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Composition Of Certain Financial Statement Captions | 12 Months Ended
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Sep. 30, 2011
Composition Of Certain Financial Statement Captions [Abstract] |
Composition Of Certain Financial Statement Captions | 3. Composition of Certain Financial Statement Captions Cash, Cash Equivalents, and Investments Cash, cash equivalents, and investments as of September 24, 2010 and September 30, 2011 consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Cash and cash equivalents: |  |  |  |  |  |  |  |
Cash |  | $ | 156,440 |  |  | $ | 394,474 |
Cash equivalents: |  |  |  |  |  |  |  |
Money market funds |  |  | 354,428 |  |  |  | 142,038 |
U.S. agency securities |  |  | 10,000 |  |  |  | 15,000 |
Commercial paper |  |  | 19,993 |  |  |  | — |
Municipal debt securities |  |  | 5,000 |  |  |  | — |
Total cash and cash equivalents |  |  | 545,861 |  |  |  | 551,512 |
Short-term investments: |  |  |  |  |  |  |  |
Corporate bonds |  |  | 3,788 |  |  |  | 52,645 |
Commercial paper |  |  | 9,990 |  |  |  | — |
Municipal debt securities |  |  | 188,123 |  |  |  | 330,562 |
U.S. agency securities |  |  | 70,376 |  |  |  | 8,074 |
U.S. government bonds |  |  | 29,992 |  |  |  | — |
Total short-term investments |  |  | 302,269 |  |  |  | 391,281 |
Long-term investments (1): |  |  |  |  |  |  |  |
Corporate bonds |  |  | 25,870 |  |  |  | 124,313 |
Municipal debt securities |  |  | 127,458 |  |  |  | 141,639 |
U.S. agency securities |  |  | 27,522 |  |  |  | 6,845 |
U.S. government bonds |  |  | 9,987 |  |  |  | — |
Total long-term investments |  |  | 190,837 |  |  |  | 272,797 |
Total cash, cash equivalents and investments |  | $ | 1,038,967 |  |  | $ | 1,215,590 |
(1) | Our long-term investments have maturities that range from one to three years.
Our investment portfolio, which is recorded as cash equivalents, short-term investments, and long-term investments, consists of the following:
|  | September 24, 2010 |
|  | Cost |  |  | Unrealized Gain |  |  | Unrealized Loss |  |  | Estimated Fair Value |
|  | (in thousands) |
Commercial paper |  | $ | 29,983 |  |  | $ | — |  |  | $ | — |  |  | $ | 29,983 |
Corporate bonds |  |  | 29,238 |  |  |  | 420 |  |  |  | — |  |  |  | 29,658 |
Money market funds |  |  | 354,428 |  |  |  | — |  |  |  | — |  |  |  | 354,428 |
Municipal debt securities |  |  | 318,825 |  |  |  | 1,781 |  |  |  | (25 | ) |  |  | 320,581 |
U.S. agency securities |  |  | 107,512 |  |  |  | 390 |  |  |  | (4 | ) |  |  | 107,898 |
U.S. government bonds |  |  | 39,949 |  |  |  | 30 |  |  |  | — |  |  |  | 39,979 |
Cash equivalents and investments |  | $ | 879,935 |  |  | $ | 2,621 |  |  | $ | (29 | ) |  | $ | 882,527 |
|  | September 30, 2011 |
|  | Cost |  |  | Unrealized Gain |  |  | Unrealized Loss |  |  | Estimated Fair Value |
|  | (in thousands) |
Corporate bonds |  | $ | 177,129 |  |  | $ | 316 |  |  | $ | (487 | ) |  | $ | 176,958 |
Money market funds |  |  | 142,038 |  |  |  | — |  |  |  | — |  |  |  | 142,038 |
Municipal debt securities |  |  | 471,005 |  |  |  | 1,251 |  |  |  | (55 | ) |  |  | 472,201 |
U.S. agency securities |  |  | 29,858 |  |  |  | 65 |  |  |  | (4 | ) |  |  | 29,919 |
Cash equivalents and investments |  | $ | 820,030 |  |  | $ | 1,632 |  |  | $ | (546 | ) |  | $ | 821,116 |
We have classified all of our investments listed in the tables above as available-for-sale securities recorded at fair market value on our consolidated balance sheets, with unrealized gains and losses reported as a component of accumulated other comprehensive income. Upon sale, amounts of gains and losses reclassified into earnings are determined based on specific identification of securities sold. The following tables show the gross unrealized losses and the fair value for those available-for-sale securities that were in an unrealized loss position:
|  | September 24, 2010 |
|  | Less than 12 months |  |  | 12 months or greater |  |  | Total |
|  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |
|  | (in thousands) |
U.S. agency securities |  | $ | 30,112 |  |  | $ | (4 | ) |  | $ | — |  |  | $ | — |  |  | $ | 30,112 |  |  | $ | (4 | )
Municipal debt securities |  |  | 62,494 |  |  |  | (25 | ) |  |  | — |  |  |  | — |  |  |  | 62,494 |  |  |  | (25 | )
Total |  | $ | 92,606 |  |  | $ | (29 | ) |  | $ | — |  |  | $ | — |  |  | $ | 92,606 |  |  | $ | (29 | )
|  | September 30, 2011 |
|  | Less than 12 months |  |  | 12 months or greater |  |  | Total |
|  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |
|  | (in thousands) |
U.S. agency securities |  | $ | 3,997 |  |  | $ | (4 | ) |  | $ | — |  |  | $ | — |  |  | $ | 3,997 |  |  | $ | (4 | )
Municipal debt securities |  |  | 79,466 |  |  |  | (52 | ) |  |  | 2,081 |  |  |  | (3 | ) |  |  | 81,547 |  |  |  | (55 | )
Corporate bonds |  |  | 87,613 |  |  |  | (487 | ) |  |  | — |  |  |  | — |  |  |  | 87,613 |  |  |  | (487 | )
Total |  | $ | 171,076 |  |  | $ | (543 | ) |  | $ | 2,081 |  |  | $ | (3 | ) |  | $ | 173,157 |  |  | $ | (546 | )
The unrealized losses on our available-for-sale securities were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. As of September 30, 2011, we owned 54 securities that were in an unrealized loss position. We do not intend to sell, nor will we need to sell, these securities before we recover the associated unrealized losses. We expect to recover the full carrying value of these securities. As a result, we do not consider any portion of the unrealized losses at September 24, 2010 and September 30, 2011 to be an other-than-temporary impairment, nor do we consider any of the unrealized losses to be credit losses. The following tables summarize the amortized cost and estimated fair value of short-term and long-term available-for-sale investments based on stated maturities as of September 24, 2010 and September 30, 2011:
|  | September 24, 2010 |
|  | Amortized Cost |  |  | Fair Value |
|  | (in thousands) |
Due within 1 year |  | $ | 289,082 |  |  | $ | 289,755 |
Due in 1 to 2 years |  |  | 183,130 |  |  |  | 184,891 |
Due in 2 to 3 years |  |  | 18,301 |  |  |  | 18,460 |
Total |  | $ | 490,513 |  |  | $ | 493,106 |
|  | September 30, 2011 |
|  | Amortized Cost |  |  | Fair Value |
|  | (in thousands) |
Due within 1 year |  | $ | 390,559 |  |  | $ | 391,281 |
Due in 1 to 2 years |  |  | 213,487 |  |  |  | 213,921 |
Due in 2 to 3 years |  |  | 58,947 |  |  |  | 58,876 |
Total |  | $ | 662,993 |  |  | $ | 664,078 |
Accounts Receivable Accounts receivable consists of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Trade accounts receivable |  | $ | 45,651 |  |  | $ | 59,831 |
Accounts receivable related to patent administration program |  |  | 10,646 |  |  |  | 4,450 |
Accounts receivable, gross |  |  | 56,297 |  |  |  | 64,281 |
Less: allowance for doubtful accounts |  |  | (2,040 | ) |  |  | (2,466 | )
Accounts receivable, net |  | $ | 54,257 |  |  | $ | 61,815 |
Allowance for Doubtful Accounts |  | Balance at Beginning of Fiscal Year |  |  | Charged to Operations |  |  | Deductions |  |  | Balance at End of Fiscal Year |
|  | (in thousands) |
For fiscal year ended September 25, 2009 |  | $ | 1,799 |  |  | $ | 1,392 |  |  | $ | (969 | ) |  | $ | 2,222 |
For fiscal year ended September 24, 2010 |  |  | 2,222 |  |  |  | 365 |  |  |  | (547 | ) |  |  | 2,040 |
For fiscal year ended September 30, 2011 |  |  | 2,040 |  |  |  | 772 |  |  |  | (346 | ) |  |  | 2,466 |
Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Raw materials |  | $ | 10,314 |  |  | $ | 10,821 |
Work in process |  |  | 3,109 |  |  |  | 2,942 |
Finished goods |  |  | 14,915 |  |  |  | 12,481 |
Inventories |  | $ | 28,338 |  |  | $ | 26,244 |
Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Prepaid assets |  | $ | 16,191 |  |  | $ | 19,915 |
Other current assets |  |  | 1,650 |  |  |  | 7,667 |
Income tax receivable |  |  | 3,497 |  |  |  | 7,829 |
Assets held for sale |  |  | 5,592 |  |  |  | 1,466 |
Prepaid expenses and other current assets |  | $ | 26,930 |  |  | $ | 36,877 |
Assets held for sale represent digital cinema equipment that we leased to exhibitors beginning in fiscal 2005 in an effort to encourage the cinema industry to transition to digital cinema. In fiscal 2010, management committed to a plan to sell some of this leased equipment, which required us to classify these assets as held for sale as of September 24, 2010. Consequently, we have classified the equipment within current assets in our consolidated balance sheets as of September 24, 2010 and September 30, 2011. During fiscal 2011 we sold the majority of these assets, and expect to sell the remaining assets in fiscal 2012. We have reviewed the carrying value of remaining assets classified as held for sale against recent sales prices and expect to recover the current carrying value of the assets. We also hold digital cinema equipment that we lease to exhibitors with a carrying value of approximately $1.1 million that is not yet classified as held for sale since it does not meet all the held for sale criteria. These assets are classified as products provided under operating leases and held for use, and remain within property, plant and equipment. We are currently exploring future uses and options for these assets, and have not yet committed to a plan of sale. We believe that the remaining carrying value of our products provided under operating leases included in property, plant and equipment is recoverable as of September 30, 2011. We enter into foreign currency forward contracts to hedge against assets and liabilities for which we have foreign currency exchange rate exposure in an effort to reduce the risk that our earnings will be adversely affected by foreign currency exchange rate fluctuations. As of September 30, 2011, the total notional amounts of outstanding contracts were $4.7 million on our consolidated balance sheets, and are included in other current assets and other accrued liabilities. See Note 4 "Fair Value Measurements" for additional information related to our foreign currency forward contracts. Property, Plant and Equipment Property, plant and equipment are recorded at cost and consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Land |  | $ | 12,835 |  |  | $ | 12,778 |
Buildings |  |  | 27,029 |  |  |  | 26,623 |
Leasehold improvements |  |  | 33,264 |  |  |  | 44,021 |
Machinery and equipment |  |  | 16,080 |  |  |  | 20,845 |
Computer systems and software |  |  | 43,611 |  |  |  | 71,220 |
Furniture and fixtures |  |  | 9,440 |  |  |  | 10,537 |
Products provided under operating leases |  |  | 1,209 |  |  |  | 1,060 |
|  |  | 143,468 |  |  |  | 187,084 |
Less: accumulated depreciation |  |  | (49,371 | ) |  |  | (69,977 | )
Property, plant and equipment, net |  | $ | 94,097 |  |  | $ | 117,107 |
Depreciation expense for property, plant and equipment was $13.5 million, $17.8 million and $24.1 million in fiscal 2009, 2010 and 2011, respectively, and is included in cost of products, cost of services, research and development expenses, sales and marketing expenses, and general and administrative expenses in the accompanying consolidated statements of operations. Our products provided under operating leases represent digital cinema equipment that we leased to exhibitors beginning in fiscal 2005 in an effort to encourage the cinema industry to transition to digital cinema. During fiscal 2010, certain events occurred that indicated that the carrying value of our products provided under operating leases may not be recoverable. These events included a reduction in expected virtual print fees and a reduction in market prices for digital cinema equipment. As a result, we concluded that sufficient indicators existed to require an impairment analysis during fiscal 2010. Based on our estimates of the undiscounted future cash flows from virtual print fees and the potential sale value of the equipment, our analysis determined that the equipment was impaired. Accordingly, we estimated the fair market value of the equipment based on potential sale price estimates and recorded the excess of the carrying value over the fair market value as an impairment charge. During fiscal 2010, we recorded an impairment charge of $9.6 million related to our products provided under operating leases, which is included in the impairment of products provided under operating leases line item in the accompanying consolidated statement of operations. During fiscal 2010, management committed to a plan to sell one of our properties in the U.K. that indicated that the carrying value of the land and building may not be recoverable. Based on our estimates of the undiscounted future cash flows from this building, our analysis determined that the building was impaired. Accordingly, we estimated the fair market value of the property based on potential sales price estimates. We recorded the excess of the carrying value over the fair market value of the land and building as impairment charges of $1.1 million and $2.3 million, respectively, within the restructuring charges line item in the accompanying consolidated statement of operations. The building is held by an entity where we are the managing member and our principal stockholder is the limited member, but with a majority ownership of the entity. Therefore, the impairment amount reflected in our restructuring charges line item for fiscal 2010 is offset by the share of the charge attributable to the limited member, or $1.7 million, in our net income attributable to controlling interest line item in the accompanying consolidated statement of operations. Based on the current facts and circumstances, the property does not meet the criteria for held for sale classification. Goodwill and Intangible Assets Intangible assets consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | Cost |  |  | Accumulated Amortization |  |  | Net |  |  | Cost |  |  | Accumulated Amortization |  |  | Net |
|  | (in thousands) |
Intangible assets subject to amortization: |  |  |  |
Acquired patents and technology |  | $ | 61,767 |  |  | $ | (24,986 | ) |  | $ | 36,781 |  |  | $ | 61,611 |  |  | $ | (32,146 | ) |  | $ | 29,465 |
Customer relationships |  |  | 30,790 |  |  |  | (10,095 | ) |  |  | 20,695 |  |  |  | 30,748 |  |  |  | (12,821 | ) |  |  | 17,927 |
Customer contracts |  |  | 5,973 |  |  |  | (4,483 | ) |  |  | 1,490 |  |  |  | 6,063 |  |  |  | (6,063 | ) |  |  | — |
Other intangibles |  |  | 20,307 |  |  |  | (12,254 | ) |  |  | 8,053 |  |  |  | 20,308 |  |  |  | (16,127 | ) |  |  | 4,181 |
Total |  | $ | 118,837 |  |  | $ | (51,818 | ) |  | $ | 67,019 |  |  | $ | 118,730 |  |  | $ | (67,157 | ) |  | $ | 51,573 |
Amortization expense for our intangible assets was $15.2 million, $17.3 million and $19.8 million in fiscal 2009, 2010 and 2011, respectively, and is included in cost of licensing, cost of products, research and development, and sales and marketing expenses in the accompanying consolidated statements of operations. The expected future annual amortization expense of our intangible assets is as follows:
|  | Amortization |
Fiscal Year |  | Expense |
|  | (in thousands) |
2012 |  | $ | 12,697 |
2013 |  |  | 11,923 |
2014 |  |  | 10,279 |
2015 |  |  | 7,823 |
2016 |  |  | 5,654 |
Thereafter |  |  | 3,197 |
Total |  | $ | 51,573 |
The following table outlines changes to the carrying amount of goodwill:
|  | Total |
|  | (in thousands) |
Balance at September 25, 2009 |  | $ | 261,121 |
Acquired goodwill |  |  | 3,266 |
Translation adjustments and other |  |  | 193 |
Balance at September 24, 2010 |  | $ | 264,580 |
Acquired goodwill |  |  | 182 |
Translation adjustments and other |  |  | (1,502 | )
Balance at September 30, 2011 |  | $ | 263,260 |
Accrued Liabilities Accrued liabilities consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Accrued royalties |  | $ | 4,140 |  |  | $ | 1,947 |
Amounts payable to joint licensing program partners |  |  | 42,837 |  |  |  | 42,502 |
Accrued compensation and benefits |  |  | 62,044 |  |  |  | 41,168 |
Accrued professional fees |  |  | 8,078 |  |  |  | 5,727 |
Current portion of litigation settlement (see Note 12) |  |  | 2,890 |  |  |  | — |
Other accrued liabilities |  |  | 24,619 |  |  |  | 25,691 |
Accrued liabilities |  | $ | 144,608 |  |  | $ | 117,035 |
Other Non-Current Liabilities Other non-current liabilities consist of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Supplemental retirement plan obligations |  | $ | 2,118 |  |  | $ | 1,811 |
Non-current tax liabilities |  |  | 20,036 |  |  |  | 13,070 |
Other liabilities |  |  | 4,861 |  |  |  | 8,574 |
Other non-current liabilities |  | $ | 27,015 |  |  | $ | 23,455 |
See Note 7 "Income Taxes" for additional information related to tax liabilities. Accumulated Other Comprehensive Income Accumulated other comprehensive income consists of the following:
|  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands) |
Accumulated foreign currency translation gains, net of tax of ($2,655) and ($2,653) |  | $ | 6,195 |  |  | $ | 6,834 |
Accumulated unrealized gains on available-for-sale securities, net of tax of ($986) and ($387) |  |  | 1,606 |  |  |  | 699 |
Total accumulated other comprehensive income |  | $ | 7,801 |  |  | $ | 7,533 |
Per Share Data We compute basic earnings per share by dividing net income attributable to Dolby Laboratories, Inc. by the weighted average number of shares of Class A and Class B common stock outstanding during the period. For diluted earnings per share, we divide net income attributable to Dolby Laboratories, Inc. by the sum of the weighted average number of shares of Class A and Class B common stock outstanding and the potential number of dilutive shares of Class A and Class B common stock outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share attributable to Dolby Laboratories, Inc.:
|  | Fiscal Year Ended |
|  | September 25, 2009 |  |  | September 24, 2010 |  |  | September 30, 2011 |
|  | (in thousands, except per share amounts) |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net income attributable to Dolby Laboratories, Inc. |  | $ | 242,991 |  |  | $ | 283,447 |  |  | $ | 309,267 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average shares outstanding—basic |  |  | 113,101 |  |  |  | 113,452 |  |  |  | 111,444 |
Potential common shares from options to purchase Class A and Class B common stock |  |  | 2,167 |  |  |  | 1,769 |  |  |  | 941 |
Potential common shares from restricted stock units |  |  | 99 |  |  |  | 167 |  |  |  | 169 |
Weighted-average shares outstanding—diluted |  |  | 115,367 |  |  |  | 115,388 |  |  |  | 112,554 |
Net income per share attributable to Dolby Laboratories, Inc.—basic |  | $ | 2.15 |  |  | $ | 2.50 |  |  | $ | 2.78 |
Net income per share attributable to Dolby Laboratories, Inc.—diluted |  | $ | 2.11 |  |  | $ | 2.46 |  |  | $ | 2.75 |
Antidilutive options excluded from calculation |  |  | 3,409 |  |  |  | 2,074 |  |  |  | 3,289 |
Antidilutive restricted stock units excluded from calculation |  |  | 148 |  |  |  | 457 |  |  |  | 535 |
Sales Tax We account for sales tax on a net basis by excluding sales tax from our revenue. Release of Value-Added Tax ("VAT") Reserves During fiscal 2011 we completed our analysis of recent VAT law changes enacted in the European Union and other foreign jurisdictions. Based on this analysis, we released $3.2 million of VAT reserves and related estimated penalties which were recorded as reductions of general and administrative expense. Additionally, we released $1.4 million of VAT-related interest reserves, which was recorded as a reduction of interest expense. These liabilities were previously included in other accrued liabilities in our consolidated balance sheets.

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