dlb aug 2011 valuation

8/4/2019 DLB Aug 2011 Valuation

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Dolby Laboratories Inc(DLB)

Figures in Millions except per share values

Company Overview

ValuationCurrent Price 33.50$ Margin of SafetyNCAV 8.02$

Total Net Reprod. Cost 11.05$Earnings Power Value (EPV) 32.51$Discounted Cash Flow (DCF) 53.60$Ben Graham Formula 103.59$

Key Statistics Valuation RatiosMkt Cap ($M) 3,700.00$ P/E(TTM) 12.952 Wk High 69.69$ P/S(TTM) 3.952 Wk Low 28.89$% off 52Wk Low 16.0% P/Tang BV(MRQ) 2.8

FCF/EV (TTM) 8.0%

Cash Flows P/FCF(TTM) 11.6Owner Earnings FCF Earnings Yld (TTM) 17.1%

5 yr FCF Growth 38.4% Piotroski (TTM) 6

10 yr FCF Growth 40.4% Altman (MRQ) 13.34

Beneish (TTM) -2.69 Balance SheetEffectiveness Cash and Equiv 594.60$CROIC Margins & Profitability Short-Term Investments 309.10$

Avg 17.6% Gross Accts Rec 49.20$

FCF/S Gross Margin Inventory 23.40$

Avg 31.3% Operating Total Current Assets 1,093.90$

ROA Operating Margin Net PP&E 108.30$

Avg 14.7% Net Profit Intangibles 323.51$

ROE Net Margin Total Assets 1,831.22$

Avg 18.0%

Financial Strength (MRQ) Total Current Liabilities 123.70$Efficiency Quick Ratio(MRQ) 7.8 Long-Term Debt -$Rec Turnover(TTM) 21.6 Current Ratio(MRQ) 8.0 Total Liabilities 197.53$

Inv Turnover(TTM) 5.5 LTD/Eq(MRQ) 0.0Asset Turnover(TTM) 0.5 Tot D/Eq(MRQ) 0.0

Dolby Laboratories, Inc. develops and delivers products and technologies that areused in the entertainment industry. Its audio technologies are used throughout theglobal entertainment industry. It is developing and marketing video technologies toimprove the quality of video presentation. Its offerings include video products aimedat the cinema market, such as its digital cinema server, its Dolby three-dimensional(3D) Digital Cinema products, and its Dolby PRM-4200 Professional ReferenceMonitor. It offers products and services to content creators, such as studios,broadcasters, and downloadable content service providers to encode content usingDolby s technologies. As of September 24, 2010, the Company sold its productsand provide services in over 85 countries. In addition, it has licensed its technologies

to CE manufacturers and to software vendors in 40 countries, which in turn distributetheir products incorporating its technologies throughout the world.

August 28, 2011

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High Growth

Under Valued

Well Managed

Good Financials

Strong Moat

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8/22/20117/19/20106/15/20095/12/20084/9/20073/6/2006

5 Yr Price vs I ntrinsic Value

Historical Price Intrinsic Value Buy Price


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by Laboratories Inc

B) Figures in Millions except per share values

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

me Statement 9 8 7 6 5 4 3 2 1 0 Revenue -$ -$ 217.5$ 289.0$ 328.0$ 391.5$ 482.0$ 640.2$ 719.5$ 922.7$ 939.5$

% change from prev year 0.0% 0.0% 32.9% 13.5% 19.4% 23.1% 32.8% 12.4% 28.2% 1.8%

Cost of Revenues -$ -$ 66.1$ 83.0$ 68.9$ 63.2$ 59.5$ 43.0$ 30.4$ 87.8$ 53.4$

COGS (%) 0.0% 0.0% 30.4% 28.7% 21.0% 16.1% 12.3% 6.7% 4.2% 9.5% 5.7% Gross Profit -$ -$ 151.3$ 206.1$ 259.1$ 328.4$ 422.6$ 597.3$ 689.1$ 835.0$ 886.1$

Gross Profit (%) 0.0% 0.0% 69.6% 71.3% 79.0% 83.9% 87.7% 93.3% 95.8% 90.5% 94.3%

Operating Expenses

Selling, General & Admin. Expenses -$ -$ 76.6$ 106.5$ 135.2$ 154.2$ 178.8$ 224.1$ 225.5$ 249.5$ 286.3$

SG&A (%) 0.0% 0.0% 35.2% 36.8% 41.2% 39.4% 37.1% 35.0% 31.3% 27.0% 30.5%

Research & Development -$ -$ 18.3$ 23.5$ 30.5$ 35.4$ 44.1$ 62.1$ 66.7$ 105.0$ 120.2$R&D (%) 0.0% 0.0% 8.4% 8.1% 9.3% 9.0% 9.2% 9.7% 9.3% 11.4% 12.8%

EBITDA -$ -$ 56.5$ 76.1$ 93.4$ 138.8$ 199.7$ 311.1$ 396.9$ 480.5$ 479.6$

EBITDA (%) 0.0% 0.0% 26.0% 26.3% 28.5% 35.5% 41.4% 48.6% 55.2% 52.1% 51.0% Other Special Charges -$ 24.2$ -$ 2.0$ 2.0$ 3.6$ 2.1$ 0.5$ 6.0$ -$ -$

Depreciation & Amortization -$ -$ 7.5$ 8.5$ 11.3$ 12.9$ 14.8$ 24.8$ 34.3$ 44.1$ 58.5$

D&A (%) 0.0% 0.0% 3.4% 2.9% 3.5% 3.3% 3.1% 3.9% 4.8% 4.8% 6.2%

Operating Income -$ -$ 49.0$ 67.6$ 82.1$ 126.0$ 184.9$ 286.3$ 362.5$ 436.4$ 421.2$Operating Income (%) 0.0% 0.0% 22.5% 23.4% 25.0% 32.2% 38.3% 44.7% 50.4% 47.3% 44.8%

Other Income and Expense

Interest Expense -$ -$ 2.3$ 2.3$ 1.9$ 1.8$ 3.1$ 2.1$ 0.9$ 0.7$ 0.5$Other Income -$ -$ 1.1$ 1.1$ 2.0$ 0.1$ (0.6)$ (0.7)$ (2.6)$ 1.0$ 0.8$

Earnings Before Taxes -$ -$ 52.4$ 71.1$ 86.0$ 127.8$ 187.4$ 287.7$ 360.9$ 438.1$ 422.4$

Income Taxes/(Credit) -$ -$ 16.1$ 27.3$ 37.3$ 55.8$ 65.1$ 100.8$ 127.1$ 154.2$ 128.0$Tax Rate % 30.7% 38.4% 43.4% 43.7% 34.7% 35.0% 35.2% 35.2% 30.3%

Earnings After Taxes -$ -$ 36.3$ 43.8$ 48.7$ 72.0$ 122.3$ 186.9$ 233.8$ 283.9$ 294.4$

Minority Interest -$ -$ 0.6$ 0.9$ 1.6$ 1.3$ 1.5$ 1.6$ 1.4$ (0.6)$ (0.6)$Net Income From Continuing

Operations -$ -$ 31.0$ 39.8$ 52.3$ 89.5$ 142.8$ 199.5$ 243.0$ 283.4$ 295.2$

N et In co me F ro m D is co nt in ue d Ope ra ti on -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Net Income From Total Operations -$ -$ 31.0$ 39.8$ 52.3$ 89.5$ 142.8$ 199.5$ 243.0$ 283.4$ 295.2$Net Income (%) 0.0% 0.0% 14.2% 13.8% 15.9% 22.9% 29.6% 31.2% 33.8% 30.7% 31.4%

Shares and EPSTotal Basic EPS -$ -$ 0.36$ 0.47$ 0.54$ 0.85$ 1.31$ 1.79$ 2.15$ 2.50$ 2.63$Fully Diluted EPS -$ -$ 0.36$ 0.43$ 0.50$ 0.80$ 1.26$ 1.74$ 2.11$ 2.46$ 2.60$Basic Shares Outstanding 0.0 0.0 86.0 84.8 96.8 105.4 109.0 111.4 113.0 113.4 111.8Diluted Shares Outstanding 0.0 0.0 86.0 92.7 104.6 111.9 113.4 114.6 115.2 115.2

User Defined Shares Outstanding

nce Sheet MRQAssets

Cash & Equivalents -$ -$ 61.9$ 78.7$ 372.4$ 412.5$ 368.5$ 394.8$ 451.7$ 545.9$ 594.6$Short-Term Investments -$ -$ -$ -$ -$ 73.2$ 231.2$ 119.7$ 283.8$ 302.3$ 309.1$

Net Receivables -$ -$ 15.8$ 24.4$ 33.2$ 24.9$ 28.2$ 27.7$ 23.0$ 54.3$ 49.2$

% change from prev year 54.6% 36.1% -25.0% 13.0% -1.8% -16.9% 136.1% -33.2%

Inventories -$ -$ 4.2$ 7.2$ 11.7$ 11.1$ 14.9$ 18.1$ 13.0$ 28.3$ 23.4$

% change from prev year 69.2% 63.6% -5.3% 34.0% 21.8% -28.4% 118.4% -25.4%

Other Current Assets -$ -$ 23.6$ 34.5$ 36.8$ 50.9$ 90.7$ 131.7$ 129.4$ 129.7$ 117.6$

Total Current Assets -$ -$ 105.6$ 144.8$ 454.2$ 572.6$ 733.4$ 691.9$ 900.8$ 1,060.4$ 1,093.9$

Fixed Assets -$ -$ 65.7$ 72.3$ 76.5$ 77.0$ 85.6$ 87.9$ 92.2$ 94.1$ 108.3$

Intangible Assets -$ -$ 14.3$ 28.8$ 41.0$ 38.1$ 74.8$ 333.4$ 343.2$ 331.6$ 323.5$

Other Long-Term Assets -$ -$ 17.1$ 16.0$ 14.6$ 51.5$ 98.0$ 222.9$ 245.1$ 225.7$ 305.5$

Total Long-Term Assets -$ -$ 97.1$ 117.1$ 132.1$ 166.7$ 258.3$ 644.3$ 680.5$ 651.4$ 737.3$

Total Assets -$ -$ 202.7$ 261.9$ 586.3$ 739.3$ 991.7$ 1,336.1$ 1,581.3$ 1,711.8$ 1,831.2$

Liabilities & Stockholders' EquityAccounts payable -$ -$ 9.6$ 6.5$ 6.5$ 4.6$ 9.3$ 10.1$ 12.9$ 3.6$ 56.3$

Short-Term Debt -$ -$ 1.1$ 1.3$ 1.3$ 1.4$ 1.6$ 1.6$ 1.6$ -$ -$

Taxes Payable -$ -$ 33.8$ 50.3$ 58.6$ 74.8$ 109.8$ 146.8$ 100.9$ 144.6$ 3.7$Accrued Liabilities -$ -$ 33.8$ 50.3$ 58.6$ 74.8$ 109.8$ 146.8$ 100.9$ 144.6$ 63.7$

Other Current Liabilities -$ -$ 40.7$ 56.6$ 64.9$ 86.8$ 132.4$ 188.9$ 142.0$ 162.2$ 80.4$

Total Current Liabilities -$ -$ 51.4$ 64.5$ 72.8$ 92.9$ 143.2$ 200.7$ 156.6$ 165.8$ 136.6$

Long-Term Debt -$ -$ 14.5$ 13.6$ 12.1$ 10.9$ 9.7$ 7.8$ 5.8$ -$ -$

Other Liabilities -$ -$ 26.9$ 23.3$ 22.0$ 21.3$ 19.4$ 39.6$ 42.2$ 39.8$ 38.1$

Deferred Income Taxes -$ -$ -$ -$ -$ -$ -$ 16.8$ 13.6$ 11.5$ 0.6$Minority Interest -$ -$ 16.1$ 17.2$ 18.3$ 19.9$ 22.3$ 22.1$ 22.0$ 20.9$ 22.2$

Total Long-Term Liabilities -$ -$ 57.6$ 54.1$ 52.3$ 52.1$ 51.3$ 86.2$ 83.6$ 72.3$ 60.9$

Total Liabilities -$ -$ 108.9$ 118.5$ 125.1$ 145.0$ 194.5$ 286.9$ 240.2$ 238.0$ 197.5$

Retained Earnings -$ -$ 85.2$ 125.1$ 177.4$ 266.9$ 409.7$ 609.5$ 852.5$ 1,135.9$ 1,366.1$

Preferred Equity -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Total Equity -$ -$ 93.8$ 143.3$ 461.1$ 594.3$ 797.2$ 1,049.3$ 1,341.1$ 1,473.7$ 1,633.7$

Total Liabilities & Equity -$ -$ 202.7$ 261.9$ 586.3$ 739.3$ 991.7$ 1,336.1$ 1,581.3$ 1,711.8$ 1,831.2$

h Flows Statement TTMCash Flows From Operating ActivitiesNet Income -$ -$ 31.0$ 39.8$ 52.3$ 89.5$ 142.8$ 199.5$ 243.0$ 282.8$ 294.6$

Depreciation & Amortization -$ -$ 7.5$ 8.5$ 11.3$ 12.9$ 14.8$ 24.8$ 34.3$ 44.1$ 58.5$

Deferred Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 7.3$

Other (5.7)$ 0.1$ 4.2$ 8.6$ 16.9$ 48.8$ 38.5$ 62.0$ (3.7)$ 24.9$ 16.1$

Net Cash From Operating Activities -$ -$ 39.6$ 46.9$ 80.4$ 132.5$ 163.0$ 264.5$ 273.2$ 327.3$ 362.0$

Cash Flows From Investing ActivitiesCapital Expenditures -$ -$ (6.8)$ (12.5)$ (14.7)$ (8.0)$ (15.8)$ (13.6)$ (23.6)$ (38.3)$ (42.9)$

Acquisitions -$ -$ (7.1)$ (18.4)$ (4.6)$ -$ (30.2)$ (253.0)$ (16.6)$ (5.6)$ (9.0)$Sale of Assets -$ -$ (7.3)$ (18.4)$ (16.4)$ (106.4)$ (177.0)$ (257.7)$ (222.5)$ (6.9)$ (79.2)$Net Cash From Investing Activities -$ -$ (14.1)$ (30.9)$ (31.1)$ (114.4)$ (192.8)$ (271.3)$ (236.5)$ (44.4)$ (122.1)$

Cash Flows From Financing ActivitiesIssuance of Capital Stock -$ -$ 0.0$ 1.4$ 246.1$ 7.7$ 10.1$ 14.7$ 17.2$ 39.6$ 25.5$

Repurchase of Capital Stock -$ -$ (0.0)$ (0.1)$ (0.1)$ -$ -$ -$ -$ (241.4)$ (206.2)$

Net Issuance of Stock -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$Issuance of Debt -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Repayment of Debt -$ -$ (1.4)$ (1.2)$ (1.3)$ (1.4)$ (1.5)$ (1.5)$ (1.5)$ (7.7)$ (6.5)$

Net Issuance of Debt -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Dividends Paid -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$Cash from Financing -$ -$ (1.4)$ (0.0)$ 244.7$ 20.2$ 30.5$ 34.9$ 21.5$ (184.8)$ (166.8)$

Cash at Beginning of the Period -$ -$ 37.4$ 61.9$ 78.7$ 372.4$ 363.5$ 368.5$ 394.8$ 451.7$ 520.3$

Cash at End of the Period -$ -$ 61.9$ 78.7$ 372.4$ 412.5$ 368.5$ 394.8$ 451.7$ 545.9$ 594.6$Change in Cash -$ -$ 24.5$ 16.8$ 293.7$ 40.1$ 4.9$ 26.3$ 56.9$ 94.2$ 74.3$

Free Cash FlowCash from Operations -$ -$ 39.6$ 46.9$ 80.4$ 132.5$ 163.0$ 264.5$ 273.2$ 327.3$ 362.0$Cap Ex -$ -$ (6.8)$ (12.5)$ (14.7)$ (8.0)$ (15.8)$ (13.6)$ (23.6)$ (38.3)$ (42.9)$Free Cash Flow -$ -$ 32.9$ 34.3$ 65.7$ 124.5$ 147.2$ 250.9$ 249.7$ 289.0$ 319.1$

Owner Earnings FCF -$ 24.2$ 31.7$ 37.8$ 50.9$ 98.0$ 143.9$ 211.2$ 259.7$ 288.6$ 310.2$User Defined

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by Laboratories Inc

LB)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

ome StatementRevenue 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cost of Revenues 0.0% 0.0% 30.4% 28.7% 21.0% 16.1% 12.3% 6.7% 4.2% 9.5% 5.7%

Gross Profit 0.0% 0.0% 69.6% 71.3% 79.0% 83.9% 87.7% 93.3% 95.8% 90.5% 94.3%

Operating Expenses

Selling, General & Admin. Expenses 0.0% 0.0% 35.2% 36.8% 41.2% 39.4% 37.1% 35.0% 31.3% 27.0% 30.5%

Research & Development 0.0% 0.0% 8.4% 8.1% 9.3% 9.0% 9.2% 9.7% 9.3% 11.4% 12.8%

EBITDA 0.0% 0.0% 26.0% 26.3% 28.5% 35.5% 41.4% 48.6% 55.2% 52.1% 51.0%

Other Special Charges 0.0% #DIV/0! 0.0% 0.7% 0.6% 0.9% 0.4% 0.1% 0.8% 0.0% 0.0%

Depreciation & Amortization 0.0% 0.0% 3.4% 2.9% 3.5% 3.3% 3.1% 3.9% 4.8% 4.8% 6.2%

Operating Income 0.0% 0.0% 22.5% 23.4% 25.0% 32.2% 38.3% 44.7% 50.4% 47.3% 44.8%

Other Income and Expense

Interest Expense 0.0% 0.0% 1.1% 0.8% 0.6% 0.5% 0.6% 0.3% 0.1% 0.1% 0.1%

Other Income 0.0% 0.0% 0.5% 0.4% 0.6% 0.0% -0.1% -0.1% -0.4% 0.1% 0.1%

Earnings Before Taxes 0.0% 0.0% 24.1% 24.6% 26.2% 32.6% 38.9% 44.9% 50.2% 47.5% 45.0%

Income Taxes/(Credit) 0.0% 0.0% 7.4% 9.4% 11.4% 14.3% 13.5% 15.7% 17.7% 16.7% 13.6%

Earnings After Taxes 0.0% 0.0% 16.7% 15.2% 14.8% 18.4% 25.4% 29.2% 32.5% 30.8% 31.3%

Minority Interest 0.0% 0.0% 0.3% 0.3% 0.5% 0.3% 0.3% 0.2% 0.2% -0.1% -0.1%Net Income From Continuing

Operations 0.0% 0.0% 14.2% 13.8% 15.9% 22.9% 29.6% 31.2% 33.8% 30.7% 31.4%

Net Income From Discontinued

Operations 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income From Total Operations 0.0% 0.0% 14.2% 13.8% 15.9% 22.9% 29.6% 31.2% 33.8% 30.7% 31.4%

lance Sheet MRQAssets

Cash & Equivalents 0.0% 0.0% 30.5% 30.1% 63.5% 55.8% 37.2% 29.5% 28.6% 31.9% 32.5%

Short-Term Investments 0.0% 0.0% 0.0% 0.0% 0.0% 9.9% 23.3% 9.0% 17.9% 17.7% 16.9%

Net Receivables 0.0% 0.0% 7.8% 9.3% 5.7% 3.4% 2.8% 2.1% 1.5% 3.2% 2.7%

Inventories 0.0% 0.0% 2.1% 2.7% 2.0% 1.5% 1.5% 1.4% 0.8% 1.7% 1.3%

Other Current Assets 0.0% 0.0% 11.7% 13.2% 6.3% 6.9% 9.1% 9.9% 8.2% 7.6% 6.4%

Total Current Assets 0.0% 0.0% 52.1% 55.3% 77.5% 77.5% 74.0% 51.8% 57.0% 61.9% 59.7%

Fixed Assets 0.0% 0.0% 32.4% 27.6% 13.0% 10.4% 8.6% 6.6% 5.8% 5.5% 5.9%

Intangible Assets 0.0% 0.0% 7.1% 11.0% 7.0% 5.2% 7.5% 25.0% 21.7% 19.4% 17.7%

Other Long-Term Assets 0.0% 0.0% 8.4% 6.1% 2.5% 7.0% 9.9% 16.7% 15.5% 13.2% 16.7%

Total Long-Term Assets 0.0% 0.0% 47.9% 44.7% 22.5% 22.5% 26.0% 48.2% 43.0% 38.1% 40.3%

Total Assets 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Liabilities & Stockholders' Equity

Accounts payable 0.0% 0.0% 4.7% 2.5% 1.1% 0.6% 0.9% 0.8% 0.8% 0.2% 3.1%

Short-Term Debt 0.0% 0.0% 0.5% 0.5% 0.2% 0.2% 0.2% 0.1% 0.1% 0.0% 0.0%

Taxes Payable 0.0% 0.0% 16.7% 19.2% 10.0% 10.1% 11.1% 11.0% 6.4% 8.4% 0.2%

Accrued Liabilities 0.0% 0.0% 16.7% 19.2% 10.0% 10.1% 11.1% 11.0% 6.4% 8.4% 3.5%

Other Current Liabilities 0.0% 0.0% 20.1% 21.6% 11.1% 11.7% 13.3% 14.1% 9.0% 9.5% 4.4%

Total Current Liabilities 0.0% 0.0% 25.3% 24.6% 12.4% 12.6% 14.4% 15.0% 9.9% 9.7% 7.5%

Long-Term Debt 0.0% 0.0% 7.2% 5.2% 2.1% 1.5% 1.0% 0.6% 0.4% 0.0% 0.0%

Other Liabilities 0.0% 0.0% 13.3% 8.9% 3.7% 2.9% 2.0% 3.0% 2.7% 2.3% 2.1%

Deferred Income Taxes 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.3% 0.9% 0.7% 0.0%

Minority Interest 0.0% 0.0% 8.0% 6.6% 3.1% 2.7% 2.2% 1.7% 1.4% 1.2% 1.2%

Total Long-Term Liabilities 0.0% 0.0% 28.4% 20.6% 8.9% 7.1% 5.2% 6.5% 5.3% 4.2% 3.3%

Total Liabilities 0.0% 0.0% 53.7% 45.3% 21.3% 19.6% 19.6% 21.5% 15.2% 13.9% 10.8%

Retained Earnings 0.0% 0.0% 42.0% 47.8% 30.3% 36.1% 41.3% 45.6% 53.9% 66.4% 74.6%

Preferred Equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Equity 0.0% 0.0% 46.3% 54.7% 78.7% 80.4% 80.4% 78.5% 84.8% 86.1% 89.2%

Total Liabilities & Equity 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

sh Flows Statement TTMCash Flows From Operating Activities

Net Income 0.0% 0.0% 78.1% 85.0% 65.0% 67.6% 87.6% 75.4% 88.9% 86.4% 81.4%

Depreciation & Amortization 0.0% 0.0% 18.9% 18.2% 14.1% 9.7% 9.1% 9.4% 12.6% 13.5% 16.2%

Deferred Taxes 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0%

Other #DIV/0! #DIV/0! 10.6% 18.4% 21.0% 36.8% 23.6% 23.4% -1.4% 7.6% 4.4%

Net Cash From Operating Activities 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cash Flows From Investing Activities

Capital Expenditures 0.0% 0.0% 48.0% 40.5% 47.4% 7.0% 8.2% 5.0% 10.0% 86.4% 35.2%

Acquisitions 0.0% 0.0% 50.2% 59.7% 14.8% 0.0% 15.7% 93.3% 7.0% 12.6% 7.3%

Sale of Assets 0.0% 0.0% 52.0% 59.5% 52.8% 93.0% 91.8% 95.0% 94.1% 15.6% 64.9%

Net Cash From Investing Activities 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Cash Flows From Financing Activities

Issuance of Capital Stock 0.0% 0.0% -2.4% -6815.0% 100.6% 38.2% 33.2% 42.1% 80.0% -21.4% -15.3%

Repurchase of Capital Stock 0.0% 0.0% 2.7% 720.0% 0.0% 0.0% 0.0% 0.0% 0.0% 130.6% 123.7%

Net Issuance of Stock 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Issuance of Debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Repayment of Debt 0.0% 0.0% 99.6% 6195.0% -0.5% -6.7% -4.8% -4.4% -7.1% 4.2% 3.9%

Net Issuance of Debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Dividends Paid 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Cash from Financing 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

/2011



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lby Laboratories Inc

LB) Color Coding

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

nancial Statistics & Ratios

Profitability Ratios

P/E 0.00 0.00 68.25 57.14 33.98 40.13 35.60 18.12 19.78 28.26

P/S 0.00 0.00 9.72 7.88 5.42 9.18 10.55 5.65 6.68 8.68

P/BV 0.00 0.00 22.54 15.88 3.85 6.05 6.38 3.44 3.58 5.43

P/Tang BV 0.00 0.00 26.61 19.88 4.23 6.46 7.04 5.05 4.82 7.01

P/CF 0.00 0.00 53.34 52.71 35.66 45.54 39.64 17.29 18.48 25.42

P/FCF 0.00 0.00 55.86 44.72 18.14 24.96 24.08 13.91 16.66 25.82

ROE 0.0% 0.0% 33.0% 27.8% 11.3% 15.1% 17.9% 19.0% 18.1% 19.2%

ROA 0.0% 0.0% 15.3% 15.2% 8.9% 12.1% 14.4% 14.9% 15.4% 16.6%

SolvencyQuick Ratio 0.00 0.00 1.97 2.13 6.08 6.05 5.02 3.36 5.67 6.23

Current Ratio 0.00 0.00 2.06 2.25 6.24 6.17 5.12 3.45 5.75 6.40

Total Debt/Equity Ratio 0.00 0.00 1.16 0.83 0.27 0.24 0.24 0.27 0.18 0.16

Long Term Debt/Equity Ratio 0.00 0.00 0.16 0.09 0.03 0.02 0.01 0.01 0.00 0.00

Short Term Debt/Equity Ratio 0.00 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00

Efficiency Ratios

Asset Turnover 0.00 0.00 1.07 1.10 0.56 0.53 0.49 0.48 0.46 0.54

Cash % of Revenue 0.0% 0.0% 28.5% 27.2% 113.5% 105.3% 76.4% 61.7% 62.8% 59.2%

Receivables % of Revenue 0.0% 0.0% 7.3% 8.5% 10.1% 6.4% 5.8% 4.3% 3.2% 5.9%

SG&A % of Revenue 0.0% 0.0% 35.2% 36.8% 41.2% 39.4% 37.1% 35.0% 31.3% 27.0%

R&D % of Revenue 0.0% 0.0% 8.4% 8.1% 9.3% 9.0% 9.2% 9.7% 9.3% 11.4%

Liquidity Ratios

Receivables Turnover 0.00 0.00 3.92 1.98 1.81 3.08 5.38 7.15 9.60 7.34

Days Sales Outstanding 0.0 0.0 26.5 30.9 37.0 23.2 21.3 15.8 11.7 21.5

Inventory Turnover 0.00 0.00 31.24 14.56 7.29 5.54 4.58 2.60 1.96 4.25

Average Age of Inventory (Days) 0.00 0.00 11.68 25.06 50.04 65.93 79.76 140.25 186.46 85.91Intangibles % of Book Value 0.0% 0.0% 15.3% 20.1% 8.9% 6.4% 9.4% 31.8% 25.6% 22.5%

Inventory % of Revenue 0.0% 0.0% 1.9% 2.5% 3.6% 2.8% 3.1% 2.8% 1.8% 3.1%

Capital Structure Ratios

LT-Debt as % of Invested Capital 0.0% 0.0% 16.3% 11.4% 8.6% 6.8% 3.9% 1.3% 0.8% 0.0%

ST-Debt as % of Invested Capital 0.0% 0.0% 1.2% 1.1% 1.0% 0.9% 0.6% 0.3% 0.2% 0.0%

LT-Debt as % of Total Debt 0.0% 0.0% 13.4% 11.5% 9.7% 7.5% 5.0% 2.7% 2.4% 0.0%

ST-Debt as % of Total Debt 0.0% 0.0% 1.0% 1.1% 1.1% 1.0% 0.8% 0.6% 0.7% 0.0%

Total Debt % of Total Assets 0.0% 0.0% 53.7% 45.3% 21.3% 19.6% 19.6% 21.5% 15.2% 13.9%

Working Capital % of Price 0.0% 0.0% 2.6% 3.5% 21.5% 13.4% 11.6% 13.6% 15.5% 11.2%

/2011



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Dolby Laboratories Inc Shares Out. M.O.S Growth Discount % Terminal % Select FCF Adjust 2010 FCF(DLB) #VALUE! 111.81 11.0% 9.0%

8/28/2011Select input with

each list or enter 11.0%

Current Pr ice In tr insic $ Buy Under Actual M.O.S 52 Wk High 52 Wk Low

$33.50 $53.60 $40.20 37% $69.69 $28.89

Fiscal Year Trend 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

Cash Flow DataCash from Operations $0.0 $0.0 $39.6 $46.9 $80.4 $132.5 $163.0 $264.5 $273.2 $327.3 $362.0Capex $0.0 $0.0 $6.8 $12.5 $14.7 $8.0 $15.8 $13.6 $23.6 $38.3 $42.9Cash Flow $39.6 $43.2 $49.8 $78.9 $128.3 $209.0 $260.2 $315.1 $345.1

Owner Earnings FCF $0.0 $24.2 $31.7 $37.8 $50.9 $98.0 $143.9 $211.2 $259.7 $288.6 $310.2YOY% Change - 31.1% 19.3% 34.5% 92.5% 46.9% 46.7% 23.0% 11.1% 7.5%

MarginsGross Margin 0.0% 0.0% 69.6% 71.3% 79.0% 83.9% 87.7% 93.3% 95.8% 90.5% 94.3%Operating Margin 0.0% 0.0% 22.5% 23.4% 25.0% 32.2% 38.3% 44.7% 50.4% 47.3% 44.8%Net Margin 0.0% 0.0% 14.2% 13.8% 15.9% 22.9% 29.6% 31.2% 33.8% 30.7% 31.4%

EPS & TaxDiluted EPS $0.00 $0.00 $0.36 $0.43 $0.50 $0.80 $1.26 $1.74 $2.11 $2.46 $2.60Tax Rate 30.7% 38.4% 43.4% 43.7% 34.7% 35.0% 35.2% 35.2% 30.3%

Efficiency & ProfitabilityCROIC #DIV/0! #DIV/0! 21.0% 19.2% 9.9% 15.2% 17.0% 18.6% 18.2% 18.7% 18.3%FCF/Sales 14.6% 13.1% 15.5% 25.0% 29.9% 33.0% 36.1% 31.3% 33.0%Inventory Turnover 31.2 14.6 7.3 5.5 4.6 2.6 2.0 4.2 2.3Return On Assets (ROA) 0.0% 0.0% 15.3% 15.2% 8.9% 12.1% 14.4% 14.9% 15.4% 16.6% 16.1%Retun On Equity (ROE) 0.0% 0.0% 33.0% 27.8% 11.3% 15.1% 17.9% 19.0% 18.1% 19.2% 18.1%

Debt RelatedDebt to Equity 116.2% 82.7% 27.1% 24.4% 24.4% 27.3% 17.9% 16.2% 12.1%Capitalization Ratio 13.4% 8.7% 2.6% 1.8% 1.2% 0.7% 0.4% 0.0% 0.0%FCF to Total Debt 29.1% 31.9% 40.7% 67.6% 74.0% 73.6% 108.1% 121.2% 157.0%FCF to Short Term Debt 3020.7% 2933.1% 3782.1% 6798.9% 9208.8% 13255.6% 15994.3%FCF to Long Term Debt 218.0% 278.6% 419.9% 899.4% 1485.2% 2713.5% 4459.2%

2005-2009 2006-2010 2005-2008 2006-2009 2007-2010 2005-2007 2006-2008 2007-2009 2008-2010 Median

Tang Shareholder Equity 24.1% 19.7% 19.4% 21.5% 16.5% 31.1% 13.5% 17.5% 26.3% 19.7%Owner Earnings FCF 50.3% 31.0% 60.7% 38.4% 26.1% 68.1% 46.8% 34.3% 16.9% 38.4%CROIC 17.0% 18.2% 16.1% 17.6% 18.4% 15.2% 17.0% 18.2% 18.6% 17.6%FCF/Sales 29.9% 31.3% 27.4% 31.4% 32.1% 25.0% 29.9% 33.0% 33.0% 31.3%ROA 14.4% 14.9% 13.3% 14.7% 15.1% 12.1% 14.4% 14.9% 15.4% 14.7%ROE 17.9% 18.1% 16.5% 18.0% 18.6% 15.1% 17.9% 18.1% 19.0% 18.0%Gross Margin 87.7% 90.5% 85.8% 90.5% 91.9% 83.9% 87.7% 93.3% 93.3% 90.5%Operating Margin 38.3% 44.7% 35.3% 41.5% 46.0% 32.2% 38.3% 44.7% 47.3% 41.5%Net Margin 29.6% 30.7% 26.3% 30.4% 30.9% 22.9% 29.6% 31.2% 31.2% 30.4%Revenue Growth 21.7% 23.9% 25.0% 22.5% 24.2% 21.2% 27.9% 22.2% 20.1% 22.5%Earnings Growth 43.3% 32.4% 51.5% 38.2% 25.0% 58.7% 47.5% 29.4% 18.9% 38.2%Cash from Ops Growth 35.8% 25.4% 48.7% 27.3% 26.2% 42.4% 41.3% 29.5% 11.2% 29.5%

10 Year Multi-Year Performance2001-2008 2002-2009 2003-2010 2001-2006 2002-2007 2003-2008 2004-2009 2005-2010 2001-2010 Median

Tang Shareholder Equity 0.0% 0.0% 46.3% 0.0% 0.0% 55.2% 54.2% 22.1% 0.0% 0.0%Owner Earnings FCF 0.0% 40.4% 37.1% 0.0% 42.8% 46.1% 47.0% 41.5% 0.0% 40.4%CROIC 0.0% 0.0% 18.4% 0.0% 0.0% 17.8% 17.6% 17.6% 0.0% 0.0%FCF/Sales 20.3% 25.0% 27.4% 15.1% 15.5% 20.3% 27.4% 30.6% 27.4% 25.0%ROA 13.3% 14.7% 15.1% 10.5% 13.3% 14.7% 14.7% 14.7% 14.7% 14.7%ROE 16.5% 18.0% 18.6% 13.2% 16.5% 18.5% 18.0% 18.0% 18.0% 18.0%Gross Margin 75.1% 81.4% 85.8% 70.4% 75.1% 81.4% 85.8% 89.1% 81.4% 81.4%Operating Margin 24.2% 28.6% 35.3% 23.0% 24.2% 28.6% 35.3% 41.5% 28.6% 28.6%Net Margin 15.1% 19.4% 26.3% 14.0% 15.1% 19.4% 26.3% 30.2% 19.4% 19.4%

Revenue Growth 0.0% 0.0% 22.9% 0.0% 0.0% 24.1% 20.0% 23.0% 0.0% 0.0%Earnings Growth 0.0% 0.0% 31.6% 0.0% 0.0% 37.0% 37.5% 37.5% 0.0% 0.0%Cash from Ops Growth 0.0% 0.0% 35.2% 0.0% 0.0% 46.2% 42.3% 32.4% 0.0% 0.0%

Projection of future Free Cash Flow2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Yearly Growth Input Field11% $320.32 $355.55 $394.66 $420.97 $462.64 $508.45 $558.78 $571.22 $622.11 $677.54Terminal Growth 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 3% 697.87$ 718.80$ 740.37$ 762.58$ 785.46$ 809.02$ 833.29$ 858.29$ 884.04$ 910.56$

Calculation Sensitivity Matrix: Growth vs Discount RateTotal Cash

MAX(0,Current Liabilities-Current A 7% 8% 9% 10% 11%Excess Cash 7% 51.28$ 47.65$ 44.44$ 41.61$ 39.10$

Adding some Intangibles 9% 56.61$ 52.43$ 48.76$ 45.51$ 42.64$

Present Value 11% 62.59$ 57.81$ 53.60$ 49.88$ 46.60$Shares Outstanding 13% 69.32$ 63.84$ 59.02$ 54.77$ 51.02$Per Share Value 15% 76.87$ 70.60$ 65.10$ 60.25$ 55.97$

Margin of Safety

Purchase Price Sensitivity Matrix: Margin of Safety %Current Price

Actual M.O.S 7% 8% 9% 10% 11%7% 34.7% 29.7% 24.6% 19.5% 14.3%

Variable Fields 9% 40.8% 36.1% 31.3% 26.4% 21.4%

Intangibles% add to DCF 11% 46.5% 42.0% 37.5% 32.8% 28.1%Decay Rate (Yr4E-Yr7E) 13% 51.7% 47.5% 43.2% 38.8% 34.3%Extra Decay (Yr8E-Yr10E) 15% 56.4% 52.5% 48.5% 44.4% 40.1%

111.8153.60$

5,992.64$

10%

37%

3%25%

25%

40.20$

33.50$

Owner Earnings

903.67$

-$

5 Year Multi-Year Performance

-$

0%

Discount Rates

Growth Rates

903.67$

10%

Discount Rates

Growth Rates

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8/16


9/16

Shares Out. M.O.S Growth Projection EPS Corp Bond

(DLB) #VALUE! 25.2% $2.46 4.68

8/28/2011

Current Price Intrinsic $ Buy Under Actual M.O.S 52 Wk High 52 Wk Low

$33.50 $103.59 $35.22 68% $69.69 $28.89

2005-2009 2006-2010 2005-2008 2006-2009 2007-2010 2005-2007 2006-2008 2007-2009 2008-2010 Median5 Yr EPS Growth 43.3% 32.4% 51.5% 38.2% 25.0% 58.7% 47.5% 29.4% 18.9% 38.2%

2001-2008 2002-2009 2003-2010 2001-2006 2002-2007 2003-2008 2004-2009 2005-201010 Yr EPS Growth 0.0% 0.0% 31.6% 0.0% 0.0% 37.0% 37.5% 37.5%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

Diltued EPS -$ -$ 0.36$ 0.43$ 0.50$ 0.80$ 1.26$ 1.74$ 2.11$ 2.46$ 2.6$2011E 2012E

Forecast Method 2.24$ 2.80$Linear Regression Method 2.46$ 3.08$

Normal Earnings 2.46$

Growth Rate 25.18%

Corp Bond Rate 4.68

Per Share Value 103.59$

MOS 66%

Purchase Price 35.22$

Current Price $33.50Actual Discount 68%

Median0.0%

Graham Value Calculation

66%111.81Linear

Regression

Dolby Laboratories Inc

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$- $-$0.36 $0.43 $0.50

$0.80$1.26

$1.74$2.11

$2.46 $2.46

$3.08

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E

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10/16

Dolby Laboratories Inc Shares Out. Source Normalized Income Discount Rate R&D Years SG&A %

(DLB)#VALUE! 111.81 $264.90 25%

8/28/2011Figures in Millions except per share values

Current Price EPV Net Reproduction Value EPV MOS NCAV 52 Wk High 52 Wk Low

$33.50 $32.51 $11.05 -3.0% $6.97 $69.69 $28.89

Asset Valuation Section EPV Valuation Section

Data: Asset ValuationShares Outstanding 111.8 2010 Owner Earnings FCF 288.6$

Balance Sheet Assets 1,831.2$ Normalized Income 264.9$Adjusted Assets 1,831.2$ Avg Adj. Income 5 yrs 232.0$Total Liabilities 197.5$ TTM Adjusted Income 367.7$

Total Equity 1,633.7$

Average SGA % 34.0% Data: EPVMarketing/Brand Value 313.4$ Cost of Capital 9.0%

R&D Value 138.3$ Normalized Adjusted Income 264.9$

Cash Needed for Business 9.4$ Average Maintenance Capex 18.2$Interest Bearing Debt -$ Interest Bearing Debt -$Non Interest Bearing Debt 162.4$ 1% of sales 9.4$Excess Cash 885.2$ Cash & Equiv 903.7$

Cash - Debt 894.3$

Calculation: Asset Valuation Shares 111.81Total Per Share

Tangible BV 1,310$ 11.72$ Calculation: EPVAdjusted BV 1,634$ 14.61$ Cost of Capital Rates EPV Per Share + Cash - Debt Per ShareNCAV 779$ 6.97$ 5% 4,933.1$ 44.12$ 5,827.4$ 52.12$Reprod. Cost of Assets 2,283$ 20.42$ 7% 3,523.6$ 31.51$ 4,418.0$ 39.51$

Reprod. Cost of Assets BV 2,085$ 18.65$ 9% 2,740.6$ 24.51$ 3,634.9$ 32.51$Total Net Reprod. Cost 1,235$ 11.05$ 11% 2,242.3$ 20.05$ 3,136.6$ 28.05$

13% 1,897.3$ 16.97$ 2,791.7$ 24.97$

Quarterly numbers based on: Error Statement Source Date: 4-Aug-11Adjustments:Assets Book Value Fixed BV Multipl ier

ReproductionAsset Value

Cash & Equivalents 594.6$ 594.6$

Adjustments:

Liabilities & Equity Book Value Fixed BV MultiplierReproductionLiability Value

Marketable Securities 309.1$ 309.1$ Accounts Payable 56.3$ 56.3$Accounts Receivable - Gross 39.4$ 39.4$ Accrued Expenses -$ -$Other Receivable 9.9$ 9.9$ Accrued Liabilities 63.7$ 63.7$

Receivables 49.2$ 49.2$ Notes Payable/Short Term Debt -$ -$

Inventories: Raw Materials 10.0$

Current Port. of LT Debt/CapitalLeases -$ -$

Inventories: Work in Progress 3.6$ Other Current Liabilities 3.7$ 3.7$

Inventories: Purchased Components -$ Total Current Liabilities 123.7$ 123.7$Inventories: Finished Goods 9.8$ Long-Term Debt -$ -$Inventories: Other -$ Capital Lease Obligations -$ -$

Inventories -- Total 23.4$ 23.4$ Deferred Income Taxes 0.6$ 0.6$Prepaid Expenses 18.0$ 18.0$ Minority Interest -$ -$Current Defered Income Taxes 91.4$ 91.4$ Total Other Liabilities 38.1$ 38.1$

Other Current Assets 8.2$ 8.2$ Total Liabilities 197.5$ 197.5$Total Current Assets 1,093.9$ 1,093.9$ Common Stock Equity 1,633.7$ 1,633.7$Goodwill, Net 268.0$ 268.0$ Retained Earnings 1,366.1$ 1,366.1$Intangibles, Net 55.5$ 55.5$ Total Capitalization 1,633.7$ 1,633.7$

Intangibles 323.5$ 323.5$ Total Equity 1,633.7$ 1,633.7$Property/Plant/Equipment - Net 108.3$ 108.3$ Total Liabilities & Equity 1,831.2$ 1,831.2$

Long Term Investments 280.4$ 280.4$Note Receivable - Long Term -$ -$Other Long Term Assets, Total 25.1$ 25.1$Total Assets 1,831.2$ 1,831.2$

9% 3ADVFN

Values for Normalized Income

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11/16

(DLB)8/28/2011 Current Price NNWC NNWC % NCAV NCAV % Data

$33.50 $6.75 -396.3% $8.02 -317.9% Statements

Numbers as of 2011/06 (go to SEC for accurate numbers)

Figures in Millions except per share values BV

BV

Multiplier Net Net ValueCash & Equivalents 594.60$ 100% 903.67$

Marketable Securities 309.07$Accounts Receivable 49.22$ 75%Other Receivable -$

Receivables 49.22$ 36.92$

Inventories: Raw Materials -$ 50%Inventories: Work in Progress -$Inventories: Purchased Components -$Inventories: Finished Goods -$Inventories: Other -$

Inventories -- Total 23.42$ 11.71$Current Assets - Total 1,093.92$ 1,093.92$Total Liabilities 197.53$ 197.53$Shares Outstanding 111.81 111.81

Total ($m) Per ShareTotal Current Assets 1,093.92$ 9.78$

Market Cap & Share Price 3,700.00$ 33.50$Net Net Working Capital 754.77$ 6.75$

Discount to NNWC -396%Net Current Asset Value 896.39$ 8.02$

Discount to NCAV -318%


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12/16

Dolby Laboratories Inc(DLB)8/28/2011

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

Piotroski F Scores N/A N/A 5 7 6 6 6 6 7 7 6

Piotroski 1: Net Income 0 0 1 1 1 1 1 1 1 1 1

Piotroski 2: Operating Cash Flo 0 0 1 1 1 1 1 1 1 1 1

Piotroski 3: Return on Assets 1 0 0 0 0 1 1 1 1 1 0

Piotroski 4: Quality of Earnings 0 0 1 1 1 1 1 1 1 1 1

Piotroski 5: LT Debt vs Assets 1 0 1 1 1 1 1 1 1 1 0

Piotroski 6: Current Ratio 0 0 1 1 1 0 0 0 1 1 1

Piotroski 7: Shares Outstanding 1 1 0 0 0 0 0 0 0 0 1

Piotroski 8: Gross Margin 1 0 0 1 1 1 1 1 1 0 1Piotroski 9: Asset Turnover 1 0 0 1 0 0 0 0 0 1 0

MRQError 2002/09 2003/09 2004/09 2005/09 2006/09 2007/09 2008/09 2009/09 2010/09 2011/06

Working Capital -$ -$ 54$ 80$ 381$ 480$ 590$ 491$ 744$ 895$ 957$

Total Assets -$ -$ 203$ 262$ 586$ 739$ 992$ 1,336$ 1,581$ 1,712$ 1,831$

Total Liabilities -$ -$ 109$ 119$ 125$ 145$ 195$ 287$ 240$ 238$ 198$

Retained Earnings -$ -$ 85$ 125$ 177$ 267$ 410$ 609$ 852$ 1,136$ 1,366$

EBITDA -$ -$ 55$ 73$ 88$ 130$ 190$ 290$ 362$ 439$ 88$

Market Value of Equity #VALUE! 2,088$ 2,088$ 2,125$ 1,765$ 3,444$ 4,948$ 3,547$ 4,758$ 3,750$ 3,750$

Net Sales -$ -$ 217$ 289$ 328$ 392$ 482$ 640$ 720$ 923$ 219$

Normal Altman Z Score 14.37 13.82 10.72 16.64 17.67 9.69 14.41 12.39 13.34 Revised Altman Z Score 25.07 24.28 21.07 31.55 33.25 18.34 27.18 23.86 26.12

X1 0.52 0.52

X2 0.66 0.75

X3 0.26 0.05

X4 15.75 18.99X5 0.54 0.12

Altman Z Score

MRQ EditAnnual

12.39 13.34

Revised Altman Z Score

Annual

Piotroski Score

Annual MRQ

23.86 26.12

X2 = Retained Earnings/Total AssetsX3 = EBITDA/Total Assets

X4 = Market Value of Equity/Total Liabilities

The Z-score formula may be used to predict the probability that a firm will go into bankruptcy within two years.

Z-scores are used to predict corporate defaults and an easy-to-calculate control measure for the f inancial distress status of companies in academic studies. The Z-score uses multiple corporate

income and balance sheet values to measure the financial health of a company.

The main problem with the Altman Z formula is that the formula is not suited for many industries. Industries that operate with high leverage, such as radio and utilities will show a higher r isk of

bankruptcy.

Also, industries with negative working capital, such as many retail and restaurant companies will also exhibit the same high level of bankruptcy.

(Wikipedia http://en.wikipedia.org/wiki/Z-Score_Financial_Analysis_Tool)

Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 1.0*X5

There is also a revised Altman Z score which is adjusted for non manufacturing corporations. The revised formula is:

Z = 6.56*X1 + 3.26*X2 + 6.72*X3 + 1.05*X4

X1 = Working Capital/Total Assets

A discrete score between 0-9 which reflects nine criteria used to determine the strength of a firm's financial position. The Piotroski score is used to determine the best value stocks, nine being thebest. The score was named after Chicago Accounting Professor, Joseph Piotroski who devised the scale according to specific criteria found in the financial statements. For every criteria (below) that

is met the company is given one point, if it is not met, then no points are awarded. The points are then added up to determine the best value stocks.

Profitability

* Positive return on assets in the current year (1 point)

* Positive operating cash flow in the current year (1 point)

* Higher return on assets (ROA) in the current period compared to the ROA in the previous year (1 point)

* Cash flow from operations are greater than ROA (1 point)

Leverage, Liquidity and Source of Funds

* Lower ratio of long term debt to in the current period compared value in the previous year (1 point)

* Higher current ratio this year compared to the previous year (1 point)* No new shares were issued in the last year (1 point)

Operating Efficiency

* A higher gross margin compared to the previous year (1 point)

* A higher asset turnover ratio compared to the previous year (1 point)

MRQ

X5 = Net Sales/Total Assets

Altman Z Score

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

M Score - 5 Variable NA NA NA -2.51 -3.03 -2.98 -2.60 -2.16 -3.15 -2.06 -3.01

M Score - 8 Variable NA NA NA -2.12 -2.51 -2.83 -2.32 -2.16 -2.65 -1.57 -2.69

DSRI 1.16 1.20 0.63 0.92 0.74 0.74 1.84 0.89 0.00

GMI 0.98 0.90 0.94 0.96 0.94 0.97 1.06 0.96 0.00

AQI 1.10 0.55 1.28 1.44 2.39 0.89 0.88 1.06 0.00

SGI 1.33 1.13 1.19 1.23 1.33 1.12 1.28 1.02 0.00

DEPI 0.97 0.82 0.90 0.97 0.67 0.81 0.85 0.91 0.00

SGAI 1.05 1.12 0.96 0.94 0.94 0.90 0.86 1.13 0.00

TATA -0.04 -0.03 -0.05 -0.06 -0.02 -0.05 -0.02 -0.03 -0.04 0.00LVGI 0.92 0.49 0.97 1.10 1.01 0.66 0.94 0.77 0.00

Revised Altman Z Score

The Beneish Model - M Score VariablesDSRI = Days' Sales in Receivables Index. Measured as the ratio of days' sales in receivables in year t to year t-1. A large increase in DSR could be indicative of revenue inflation.

GMI = Gross Margin Index. Measured as the ratio of gross margin in year t-1 to gross margin in year t. Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is

more likely to manipulate earnings.

AQI = Asset Quality Index. Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.AQI is the ratio of asset quality in year t to year t-1.

SGI = Sales Growth Index. Ratio of sales in year t to sales in year t-1. Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressureto manipulate in order to keep up appearances.

DEPI = Depreciation Index. Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t. DEPI gr eater than 1 indicates that assets are being depreciated at a slowerrate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

SGAI = Sales, General and Administrative expenses Index. The ratio of SGA expenses in year t relative to year t -1.

LVGI = Leverage Index. The ratio of total debt to total assets in year t relative to yeat t-1. An LVGI >1 indicates an increase in leverage

TATA - Total Accruals to Total Assets. Total accruals calculated as the change in working capital accounts other than cash less depreciation.

The Beneish M Score FormulaThe eight variables are then weighted together according to the following:

M = -4.84 + 0.92*DSRI + 0.528*GMI + 0.404*AQI + 0.892*SGI + 0.115*DEPI - 0.172*SGAI + 4.679*TATA - 0.327*LVGI

A score greater than -2.22 indicates a strong likelihood of a firm being a manipulator. In his out of sample tests, Beneish found that he could correctly identify 76% of manipulators, whilst only

incorrectly identifying 17.5% of non-manipulators.

The 5 Variable Version of the Beneish ModelThe five variable version excludes SGAI, DEPI and LEVI which w ere not significant in the original Beneish model.

M = -6.065 + 0.823*DSRI + 0.906*GMI + 0.593*AQI + 0.717*SGI + 0.107*DEPI

A score greater than -2.22 indicates a strong likelihood of a firm being a manipulator.

Original Altman Z Score

When Z is 2.6 or more, the firm is most likely safe based on the f inancial data. However, be careful to double check as fraud, economic downturns and other factors could cause unexpectedreversals.

When Z is 1.1 to 2.6, the company is probably safe from bankruptcy, but this is in the grey area and caution should be taken.

When Z is below 1.1, the company is highly likely to be bankrupt. If a company is generating lower than 1.8, serious studies must be performed to ensure the company can survive.

When Z is 3.0 or more, the firm is most likely safe based on the financial data. However, be careful to double check as fraud, economic downturns and other factors couldcause unexpected reversals.

When Z is 2.7 to 3.0, the company is probably safe from bankruptcy, but this is in the grey area and caution should be taken.

When Z is 1.8 to 2.7, the company is likely to be bankrupt within 2 years. This is the lower portion of the grey area and a dramatic turnaround of the company is needed.

When Z is below 1.8, the company is highly likely to be bankrupt. If a company is generating lower than 1.8, serious studies must be performed to ensure the company can

survive.


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Dolby Laboratories Inc(DLB)8/28/2011

DLB SRSL DTSI IMAX

Sorted Data DLB DTSI IMAX SRSLStock Price $ 33.50 $ 29.93 $ 16.16 $ 7.68 $ 0.00 $ 0.00Mkt Cap ($M) $ 3,700.00 $ 514.38 $ 1,050.00 $ 114.56 $ 0.00 $ 0.00EV $ 2,960.00 $ 425.96 $ 1,050.00 $ 78.77 $ 0.00 $ 0.0052 Wk High $ 69.69 $ 50.57 $ 38.00 $ 11.07 $ 0.00 $ 0.0052 Wk Low $ 28.89 $ 20.93 $ 13.70 $ 7.27 $ 0.00 $ 0.00% off 52Wk Low 16.0% 43.0% 18.0% 5.6% 0.0% 0.0%

MultiplesP/E(TTM) 12.9 29.9 17.5 202.2 0.0 0.0P/S(TTM) 3.9 5.4 4.7 3.6 0.0 0.0P/Tang BV(MRQ) 2.8 3.6 8.2 2.2 0.0 0.0P/CF 10.9 22.6 12.5 66.5 0.0 0.0P/FCF(TTM) 11.6 17.0 418.6 0.0 0.0 0.0EV/EBITDA(TTM) 6.2 12.5 42.8 55.8 0.0 0.0

DividendsDiv Yld 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Div Yld - 5yr avg 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Div 5yr Grth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Payout Ratio(TTM) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Growth RatesSales(MRQ) v 1yr ago -4.9% 17.9% 2.9% 6.2% 0.0% 0.0%Sales(TTM) v 1yr ago 3.9% 5.4% 4.7% 3.6% 0.0% 0.0%Sales 5yr Grth 23.0% 12.6% 13.3% 16.4% 0.0% 0.0%EPS(MRQ) v 1yr ago -0.1% 65.4% -86.6% -189.7% 0.0% 0.0%EPS(TTM) v 1yr ago 14.7% 45.1% 35.4% -85.7% 0.0% 0.0%EPS 5yr Grth 37.4% 5.3% 61.0% 12.0% 0.0% 0.0%

Balance SheetQuick Ratio(MRQ) 7.8 0.0 0.0 0.0 0.0 0.0Current Ratio(MRQ) 8.0 10.6 0.0 11.8 0.0 0.0LTD/Eq(MRQ) 0.0 0.0 0.0 0.0 0.0 0.0Tot D/Eq(MRQ) 0.0 0.0 20.3 0.0 0.0 0.0

MarginsGross %(TTM) 88.1% 98.9% 48.9% 98.3% 0.0% 0.0%Gross % 5yr 86.9% 97.6% 45.7% 99.0% 0.0% 0.0%Op %(TTM) 44.2% 30.7% 6.0% 1.4% 0.0% 0.0%Op % 5yr avg 44.2% 23.3% 5.9% 9.0% 0.0% 0.0%Net %(TTM) 31.4% 18.7% 27.7% 2.1% 0.0% 0.0%Net % 5yr avg 30.5% 16.6% 3.2% 12.4% 0.0% 0.0%

ReturnsROA(TTM) 16.7% 11.2% 19.2% 1.2% 0.0% 0.0%ROA 5yr avg 16.6% 7.1% 2.0% 5.8% 0.0% 0.0%ROE(TTM) 19.1% 12.6% 47.1% 1.2% 0.0% 0.0%ROE 5yr avg 20.2% 7.9% 0.0% 6.1% 0.0% 0.0%

EfficiencyRec Turnover(TTM) 21.6 23.2 5.3 28.5 0.0 0.0Inv Turnover(TTM) 5.5 0.0 7.7 0.0 0.0 0.0Asset Turnover(TTM) 0.5 0.6 0.7 0.6 0.0 0.0

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Figures in Millions except per share valu

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM$0.0 $0.0 $32.9 $34.3 $65.7 $124.5 $147.2 $250.9 $249.7 $289.0 $319.1 $0.0 $24.2 $31.7 $37.8 $50.9 $98.0 $143.9 $211.2 $259.7 $288.6 $310.

% Change #DIV/0! #DIV/0! 4.4% 91.3% 89.5% 18.2% 70.5% -0.5% 15.8% 10.4% % Change #DIV/0! 31.1% 19.3% 34.5% 92.5% 46.9% 46.7% 23.0% 11.1% 7.5%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM#VALUE! $24.6 $24.6 $24.6 $17.0 $32.1 $44.9 $31.5 $41.7 $69.5 $33.5 $0.00 $0.00 $0.36 $0.43 $0.50 $0.80 $1.26 $1.74 $2.11 $2.46 $0.57

% Change #VALUE! 0.0% 0.0% -30.9% 88.9% 39.8% -29.7% 32.4% 66.5% -51.8% % Change #DIV/0! #DIV/0! 19.4% 16.3% 60.0% 57.5% 38.1% 21.3% 16.6% -76.8%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM

14.6% 13.1% 15.5% 25.0% 29.9% 33.0% 36.1% 31.3% 33.0% #VALUE! #DIV/0! 63.5 61.9 26.9 27.7 33.6 14.1 19.1 27.0 11.6% Change #VALUE! #VALUE! -10.2% 18.6% 61.2% 19.3% 10.5% 9.5% -13.4% 5.6% % Change #DIV/0! #DIV/0! -2.5% -56.6% 3.0% 21.5% -57.9% 34.8% 41.5% -56.9%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM#DIV/0! #DIV/0! 21.0% 19.2% 9.9% 15.2% 17.0% 18.6% 18.2% 18.7% 18.3% #VALUE! 0.0% 1.6% 1.6% 3.7% 3.6% 3.0% 7.1% 5.2% 3.7% 8.6%

% Change #DIV/0! #DIV/0! -8.5% -48.3% 52.9% 11.9% 9.6% -2.0% 2.4% -1.9% % Change #VALUE! #DIV/0! 2.6% 130.3% -2.9% -17.7% 137.8% -25.8% -29.3% 131.8%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM#VALUE! 0.0% 2.8% 3.7% 6.6% 4.7% 4.6% 10.2% 9.8% 6.9% 17.1% #VALUE! #DIV/0! 43.7% 46.6% 18.8% 23.0% 27.7% 49.7% 43.1% 44.3% 39.6%

% Change #VALUE! #DIV/0! 33.5% 79.9% -29.7% -2.0% 123.3% -3.7% -29.7% 146.9% % Change #DIV/0! #DIV/0! 6.7% -59.7% 22.3% 20.8% 79.2% -13.1% 2.7% -10.5%

Magic Formula Investing -- Earnings Yield Magic Formula Investing -- Return on Capital

Owner Earnings

Cash Return on Invested Capital (CROIC) FCF Yield

(DLB)8/28/2011

Diluted EPS

FCF / Sales Price / FCF

Free Cash Flow

Stock Price



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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM0.0% 0.0% 69.6% 71.3% 79.0% 83.9% 87.7% 93.3% 95.8% 90.5% 94.3% 0.0% 0.0% 14.2% 13.8% 15.9% 22.9% 29.6% 31.2% 33.8% 30.7% 31.4%

% Change #DIV/0! #DIV/0! 2.4% 10.8% 6.2% 4.5% 6.4% 2.7% -5.5% 4.2% % Change #DIV/0! #DIV/0! -3.2% 15.7% 43.4% 29.6% 5.1% 8.4% -9.0% 2.3%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTMN/A N/A 5.0 7.0 6.0 6.0 6.0 6.0 7.0 7.0 6.0 14.4 13.8 10.7 16.6 17.7 9.7 14.4 12.4 13.3

% Change #VALUE! #VALUE! 40.0% -14.3% 0.0% 0.0% 0.0% 16.7% 0.0% -14.3% % Change #VALUE! #VALUE! -3.8% -22.4% 55.2% 6.2% -45.2% 48.7% -14.0% 7.7%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTMNA NA -2.1 -2.5 -2.8 -2.3 -2.2 -2.6 -1.6 -2.7 30.7% 38.4% 43.4% 43.7% 34.7% 35.0% 35.2% 35.2% 30.3%

% Change #VALUE! #VALUE! #VALUE! -18.4% -13.0% 18.2% 6.9% -22.7% 40.7% -71.5% % Change #VALUE! #VALUE! 24.9% 13.0% 0.6% -20.4% 0.9% 0.5% -0.1% -13.9%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM116.2% 82.7% 27.1% 24.4% 24.4% 27.3% 17.9% 16.2% 12.1% 29.1% 31.9% 40.7% 67.6% 74.0% 73.6% 108.1% 121.2% 157.0%

% Change #VALUE! #VALUE! -28.8% -67.2% -10.1% 0.0% 12.0% -34.5% -9.8% -25.1% % Change #VALUE! #VALUE! 9.6% 27.4% 66.1% 9.5% -0.5% 46.9% 12.1% 29.5%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM3020.7% 2933.1% 3782.1% 6798.9% 9208.8% 13255.6% 15994.3% 218.0% 278.6% 419.9% 899.4% 1485.2% 2713.5% 4459.2%

% Change #VALUE! #VALUE! -2.9% 28.9% 79.8% 35.4% 43.9% 20.7% #VALUE! #VALUE! % Change #VALUE! #VALUE! 27.8% 50.7% 114.2% 65.1% 82.7% 64.3% #VALUE! #VALU

Debt to Equity FCF to Total Debt

FCF to Short Term Debt FCF to Long Term Debt

Gross Margin Net Profit Margin

Piotroski F score Original Altman Z Score

Beneish M Score - 8 Variable Version Tax Rate

dlb aug 2011 valuation

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