( 4,067 ) 8,952

Inventories September 25,

September 24,

2021 September 25,

Raw materials $ 2,792 $ 3,770

1 unchanged sentence

Finished goods 4,712 12,566

Total $ 25,550 $ 32,331

Total inventories $ 10,965 $ 25,550

Inventories are stated at the lower of cost and net realizable value.

Inventory with a consumption period expected to exceed twelve months is recorded within other non-current assets in our consolidated balance sheets.

We have included $ 2.6 million and $ 3.0 million of raw materials inventory within other non-current assets in our consolidated balance sheets as of September 25, 2020 and September 27, 2019, respectively.

Based on anticipated

inventory consumption rates, and aside from existing write-downs due to excess inventory, we do not believe that material risk of obsolescence exists prior to ultimate sale.

We have included $ 1.9 million and $ 2.6 million of raw materials inventory within non-current assets as of September 24, 2021 and September 25, 2020, respectively.

Based on anticipated inventory consumption rates, and

aside from existing write-downs due to excess inventory, we do not believe that material risk of obsolescence exists prior to ultimate sale.

Prepaid Expenses And Other Current Assets

Prepaid Expenses And Other Current Assets September 25,

September 24,

2021 September 25,

Prepaid expenses $ 29,964 $ 17,884

Other current assets 32,773 35,138

Total $ 53,022 $ 39,704

As of September 25, 2020, other current assets include the carrying value of $ 2.2 million of land and building that are currently held for sale.

In fiscal year 2019, management committed to a plan to sell the property.

There have been no changes to this plan in the current period.

Based on current estimated selling prices in the market, we have determined that no indicators of potential impairment exist.

Total prepaid expenses and other current assets $ 62,737 $ 53,022

In fiscal year 2019, management committed to a plan to sell a property, which included land and a building , after the lease on the property expired and we re-assessed the real estate needs of our business .

This property was previously classified as held for sale and was included in other current assets on the consolidated balance sheets, with a carrying value of $ 2.2 million as of September 25, 2020.

In the first quarter of fiscal 2021, we finalized the sale on this property, and as a result, we realized a gain of $ 13.9 million, which was recorded to gain on sale of assets on the consolidated statements of operations.

The property was 51% owned by the controlling interest, therefore 51% of the gain realized in gain on sale of assets has been attributed to the controlling interest.

Accrued Liabilities

Accrued Liabilities September 25,

September 24,

Accrued royalties $ 901 $ 2,957

2021 September 25,

Amounts payable to patent administration program partners $ 72,847 $ 60,427

1 unchanged sentence

Accrued professional fees 11,737 10,344

Unpaid PP&E additions 15,102 15,332

Unpaid property, plant, and equipment additions 17,839 15,102

Accrued customer refunds 14,151 10,053

Accrued market development funds 7,777 6,612

Other accrued liabilities 31,055 27,752

Total $ 219,974 $ 268,144

Total accrued liabilities $ 262,728 $ 219,974

Other Non-Current Liabilities

Other Non-Current Liabilities September 25,

September 24,

2021 September 25,

Supplemental retirement plan obligations $ 4,877 $ 4,181

2 unchanged sentences

Other liabilities 15,370 32,030

Total $ 122,154 $ 177,462

(1) Refer to Note 12 “ Income Taxes ” for additional information related to tax liabilities.

Investments & Fair Value Measurements

Total other non-current liabilities $ 105,310 $ 122,154

(1) Refer to Note 12 “ Income Taxes ” for additional information related to our tax liabilities.

Investments and Fair Value Measurements

We use cash holdings to purchase investment grade securities diversified among security types, industries, and issuers.

1 unchanged sentence

With the exception of our mutual fund investments held in our SERP and classified as trading securities, all of our investments are classified as AFS securities.

Our investment securities primarily consist of government bonds, certificates of deposit, municipal debt securities, corporate bonds, U.S.

agency securities, and commercial paper.

Derivative contracts are used to hedge currency risk, these are carried at fair value and classified as other assets and other liabilities.

Our investment securities primarily consist of corporate bonds, municipal debt securities, government bonds, commercial paper, U.S.

agency securities, and certificates of deposit.

In addition, our cash and cash equivalents also consist of highly-liquid money market funds.

7 unchanged sentences

Cash equivalents:

Commercial paper 900 — — 900 — 900 —

Money market funds 235,198 — — 235,198 235,198 — —

Government bonds 125 — — 125 125 — —

Cash and cash equivalents 1,225,380 — — 1,225,380 1,225,380 — —

17 unchanged sentences

Assets $ 4,975 $ — $ — $ 4,975 $ 4,975 $ — $ —

Included in prepaid expenses and other current assets & other non-current assets

Included in prepaid expenses and other current assets and other non-current assets

Liabilities $ 4,975 $ — $ — $ 4,975 $ 4,975 $ — $ —

Included in accrued liabilities & other non-current liabilities

Included in accrued liabilities and other non-current liabilities

Currency derivatives as hedge instruments:

Included in other current assets $ — $ 689 $ — $ 689 $ — $ 689 $ —

included in other non-current assets — 369 — 369 — 369 —

Included in other accrued expenses — — ( 79 ) ( 79 ) — ( 79 ) —

Included in other accrued liabilities — — ( 197 ) ( 197 ) — ( 197 ) —

(1) Other long-term investments as of September 24, 2021 is comprised of one equity method investment which is not carried at fair value of $ 6.5 million.

5 unchanged sentences

Cash equivalents:

Corporate bonds 1,000 — — 1,000 — 1,000 —

Commercial paper 900 — — 900 — 900 —

Money market funds 214,111 — — 214,111 214,111 — —

10 unchanged sentences

Long-term investments:

Asset backed securities 400 2 — 402 — 402 —

agency securities 2,214 56 — 2,270 — 2,270 —

7 unchanged sentences

Assets $ 4,279 $ — $ — $ 4,279 $ 4,279 $ — $ —

Included in prepaid expenses and other current assets & other non-current assets

Included in prepaid expenses and other current assets and other non-current assets

Liabilities $ 4,279 $ — $ — $ 4,279 $ 4,279 $ — $ —

Included in accrued liabilities & other non-current liabilities

Included in accrued liabilities and other non-current liabilities

Currency derivatives as hedge instruments:

Included in other accrued expenses — — ( 242 ) ( 242 ) — ( 242 ) —

Included in other current assets $ — $ 4,267 $ — $ 4,267 $ — $ 4,267 $ —

included in other non-current assets — 369 — 369 — 369 —

Included in other accrued liabilities — — ( 79 ) ( 79 ) — ( 79 ) —

(1) Other long-term investments as of September 25, 2020 is comprised of one equity method investment which is not carried at fair value of $ 4.7 million.

8 unchanged sentences

To validate the fair value determination provided by our primary pricing service, we perform quality controls over values received which include comparing our pricing service provider’s assessment of the fair values of our investment securities against the fair values of our investment securities obtained from another independent source, reviewing the pricing movement in the context of overall market trends, and reviewing trading information from our investment managers.

In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities

in the fair value hierarchy.

The fair value of the currency derivatives are calculated from market spot rates, forward rates, interest rates, and credit ratings at the end of the period.

Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

1 unchanged sentence

Asset Type Primary Source Update Frequency Fair Value Methodology Secondary Source

Money Market Funds ICE (Intercontinental Exchange) Daily $1 per share Not Applicable

Money Market Funds Not Applicable Daily $1 per share Not Applicable

Government Bonds ICE (Intercontinental Exchange) Daily Institutional Bond Quotes - evaluations based on various market and industry inputs Bloomberg

Certificates of Deposit ICE (Intercontinental Exchange) Monthly Market Prices Bloomberg

Certificates of Deposit ICE (Intercontinental Exchange) Daily Institutional Bond Quotes - evaluations based on various market and industry inputs Bloomberg

Commercial Paper U.S.

8 unchanged sentences

The unrealized losses on our AFS securities were primarily the result of unfavorable changes in interest rates subsequent to the initial purchase of these securities.

The following table presents the gross unrealized losses and fair value for those AFS securities that were in an unrealized loss position as of September 25, 2020 and September 27, 2019 (in thousands):

The following table presents the gross unrealized losses and fair value for those AFS securities that were in an unrealized loss position for less than twelve months as of September 24, 2021 and September 25, 2020 (in thousands):

September 24, 2021 September 25, 2020

Less Than 12 Months Greater Than 12 Months Less Than 12 Months Greater Than 12 Months

Investment Type Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

Less Than 12 Months Less Than 12 Months

Investment Type Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

Certificate of deposit $ 600 $ — $ — $ —

4 unchanged sentences

Total $ 40,984 $ ( 52 ) $ 9,581 $ ( 16 )

Although we had certain securities that were in an unrealized loss position as of September 25, 2020, we expect to recover the full carrying value of these securities as we do not intend to, nor do we currently anticipate a need to sell these securities prior to recovering the associated unrealized losses.

As a result, we do not consider any portion of the unrealized losses at either September 25, 2020 or September 27, 2019 to represent an other-than-temporary impairment, nor do we consider any of the unrealized losses to be credit losses.

As of September 24, 2021 and September 25, 2020, there were no gross unrealized losses and no AFS securities that were in an unrealized loss position for twelve months or greater.

Although we had certain securities that were in an unrealized loss position for less than twelve months as of September 24, 2021, we expect to recover the full carrying value of these securities.

Investment Maturities.

6 unchanged sentences

Total $ 330,129 $ 330,401 $ 399,933 $ 400,301

Property, Plant, & Equipment

PP&E are recorded at cost, with depreciation expense included in cost of licensing, cost of products, cost of services, R&D, S&M, and G&A expenses in our consolidated statements of operations.

Property, Plant, and Equipment

PP&E are recorded at cost, with depreciation expense included in cost of licensing, cost of products and services, R&D, S&M, and G&A expenses in our consolidated statements of operations.

Depreciation expense was $ 66.4 million, $ 61.4 million, and $ 55.5 million in fiscal 2021, 2020, and 2019, respectively.

As of September 24, 2021 and September 25, 2020, PP&E consisted of the following (in thousands):

Property, Plant, & Equipment September 25,

Property, Plant, and Equipment September 24,

2021 September 25,

9 unchanged sentences

accumulated depreciation ( 537,941 ) ( 476,066 )

Property, plant, & equipment, net $ 541,963 $ 537,432

As a lessee, we enter into contracts to access and utilize office space, including those payable to our principal stockholder and portions attributable to the controlling interests in our wholly owned subsidiaries.

Property, plant, and equipment, net $ 534,381 $ 541,963

We determine if a contract contains a lease based on whether we have the right to obtain substantially all of the economic benefits from the use of an identified asset and whether we have the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which we do not own.

Right of use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets are recognized as the lease liability, adjusted for lease incentives received.

Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date.

The interest rate used to determine the present value of the future lease payments is our Incremental Borrowing Rate, because the interest rate implicit in our leases is not readily determinable.

The IBR is a hypothetical rate based on our understanding of what our credit rating would be to borrow and resulting interest we would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis.

The interest rate used to determine the present value of the future lease payments is our IBR, because the interest rate implicit in our leases is not readily determinable.

The IBR is a hypothetical rate based on our understanding of what our credit rating would be and resulting interest we would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis.

Lease payments may be fixed or variable, however, only fixed payments are included in our lease liability calculation.

Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments are incurred.

Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred.

The lease term of operating leases vary from less than a year to 11 years.

2 unchanged sentences

The components of lease expense were as follows (in thousands):

Fiscal Year Ended

September 24,

2021 September 25,

Operating lease cost $ 19,261 $ 23,570

1 unchanged sentence

Total lease cost $ 20,016 $ 24,745

Total rent expense incurred under operating leases, including the portion of total rent expense which is payable to our principal stockholder, was $ 20.6 million and $ 17.2 million in fiscal 2019 and 2018, respectively.

Total rent expense incurred under operating leases, including the portion of total rent expense which is payable to our principal stockholder, was $ 20.6 million in fiscal 2019.

Supplemental cash flow information related to leases was as follows (in thousands):

Fiscal Year Ended

September 24,

2021 September 25,

Other information

3 unchanged sentences

September 24,

2021 September 25,

Operating Leases

Weighted-average remaining lease term 6.5 years

Weighted-average remaining lease term 5.8 years 6.5 years

Weighted-average discount rate 3.1 % 3.1 %

11 unchanged sentences

Total lease liabilities $ 72,118

September 27, 2019

Operating Leases

Remainder of Fiscal 2020 $ 17,231

Fiscal 2021 9,329

Fiscal 2022 7,191

Fiscal 2023 6,218

Fiscal 2024 4,499

Thereafter 12,355

Total undiscounted lease payments $ 56,823

As a lessor, we lease our Dolby Cinema product solution to exhibitors, Dolby Voice equipment to cloud conferencing service providers, and lease or sublease real estate properties.

3 unchanged sentences

Dolby Cinema lease arrangements have options to extend the lease term at expiration by increments ranging from 1 to 5 years.

Assets provided under an operating lease are carried at cost within property, plant and equipment and depreciated over the useful life of these asset using the straight-line method.

Assets provided under an operating lease are carried at cost within property, plant and equipment, net on the consolidated balance sheets, and depreciated over the useful life of the asset using the straight-line method.

Fixed operating lease payments are recognized on a straight-line basis over the lease term to other income for our real estate property and to revenue for all other leases.

Variable lease payments received under our Dolby Cinema operating leases are computed as shares of lessees' box office revenues and recognized to revenue in the period that box office sales occur.

Variable lease payments received under our Dolby Cinema operating leases are computed as shares of lessees' box office revenue and recognized to revenue in the period that box office sales occur.

Lease incentive payments we make to lessees are amortized as a reduction in revenue over the lease term.

For the year ended September 25, 2020, variable operating lease income was $ 10.4 million and fixed operating lease income was $ 3.7 million.

If a lease is classified as a sales-type lease, the carrying amount of the asset is derecognized from property, plant and equipment and a net investment in the lease is recorded.

The components of lease income were as follows (in millions):

Fiscal Year Ended

September 24,

2021 September 25,

Operating Lease Income

Variable operating lease income $ 9.5 $ 10.4

Fixed operating lease income 4.2 3.7

If a lease is classified as a sales-type lease, the carrying amount of the asset is derecognized from property, plant and equipment, net, and a net investment in the lease is recorded.

The net investment in the lease is measured at commencement date as the sum of the lease receivable and the estimated residual value of the equipment.

The unguaranteed residual value of the equipment was determined as the estimated carrying value of the asset at the end of the lease term had the asset been depreciated on a straight-line basis.

At September 25, 2020, the unguaranteed residual value of sales-type leases was $ 0.7 million.

The unguaranteed residual value of the equipment is determined as the estimated carrying value of the asset at the end of the lease term had the asset been depreciated on a straight-line basis.

The unguaranteed residual value of sales-type leases was $ 0.8 million and $ 0.7 million as of September 24, 2021 and September 25, 2020, respectively.

Selling profit or loss arising from a sales-type lease is recorded at lease commencement and presented on a gross basis.

Over the term of the lease, we recognize interest income on the net investment in the lease and any variable lease payments, which is not material and not included in the net investment in the lease.

Over the term of the lease, we recognize interest income on the net investment in the lease.

We also recognize variable lease payments, if any, which are not material and not included in the net investment in the lease.

The following table presents the maturity analysis of fixed lease payments due to Dolby (in thousands):

10 unchanged sentences

Difference $ 1,084

Goodwill & Intangible Assets

Goodwill and Intangible Assets

The following table outlines changes to the carrying amount of goodwill (in thousands):

Balance at September 27, 2019 $ 334,829

Acquired goodwill 9,367

Translation adjustments 2,116

4 unchanged sentences

Intangible Assets

Intangible assets are stated at their original cost less accumulated amortization.

Intangible assets are stated at their original cost less accumulated amortization, and principally consist of acquired patents, technology, customer relationships and contracts, and trademarks.

Intangible assets subject to amortization consisted of the following (in thousands):

5 unchanged sentences

Customer relationships 65,822 ( 52,730 ) 13,092 64,740 ( 49,062 ) 15,678

Other intangibles 22,969 ( 22,730 ) 239 22,902 ( 22,437 ) 465

Other intangible assets 22,972 ( 22,665 ) 307 22,969 ( 22,730 ) 239

Total $ 432,074 $ ( 309,184 ) $ 122,890 $ 430,346 $ ( 277,915 ) $ 152,431

During fiscal 2020 and 2019, we purchased various patents and developed technology for purchase consideration of $ 2.9 million and $ 27.3 million, and upon acquisition, these intangible assets had a weighted-average useful life of 14.0 years and 7.9 years, respectively.

These acquisitions facilitate our R&D efforts, technologies and potential product offerings.

Amortization expense for our intangible assets is included in cost of licensing, cost of products, R&D and S&M expenses in our consolidated statements of operations.

During fiscal 2020, we purchased various patents for purchase consideration of $ 2.9 million, and upon acquisition, these intangible assets had a weighted-average useful life of 14.0 years.

These intangible assets facilitate our R&D efforts, technologies, and potential product offerings.

Amortization expense for our intangible assets is included in cost of licensing, cost of products and services, R&D, S&M, and G&A expenses in our consolidated statements of operations.

Amortization expense was $ 29.5 million, $ 29.5 million, and $ 29.7 million in fiscal 2021, 2020 and 2019, respectively.

4 unchanged sentences

Total $ 122,890

Stockholders' Equity & Stock-Based Compensation

Stockholders' Equity and Stock-Based Compensation

We provide stock-based awards as a form of compensation for employees, officers and directors.

2 unchanged sentences

Our Board of Directors has authorized two classes of common stock, Class A and Class B.

At September 25, 2020, we had authorized 500,000,000 Class A shares and 500,000,000 Class B shares.

At September 25, 2020, we had 64,167,725 shares of Class A common stock and 36,128,720 shares of Class B common stock issued and outstanding.

As of September 24, 2021, we had authorized 500,000,000 Class A shares and 500,000,000 Class B shares.

As of September 24, 2021, we had 64,986,316 shares of Class A common stock and 36,086,779 shares of Class B common stock issued and outstanding.

Holders of our Class A and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to ten votes per share.

Shares of Class B common stock can be converted to shares of Class A common stock at any time at the option of the stockholder and automatically convert upon sale or transfer, except for certain transfers specified in our amended and restated certificate of incorporation.

2020 Stock Incentive Plan

Stock Incentive Plans

Following shareholder approval in January 2005, our 2005 Stock Plan was adopted by our Board of Directors on February 16, 2005.

6 unchanged sentences

Stock options are granted at fair market value on the date of grant.

Options granted to employees and officers from June 2008 onward generally vest over four years , with 25 % of the shares subject to the option becoming exercisable on the one-year anniversary of the date of grant and the balance of the shares vesting in equal monthly installments over the following 36 months.

Options granted to employees and officers generally vest over four years , with 25 % of the shares subject to the option becoming exercisable on the one-year anniversary of the date of grant and the balance of the shares vesting in equal monthly installments over the following 36 months.

These options expire on the earlier of ten years after the date of grant or three months after termination of service.

4 unchanged sentences

The contractual term for the PSOs is seven years, with vesting contingent upon market-based performance conditions, representing the achievement of specified Dolby annualized TSR targets at the end of a three-year measurement period following the date of grant.

If the minimum conditions are met, the PSOs earned will cliff vest on the third anniversary of the grant date, upon certification of achievement of the performance conditions by our Compensation Committee.

If the minimum

conditions are met, the PSOs earned will cliff vest on the third anniversary of the grant date, upon certification of achievement of the performance conditions by our Compensation Committee.

Anywhere from 0 % to 125 % of the shares subject to a PSO may vest based on achievement of the performance conditions at the end of the three-year performance period.

2 unchanged sentences

Compensation cost is being amortized on a straight-line basis over the requisite service period.

On December 15, 2018, we granted PSOs to our executive officers exercisable for an aggregate of 241,100 shares at the target award amount, which would be exercisable up to an aggregate of 301,375 shares at 125 % of the target award amount.

The following table summarizes information about PSOs granted to our executive officers that have vested:

Grant Date Aggregate Shares Granted at Target Award Aggregate Shares Exercisable at Vest Date (1)

Percentage Vested of Target Award Vested Date

December 15, 2015 419,623 334,623 125 % December 2018

December 15, 2016 276,199 240,539 95 % December 2019

December 15, 2017 264,000 253,440 96 % December 2020

(1) Aggregate shares exercisable at vest date does not include any shares that were cancelled before the vest date after they were granted.

On December 15, 2016, we granted PSOs to our executive officers exercisable for an aggregate of 276,199 shares at the target award amount, which would be exercisable for an aggregate of up to 345,248 shares at 125 % of the target award amount.

On December 15, 2015, we granted PSOs to

our executive officers, which vested in December 2018 at 125 % of the target award amount, for an aggregate of 334,623 shares.

As of September 25, 2020, PSOs which would be exercisable for an aggregate of 726,639 shares at the target award amount ( 994,455 shares at 125 % of the target award amount) were outstanding.

As of September 24, 2021, PSOs which would be exercisable for an aggregate of 604,737 shares at the target award amount ( 657,637 shares at up to 125 % of the target award amount) were outstanding.

The following table summarizes information about stock options issued under our 2020 Stock Plan:

Shares Weighted-Average

Exercise Price Weighted-Average

Contractual Life Aggregate

Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic

(in thousands) (in years) (in thousands)

6 unchanged sentences

Options exercisable at September 24, 2021 3,071 52.86 4.99 121,639

(1) Aggregate intrinsic value is based on the closing price of our Class A common stock on September 25, 2020 of $ 64.99 and excludes the impact of options that were not in-the-money.

(1) Aggregate intrinsic value is based on the closing stock price of our Class A common stock on September 24, 2021 of $ 92.47 and excludes the impact of options that were not in-the-money.

Restricted Stock Units.

Beginning in fiscal 2008, we began granting RSUs to certain directors, officers and employees under our 2020 Stock Plan.

Beginning in fiscal 2008, we began granting RSUs to certain directors, officers and employees.

Awards granted to employees and officers generally vest over four years , with equal annual cliff-vesting.

Awards granted to directors prior to November 2010 generally vest over three years , with equal annual cliff-vesting.

Awards granted after November 2010 and prior to fiscal 2014 to new directors vest over approximately two years , with 50 % vesting per year, while awards granted from November 2010 onward to ongoing directors generally vest over approximately one year .

Awards granted from November 2010 onward to ongoing directors generally vest over approximately one year .

Awards granted to new directors from fiscal 2014 onward vest on the earlier of the first anniversary of the award’s date of grant, or the day immediately preceding the date of the next annual meeting of stockholders that occurs after the award’s date of grant.

1 unchanged sentence

At each vesting date, the holder of the award is issued shares of our Class A common stock.

Compensation expense from these awards is equal to the adjusted fair market value of our Class A common stock on the date of grant, discounted to account for dividend payments forgone during the vesting period, and recognized on a straight-line basis over the requisite service period.

Performance-Based Restricted Stock Units (PSUs).

In the first quarter of fiscal 2020, we began granting PSUs to our executive officers with shares of our Class A common stock underlying such awards, which would vest for an aggregate of 62,000 shares at the target amount ( 124,000 shares at 200 % of the target award amount).

The terms of the PSU Agreement adopted in the first quarter fiscal 2020 provide for the grant of performance-based restricted stock units to our executive officers contingent on Dolby's achievement of annualized TSR targets measured against a comparator index over a three-year performance period following the date of grant.

Compensation expense from these awards is equal to the adjusted fair market value of our Class A common stock on the date of grant, discounted to account for dividend payments forgone during the vesting period, and is recognized on a straight-line basis over the requisite service period.

Certain grants may have other vesting conditions or other award terms as approved by the Compensation Committee of our Board of Directors.

Performance-Based Restricted Stock Units.

In the first quarter of fiscal 2020, we began granting PSUs to our executive officers with shares of our Class A common stock underlying such awards.

The terms of the PSU Agreement adopted in the first quarter fiscal 2020 provide for the grant of PSUs to our executive officers contingent on Dolby's achievement of annualized TSR targets measured against a comparator index over a three-year performance period following the date of grant.

Anywhere from 0 % to 200 % of eligible restricted stock units may vest based on achievement of the performance conditions at the end of the three-year performance period.

In valuing the PSUs which will be recognized as compensation cost, we used a Monte Carlo valuation model.

Compensation cost is being amortized on a straight-line basis over the requisite service period.

Compensation cost is being

amortized on a straight-line basis over the requisite service period.

Certain grants may have other vesting conditions or other award terms as approved by the Compensation Committee of our Board of Directors.

On December 15, 2020, we granted PSUs to our executive officers vesting for an aggregate of 66,138 shares at the target award amount, which would vest at 132,276 shares at 200 % of the target award amount.

On December 16, 2019, we granted PSUs to our executive officers vesting for an aggregate of 62,000 shares at the target award amount, which would vest at 124,000 shares at 200 % of the target award amount.

As of September 24, 2021, PSUs which would vest for an aggregate of 116,281 shares at the target award amount ( 232,562 shares at 200 % of the target award amount) were outstanding.

The following table summarizes information about RSUs issued under our 2020 Stock Plan:

Shares Weighted-Average

Grant Date Fair Value

(in thousands)

13 unchanged sentences

An offering period consists of successive six-month purchase periods, with a look back feature to our stock price at the commencement of a one-year offering period.

The plan provides for a discount equal to 15 percent of the lower of the closing price of our Class A common stock on the New York Stock Exchange on the first and last day of the offering periods.

The plan provides for a discount equal to 15 percent of the lower of the closing price of our Class A common stock on the NYSE on the first and last day of the offering periods.

The plan also includes an automatic reset feature that provides for an offering period to be reset and recommenced to a new lower-priced offering if the offering price of a new offering period is less than that of the immediately preceding offering period.

6 unchanged sentences

Risk-Free Interest Rate.

The risk-free interest rate is based on the yield curve of United States Treasury instruments in effect on the date of grant.

The risk-free interest rate is based on the yield curve of U.S.

Treasury instruments in effect on the date of grant.

In determining an estimate for the risk-free interest rate, we use average interest rates based on these instruments’ constant maturities with a term that approximates and corresponds with the expected term of our awards.

54 unchanged sentences

The tax benefit that we recognize from shares issued under our ESPP is excluded from the tables above.

This benefit was as follows (in thousands):

Fiscal Year Ended

September 25,

2020 September 27,

2019 September 28,

Tax benefit - shares issued under ESPP $ 409 $ 353 $ 577

The tax benefit recognized was $ 1.2 million in fiscal 2021, and was not material in fiscal 2020 and fiscal 2019.

Unrecognized Compensation Expense.

At September 25, 2020, total unrecognized compensation expense associated with employee stock options expected to vest was approximately $ 23.8 million, which is expected to be recognized over a weighted-average period of 2.2 years.

At September 25, 2020, total unrecognized compensation expense associated with RSUs expected to vest was approximately $ 121.8 million, which is expected to be recognized over a weighted-average period of 2.3 years.

As of September 24, 2021, total unrecognized compensation expense associated with employee stock options expected to vest was approximately $ 17.3 million, which is expected to be recognized over a weighted-average period of 2.0 years.

As of September 24, 2021, total unrecognized compensation expense associated with RSUs expected to vest was approximately $ 170.4 million, which is expected to be recognized over a weighted-average period of 2.4 years.

Common Stock Repurchase Program

10 unchanged sentences

July 2019 350,000

July 2021 350,000

Total $ 2,350,000

3 unchanged sentences

Shares repurchased under the program will be returned to the status of authorized but unissued shares of Class A common stock.

As of September 25, 2020, the remaining authorization to purchase additional shares is approximately $ 187 million.

The following table provides information regarding share repurchase activity under the program in fiscal 2020:

As of September 24, 2021, the remaining authorization to purchase additional shares was $ 291.3 million.

The following table provides information regarding share repurchase activity under the program during fiscal 2021:

Quarterly Repurchase Activity Shares

11 unchanged sentences

The following table summarizes dividends declared under the program during fiscal 2021:

Fiscal Period Announcement Date Record Date Payment Date Cash Dividend Per Common Share Dividend Payment

Fiscal Period Announcement Date Record Date Payment Date Cash Dividend Per Common Share Estimated Dividend Payment (1)

Q1 - Quarter ended December 25, 2020 January 28, 2021 February 9, 2021 February 19, 2021 $ 0.22 $ 22.4 million

Q2 - Quarter ended March 26, 2021 May 4, 2021 May 17, 2021 May 25, 2021 $ 0.22 $ 22.3 million

Q3 - Quarter ended June 26, 2020 August 3, 2020 August 17, 2020 August 26, 2020 $ 0.22 $ 22.1 million

Q3 - Quarter ended June 25, 2021 July 29, 2021 August 11, 2021 August 19, 2021 $ 0.22 $ 22.3 million

Q4 - Quarter ended September 24, 2021 November 16, 2021 November 30, 2021 December 8, 2021 $ 0.25 $ 25.3 million

(1) The dividend payment amount is estimated based on the number of shares of our Class A and Class B common stock that we estimate will be outstanding as of the Record Date.

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Loss

Other comprehensive income consists of three components:

1 unchanged sentence

dollar functional currencies.

Until realized and reported as a component of net income, these comprehensive income items accumulate and are included within accumulated other comprehensive income, a subsection within stockholders’ equity in our consolidated balance sheets.

Until realized and reported as a component of net income, these comprehensive income items accumulate and are included within accumulated other comprehensive loss, a subsection within stockholders’ equity in our consolidated balance sheets.

Unrealized gains and losses on our investment securities are reclassified from AOCI into earnings when realized upon sale, and are determined based on specific identification of securities sold.

7 unchanged sentences

Unrealized gains/(losses) ( 917 ) ( 12,704 ) — ( 13,621 ) ( 5,393 ) 5,270 — ( 123 )

Foreign currency translation gains/(losses) (1)

Foreign currency translation gains (1)

— — 5,754 5,754 — — 7,420 7,420

10 unchanged sentences

(1) Realized gains or losses, if any, from the sale of our AFS investment securities or from foreign currency translation adjustments are included within other income/expense, net in our consolidated statements of operations .

Realized gains or losses on foreign currency contracts designated as cash flow hedges are included in operating expenses on the consolidated statements of operations.

Realized gains or losses on foreign currency contracts designated as cash flow hedges are included in operating expenses in the consolidated statements of operations.

(2) The income tax benefit or expense is included within provision for income taxes in our consolidated statements of operations.

18 unchanged sentences

Potential common shares from restricted stock units 1,376 941 1,021

Potential common shares from ESPP 39 — —

Potential common shares from employee stock purchase plan 62 39 —

Weighted-average shares outstanding—diluted 104,622 102,944 104,572

5 unchanged sentences

Restricted stock units 48 2 1

Employee stock purchase plan 2 1 —

Our income tax expense, deferred tax assets and liabilities, and unrecognized tax benefits reflect management's best assessment of estimated current and future liabilities.

We are subject to income taxes in both the United States and numerous foreign jurisdictions.

We are subject to income taxes in both the U.S.

and numerous foreign jurisdictions.

Significant judgments and estimates are required in determining the consolidated income tax expense.

7 unchanged sentences

Foreign 249,771 207,289 221,807

Total $ 239,715 $ 282,307 $ 196,374

Total income before income taxes $ 354,512 $ 239,715 $ 282,307

Fiscal Year Ended

14 unchanged sentences

without incurring further U.S.

The Tax Act moves towards a modified territorial tax system through the provision of a 100% dividend received deduction for the foreign-source portions of dividends received from controlled foreign subsidiaries.

The Tax Act changed to a modified territorial tax system through the provision of a 100% dividend received deduction for the foreign-source portions of dividends received from controlled foreign subsidiaries.

As a result, we have reevaluated our historical assertion and determined that we no longer consider a vast majority of these earnings to be indefinitely reinvested.

During the fiscal year, we repatriated $ 300 million of foreign subsidiary earnings which were exempt from foreign withholding tax.

During fiscal 2021, we repatriated $ 200 million of foreign subsidiary earnings which were exempt from foreign withholding tax.

As of September 24, 2021, the total undistributed earnings of our foreign subsidiaries were approximately $ 239 million.

24 unchanged sentences

Right of use asset ( 14,288 ) ( 17,360 )

Intangibles ( 2,901 ) ( 2,351 )

Intangible assets ( 2,917 ) ( 2,901 )

Deferred income tax assets, net $ 156,020 $ 118,881

Net Operating Losses ("NOL") and Tax Credit Carryforwards

At September 25, 2020, the NOL carryforwards for U.S.

Net Operating Losses and Tax Credit Carryforwards

As of September 24, 2021, the NOL carryforwards for U.S.

federal and California were $ 3.6 million and $ 7.2 million, respectively, and will start to expire in fiscal 2034 and 2029, respectively.

Additionally, we had foreign NOL carryforwards of $ 9.8 million as of September 24, 2021, an amount which is not subject to expiration.

At September 25, 2020, we had foreign tax credit and federal R&D tax credit carryforwards of $ 8.5 million and $ 6.9 million, respectively, which will start to expire in fiscal 2029 and fiscal 2039.

We had California R&D tax credits of $ 34.7 million, which will carry forward indefinitely, and foreign R&D tax credits of $ 2.6 million, which will start to expire in fiscal 2021 and fiscal 2029.

As of September 24, 2021, we had foreign tax credit and federal R&D tax credit carryforwards of $ 7.9 million and $ 13.0 million, respectively, which will start to expire in fiscal 2029 and fiscal 2035, respectively.

We had California R&D tax credits of $ 34.3 million, which will carry forward indefinitely, and foreign R&D tax credits of $ 3.0 million, which will start to expire in fiscal 2028.

Valuation Allowance

As of September 25, 2020, a $ 25.8 million valuation allowance was recorded against California deferred tax assets and a $ 4.6 million valuation allowance was recorded against foreign deferred tax assets for which ultimate realization of its future benefits is uncertain.

As of September 24, 2021, a $ 25.7 million valuation allowance was recorded against California deferred tax assets, a $ 2.0 million valuation allowance was recorded against federal foreign tax credit deferred tax assets, and a $ 5.6 million valuation allowance was recorded against foreign deferred tax assets for which ultimate realization of its future benefits is uncertain.

Effective Tax Rate

19 unchanged sentences

Our effective tax rate was 10.3 % in fiscal 2021, compared with our federal statutory rate of 21.0 %, and with our effective tax rate in fiscal 2020 of 3.4 %.

The decrease in our effective tax rate is primarily related to a benefit in fiscal 2020 from reversals of unrecognized tax benefits.

Our effective tax rate was 78.5 % in fiscal 2018 and was 9.5 % in fiscal 2019.

The effective tax rate in fiscal 2018 reflects the impact from the Tax Act, most notably the remeasurement of net deferred tax assets and the Transition Tax on the accumulated earnings of our foreign subsidiaries, and the establishment of a valuation allowance against California tax credits in fiscal 2018.

In addition, our federal statutory tax rate decreased from a blended rate of 24.6% in fiscal 2018 to 21% in fiscal 2019.

The increase in our effective tax rate is primarily related to a benefit in fiscal 2020 from reversals of unrecognized tax benefits that did not recur in fiscal 2021 partially offset by higher benefits in fiscal 2021 related to changes in jurisdictional mix of income and settlement of stock-based awards.

Our effective tax rate in fiscal 2020 decreased as compared to the effective tax rate in fiscal 2019 of 9.5 % due to reversals of unrecognized tax benefits in fiscal 2020.

The effective tax rate in fiscal 2019 also included a benefit from updated calculations related to the Tax Act.

Uncertain Tax Positions

As of September 24, 2021, the total amount of gross unrecognized tax benefits was $ 66.1 million, of which $ 43.6 million, if recognized, would reduce our effective tax rate.

Our liability decreased from fiscal 2019 primarily due to lapse in the statute of limitations in fiscal 2020.

Our liability increased from fiscal 2020 primarily due to additional accruals in fiscal 2021.

Our liability for unrecognized tax benefits is classified within other non-current liabilities in our consolidated balance sheets.

Over the next twelve months, we estimate that this amount could be reduced by $ 24.0 million as a result of the expiration of certain statute of limitations.

Over the next twelve months, we estimate that there will be no reduction to this amount.

Aggregate changes in the balance of gross unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):

13 unchanged sentences

To the extent accrued interest and penalties do not ultimately become payable, amounts accrued are reduced in the period that such determination is made and are reflected as a reduction of the overall income tax provision.

In fiscal year 2020, our current tax provision was decreased by interest expense of $ 6.3 million, while in fiscal year 2019, our current tax provision was increased by interest expense of $ 3.5 million.

In fiscal year 2021, our current tax provision was increased by interest expense of $ 1.0 million, while in fiscal year 2020, our current tax provision was decreased by interest expense of $ 6.3 million.

Accrued interest and penalties are included within the related tax liability line item in our consolidated balance sheets.

11 unchanged sentences

federal, California, New York, and the Netherlands.

We are currently under audit by the State of Oregon for fiscal years 2016 through 2018 and Spain for fiscal years 2014 and 2015.

The statute remains open for fiscal years subsequent to 2014 for U.S.

federal, and 2014 and onward for state and foreign purposes.

We are currently under audit by the state of Oregon for fiscal years 2016 through 2018, state of New York for fiscal years 2017 through 2019, and Spain for fiscal years 2014 through 2016.

In addition, our fiscal 2014 amended U.S.

federal tax return is currently under review.

Aside from the years still under audit noted above, the statute remains open for fiscal years 2017 and onward for U.S.

federal, state, and foreign purposes.

Therefore, these periods may be subject to examination by the tax authorities.

4 unchanged sentences

Restructuring

Restructuring charges/(credits) recorded in our statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods.

Restructuring charges recorded in our consolidated statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods.

Costs arising from these actions, including fluctuations in related balances between fiscal periods, are based on the nature of activities under the various plans.

Fiscal 2021 Restructuring Events.

In fiscal 2019, we recorded charges as a result of our early exit of a leased facility.

In addition, we recorded charges associated with a strategic reorganization of our marketing function that resulted in severance and other related benefits provided to the affected employees.

As a result of these events, we recorded a total of $ 36.6 million in restructuring costs in fiscal 2019 and they are reflected as such in the accompanying consolidated statement of operations.

The table presented below summarizes changes in restructuring accruals under these plans (in thousands):

Severance Leased facility exit costs Fixed assets write-off Other associated costs Total

In October 2020, we implemented a plan to reduce certain activities, such as exiting our conferencing hardware business, in order to focus our efforts on higher priority investment areas, and reduce the cost structure of our manufacturing operations.

As a result, we recorded $ 9.5 million in restructuring costs in fiscal 2021, primarily representing severance and other related benefits offered to approximately 100 employees that were impacted by this action.

Actions related to this plan have substantially completed as of the end of fiscal 2021.

The table presented below summarizes the changes in our restructuring accruals (in thousands):

Severance Leased facility exit costs and other costs Total

Balance at September 27, 2019 $ 128 $ 15,723 $ 15,851

3 unchanged sentences

Balance at September 25, 2020 $ — $ — $ —

Accruals for restructuring charges incurred for the restructuring plans described above are included within accrued liabilities in our consolidated balance sheets while restructuring charges are included within restructuring charges in our consolidated statements of operations.

Commitments & Contingencies

Restructuring charges 9,522 718 10,240

Cash payments and adjustments ( 9,359 ) ( 714 ) ( 10,073 )

Balance at September 24, 2021 $ 163 $ 4 $ 167

The activities during fiscal 2020 reflects the impact of our early exit of a leased facility and related strategic reorganization of our marketing function as a part of the fiscal 2019 restructuring plan.

Accruals for restructuring charges incurred for the restructuring plan described above are included within accrued liabilities in our consolidated balance sheets, while restructuring charges are included within restructuring charges in our consolidated statements of operations.

Commitments and Contingencies

In the ordinary course of business, we enter into contractual agreements with third parties that include non-cancelable payment obligations, for which we are liable in future periods.

10 unchanged sentences

The term of the agreement is 20 years, over which we will make payments on a semi-annual basis until fiscal 2032.

Our payment obligations are conditioned in part on the Academy Awards being held and broadcast from the Dolby Theatre.

Our ongoing annual payment obligations are conditioned in part on the Academy Awards being held and broadcast from the Dolby Theatre.

Our payment obligations may be suspended or reduced in certain circumstances, including protracted closure of the Dolby Theatre.

Purchase Obligations.

Purchase obligations primarily consist of our commitments made under agreements to purchase goods and services related to Dolby Cinema and for purposes that include IT and telecommunications, marketing and professional services, and manufacturing and other R&D activities.

Purchase obligations primarily consist of our commitments made under agreements to purchase goods and services related to Dolby Cinema and for purposes that include information technology and telecommunications, marketing and professional services, and manufacturing and other R&D activities.

Donation Commitments.

Our donation commitments relate to non-cancelable obligations that consist of maintenance services and installation of imaging and audio products in exchange for various marketing, branding, and publicity benefits.

These donation agreements either transfer title of our audio and imaging products to the donee or offer use of the products free of charge for a specified period of time via a leasing arrangement.

The recipients of these donations participate in or promote the cinema and entertainment industry and our commitments vary in length, lasting up to 15 years.

Indemnification Clauses.

On a limited basis, our contractual agreements will contain a clause under which we agree to provide indemnification to the counterparty, most commonly to licensees in connection with licensing arrangements that include our IP.

On a limited basis, our contractual agreements contain a clause under which we agree to provide indemnification to the counterparty, most commonly to licensees in connection with licensing arrangements that include our IP.

We have also entered into indemnification agreements with our officers, directors, and certain employees, and our certificate of incorporation and bylaws contain similar indemnification obligations.

3 unchanged sentences

As a result, no amounts have been accrued in our consolidated financial statements with respect to the contingent aspect of these indemnities.

Operating Segments & Geographic Information

Operating Segments and Geographic Information

Operating Segments

Operating segments are defined as components of an enterprise for which separate financial information is available, and which are evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance.

Operating segments are defined as components of an enterprise for which separate financial information is available, and which are evaluated regularly by the CODM, or decision-making group, in deciding how to allocate resources and assess performance.

Our CODM is our Chief Executive Officer.

Reporting segments are operating segments exceeding specified revenue, profit or loss, or asset thresholds for which separate disclosure of information is necessary.

We operate as a single reporting segment.

We operate as a single reportable segment.

This reflects the fact that our CODM continues to evaluate our financial information and resources, and continues to assess the performance of these resources, on a consolidated basis.

1 unchanged sentence

Geographic Information

The methods to determine revenue by geographic region for each of the three categories included within total

revenue in our consolidated statements of operations are described within the table presented below.

The methods to determine revenue by geographic region for each of the three categories included within total revenue in our consolidated statements of operations are described within the table presented below.

Revenue Category Basis For Determining Geographic Location

3 unchanged sentences

The following tables present selected information regarding total revenue by geographic location (amounts presented in thousands).

Revenue Composition - United States & International

Revenue Composition—U.S .

and International

Fiscal Year Ended

15 unchanged sentences

Europe 10 % 10 % 12 %

Taiwan 2 % 4 % 3 %

Other 9 % 9 % 9 %

11 unchanged sentences

Given the unpredictable nature of legal proceedings, it is possible that an unfavorable resolution of one or more such proceedings could materially affect our future operating results or financial condition in a particular period, including as a result of required changes to our licensing terms, monetary penalties, and other potential consequences.

However, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our consolidated financial statements, any such amounts are either immaterial, or it is not possible to provide an estimate of any such potential losses.

However, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our consolidated financial statements, any such amounts are either immaterial, or it is not feasible to provide an estimate of any such potential losses.

Related Parties

6 unchanged sentences

The share of earnings and net assets of the entities attributable to the limited member or LP, as the case may be, is reflected as controlling interest in our consolidated financial statements.

Our interests in these consolidated affiliated entities and the location of the property leased to Dolby Laboratories as of September 25, 2020 were as follows:

Our interests in these consolidated affiliated entities and the location of the properties leased to Dolby Laboratories as of September 24, 2021 were as follows:

Entity Name Minority Ownership Interest Location Of Properties

Dolby Properties Brisbane, LLC 49.0 % Brisbane, California

Dolby Properties Burbank, LLC 49.0 % Burbank, California

Dolby Properties, LP 10.0 % Wootton Bassett, England

The property leased to Dolby Laboratories through Dolby Properties Brisbane, LLC, located in Brisbane, California, was sold during fiscal 2021.

We maintain a 49.0 % minority ownership interest in the affiliated entity.

Refer to Note 4 to the consolidated financial statements for more information.

We lease from our principal stockholder a commercial office building located at 100 Potrero Avenue in San Francisco, California under a term that expires on October 31, 2024.

In fiscal 2019, we ceased occupancy of the facility, and do not intend to re-occupy the locations.

As a result of our ceased occupancy, we incurred $ 33.5 million in restructuring charges recorded as operating expenses in our consolidated statement of operations.

Related party rent expense included in operating expenses in our consolidated statements of operations were as follows (in thousands):

In fiscal 2019, we ceased occupancy of the facility, and as a result, we incurred $ 33.5 million in restructuring charges recorded as operating expenses in our consolidated statements of operations.

Related party rent expense and restructuring charges included in operating expenses in our consolidated statements of operations were as follows (in thousands):

Fiscal Year Ended

11 unchanged sentences

Retirement Plans

We maintain a tax-qualified Section 401(k) retirement plan for employees in the United States and similar plans in foreign jurisdictions.

We maintain a tax-qualified Section 401(k) retirement plan for employees in the U.S.

and similar plans in foreign jurisdictions.

Under the plan, employees are eligible to receive matching contributions and profit-sharing contributions.

We also maintain a SERP, a non-qualified, employer-funded defined contribution retirement plan which was terminated in fiscal 2005.

Retirement plan expenses, which are included in cost of products, cost of services, R&D, S&M, and G&A expense in our consolidated statements of operations, were as follows (in thousands):

Retirement plan expenses, which are included in cost of products and services, R&D, S&M, and G&A expense in our consolidated statements of operations, were as follows (in thousands):

Fiscal Year Ended

3 unchanged sentences

Retirement plan expenses $ 26,379 $ 25,257 $ 23,375

Selected Quarterly Financial Data

The following table presents selected unaudited quarterly financial information from fiscal 2020 and 2019 (in thousands, except per share amounts):

Fiscal Year 2020 Fiscal Year 2019

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Licensing $ 257,683 $ 328,865 $ 235,125 $ 256,904 $ 260,279 $ 310,308 $ 271,897 $ 264,796

Products and services 34,194 22,950 11,784 14,287 42,097 27,950 30,262 34,031

Total revenue 291,877 351,815 246,909 271,191 302,376 338,258 302,159 298,827

Cost of revenue 37,315 36,830 29,888 42,465 38,629 36,575 39,690 45,960

Gross margin 254,562 314,985 217,021 228,726 263,747 301,683 262,469 252,867

Income/(loss) before taxes and controlling interest 54,454 110,779 39,990 34,492 74,254 110,002 41,800 56,251

Net income/(loss) attributable to Dolby Laboratories $ 48,753 $ 88,496 $ 67,285 $ 26,829 $ 98,219 $ 73,440 $ 39,574 $ 43,918

Earnings per share:

Basic $ 0.49 $ 0.88 $ 0.67 $ 0.27 $ 0.96 $ 0.72 $ 0.39 $ 0.44

Diluted $ 0.47 $ 0.86 $ 0.66 $ 0.26 $ 0.93 $ 0.70 $ 0.38 $ 0.43

Weighted-average shares outstanding:

Basic 100,336 100,854 100,593 100,473 102,677 102,141 101,218 100,481

Diluted 103,078 102,773 102,075 102,722 106,130 104,587 103,717 102,945

Subsequent Events

Fiscal 2021 Restructuring Program.

Subsequent to the fiscal year ended September 25, 2020, we approved a plan to reduce certain activities, such as winding down our conferencing hardware business, in order to reallocate those resources towards higher priority investment areas and growth opportunities for the future of our business.

As a result, we expect to record approximately $ 10 million in restructuring costs that will be reflected in the fiscal 2021 financial statements, representing severance and other related benefits offered to approximately 100 employees that were impacted by this action.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk