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Stockholders' Equity And Stock-Based Compensation | 12 Months Ended
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Sep. 30, 2011
Stockholders' Equity And Stock-Based Compensation [Abstract] |
Stockholders' Equity And Stock-Based Compensation | 5. Stockholders' Equity and Stock-Based Compensation Class A and Class B Common Stock Our board of directors has authorized two classes of common stock, Class A and Class B. At September 30, 2011, we had authorized 500,000,000 Class A shares and 500,000,000 Class B shares. At September 30, 2011, we had 51,860,546 shares of Class A common stock and 57,559,554 shares of Class B common stock issued and outstanding. Holders of our Class A and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to ten votes per share. Shares of Class B common stock can be converted to shares of Class A common stock at any time at the option of the stockholder and automatically convert upon sale or transfer, except for certain transfers specified in our amended and restated certificate of incorporation. Stock Incentive Plans 2000 Stock Incentive Plan. Effective October 2000, we adopted the 2000 Stock Incentive Plan. The 2000 Stock Incentive Plan, as amended, provides for the issuance of incentive and non-qualified stock options to employees, directors and consultants of Dolby Laboratories to purchase up to 15.1 million shares of Class B common stock. Under the terms of this plan, options became exercisable as established by the board of directors (ratably over four years), and expire ten years after the date of the grant. Options granted under the plan were granted at not less than fair market value at the date of grant. As of September 30, 2011, there were options outstanding to purchase 0.3 million shares of Class B common stock, of which all were vested and exercisable. The options outstanding have a remaining weighted-average contractual life of 2.6 years. Subsequent to fiscal 2005, no further options were granted under this plan. The 2000 Stock Incentive Plan terminated on October 1, 2010 and no shares of our common stock remained available for future issuance under that plan other than pursuant to outstanding options. 2005 Stock Plan. In January 2005, our stockholders approved our 2005 Stock Plan, which our board of directors adopted in November 2004. The 2005 Stock Plan became effective on February 16, 2005, the day prior to the completion of our initial public offering. Our 2005 Stock Plan, as amended and restated, provides for the ability to grant incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, deferred stock units, performance units, performance bonus awards, and performance shares. A total of 21.0 million shares of our Class A common stock is authorized for issuance under the 2005 Stock Plan. For any 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 restricted stock unit 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 2005 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 restricted stock unit 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 2005 Stock Plan, such shares will be counted as 1.6 shares for every one share returned. As of September 30, 2011, there were options outstanding to purchase 5.5 million shares of Class A common stock, of which 2.5 million were vested and exercisable. The options outstanding have a remaining weighted-average contractual life of 7.7 years. Stock-Based Compensation We provide stock-based awards as a form of compensation for employees, officers, and directors. We have issued stock-based awards in the form of stock options, restricted stock units, and stock appreciation rights under our equity incentive plans, as well as shares under our Employee Stock Purchase Plan ("ESPP"). Stock-based compensation expense recorded in our consolidated statements of operations for fiscal 2009, 2010, and 2011 was as follows:
|  | Fiscal Year Ended |
|  | September 25, 2009 (2) |  |  | September 24, 2010 (2) |  |  | September 30, 2011 (2) |
|  | (in thousands) |
Stock-based compensation: |  |  |  |
Stock options (1) |  | $ | 16,643 |  |  | $ | 18,135 |  |  | $ | 24,788 |
Restricted stock units |  |  | 5,205 |  |  |  | 9,560 |  |  |  | 18,339 |
Employee stock purchase plan |  |  | 529 |  |  |  | 673 |  |  |  | 842 |
Stock appreciation rights |  |  | 45 |  |  |  | 447 |  |  |  | (304 | )
Total stock-based compensation |  |  | 22,422 |  |  |  | 28,815 |  |  |  | 43,665 |
Benefit from income taxes |  |  | (7,708 | ) |  |  | (9,805 | ) |  |  | (14,744 | )
Total stock-based compensation, net of tax |  | $ | 14,714 |  |  | $ | 19,010 |  |  | $ | 28,921 |
(1) | Expense excludes $0.8 million in fiscal 2010 and $0.6 million in fiscal 2011 related to stock-based compensation which was capitalized to property, plant and equipment.
(2) | We also recognized $0.7 million, $1.2 million, and $0.3 million in fiscal 2009, 2010, and 2011, respectively, of tax benefit from certain exercises of incentive stock options and shares issued under our ESPP, which is not included in the table above.
Stock Options. We have granted stock options to our employees, officers, and directors under our 2005 Stock Plan and our 2000 Stock Incentive Plan. Stock options are generally granted at fair market value on the date of grant. Options granted to employees and officers prior to June 2008 generally vest over four years, with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or 3 months after termination of service. Options granted to employees and officers from June 2008 onward generally vest over four years, with 25% of the shares subject to the option becoming exercisable on the one-year anniversary of the date of grant and the balance of the shares vesting in equal monthly installments over the following 36 months. These options expire on the earlier of 10 years after the date of grant or 3 months after termination of service. All options granted vest over the requisite service period and upon the exercise of stock options, we issue new shares of Class B common stock under the 2000 Stock Incentive Plan and new shares of Class A common stock under the 2005 Stock Plan. Our 2005 Stock Plan also allows us to grant stock awards which vest based on the satisfaction of specific performance criteria. On February 16, 2010 and February 15, 2011, pursuant to a contractual agreement, we granted 16,651 and 12,443 stock options, respectively, to our Executive Chairman of the Board of Directors. The size of the grants were determined by our Compensation Committee in the second quarter of fiscal 2010 and second quarter of fiscal 2011, and were based on the Compensation Committee's assessment of his achievement of performance goals relating to leadership, counseling, and technology consulting in each preceding year. The stock options have an exercise price equal to the fair market value of the Class A common stock on the date of grant. The fair value of each of the grants on February 16, 2010 and February 15, 2011 was $0.3 million and $0.2 million, respectively. We recorded $0.1 million, $0.1 million, and $0.3 million in stock-based compensation expense in fiscal 2009, 2010 and 2011, respectively, related to this contractual agreement with our Executive Chairman of the Board of Directors. We use the Black-Scholes option pricing model to determine the fair value of employee stock options at the date of grant. The fair value of our stock-based awards was estimated using the following weighted-average assumptions:
|  | Fiscal Year Ended |
|  | September 25, 2009 |  |  | September 24, 2010 |  |  | September 30, 2011 |
Expected life (in years) |  |  | 5.02 |  |  |  | 4.66 |  |  |  | 4.40 |
Risk-free interest rate |  |  | 2.0 | % |  |  | 2.2 | % |  |  | 1.5 | %
Expected stock price volatility |  |  | 47.1 | % |  |  | 41.7 | % |  |  | 41.4 | %
Dividend yield |  |  | — |  |  |  | — |  |  |  | — |
To determine an estimate for the expected term of our stock options, we evaluated historical exercise patterns of our employees and made an assumption regarding future exercise patterns. To determine an estimate for the expected stock price volatility, we used a blend of the historical volatility for our common stock since our initial public offering and our implied volatility. To determine an estimate for the risk-free interest rate we used an average interest rate based on U.S. Treasury instruments having terms consistent with the expected term of our awards. The following table summarizes the weighted-average fair value of stock options granted and the total intrinsic value of stock options exercised during fiscal 2009, 2010, and 2011:
|  | Fiscal Year Ended |
|  | September 25, 2009 |  |  | September 24, 2010 |  |  | September 30, 2011 |
Weighted-average fair value at date of grant |  | $ | 14.32 |  |  | $ | 19.93 |  |  | $ | 22.31 |
Intrinsic value of options exercised (in thousands) |  |  | 29,523 |  |  |  | 79,453 |  |  |  | 46,649 |
Fair value of options vested (in thousands) |  |  | 17,448 |  |  |  | 20,542 |  |  |  | 26,442 |
Stock-based compensation expense related to employee stock options was recognized net of estimated forfeitures. We determine our estimated forfeiture rate based on an evaluation of historical forfeitures. For awards granted in fiscal 2009, 2010, and 2011, we used an estimated forfeiture rate of 5.13%, 5.69%, and 6.10%, respectively. Total unrecorded stock-based compensation cost at September 30, 2011 associated with employee stock options expected to vest was $52.7 million, which is expected to be recognized over a weighted-average period of 2.7 years. The following table summarizes information about stock options issued to officers, directors, and employees under our 2000 Stock Incentive Plan and 2005 Stock Plan:
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life |  |  | Aggregate Intrinsic Value |
|  | (in thousands) |  |  |  |  |  | (in years) |  |  | (in thousands) |
Options outstanding at September 24, 2010 |  |  | 5,625 |  |  | $ | 35.05 |  |  |  |  |  |  |  |  |
Grants |  |  | 1,628 |  |  |  | 62.30 |  |  |  |  |  |  |  |  |
Exercises |  |  | (1,166 | ) |  |  | 19.27 |  |  |  |  |  |  |  |  |
Forfeitures |  |  | (286 | ) |  |  | 49.07 |  |  |  |  |  |  |  |  |
Options outstanding at September 30, 2011 |  |  | 5,801 |  |  |  | 45.19 |  |  |  | 7.5 |  |  | $ | 8,358 |
Options vested and expected to vest at September 30, 2011 |  |  | 5,549 |  |  |  | 44.94 |  |  |  | 7.4 |  |  |  | 8,358 |
Options exercisable at September 30, 2011 |  |  | 2,721 |  |  |  | 34.91 |  |  |  | 6.2 |  |  |  | 8,357 |
Aggregate intrinsic value is based on the closing price of our common stock on September 30, 2011 of $27.44 and excludes the impact of options that were not in-the-money. The following table summarizes information about stock options outstanding and exercisable at September 30, 2011:
|  | Outstanding Options |  |  | Options Exercisable |
Range of Exercise Price |  | Shares |  |  | Weighted Average Remaining Contractual Life |  |  | Weighted Average Exercise Price |  |  | Shares |  |  | Weighted Average Exercise Price |
|  | (in thousands) |  |  | (in years) |  |  |  |  |  | (in thousands) |  |  |  |
$1.25 - $1.25 |  |  | 5 |  |  |  | 0.1 |  |  | $ | 1.25 |  |  |  | 5 |  |  | $ | 1.25 |
$1.26 - $1.26 |  |  | 19 |  |  |  | 1.2 |  |  |  | 1.26 |  |  |  | 19 |  |  |  | 1.26 |
$2.08 - $6.28 |  |  | 161 |  |  |  | 2.6 |  |  |  | 2.08 |  |  |  | 161 |  |  |  | 2.08 |
$6.29 - $19.21 |  |  | 282 |  |  |  | 3.5 |  |  |  | 15.68 |  |  |  | 282 |  |  |  | 15.68 |
$19.22 - 28.12 |  |  | 64 |  |  |  | 5.0 |  |  |  | 22.45 |  |  |  | 60 |  |  |  | 22.08 |
$28.13 - $38.20 |  |  | 1,526 |  |  |  | 6.7 |  |  |  | 31.61 |  |  |  | 1,052 |  |  |  | 31.17 |
$38.21 - $48.14 |  |  | 539 |  |  |  | 7.6 |  |  |  | 43.38 |  |  |  | 248 |  |  |  | 42.81 |
$48.15 - $51.18 |  |  | 507 |  |  |  | 6.6 |  |  |  | 48.35 |  |  |  | 343 |  |  |  | 48.25 |
$51.19 and above |  |  | 2,698 |  |  |  | 8.8 |  |  |  | 59.22 |  |  |  | 551 |  |  |  | 52.50 |
|  |  | 5,801 |  |  |  |  |  |  |  |  |  |  |  | 2,721 |  |  |  |  |
Restricted Stock Units. We grant restricted stock units to certain employees, officers, and directors under our 2005 Stock Plan. Awards granted to employees and officers generally vest over four years, with equal annual cliff-vesting. Awards granted to directors prior to November 2010 generally vest over three years, with equal annual cliff-vesting. Awards granted after November 2010 to new directors vest over approximately two years, with 50% vesting per year, while awards granted from November 2010 onwards to ongoing directors vest over approximately one year. Our 2005 Stock Plan also allows us to grant restricted stock units which vest based on the satisfaction of specific performance criteria, although no such awards have been granted as of September 30, 2011. At each vesting date, the holder of the award is issued shares of our Class A common stock. Compensation expense from these awards is equal to the fair market value of our common stock on the date of grant and is recognized over the requisite service period. No restricted stock units were granted prior to fiscal 2008. Total unrecorded stock-based compensation cost at September 30, 2011 associated with restricted stock units expected to vest was $37.6 million, which is expected to be recognized over a weighted-average period of 2.8 years. The following table summarizes information about restricted stock units issued to officers, directors, and employees under our 2005 Stock Incentive Plan:
|  | Shares |  |  | Weighted Average Fair Value |
|  | (in thousands) |  |  |  |
Non-vested at September 24, 2010 |  |  | 823 |  |  | $ | 44.91 |
Granted |  |  | 484 |  |  |  | 61.62 |
Vested |  |  | (292 | ) |  |  | 43.46 |
Forfeitures |  |  | (69 | ) |  |  | 47.67 |
Non-vested at September 30, 2011 |  |  | 946 |  |  |  | 53.71 |
Stock Appreciation Rights. We have granted stock appreciation rights to certain of our foreign employees. These awards are settled in cash rather than stock, and are classified as liability awards. Employee Stock Purchase Plan. In January 2005, our board of directors adopted and our stockholders approved our ESPP, which 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 one thousand shares in an offering period, whichever is less. The plan provides for a discount equal to 15 percent of the closing price on the New York Stock Exchange on the last day of the purchase period. Under the ESPP, substantially all employees may purchase Class A common stock through payroll withholdings. Our ESPP does not have a look-back option and is classified as a liability award. At September 30, 2011, our accrued liabilities included $2.4 million for employee withholdings and related compensation cost.

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Also includes disclosure of compensation-related costs for equity-based compensation which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details, and employee stock purchase plan details. + Details
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