Prospectus Summary
This summary highlights the information contained elsewhere in this prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including “Risk Factors” and the consolidated financial statements and accompanying notes, before making an investment decision.
Our Business
We are a leading provider of high-quality digital multi-channel audio technology, products, and services for entertainment markets worldwide. Multi-channel audio, commonly referred to as surround sound, allows listeners to hear discrete sounds simultaneously through more than two speakers. Our DTS digital multi-channel audio technology delivers compelling surround sound and is frequently rated as the top performing surround sound technology by authoritative sources such as Widescreen Review and AudioRevolution.com. In addition, we have received a number of awards for our technology, including a Scientific and Engineering Oscar Award from the Academy of Motion Picture Arts and Sciences for our movie theater playback system.
We were founded in 1990 and received a key strategic investment in 1993 from investors, including Universal City Studios, Inc. The first DTS digital multi-channel audio soundtrack was created for Steven Spielberg’s Jurassic Park in 1993. From this initial release, we established a technology and marketing platform for the development of digital multi-channel audio solutions for the motion picture, home theater, and other consumer markets.
We provide products and services to film studios, production companies, and movie theaters to produce and play back digital multi-channel soundtracks for films. We license our sound technology to all major film distributors in the United States, including 20th Century Fox, Buena Vista Pictures, Warner Bros. Pictures, and many international distributors. These studios use our technology to create digital multi-channel soundtracks in our DTS format. Our playback systems for DTS-formatted soundtracks have been installed in approximately 22,000 movie theaters worldwide.
In 1996, we launched our consumer business, through which we license our technology to consumer electronics products manufacturers for inclusion in products such as audio/video receivers, DVD players, and home theater systems. Our technology enables consumers to enjoy movies, video games, and music in our DTS multi-channel format. Our consumer business has since grown to become our largest business segment. To date, we have entered into licensing agreements with substantially all of the major consumer audio electronics products manufacturers in the world, including Pioneer Corporation, Sony Corporation, and Yamaha Corporation. Our technology is also licensed to major consumer semiconductor manufacturers, including Cirrus Logic Inc., Yamaha Corporation, and Zoran Corporation. Our technology, trademarks, and/or know-how have been incorporated in more than 100 million consumer electronics products worldwide.
We also provide multi-channel audio compact discs, or CDs, and digital video discs, or DVDs, for the consumer retail market. We license titles by well-known recording artists, then re-mix and release these titles in our digital multi-channel format. These releases include works from classical composers such as Handel and Tchaikovsky, and titles by Diana Krall, Herb Alpert, Vince Gill, Lyle Lovett, The Eagles, Queen, Sting, and Bonnie Raitt.
Market Opportunity
In the early 1990s, the listening experience of movie audiences was significantly enhanced through the introduction of digital multi-channel surround sound technology. Digital multi-channel sound is now an industry standard audio format for feature films. Today, all of the major film producers and distributors in the United States, and an increasing number of international film producers and distributors, release their feature films with digital multi-channel soundtracks.
The proliferation of digital multi-channel audio in movie theaters has fueled demand for digital multi-channel audio in consumer electronics products, such as home theater systems. Digital multi-channel audio is extending into a growing number of consumer electronics environments, including homes, cars, personal computers, video games and consoles, portable electronics devices, and digital satellite and cable broadcast products.
Demand for digital multi-channel audio in emerging segments of the consumer markets is dependent upon the availability of both compelling content and the devices required to play it. Multi-channel music can provide an enhanced experience to music listeners, just as home theater systems now provide for home video enthusiasts, and may provide new revenue opportunities to music artists and labels.
The DTS Solution
Our proprietary DTS digital audio system provides moviegoers with a high-quality, digital multi-channel audio experience. Film studios and production companies use our technology and services to encode their film soundtracks in our proprietary digital multi-channel sound format. Theater owners purchase and use our products to play back DTS-encoded soundtracks through six or more speakers.
Our Coherent Acoustics technology for the consumer market brings advanced digital audio entertainment to the home and other consumer electronics environments such as cars and portable electronics devices. Coherent Acoustics is an audio compression/ decompression algorithm, or codec, which enables audio tracks to be formatted and played back in our DTS digital multi-channel sound format. The audio information can be stored on a digital medium, such as a DVD, or transmitted over a broadband connection or broadcast signal. The encoded content can be played back on digital audio electronics products equipped with a DTS Coherent Acoustics decoder, such as a DVD-based home theater system.
To facilitate the availability of high-quality digital multi-channel audio content, we provide products and services to filmmakers, recording artists, producers, and software developers to make it easy to create content in our proprietary format.
Our Strategy
Our goal is to become essential to the ultimate entertainment experience by incorporating our technology into every device that manages or controls high-quality digital audio. Key elements of our strategy include the following:
Company Information
Our business was incorporated in California in October 1990 as Digital Theater Systems Corporation. In February 1993, we became the general partner of Digital Theater Systems, L.P., a Delaware limited partnership. In 1996, we formed DTS Technology, LLC, a majority-owned subsidiary, to develop audio technologies for the consumer electronics and other markets. In October 1997, we completed a reorganization and consolidation of the predecessor entities and were re-incorporated in Delaware as Digital Theater Systems, Inc.
Our principal executive offices are located at 5171 Clareton Drive, Agoura Hills, California 91301. Our telephone number is (818) 706-3525. Our website is located at www.dtsonline.com. The information contained on our website is not part of this prospectus.
link1 "The Offering"The Offering
The number of shares of our common stock to be outstanding after the offering:
Except as otherwise noted, all information in this prospectus is based on the following assumptions:
DTS, DTS Digital Surround, DTS Digital Out, Neo:6, Coherent Acoustics, and DTS Digital Sound are trademarks of Digital Theater Systems, Inc. We have trademark rights in these marks in the United States and other countries and have a number of registrations issued and pending in the United States and other countries. This prospectus also refers to brand names, trademarks, service marks, and trade names of other companies and organizations, and these brand names, trademarks, service marks, and trade names are the property of their respective holders.
This prospectus contains market data and industry forecasts that were obtained from industry publications. These publications generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that these market data and industry forecasts are reliable, we have not independently verified, and make no representation as to the accuracy of, such information.
Summary Consolidated Financial Data
The following tables summarize our consolidated financial data for the periods presented. You should read the following financial information together with the information under “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this prospectus.