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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-11-17 compared with 2022-11-18 · 279 added, 215 removed, 1317 unchanged (27% of the section changed)

1 unchanged sentence

Interest Rate Sensitivity

As of September 30, 2022, we had cash and cash equivalents of $620.1 million, which consisted of cash and highly liquid money market funds and U.S.

agency securities.

In addition, we had both short and long-term investments of $291.7 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.

As of September 29, 2023, we had cash and cash equivalents of $745.4 million, which consisted of cash and highly liquid money market funds.

In addition, we had both short and long-term investments of $237.0 million, which consisted of corporate bonds, government bonds, municipal debt securities, U.S.

agency securities, commercial paper, 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.

As of September 30, 2022, the weighted-average credit quality of our investment portfolio was AA+, with a weighted-average maturity of approximately ten months.

As of September 29, 2023, the weighted-average credit quality of our investment portfolio was AA-, with a weighted-average maturity of approximately eleven months.

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

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Foreign Currency Exchange Risk

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

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

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

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dollar strengthens against the local currency.

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.

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 conditions and geopolitical climate, differing tax structures, foreign exchange rate volatility and other regulations and restrictions.

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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 $2.6 million in fiscal 2022.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $4.9 million in fiscal 2023.

The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $2.6 million in fiscal 2022.

The pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $2.1 million in fiscal 2022, and the pre-tax effective portion of the gain reclassified to the consolidated statements of operations was $9.0 million in fiscal 2021.

The pre-tax effective portion of the losses reclassified to the consolidated statements of operations was $0.7 million in fiscal 2023, and the pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $2.1 million in fiscal 2022.

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.

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

and subsidiaries (the Company) as of September 30, 2022 and September 24, 2021, 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 30, 2022 and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of September 29, 2023 and September 30, 2022, 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 29, 2023, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of September 29, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 29, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired MPEG LA, L.L.C.

during fiscal 2023.

Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 29, 2023, MPEG LA, L.L.C.’s internal control over financial reporting which represented 12% of total assets and less than 1.5% of total revenue included in the consolidated financial statements of the Company as of and for the year ended September 29, 2023.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of MPEG LA, L.L.C..

Basis for Opinions

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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;

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.

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Class A, $ 0.001 par value, one vote per share, 500,000,000 shares authorized:

59,798,862 shares issued and outstanding at September 30, 2022 and 64,986,316 at September 24, 2021

59,673,633 shares issued and outstanding as of September 29, 2023 and 59,798,862 as of September 30, 2022

Class B, $ 0.001 par value, ten votes per share, 500,000,000 shares authorized:

36,085,779 shares issued and outstanding at September 30, 2022 and 36,086,779 at September 24, 2021

36,085,779 shares issued and outstanding as of September 29, 2023 and 36,085,779 as of September 30, 2022

Retained earnings 2,391,990 2,297,730

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2,355,100 2,246,183

Controlling interest 4,837 6,253

Noncontrolling interest 17,084 4,837

Total stockholders’ equity 2,372,184 2,251,020

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Other income/(expense):

Interest income 6,568 3,493 12,725

Interest expense ( 394 ) ( 479 ) ( 186 )

Interest income/(expense), net 28,086 6,174 3,014

Other income, net 6,214 2,500 7,108

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Provision for income taxes ( 48,409 ) ( 31,381 ) ( 36,689 )

Net income including controlling interest 183,898 317,823 231,619

net (income)/loss attributable to controlling interest 189 ( 7,596 ) ( 256 )

Net income including noncontrolling interest 201,644 183,898 317,823

net (income)/loss attributable to noncontrolling interest ( 988 ) 189 ( 7,596 )

Net income attributable to Dolby Laboratories, Inc.

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Included in operating expenses $ — $ — $ ( 392 )

Included in net income attributable to controlling interest $ 284 $ 381 $ 455

Included in net income attributable to noncontrolling interest $ 292 $ 284 $ 381

Cash dividend declared per common share $ 1.11 $ 1.02 $ 0.91

8 unchanged sentences

2022 September 24,

Net income including controlling interest $ 183,898 $ 317,823 $ 231,619

Net income including noncontrolling interest $ 201,644 $ 183,898 $ 317,823

Other comprehensive income:

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7,574 ( 31,586 ) 5,510

Unrealized losses on investments, net of tax benefit/(expense) of $ 50 , $ 108 , and ($ 926 )

Unrealized gains/(losses) on investments, net of tax benefit of $ 54 , $ 50 , and $ 108

3,128 ( 6,206 ) ( 598 )

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Total comprehensive income 216,632 141,745 318,644

comprehensive (income)/loss attributable to controlling interest 731 ( 7,853 ) ( 366 )

comprehensive (income)/loss attributable to noncontrolling interest ( 1,319 ) 731 ( 7,853 )

Comprehensive income attributable to Dolby Laboratories, Inc.

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Class A Class B APIC Retained

Earnings AOCI Total Stockholders’ Equity Controlling

Earnings AOCI Total Stockholders’ Equity Noncontrolling

Interest Total

Shares Amount Shares Amount

Balance at September 27, 2019 63,911 $ 58 36,230 $ 41 $ — $ 2,327,877 $ ( 20,625 ) $ 2,307,351 $ 5,679 $ 2,313,030

Balance as of September 25, 2020 64,168 $ 58 36,129 $ 41 $ — $ 2,443,138 $ ( 10,594 ) $ 2,432,643 $ 5,762 $ 2,438,405

Net income — — — — — 310,227 — 310,227 7,596 317,823

Other comprehensive income, net of tax — — — — — — 564 564 257 821

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

Distributions to noncontrolling interest — — — — — — — — ( 7,362 ) ( 7,362 )

Stock-based compensation expense — — — — 99,698 — — 99,698 — 99,698

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Common stock transfers - Class B to Class A 42 — ( 42 ) — — — — — — —

Balance at September 25, 2020 64,168 58 36,129 41 — 2,443,138 ( 10,594 ) 2,432,643 5,762 2,438,405

Balance as of September 24, 2021 64,986 59 36,087 41 — 2,607,909 ( 10,030 ) 2,597,979 6,253 2,604,232

Net income — — — — — 184,087 — 184,087 ( 189 ) 183,898

Other comprehensive income, net of tax — — — — — — 564 564 257 821

Distributions to controlling interest — — — — — — — — ( 7,362 ) ( 7,362 )

Other comprehensive loss, net of tax — — — — — — ( 41,611 ) ( 41,611 ) ( 542 ) ( 42,153 )

Distributions to noncontrolling interest — — — — — — — — ( 1,435 ) ( 1,435 )

Stock-based compensation expense — — — — 114,925 — — 114,925 — 114,925

Capitalized stock-based compensation expense — — — — 746 — — 746 — 746

Repurchase of common stock ( 7,003 ) ( 7 ) — — ( 137,100 ) ( 393,379 ) — ( 530,486 ) — ( 530,486 )

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Common stock transfers - Class B to Class A 1 — ( 1 ) — — — — — — —

Balance at September 24, 2021 64,986 59 36,087 41 — 2,607,909 ( 10,030 ) 2,597,979 6,253 2,604,232

Deconsolidation of subsidiary — — — — — ( 820 ) — ( 820 ) 750 ( 70 )

Balance as of September 30, 2022 59,799 $ 53 36,086 $ 41 $ — $ 2,297,730 $ ( 51,641 ) $ 2,246,183 $ 4,837 $ 2,251,020

Net income — — — — — 200,656 — 200,656 988 201,644

Other comprehensive loss, net of tax — — — — — — ( 41,611 ) ( 41,611 ) ( 542 ) ( 42,153 )

Distributions to controlling interest — — — — — — — — ( 1,435 ) ( 1,435 )

Other comprehensive income, net of tax — — — — — — 14,657 14,657 331 14,988

Distributions to noncontrolling interest — — — — — — — — ( 266 ) ( 266 )

Stock-based compensation expense — — — — 118,486 — — 118,486 — 118,486

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Tax withholdings on vesting of restricted stock ( 422 ) — — — ( 31,144 ) — — ( 31,144 ) — ( 31,144 )

Common stock transfers - Class B to Class A 1 — ( 1 ) — — — — — — —

Deconsolidation of subsidiary — — — — — ( 820 ) — ( 820 ) 750 ( 70 )

Balance at September 24, 2021 59,799 $ 53 36,086 $ 41 $ — $ 2,297,730 $ ( 51,641 ) $ 2,246,183 $ 4,837 $ 2,251,020

Equity issued in connection with business combination — — — — 10,004 — — 10,004 11,194 21,198

Balance as of September 29, 2023 59,674 $ 53 36,086 $ 41 $ — $ 2,391,990 $ ( 36,984 ) $ 2,355,100 $ 17,084 $ 2,372,184

See accompanying notes to consolidated financial statements

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Operating activities:

Net income including controlling interest $ 183,898 $ 317,823 $ 231,619

Net income including noncontrolling interest $ 201,644 $ 183,898 $ 317,823

Adjustments to reconcile net income to net cash provided by operating activities:

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Deferred income taxes ( 18,337 ) ( 29,465 ) ( 37,048 )

Impairment loss on internally developed software 16,225 — —

Gain on sale of assets — — ( 13,871 )

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Proceeds from sale of assets — — 16,365

Payments for business combinations, net of cash acquired ( 38,171 ) ( 4,500 ) —

Business combinations, net of cash and restricted cash acquired 25,703 ( 38,171 ) ( 4,500 )

Purchases of intangible assets — ( 11,528 ) —

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Payment of cash dividend ( 103,407 ) ( 100,067 ) ( 89,172 )

Distribution to controlling interest ( 1,435 ) ( 7,362 ) ( 283 )

Distribution to noncontrolling interest ( 266 ) ( 1,435 ) ( 7,362 )

Shares repurchased for tax withholdings on vesting of restricted stock ( 31,144 ) ( 36,418 ) ( 32,205 )

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

Payment of deferred consideration for prior business combinations ( 500 ) — —

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Change in property, plant, and equipment purchased, unpaid at period-end $ 3,882 $ ( 1,481 ) $ 2,772

Equity issued in connection with business combination 21,198 — —

Purchase consideration payable for business combinations — — 500

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The consolidated financial statements include the accounts of Dolby Laboratories, Inc.

and our wholly owned subsidiaries.

In addition, we have consolidated the financial results of jointly owned affiliated companies in which our principal stockholder has a controlling interest.

We report these controlling interests as a separate line in our consolidated statements of operations as net income attributable to controlling interest and in our consolidated balance sheets as a controlling interest.

and our wholly-owned and majority-owned subsidiaries.

In addition, we have consolidated the financial results of jointly owned affiliated companies in which our principal stockholder or other entities have a noncontrolling interest.

We report these noncontrolling interests as a separate line in our consolidated statements of operations as net income attributable to noncontrolling interest and in our consolidated balance sheets as a noncontrolling interest.

We eliminate all intercompany accounts and transactions upon consolidation.

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Our fiscal year is a 52 or 53 week period ending on the last Friday in September.

The fiscal years presented herein include the 53 week period ended September 30, 2022 (fiscal 2022), and the 52 week periods ended September 24, 2021 (fiscal 2021) and September 25, 2020 (fiscal 2020).

The fiscal years presented herein include the 52 week period ended September 29, 2023 (fiscal 2023) and September 24, 2021 (fiscal 2021), and the 53 week period ended September 30, 2022 (fiscal 2022).

Our fiscal year ending September 27, 2024 (fiscal 2024) will consist of 52 weeks.

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Concentration of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, investments, and accounts receivable.

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, restricted cash, investments, accounts receivable, and contract assets.

We maintain cash, cash equivalents, and investments with multiple financial institutions that have high credit standing, and that we believe are financially sound and have minimal credit risk exposure, although at times our balances may exceed the applicable insurance coverage limits.

We monitor and manage the overall counterparty credit risk exposure of our cash balances to individual financial institutions on an ongoing basis.

Our investment portfolio consists of investment-grade securities diversified amongst security types, industries, and issuers.

All our securities are held in custody by a recognized financial institution.

Our policy limits the amount of credit exposure to a maximum of 5 % to any one issuer, except for the U.S.

All of our securities are held in custody by large national financial institutions.

Our investment policy limits the amount of credit exposure to a maximum of 5 % of our total portfolio to any one issuer, except for the U.S.

Treasury, and we believe no significant concentration risk exists with respect to these investments.

We also mitigate counterparty risk through entering into derivative contracts with high-credit-quality financial institutions.

Actual or potential defaults of one or more financial institutions could impact our results of operations or financial position, and make it challenging to find alternative qualified counterparties.

The majority of our licensing revenue is generated from customers outside of the U.S.

We manage this risk by performing regular evaluations of the creditworthiness of our licensing customers.

In fiscal 2022, revenue from one individual customer accounted for 10% of our total revenue.

For fiscal 2021 and 2020, we did not have any individual customers whose revenue exceeded 10% of our total revenue.

We manage the credit risk posed by non-U.S.

customers by performing regular evaluations of the creditworthiness of our licensing customers and recognize revenue in accordance with US GAAP.

In fiscal 2023 and 2021, we did not have any individual customers that accounted for 10% of our total revenue.

For fiscal 2022, we had one individual customer whose revenue exceeded 10% of our total revenue.

Cash and Cash Equivalents

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Restricted Cash

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 .

Restricted cash on our consolidated balance sheets consists of royalties payable to third-party licensors through certain Via LA-administered patent pools.

Restricted cash also consists of cash contributed by Dolby and third-party licensors to Via LA, our subsidiary, that may only be used for licensor enforcement actions or licensee compliance activities related to certain Via LA-administered patent pools, as well as to disperse costs associated with any audit of Via LA 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 SERP, which are classified as trading securities, and our equity securities.

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Equity securities for which we possess the ability to exercise significant influence, but not control, over operating and financing decisions are accounted for under the equity method.

In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount by our proportionate share of the investee's net earnings or losses.

In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the investee's net earnings or losses.

We record dividends or other equity distributions as reductions in the carrying value of the investment.

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Risk characteristics considered in creating these risk pools include assessing historical or expected loss patterns, credit ratings, current macroeconomic conditions that could impact collectability of cash flows, 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.

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.

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Our evaluation includes the analysis of future sales demand by product within specific time horizons.

Inventories in excess

of projected future demand are written down to their net realizable value.

Inventories in excess of projected future demand are written down to their net realizable value.

In addition, we assess the impact of changing technology on our inventory balances and write-off inventories that are considered obsolete.

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Equipment Provided Under Operating Leases.

In arrangements that we assess as operating leases, we recognize our equipment installed at third-party sites as a fixed asset and depreciate the asset on a straight-line basis.

In arrangements that we assess as operating leases, we recognize our equipment installed at third-party sites as PP&E and depreciate the asset on a straight-line basis.

Internal Use Software.

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We perform an assessment of goodwill for potential impairment annually during our third fiscal quarter or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

For our annual goodwill test as of the fiscal quarter ended July 1, 2022, a qualitative assessment was performed and we concluded that it was more likely than not that its fair value was in excess of its carrying amount.

For our annual goodwill test as of the fiscal quarter ended June 30, 2023, a qualitative assessment was performed and we concluded that it was more likely than not that its fair value was in excess of its carrying amount.

Accordingly, no quantitative assessment was performed and no impairment was recorded.

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Our intangible assets principally consist of acquired technology, patents, trademarks, customer relationships and contracts, the majority of which are amortized on a straight-line basis over their useful lives using a range from three to eighteen years .

We review long-lived assets, including intangible assets, for impairment whenever events or a change in circumstances indicate an asset’s carrying value may not be recoverable.

Recoverability of an asset is measured by comparing its carrying value to the total future undiscounted cash flows that the asset is expected to generate.

If it is determined that an asset is not recoverable, an impairment loss is recorded in the amount by which the carrying value of the asset exceeds its estimated fair value.

We review long-lived assets, including intangible assets, for impairment whenever events or a change in circumstances indicate an asset or asset group’s carrying value may not be recoverable.

Recoverability of an asset or asset group is measured by comparing its carrying amount to the total future undiscounted cash flows that it is expected to generate.

If it is determined that an asset or asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount exceeds its estimated fair value.

Revenue Recognition

We enter into revenue arrangements with our customers to license technologies, trademarks and patents for sound, imaging and voice solutions, and to sell products and services.

We enter into revenue arrangements with our customers to license technologies, trademarks and patents for sound and imaging solutions, and to sell products and services.

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

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Advertising and Promotional Costs

Advertising and promotional costs are charged to S&M expense as incurred.

Advertising and promotional costs are charged primarily to S&M expense as incurred.

Our advertising and promotional costs were as follows (in thousands):

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2022 September 24,

Foreign currency transaction losses $ ( 1,283 ) $ ( 749 ) $ ( 1,361 )

Foreign currency transaction gains/(losses) $ 536 $ ( 1,283 ) $ ( 749 )

Non-designated Hedges.

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These contracts do not subject us to material balance sheet risk due to exchange rate movements as gains and losses on these derivatives are intended to offset gains and losses on the related receivables and payables for which we have foreign currency exchange rate exposure.

As of September 30, 2022 and September 24, 2021, the outstanding derivative instruments had maturities of equal to or less than 31 days and 38 days, respectively, and the total notional amounts of outstanding contracts were $ 56.6 million and $ 35.3 million, respectively.

The fair values of these contracts

are included within prepaid expenses and other current assets and within accrued liabilities in our consolidated balance sheets.

As of September 29, 2023 and September 30, 2022, the outstanding derivative instruments had maturities of equal to or less than 31 days, respectively, and the total notional amounts of outstanding contracts were $ 61.7 million and $ 56.6 million, respectively.

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.

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dollar operating expenses.

As of September 30, 2022 and September 24, 2021, the outstanding derivative instruments had maturities of equal to or less than 12 months and 3 months, respectively, and the total notional amounts of outstanding contracts were $ 74.1 million and $ 15.7 million, respectively.

As of September 29, 2023 and September 30, 2022, the outstanding derivative instruments had maturities of equal to or less than 12 months, and the total notional amounts of outstanding contracts were $ 73.1 million and $ 74.1 million, respectively.

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 $ 2.6 million in fiscal 2022.

The pre-tax gain attributed to the effective portion of cash flow hedges recognized in AOCI was $ 4.9 million in fiscal 2023.

The pre-tax loss attributed to the effective portion of cash flow hedges recognized in AOCI was $ 2.6 million in fiscal 2022.

The pre-tax effective portion of the loss reclassified to the consolidated statements of operations was $ 2.1 million in fiscal 2022, and the pre-tax effective portion of the gain reclassified to the consolidated statements of operations was $ 9.0 million in fiscal 2021.

The pre-tax effective portion of the losses reclassified to the consolidated statements of operations was $ 0.7 million and $ 2.1 million in fiscal 2023 and fiscal 2022, respectively.

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.

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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.

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 is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

We record an unrecognized tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the tax authorities.

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

Repatriation of Undistributed Foreign Earnings.

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.

state income taxes and foreign withholding taxes on undistributed earnings of certain foreign subsidiaries, that are no longer considered to be indefinitely reinvested, are not material.

We consider the earnings of certain other foreign subsidiaries to be indefinitely reinvested outside the U.S.

on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs, and our specific plans for reinvestment of those subsidiary earnings.

Recently Issued Accounting Standards

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Adopted Standards

Income Taxes.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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

We adopted this standard in the first quarter of fiscal 2022, and it did not have a material impact on our consolidated financial statements.

Standards Not Yet Adopted

Business Combinations.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

A ccounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by an acquirer in accordance with ASC 606, Revenue from Contracts with Customers .

Currently, we recognize acquired contract assets and contract liabilities at fair value as of the acquisition date, in accordance with ASC 805.

This standard will be effective for Dolby beginning September 30, 2023 on a prospective basis, but early adoption is permitted.

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

accordance with ASC 606, Revenue from Contracts with Customers .

This standard is effective for Dolby beginning September 30, 2023 on a prospective basis, but early adoption is permitted.

We early adopted this ASU in conjunction with the acquisition of MPEG LA by Via Corp (as defined below), and with that adoption, we recognized $38.1 million in deferred revenue.

Refer to Note 15 " Business Combinations " for a description of the recent business combination involving Via LA.

There were no other business combinations entered into during fiscal 2023.

Revenue Recognition

We enter into revenue arrangements with our customers to license technologies, trademarks and patents for sound, imaging and voice solutions, and to sell products and services.

We enter into revenue arrangements with our customers to license technologies, trademarks and patents for sound and imaging solutions, and to sell products and services.

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

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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.

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

• Product Sales.

We design and provide audio and imaging products for the cinema, television, broadcast, communications, and entertainment industries.

We design and provide audio and imaging products for the cinema, television, broadcast, and entertainment industries.

We provide various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training, mixing room alignment, equalization, as well as audio, color and light image calibration.

We also offer a developer platform, Dolby.io, that enables developers to access our technologies through audio and video APIs for building high-quality communications, media, and streaming solutions.

We also offer solutions to companies building real-time digital experiences that increase audience engagement.

Our solution provides the capability to stream high quality audiovisual content in ultra-low latency which reduces the delay between the action and the viewer.

We provide PCS for products sold and for equipment leased, and we support the implementation of our licensing technologies in our licensees’ products.

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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.

We generate administrative fees for managing patent pools on behalf of third party patent owners through our subsidiary, Via LA.

See Note 15 " Business Combinations " for a description of the recent business combination involving Via LA.

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

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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.

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

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

Sales-based licensing fees.

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These estimates involve the use of historical data and judgment for several key attributes including industry estimates of expected shipments, the percentage of markets using our technologies, and average sale prices.

Generally, our estimates represent the current period’s shipments to which we expect our licensees to submit royalty statements in the following quarter.

Upon receipt of royalty statements from the licensees with the actual reporting of sales-based royalties that we estimated previously, we record a favorable or unfavorable adjustment based on the difference, if any, between

estimated and actual sales.

In the first quarter of fiscal 2022, we recorded an unfavorable adjustment of approximately $ 6 million, which was primarily related to shipments that occurred in our fourth quarter of fiscal 2021 (July through September) and largely based on actual royalty statements received from licensees.

In the second quarter of fiscal 2022, we recorded an unfavorable adjustment of $ 3 million, and in the third and fourth quarter of fiscal 2022, we recorded a favorable adjustment of $ 3 million and $ 3 million, respectively, each primarily related to shipments that occurred in the preceding fiscal quarter, and largely based on actual royalty statements received from licensees.

Generally, our estimates represent the current period’s shipments to which we expect our licensees to submit royalty statements within the following two quarters.

In the first quarter of fiscal 2023, we recorded a favorable adjustment of approximately $ 10 million, which was primarily related to shipments that occurred in our fourth quarter of fiscal 2022 (July through September) and largely based on actual royalty statements received from licensees.

In the second quarter of fiscal

2023, we recorded a favorable adjustment of $ 1 million, and in the third and fourth quarter of fiscal 2023, we recorded a favorable adjustment of $ 1 million and $ 5 million, respectively, each primarily related to shipments that occurred in the prior two quarters, and largely based on actual royalty statements received from licensees.

Fixed and guaranteed licensing fees.

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Recoveries stem from third parties who agree to remit payments to us based on past use of our technology.

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.

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

This revenue is classified as licensing revenue.

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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.

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.

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.

Licensing Administration Fee.

We generate administrative fees for managing patent pools on behalf of third party patent owners through our subsidiary, Via LA.

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

As such, we apply the sales-based royalty exception as the service provided is directly related to the patent pool licensors’ provision of IP, which results in recognition based on estimates of the licensee’s quarter shipments that use the pool’s patents.

In addition to sales-based royalties, Via also has contracts where the fees are fixed.

The revenue share Via receives from licensors on fixed fee contracts is recognized over the term in which we are providing services associated with the fixed fee contract.

In addition to sales-based royalties, Via LA also has contracts where the fees are fixed.

The revenue share Via LA receives from licensors on fixed fee contracts is recognized over the term in which we are providing services associated with the fixed fee contract.

We recognize our administrative fees net of the consideration paid to the patent licensors in the pool as licensing revenue.

See Note 15 " Business Combinations " to our consolidated financial statements for a description of the recent business combination involving Via LA.

Deferred revenue, which is a component of contract liabilities, represents amounts that are ultimately expected to be recognized as revenue, but for which we have yet to satisfy the performance obligation.

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Fiscal Year Ended

Licensing Revenue By Market September 30, 2022 September 24, 2021 September 25, 2020

Market September 29, 2023 September 30, 2022 September 24, 2021

Broadcast $ 451,719 38 % $ 433,992 37 % $ 475,648 39 %

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Fiscal Year Ended

Revenue By Geographic Location September 30, 2022 September 24, 2021 September 25, 2020

Geographic Location September 29, 2023 September 30, 2022 September 24, 2021

United States $ 466,030 36 % $ 468,246 37 % $ 419,901 33 %

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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 royalty statement is received, which is typically the quarter following our

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.

Our contract liabilities consist of advance payments and billings in advance of performance, deferred revenue that is typically satisfied within one year, and deferred interest where we have significant financing.

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.

Our contract liabilities consist of advance payments and billings in advance of performance and deferred revenue that is typically satisfied within one year.

The non-current portion of contract liabilities is separately disclosed in our consolidated balance sheets.

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Total accounts receivable and contract assets, net $ 444,375 $ 419,686

Trade accounts receivable of $ 162.5 million includes unbilled accounts receivable balances of $ 106.9 million and $ 97.5 million as of September 30, 2022 and September 24, 2021, 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.

Accounts receivable as of September 29, 2023 and September 30, 2022, respectively, includes unbilled accounts receivable balances of $ 150.4 million and $ 106.9 million, 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 LA's unconditional right to consideration related to its patent administration programs.

Allowance for Credit Losses Beginning Balance Charges/(Credits)

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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 $ 2.8 million and $ 1.9 million of raw materials inventory within non-current assets as of

September 30, 2022 and September 24, 2021, respectively.

We have included $ 8.1 million and $ 2.8 million of inventory within non-current assets as of September 29, 2023 and September 30, 2022, 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.

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

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

agency securities.

Our investments in debt securities consist of corporate bonds, government bonds, municipal debt securities, U.S.

agency securities, commercial paper, and certificates of deposit.

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

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Cash equivalents:

Commercial paper 1,514 — — 1,514 — 1,514 —

Money market funds 139,831 — — 139,831 139,831 — —

agency securities 10,328 — (1) 10,327 — 10,327 —

Government Bonds 1,731 — — 1,731 1,731 — —

Cash and cash equivalents 745,364 — — 745,364 743,850 1,514 —

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Long-term investments:

agency securities 861 — ( 39 ) 822 — 822 —

Government bonds 33,227 — ( 1,046 ) 32,181 32,181 — —

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Currency derivatives as hedge instruments:

Included in other current assets $ — $ 144 $ — $ 144 $ — $ 144 $ —

included in other non-current assets — 2 — 2 — 2 —

Included in other accrued liabilities — — ( 618 ) ( 618 ) — ( 618 ) —

Included in other non-current liabilities — — ( 24 ) ( 24 ) — ( 24 ) —

(1) Other investments as of September 30, 2022 is comprised of an equity method investment of $ 5.9 million and an equity security without a readily determinable fair value of $ 5.0 million.

(1) Other investments as of September 29, 2023 is primarily comprised of an equity method investment of $ 5.9 million and an equity security without a readily determinable fair value, valued at $ 5.0 million.

September 30, 2022

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Money market funds 134,987 — — 134,987 134,987 — —

agency securities 10,328 — ( 1 ) 10,327 — 10,327 —

Cash and cash equivalents 620,128 — ( 1 ) 620,127 609,800 10,327 —

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Currency derivatives as hedge instruments:

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

Included in other accrued liabilities $ — $ — $ ( 4,882 ) $ ( 4,882 ) $ — $ ( 4,882 ) $ —

(1) Other investments as of September 24, 2021 is comprised of one equity method investment.

Included in other non-current liabilities — — ( 420 ) ( 420 ) — ( 420 ) —

(1) Other investments as of September 30, 2022 is comprised of an equity method investment of $ 5.9 million and an equity security without a readily determinable fair value, valued at $ 5.0 million.

Fair Value Hierarchy.

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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.

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September 29, 2023 September 30, 2022

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

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

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

Certificate of deposit $ — $ — $ — $ — $ 10,352 $ ( 47 ) $ — $ —

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Total $ 136,660 $ ( 921 ) $ 63,035 $ ( 1,947 ) $ 240,170 $ ( 4,895 ) $ 31,603 $ ( 1,104 )

As of September 24, 2021, there were 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 as of September 29, 2023 and September 30, 2022, we expect to recover the full carrying value of these securities.

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Property, plant, and equipment, net $ 481,581 $ 513,481

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 consolidated subsidiaries.

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 noncontrolling interests in our consolidated subsidiaries.

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.

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Weighted-average discount rate 4.6 % 3.2 %

The following tables presents the maturity analysis of lease liabilities (in thousands):

The following table presents the maturity analysis of lease liabilities (in thousands):

September 29, 2023

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Total lease liabilities $ 50,648

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

The terms of these leases vary from 4 to 10 years.

As a lessor, we lease our Dolby Cinema product solution to exhibitors.

The terms of these leases are typically 10 years.

Lease components consist of fixed payments and/or variable lease payments based on contracted percentages of revenue.

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

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

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

Fiscal Year Ended

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The unguaranteed residual value of sales-type leases was $ 1.0 million and $ 1.1 million as of September 29, 2023 and September 30, 2022, respectively.

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

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

We recognized $ 2.3 million to revenue and $ 0.4 million to cost of revenue associated with sales-type leases in fiscal 2023.

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

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Fiscal 2026 932 395

Fiscal 2026 732 395

Fiscal 2027 — —

Thereafter — —

Total undiscounted cash flows $ 3,131 1,985

present value of lease payments (recognized as lease receivables) ( 2,801 )

Carrying value of lease receivables ( 563 )

Difference $ 1,422

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

Balance at September 25, 2020 $ 336,945

Balance as of September 24, 2021 $ 340,694

Acquired goodwill (1)

Translation adjustments ( 7,185 )

Balance at September 24, 2021 $ 340,694

Measurement period adjustments ( 57 )

Balance as of September 30, 2022 $ 365,147

Acquired goodwill (1)

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Measurement period adjustments 4,235

Balance at September 30, 2022 $ 365,147

(1) Refer to Note 15 " Business Combination " for additional information related to our acquired goodwill

Balance as of September 29, 2023 $ 408,409

(1) Refer to Note 15 " Business Combinations " for additional information related to our acquired goodwill, including the correction of an immaterial error impacting goodwill and amounts payable to patent administrative program partners.

Intangible Assets

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Total $ 521,981 $ ( 354,554 ) $ 167,427 $ 444,737 $ ( 332,472 ) $ 112,265

During fiscal 2023 and fiscal 2022, we acquired $ 86.0 million and $ 8.7 million of identifiable intangible assets in connection with the acquisition of MPEG LA and Millicast, Inc.

("Millicast"), respectively.

Refer to Note 15 " Business Combinations " for additional information.

During fiscal 2022, we purchased various patents for purchase consideration of $ 11.5 million, and upon acquisition, these intangible assets had a weighted-average useful life of 16 years.

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

In addition, we acquired intangible assets in connection with a business combination completed in fiscal 2022.

Refer to Note 15 "Business Combination" for additional information.

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 $ 28.6 million, $ 29.0 million, and $ 29.5 million in fiscal 2023, 2022 and 2021, respectively.

As of September 30, 2022, expected amortization expense of our intangible assets in future periods was as follows (in thousands):

As of September 29, 2023, expected amortization expense of our intangible assets in future fiscal periods was as follows (in thousands):

Fiscal Year Amortization Expense

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Stock Incentive Plans

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

In February 2020, our stockholders approved the name change of our 2005 Stock Plan to the 2020 Stock Plan and certain other changes described in our proxy statement for our 2020 annual meeting of stockholders.

Our 2020 Stock Plan originally was adopted by our Board of Directors and shareholders in 2005 (when the 2020 Stock Plan was called the 2005 Stock Plan).

Our stockholders last approved amendments to the 2020 Stock Plan at our 2023 annual meeting of stockholders.

Our 2020 Stock Plan, as amended and restated, provides for the ability to grant incentive stock options, non-qualified stock options, restricted stock, RSUs, stock appreciation rights, deferred stock units, performance units, performance bonus awards, and performance shares.

A total of 55.0 million shares of our Class A common stock have been authorized for issuance under the 2020 Stock Plan in total since inception of the plan.

For awards granted prior to February 2011, any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as two shares for every one share subject to the award, and if returned to the 2020 Stock Plan, such shares will be counted as two shares for every one share returned.

For those awards granted from February 2011 onward, any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as 1.6 shares for every one share subject to the award, and if returned to the 2020 Stock Plan, such shares will be counted as 1.6 shares for every one share returned.

A total of 64.0 million shares of our Class A common stock have been authorized for issuance under the 2020 Stock Plan since inception of the plan.

Any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as 1.6 shares for every one share subject to the award, and if returned to the 2020 Stock Plan, such shares will be counted as 1.6 shares for every one share returned.

Stock Options.

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

Options granted to employees and officers generally vest over four years , with 25 % of the options 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 generally vest over four years , with 25 % of the options 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.

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Performance-Based Stock Options.

From fiscal 2016 through fiscal 2019, we granted PSOs to our executive officers with shares of our Class A common stock underlying such options.

The contractual term for the PSOs was 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.

From fiscal 2016 through fiscal 2019, we granted PSOs to certain officers with shares of our Class A common stock underlying such options.

The contractual term for the PSOs was 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.

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

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

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

The following table summarizes information about PSOs granted to our officers that have vested during the periods presented:

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

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December 15, 2018 241,100 158,700 75 % December 2021

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

December 15, 2018 241,100 158,700 75 % December 2021

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

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

Options outstanding at September 25, 2021 4,577 $ 59.18

Options outstanding as of September 30, 2022 4,059 $ 62.59

Grants 326 71.07

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Forfeitures and cancellations ( 8 ) 53.19

Options outstanding at September 30, 2022 4,059 62.59 5.42 $ 29,902

Options vested and expected to vest at September 30, 2022 3,912 62.15 5.36 29,896

Options exercisable at September 30, 2022 3,091 57.16 4.60 29,690

Options outstanding as of September 29, 2023 3,720 66.13 5.25 $ 55,930

Options vested and expected to vest as of September 29, 2023 3,587 65.97 5.19 55,579

Options exercisable as of September 29, 2023 2,938 62.95 4.49 52,361

(1) Aggregate intrinsic value is based on the closing stock price of our Class A common stock on September 29, 2023 of $ 79.26 and excludes the impact of options that were not in-the-money.

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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 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.

RSU awards granted to employees and officers generally vest over four years , with cliff-vesting.

Awards granted to ongoing non-employee directors generally vest over approximately one year .

Awards granted to new non-employee 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.

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

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Performance-Based Restricted Stock Units.

In 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.

In fiscal 2020, we began granting PSUs to certain 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 certain 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.

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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, 2021, we granted PSUs to our executive officers vesting for an aggregate of 60,301 shares at the target award amount, which would vest at 120,602 shares at 200% of the target award amount.

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.

The following table summarizes information on PSUs granted to our officers that have not vested as of September 29, 2023:

Aggregate Shares Granted Potential Shares at Vest Date (at 200% of Target

December 15, 2020 66,138 132,276

December 15, 2021 60,301 120,602

December 15, 2022 90,613 181,226

On December 16, 2019, we granted PSUs vesting for an aggregate of 62,000 shares at the target award amount, which vested at 81% of the target award amount.

As of September 29, 2023, PSUs which would vest for an aggregate of 204,709 shares at the target award amount ( 409,418 shares at 200 % of the target award amount) were outstanding.

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(in thousands)

Non-vested at September 24, 2021 3,335 $ 77.46

Non-vested as of September 30, 2022 3,502 $ 83.09

Granted 1,718 69.74

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Forfeitures ( 221 ) 79.62

Non-vested at September 30, 2022 3,502 $ 83.09

Non-vested as of September 29, 2023 3,747 $ 78.62

The fair value as of the respective vesting dates of RSUs were as follows (in thousands):

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Employee Stock Purchase Plan .

Our plan allows eligible employees to have up to 10 percent of their eligible compensation withheld and used to purchase Class A common stock, subject to a maximum of $ 25,000 worth of stock purchased in a calendar year or no more than 1,000 shares in an offering period, whichever is less.

Our ESPP originally was adopted by our Board of Directors and shareholders in 2005.

Our stockholders last approved amendments to the ESPP at our 2023 annual meeting of stockholders.

The ESPP allows eligible employees to have up to 10 percent of their eligible compensation withheld and used to purchase Class A common stock, subject to a maximum of $ 25,000 worth of stock purchased in a calendar year or no more than 1,000 shares in an offering period, whichever is less.

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 NYSE 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 day of the offering period and the last day of the purchase period.

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.

A total of 5.5 million shares of our Class A common stock have been authorized for issuance under the ESPP since inception of the plan.

Stock Option Valuation Assumptions

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Expected Stock Price Volatility.

The expected volatility represents the estimated volatility in the price of our Class A common stock over a time period that approximates the expected term of the awards, and is determined using a blended combination of historical and implied volatility.

The expected volatility represents the estimated volatility in the price of our Class A common stock over a time period that approximates the expected term of the awards.

The expected volatility has historically been determined using a blended combination of historical and implied volatility, but is currently being determined using historical volatility only.

Historical volatility is representative of the historical trends in our stock price for periods preceding the measurement date for a period that is commensurate with the expected term.

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(1) Stock-based compensation expense incurred by restricted stock units includes expense from PSUs.

(2) Excludes $ 0.7 million of capitalized stock-based compensation related to internal use software in fiscal 2022.

(2) Excludes $ 1.2 million and $ 0.7 million of capitalized stock-based compensation related to internal use software in fiscal 2023 and fiscal 2022, respectively.

Expense - By Income Statement Line Item Classification

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The following table summarizes the initial amount of authorized repurchases as well as additional repurchases approved by our Board of Directors as of September 29, 2023 (in thousands):

Authorization Period Authorization Amount

Date of Authorization Authorization Amount

November 2009 $ 250,000

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Q1 - Quarter ended December 30, 2022 680,861 $ 49,412 $ 72.57

Q2 - Quarter ended April 1, 2022 1,116,032 84,913 76.08

Q3 - Quarter ended July 1, 2022 2,549,474 190,000 74.53

Q2 - Quarter ended March 31, 2023 631,046 49,864 79.02

Q3 - Quarter ended June 30, 2023 294,793 25,000 84.81

Q4 - Quarter ended September 29, 2023 285,499 25,000 87.57

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Q1 - Quarter ended December 30, 2022 February 2, 2023 February 14, 2023 February 22, 2023 $ 0.27 $ 25.9 million

Q2 - Quarter ended April 1, 2022 May 5, 2022 May 17, 2022 May 25, 2022 $ 0.25 $ 25.1 million

Q3 - Quarter ended July 1, 2022 August 9, 2022 August 23, 2022 August 31, 2022 $ 0.25 $ 24.3 million

Q2 - Quarter ended March 31, 2023 May 4, 2023 May 16, 2023 May 23, 2023 $ 0.27 $ 25.8 million

Q3 - Quarter ended June 30, 2023 August 3, 2023 August 14, 2023 August 22, 2023 $ 0.27 $ 25.8 million

Q4 - Quarter ended September 29, 2023 November 16, 2023 November 28, 2023 December 5, 2023 $ 0.30 $ 28.7 million (1)

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Ending Balance $ ( 2,858 ) $ ( 197 ) $ ( 33,929 ) $ ( 36,984 ) $ ( 5,986 ) $ ( 4,483 ) $ ( 41,172 ) $ ( 51,641 )

(1) The foreign currency translation losses during fiscal 2022 were primarily due the strengthening of the U.S.

dollar compared to other foreign currencies.

(1) The foreign currency translation gains during fiscal 2023 were primarily due to the strengthening of other foreign currencies as compared to the U.S.

The foreign currency translation losses during fiscal 2022 were primarily due to the strengthening of the U.S.

dollar as compared to other foreign currencies.

(2) 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 .

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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 U.S.

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

and numerous foreign jurisdictions.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse.

A summary of the tax effects of the

temporary differences were as follows (in thousands):

A summary of the tax effects of the temporary differences were as follows (in thousands):

Fiscal Year Ended

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Depreciation and amortization (1)

130,818 105,114

Lease liability 13,911 10,589

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Deferred income tax assets, net $ 201,860 $ 183,568

(1) Provisions enacted in the Tax Act related to the capitalization for tax purposes of research and development expenditures became effective on October 1,

These provisions require us to capitalize research and development expenditures and amortize them on our U.S.

tax return over five or fifteen

years, depending on where research is conducted.

Net Operating Losses and Tax Credit Carryforwards

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federal and California were $ 1.7 million and $ 4.6 million, respectively, and will start to expire in fiscal 2034 and 2029, respectively.

Additionally, we had foreign NOL carryforwards of $ 7.7 million as of September 30, 2022, an amount which is not subject to expiration.

As of September 29, 2023, we had foreign tax credit and federal R&D tax credit carryforwards of $ 6.3 million and $ 18.3 million, respectively, which will start to expire in fiscal 2029 and fiscal 2035, respectively.

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Valuation Allowance

As of September 30, 2022, a $ 31.7 million valuation allowance was recorded against California deferred tax assets, a $ 2.9 million valuation allowance was recorded against federal foreign tax credit deferred tax assets, and a $ 6.5 million valuation allowance was recorded against foreign deferred tax assets for which ultimate realization of its future benefits is uncertain.

As of September 29, 2023, a $ 34.9 million valuation allowance was recorded against California deferred tax assets, a $ 7.5 million valuation allowance was recorded against federal tax credit deferred tax assets, and a $ 8.3 million valuation allowance was recorded against foreign deferred tax assets for which ultimate realization of its future benefits is uncertain.

Effective Tax Rate

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Our effective tax rate was 19.4 % in fiscal 2023, compared with our federal statutory rate of 21.0 %, and with our effective tax rate in fiscal 2022 of 14.6 %.

The increase in our effective tax rate was primarily due to a shift in the mix of earnings to jurisdictions with higher tax rates and lower tax benefits related to settlement of stock-based awards partially offset by benefit from additional research and development tax credits.

The increase in our effective tax rate was primarily due to lower tax benefits related to settlement of stock-based awards and reduced benefit from less research and development tax credits.

Our effective tax rate was 14.6% in fiscal 2022, compared with our effective tax rate in fiscal 2021 of 10.3%.

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.

Uncertain Tax Positions

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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 there will be no reduction to this amount.

Over the next twelve months, we estimate that this amount could be reduced by $4.8 million as a result of the expiration of certain statutes of limitations.

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

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Our major tax jurisdictions are the U.S.

federal, California, New York, and the Netherlands.

federal, California, New York, and Ireland.

Our operations in certain jurisdictions remain subject to examination for fiscal 2015 to 2022, some of which are currently under audit or review.

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If resolution of any tax issues addressed in our current audits are inconsistent with management’s expectations, we may be required to adjust our tax provision for income taxes in the period such resolution occurs.

Provisions enacted in the Tax Act related to the capitalization of research and development expenditures are effective beginning with our fiscal 2023 for U.S.

income tax purposes.

In addition, the final U.S.

foreign tax credit regulations introduced significant changes to foreign tax credit utilization.

The final U.S.

foreign tax credit regulations, issued January 4, 2022, introduced significant changes to foreign tax credit utilization.

However, a one year relief delayed the effective date of the final U.S.

foreign tax credit regulations until our fiscal 2024.

These provisions are expected to have a material adverse effect on our fiscal 2024 and future tax provisions unless postponed or modified.

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Fiscal 2023 Restructuring Events.

In January 2022, we implemented a restructuring plan within our entertainment organization to align resources with a revised business strategy and outlook, and to support our higher priority focus areas.

As a result, we recorded $ 8.9 million in restructuring costs in the fiscal 2022, primarily representing severance and other related benefits offered to over 120 employees that were impacted by this action.

Actions related to this plan are expected to be completed by the end of fiscal 2023.

In September 2023, we initiated a restructuring plan with the purpose of focusing our resources on our highest strategic priorities.

We recorded expense of $ 13.4 million in severance and other related benefits offered to approximately 160 impacted employees.

In conjunction with focusing our resources on our top strategic priorities, we recorded an impairment loss of $ 16.9 million related primarily to internally developed software for projects we are no longer pursuing.

Cash payment of the severance and other termination benefits is expected to be completed by the second half of fiscal 2024.

In June 2023, we implemented a focused restructuring plan, primarily consisting of workforce reductions and facility consolidations to improve execution in alignment with our strategy and to reduce our cost structure through improved utilization of our global infrastructure.

As a result of these events, we recorded expense of $ 10.9 million in severance and other related benefits offered to approximately 130 impacted employees, and we recorded expense of $ 6.9 million related to a facility consolidation in New York, NY.

Actions related to this plan are expected to be completed by the second half of fiscal 2024.

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

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Cash payments and adjustments ( 9,372 ) ( 16,225 ) ( 25,597 )

Non-cash adjustment for leased facility exit costs — ( 6,893 ) ( 6,893 )

Balance at September 29, 2023 $ 20,352 $ — $ 20,352

The fiscal 2022 activities primarily related to our fiscal 2022 restructuring plan within our entertainment organization to align resources with a revised business strategy and outlook, and to support our higher priority focus areas.

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.

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Payments Due By Fiscal Period

Fiscal 2023 Fiscal

2028 Thereafter Total

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

We also hold the naming rights to Dolby Live at the Park MGM in Las Vegas, Nevada.

Dolby Live is a fully integrated performance venue offering live concerts in Dolby Atmos.

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 information technology and telecommunications, marketing and professional services, and manufacturing and other R&D activities.

Also included in purchase obligations are non-cancelable commitments to contract manufacturers, including potentially variable obligations related to inventory based on demand forecasts we provide to the contract manufacturers.

Donation Commitments.

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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.

Additionally, and although not a contractual requirement, we have at times elected to defend our licensees from third party IP infringement claims.

Additionally, and although not a contractual requirement, we have at times elected to defend our licensees from third

party IP infringement claims.

Since the terms and conditions of our contractual indemnification clauses do not explicitly specify our obligations, we are unable to reasonably estimate the maximum potential exposure for which we could be liable.

On August 7, 2019, Intertrust filed complaints against each of our customers AMC Entertainment Holdings, Inc., Cinemark Holdings, Inc., and Regal Entertainment Group in the U.S.

District Court for the Eastern District of Texas, alleging that the use of systems including certain cinema products, which were supplied under commercial agreements that we acquired as a part of an acquisition in 2014, infringed various Intertrust patents, and seeking damages based on the revenues of the defendants.

Some of our customers asserted that we are obligated to defend and indemnify them under the agreements.

As of September 30, 2022 we recorded $34.4 million within G&A expenses in our consolidated statements of operations, reflecting a settlement payment and an immaterial accrual.

We believe that these amounts fully resolve all claims relating to Intertrust’s patent assertions.

With the exception of this settlement, we have not made any payments to date in connection with any of our contractual indemnification obligations, and we believe the risk of material financial exposure in future periods from these indemnification obligations is remote.

Business Combination

Business Combinations

On April 28, 2023, our wholly-owned subsidiary Via Licensing Corporation ("Via Corp") acquired 100 % of MPEG LA, L.L.C.

("MPEG LA"), a privately held patent pool administrator that managed several collaborative licensing programs in video imaging and other technologies.

In connection with the transaction, Via Corp changed its structure and name to Via Licensing Alliance LLC ("Via LA") and became a majority owned subsidiary of Dolby.

The acquisition is expected to strengthen Via LA's licensing capabilities, particularly in video, diversify its revenues, and reinforce its ability to develop new patent licensing programs.

The total consideration for the acquisition was as follows (in thousands):

Cash $ 135,739

Noncontrolling interest in Via LA ( 24.8 million common equity units)

Total amount paid to sellers $ 160,554

amount deemed post-acquisition expense ( 2,174 )

Total consideration paid to sellers $ 158,380

Assumed settlement of pre-existing relationships due to Dolby 61,313

Total consideration $ 219,693

unrestricted cash acquired ( 80,633 )

Total consideration, net of unrestricted cash acquired $ 139,060

The noncontrolling interest in Via LA includes $ 3.6 million of cash held in escrow that will be fully remitted to Dolby in exchange for Via LA common equity units after 18 months from the transaction close date.

The fair value of the noncontrolling interest was determined through the issuance of equity in lieu of cash.

The assumed settlement of pre-existing relationships was determined based on the contractual amounts of payables and receivables between the parties as such amounts approximate fair value.

We have accounted for the taxable transaction under the acquisition method of accounting for business combinations, and the results of operations of MPEG LA have been included in the Company's consolidated statements of operations from the date of acquisition and were not material.

Additionally, we have estimated the fair values of the net tangible and intangible assets acquired, and liabilities assumed as of the acquisition date, with any amounts paid in excess of the net assets recorded as goodwill.

The fair values assigned to assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received and certain tax returns are finalized, including potential changes to income tax-related accounts.

We expect to finalize the valuation within the one year measurement period.

As this acquisition was not significant to our reported operating results, pro forma results of operations are not provided.

The following table summarizes the preliminary acquisition date fair values allocated to the net assets acquired (in thousands):

Recognized Identifiable Assets Acquired and Liabilities Assumed Purchase Price Allocation (Preliminary)

Cash and cash equivalents $ 80,633

Restricted cash 143,564

Other current assets 73,556

Intangible assets 86,000

Goodwill 40,579

Other non-current assets 34,298

Amounts payable to patent administrative program partners ( 179,616 )

Other current liabilities ( 21,709 )

Non-current liabilities ( 37,612 )

Purchase Consideration $ 219,693

In connection with the preparation of our consolidated financial statements, we identified an immaterial error related to the preliminary acquisition date fair values allocated to net assets acquired, whereby we overstated certain accounts payable to patent administrative program partners and, as a consequence, correspondingly overstated goodwill as of the quarter ended June 30, 2023.

We evaluated the error quantitatively and qualitatively, and determined that the related impact was not material to our condensed consolidated financial statements for the third quarter of fiscal 2023.

Accordingly, we have revised the previously reported financial information for such immaterial error in the above table.

The correction of this error resulted in a decrease to amounts payable to patent administrative program partners and a corresponding decrease to goodwill of $ 20.3 million, with no impact to total purchase consideration.

Goodwill is representative of our expectation of the benefits and synergies from the integration of MPEG LA operations and the assembled workforce of MPEG LA, which does not qualify for separate recognition as an intangible asset.

All of the goodwill recognized is expected to be deductible for income tax purposes.

The following table summarizes the preliminary fair values allocated to the various intangible assets acquired and the weighted-average useful lives over which they will be amortized using the straight-line method:

Purchase Price Allocation Weighted-Average Useful Life

Intangible Assets Acquired (in thousands) (in years)

Licensor Relationships – AVC & Other $ 36,000 13

Licensor Relationships - HEVC 31,000 10

Implementer Relationships – AVC & Other 12,000 13

Implementer Relationships - HEVC 7,000 10

Total $ 86,000 12

The preliminary value of acquired intangibles was determined based on the present value of estimated future cash flows using the following methodologies and inputs:

• Licensor Relationships - the multi-period excess earnings method using inputs such as projected revenue attributable to licensors in the patent pools, revenue retention rate, maintenance sales and marketing expenses, income tax rate, post-tax returns for contributory assets, and discount rate.

• Implementer Relationships - the distributor method using inputs such as projected revenue attributable to the existing implementers in the patent pools, distributor margin, income tax rate, and discount rate.

Acquisition-related costs of $ 3.8 million were incurred during fiscal 2023.

These acquisition-related costs were included in G&A expenses in the consolidated statements of operations.

On January 31, 2022, we completed the acquisition of all outstanding interests of Millicast, a privately held company.

Following the acquisition, Millicast is expected to enable developers to take the interactive events they build

with Dolby.io, and stream them from the presenter to large audiences.

Following the acquisition, Millicast is expected to enable developers to take the interactive events they build with Dolby.io, and stream them from the presenter to large audiences.

We have included the financial results of Millicast in our consolidated financial statements from the date of acquisition, and these results were not material.

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We also recorded $ 31.7 million of goodwill, which is representative of our expectation of benefits and synergies from the integration of Millicast technology with our existing technology and the assembled workforce of Millicast.

We expect to finalize the valuation within the one year measurement period.

Operating Segments and Geographic Information

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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.

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 reportable segment.

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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, other than the impact of the litigation matter discussed in Note 14, any such amounts are either immaterial, or it is not probable that a potential loss has been incurred or the amount of loss cannot be reasonably estimated.

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 probable that a potential loss has been incurred or the amount of loss cannot be reasonably estimated.

Related Parties

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primarily for our operational use.

Although the entities affiliated with the Dolby family are the limited member or LP in each of these entities, they have a controlling interest based on holding majority economic ownership.

We are the managing member or general partner in each of these affiliated entities, and with the exception of isolated instances where portions of these facilities are leased to third parties, we occupy the majority of the space.

Although the entities affiliated with the Dolby family hold a majority economic interest in such jointly-owned entities, they have a noncontrolling interest since they are the limited member or LP in each of these entities.

Therefore, we have consolidated the entities’ assets and liabilities and results of operations in our consolidated financial statements.

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.

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 noncontrolling interest in our consolidated financial statements.

Our interests in these consolidated affiliated entities and the location of the properties leased to Dolby Laboratories as of September 29, 2023 were as follows:

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We also own 10.0 % minority ownership interest in Dolby Properties, LP, which owns a facility in Wootton Bassett, England.

As of September 30, 2022, we are no longer leasing the Wootton Bassett facility.

During fiscal 2022, we ceased leasing the Wootton Bassett facility.

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

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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