<PAGE>
EXHIBIT 99
----------
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In June 1999, Lernout & Hauspie Speech Products N.V. (the "Company")
acquired Brussels Translation Group N.V. ("BTG"), a Belgian corporation, for
approximately $42.3 million, including acquisition costs. In May 2000, the
Company acquired Dictaphone Corporation ("Dictaphone") for approximately $533.4
million, including 9,384,198 shares of Lernout & Hauspie common stock,
approximately $31.5 million in cash and approximately $12.4 million in
acquisition costs.
As part of the acquisition of Dictaphone, the Company obtained $430 million
in credit facilities (the "Revolving Credit Facility") to pay a portion of the
purchase price, to repay certain Dictaphone liabilities and for general
corporate purposes. The Revolving Credit Facility consists of a short-term
facility due March 31, 2001, of $200 million at LIBOR plus 100 basis points and
a five-year declining balance facility of $230 million at LIBOR plus 175 basis
points. Borrowings under the five-year declining balance facility are for
renewable terms of up to six months and therefore will be accounted for as
short-term debt. On May 5, 2000, $200 million from the short-term debt facility
and $30 million from the five-year declining balance facility were used to repay
certain Dictaphone accrued expenses and long-term debt and to retire all of
Dictaphone's outstanding 14% PIK Preferred Stock. The Company used remaining
proceeds to fund a portion of the purchase price. Funding under the five-year
declining balance facility will be available to cover $200 million of
Dictaphone's senior subordinated notes should they be put to the Company within
90 days of the closing by noteholders at 101% of par, as permitted by the terms
of the notes.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations of
the Company for the year ended December 31, 1999 and the three months ended
March 31, 2000 (the "Pro Forma Statements of Operations") give effect to these
acquisitions as if they had occurred on January 1, 1999. The Pro Forma
Statements of Operations are based on the historical results of operations of
the Company and of BTG for the six months ended June 30, 1999 and of Dictaphone
for the year ended December 31, 1999 and the three months ended March 31, 2000.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to the
Dictaphone acquisition as if it had occurred on March 31, 2000. The Unaudited
Pro Forma Condensed Consolidated Financial Statements and the accompanying notes
should be read in conjunction with and are qualified by the consolidated
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in the Company's 1999
annual report on Form 10-K and March 31, 2000 quarterly report on Form 10-Q.
The Pro Forma Financial Information has been prepared in accordance
with generally accepted accounting principles in the United States ("US GAAP")
and gives effect to the acquisitions of BTG and Dictaphone using the purchase
method of accounting. In accordance with US GAAP, the purchase price is
allocated to the assets and liabilities of the respective companies based on
their fair values at the respective dates of acquisition.
The Pro Forma Financial Information is intended for informational
purposes only and is not necessarily indicative of the future financial position
or future results of operations of the consolidated company after the
acquisitions of BTG and Dictaphone, or of the financial position or results of
operations of the consolidated company that would have actually occurred had the
acquisitions of BTG and Dictaphone been effected as of the date or on the first
date of the period presented.
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<PAGE>
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Adjustments have been made to the unaudited pro forma condensed consolidated
financial statements to reflect the following (amounts in thousands, except
where indicated):
(a) In May 2000, the Company acquired all of the outstanding shares of
Dictaphone Corporation for an aggregate purchase price of approximately
$533.4 million. The purchase price consisted of approximately $31.5
million in cash and 9,384,198 shares of Lernout & Hauspie common stock.
Dictaphone Corporation engaged principally in the design, manufacture,
marketing and service of integrated voice and data management systems and
software. Dictaphone's two operating segments were Systems Products and
Services and Contract Manufacturing.
Total purchase price:
Purchase price:
Cash ($26,621 paid at closing and $4,925 to be paid 2 years
from the date of closing)................................... $ 31,546
9,384,198 shares of Lernout & Hauspie common stock (valued
at $52.16 per share)..................................... 489,445
--------
Total consideration...................................... 520,991
Plus:
Transaction costs......................................... 12,407
--------
Total purchase price....................................$533,398
========
Sources of funds:
Debt......................................................$ 43,953
Equity.................................................... 489,445
--------
Total...................................................$533,398
========
(b) The excess of the total purchase price over the estimated fair value of the
net assets acquired is the excess purchase price to be allocated. The
calculation of excess purchase price to be allocated is based on the
following assumptions and calculation:
Total purchase price........................................ $533,398
Dictaphone net book deficit at March 31, 2000............... 59,464 (1)
Purchase price adjustments--see (e)......................... 233,418
Reduction in excess purchase price to be allocated--see (f). (5,212)
---------
Excess purchase price to be allocated..................... $821,068
=========
(1) The Dictaphone 12% PIK preferred stock was converted into Dictaphone
common stock simultaneously with the acquisition.
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<PAGE>
The following represents the allocation of the excess purchase price. This
allocation is for illustrative pro forma purposes only. Actual fair values will
be based on financial information as of the acquisition date (May 5, 2000).
Goodwill............................................. $561,168
Customer lists....................................... 132,100
Tradenames........................................... 29,500
Workforce............................................ 21,500
Capitalized technology............................... 76,800
--------
$821,068
========
(c) To reflect the repayment of certain long-term debt, the retirement of the
14% PIK preferred stock and the payment of a portion of the purchase price
with the proceeds from the Revolving Credit Facility as follows:
Proceeds from the Revolving Credit Facility ......... $ 230,000
Long-term debt repaid (current portion of $628)...... (164,506)
Accrued interest on long-term debt repaid............ (247)
14% PIK preferred stock retired...................... (28,404)
Cash paid to former stockholders and managers........ (26,621)
---------
Remaining proceeds................................ $ 10,222
=========
(d) To reflect the capitalization of the financing costs associated with the
borrowings under the Revolving Credit Facility.
(e) To reflect the following purchase price adjustments:
. To reflect the reclassification of Dictaphone's U.K. pension plan to
other noncurrent assets in the amount of $2,124.
. To reflect a valuation allowance for Dictaphone deferred tax assets in
the amount of $40,220.
. To reflect the elimination of deferred financing fees associated with
the debt paid down on the date of acquisition in the amount of $2,200.
. To reflect the elimination of existing Dictaphone goodwill in the amount
of $192,489.
. To reflect the elimination of software capitalization in the amount of
$16,755.
. To reflect the revaluation and reclassification of Dictaphone's U.K.
pension plan in the amount of $1,676.
. To reflect the revaluation of Dictaphone's U.S. pension plan and other
post retirement benefits in the amount of $18,694.
(f) To record the fair value of costs that will be incurred by the Company in
delivering future maintenance services to Dictaphone customers, plus an
allowance for normal profit margin.
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<PAGE>
(g) To record preliminary allocation of the purchase price to Dictaphone's
manufacturing division to be disposed. It is estimated that disposal will
occur approximately three months subsequent to the date of acquisition.
Accounts receivable........................................... $ 5,357
Inventory..................................................... 20,283
Prepaid expenses and other current assets..................... 12
Property and equipment, net................................... 6,177
Accounts payable.............................................. (2,319)
Accrued expenses.............................................. (3,694)
--------
Net book value of division to be disposed.................. $ 25,816
========
Estimated proceeds from sale.................................. $ 30,000
Estimated interest on incremental debt during holding period.. (392)
Estimated net cash inflows during holding period.............. 1,420
--------
Value assigned to division to be disposed.................. 31,028
Net book value of division to be disposed..................... (25,816)
--------
Reduction in excess purchase price to be allocated......... $ 5,212
========
(h) In March 1997, the Company entered into a software development and
commercialization agreement with BTG (the "BTG Agreement") in which the
Company agreed to provide engineering services for the development of the
Machine Translation Software. The Company completed its work under the BTG
Agreement in early 1999.
During the six months ended June 30, 1999, BTG paid the Company
approximately $2 million for engineering work performed under the BTG
Agreement. The pro forma adjustment reflects the combined operations in
which intercompany revenues and expenses are eliminated.
(i) The costs of engineering associated with the BTG Agreement for the six
months ended June 30, 1999 were $781,000 and were included in cost of
language technologies and cost of consulting and services. The pro forma
adjustment reflects the reclassification of these costs to research and
development expense, reflecting a full year of combined operations.
(j) To reflect the amortization of goodwill associated with the BTG acquisition
over an estimated useful life of 15 years.
(k) To reflect the elimination of the historical amortization of goodwill and
capitalized technology costs of Dictaphone, and the amortization of the
goodwill and other intangibles in connection with the Dictaphone
acquisition as follows:
Year ended Three months
December 31, ended March 31,
1999 2000
------- ------
Dictaphone historical amortization:
Goodwill $ 8,646 $1,647
Capitalized technology 8,720 2,444
------- ------
$17,366 $4,091
======= ======
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<PAGE>
Pro forma amortization:
Goodwill 56,116 14,029
Customer lists 16,513 4,128
Tradenames 2,950 738
Workforce 4,300 1,075
------- -------
79,879 19,970
Capitalized technology 15,360 3,840
------- -------
$95,239 $23,810
======= =======
The pro forma amortization has been calculated using the following
estimated useful lives (in years):
Goodwill....................................................10
Customer lists.............................................. 8
Tradenames..................................................10
Workforce................................................... 5
Capitalized technology...................................... 5
(l) To reflect the amortization of the deferred financing costs over 5 years.
(m) To reflect the reduction in interest expense related to the Dictaphone
long-term debt repaid on the date of acquisition.
(n) To reflect the increase in interest expense related to the borrowings under
the Revolving Credit Facility at a 7.57% interest rate.
(o) To reflect the reduction in interest income related to cash balances
utilized in funding a portion of the BTG acquisition (assuming an interest
rate of 5.5%).
(p) To reflect the reduction of Dictaphone's historical amortization of
deferred financing costs related to long-term debt repaid on the date of
acquisition.
(q) To reflect the income tax effect of the pro forma adjustments at an
effective tax rate of 40%.
(r) To reflect the reduction in stock dividends of preferred stock retired and
not assumed by the Company.
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<PAGE>
(s) The following information reconciles the number of shares used to compute
historical and pro forma earnings (loss) per common share:
<TABLE>
<CAPTION>
For the period ended
------------------------------------------------------------------
December 31, 1999 March 31, 2000
------------------------------- --------------------------------
Basic Diluted Basic Diluted
-------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
Lernout & Hauspie historical 113,109,456 119,423,724 118,582,950 127,865,778
Common shares issued in Dictaphone 9,384,198 9,384,198 9,384,198 9,384,198
acquisition
Elimination of Lernout & Hauspie stock
options--antidilutive on a pro forma
basis -- (6,176,982) -- (9,148,992)
Elimination of Lernout & Hauspie
warrants--antidilutive on a pro forma
basis -- (137,286) -- (133,836)
----------- ----------- ----------- -----------
122,493,654 122,493,654 127,967,148 127,967,148
=========== =========== =========== ===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LERNOUT & HAUSPIE SPEECH PRODUCTS NV AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
DICTAPHONE
HISTORICAL HISTORICAL HISTORICAL BUSINESS TO ADJUSTED
THE COMPANY BTG DICTAPHONE BE DISPOSED DICTAPHONE
<S> <C> <C> <C> <C> <C>
Revenues:
Technologies and solutions $ 138,660 $ - $103,772 $ - $103,702
Applications 113,693 - 205,744 - 205,744
Consulting and services 91,884 - - - -
Contract manufacturing sales - - 44,288 44,288 -
------------ -------- -------- -------- --------
Total revenues 344,237 - 353,734 44,288 309,446
------------ -------- -------- -------- --------
Cost of revenues:
Technologies and solutions 19,634 - 51,936 - 51,936
Applications 18,988 - 99,557 - 99,557
Consulting and services 55,633 - - - -
Contract manufacturing sales - - 37,702 37,702 -
------------ -------- -------- -------- --------
Total cost of revenues 94,255 - 189,195 37,702 151,493
Selling, general and administrative 101,641 10 111,308 912 110,396
Research and development, net 49,621 1,978 9,761 - 9,761
Amortization of goodwill and other
business acquisition intangibles 32,439 - 11,369 2,723 8,646
Amortization of deferred financing costs - - - - -
------------ -------- -------- -------- --------
Total operating expenses 277,956 1,988 321,633 41,337 280,296
------------ -------- -------- -------- --------
Operating income (loss) 66,281 (1,988) 32,101 2,951 29,150
Other expenses (income):
Interest and other financing expenses 1,684 538 40,062 3,677 36,385
Interest income (7,949) - - - -
Foreign exchange gains and losses, net (2,479) - - - -
Share in losses of unconsolidated affiliates 1,633 - - - -
Other - - (55) - (55)
------------ -------- -------- -------- --------
Total other expenses (income) (7,111) 538 40,007 3,677 36,330
------------ -------- -------- -------- --------
Income before income taxes and minority interests 73,392 (2,526) (7,906) (726) (7,180)
Provision for income taxes (benefit) 27,150 - 1,037 - 1,037
------------ -------- -------- -------- --------
Income before minority interests 46,242 (2,526) (8,943) (726) (8,217)
Minority interests 4,500 - - - -
------------ -------- -------- -------- --------
Net income (loss) 41,742 (2,526) (8,943) (726) (8,217)
Dividends on preferred stock - - 5,815 - 5,815
------------ -------- -------- -------- --------
Net loss applicable to common stock $ 41,742 $ (2,526) $(14,758) $ (726) $(14,032)
============ ======== ======== ======== ========
Basic net loss per common share $ 0.37
============
Diluted net loss per common share $ 0.35
============
Basic weighted average number of
shares outstanding 113,109,456
============
Diluted weighted average number of
shares outstanding 119,423,724
============
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
<S> <C> <C>
Revenues:
Technologies and solutions $ - $ 242,362
Applications - 319,437
Consulting and services (1,978)h 89,906
Contract manufacturing sales - -
-------- ------------
Total revenues (1,978) 651,705
-------- ------------
Cost of revenues:
Technologies and solutions - 71,570
Applications - 118,545
Consulting and services (781)i 54,852
Contract manufacturing sales - -
-------- ------------
Total cost of revenues (781) 244,967
Selling, general and administrative (8,720)k 203,327
Research and development, net (1,978)h 75,523
15,360 k
Amortization of goodwill and other 781 i
business acquisition intangibles 2,070 j 114,388
(8,646)k
79,879 k
Amortization of deferred financing costs 207 l
(630)p (423)
-------- ------------
Total operating expenses 77,542 637,782
-------- ------------
Operating income (loss) (79,520) 13,923
Other expenses (income):
Interest and other financing expenses (12,553)m 43,465
17,411 n
Interest income 1,163 o (6,786)
Foreign exchange gains and losses, net - (2,479)
Share in losses of unconsolidated affiliates - 1,633
Other - (55)
-------- ------------
Total other expenses (income) 6,021 35,778
-------- ------------
Income before income taxes and minority interests (85,541) (21,855)
Provision for income taxes (benefit) (4,470)q 23,717
-------- ------------
Income before minority interests (81,071) (45,572)
Minority interests - 4,500
-------- ------------
Net income (loss) (81,071) (50,072)
Dividends on preferred stock (5,815)r -
-------- ------------
Net loss applicable to common stock $(75,256) $ (50,072)
======== ============
Basic net loss per common share $ (0.41)
============
Diluted net loss per common share $ (0.41)
============
Basic weighted average number of
shares outstanding s 122,493,654
============
Diluted weighted average number of
shares outstanding s 122,493,654
============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LERNOUT & HAUSPIE SPEECH PRODUCTS NV AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended March 31, 2000
DICTAPHONE
HISTORICAL HISTORICAL BUSINESS TO ADJUSTED PRO FORMA
THE COMPANY DICTAPHONE BE DISPOSED DICTAPHONE ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Technologies and solutions $ 58,886 $ 27,552 $ - $ 27,552 $ - $ 86,438
Applications 27,993 44,552 - 44,552 - 72,545
Consulting and services 23,815 - - - - 23,815
Contract manufacturing sales - 9,154 (9,154) - - -
------------ -------- ------- -------- -------- ------------
Total revenues 110,694 81,258 (9,154) 72,104 - 182,798
------------ -------- ------- -------- -------- ------------
Cost of revenues:
Technologies and solutions 5,530 22,933 - 22,933 - 28,463
Applications 6,624 23,260 - 23,260 - 29,884
Consulting and services 13,694 - - - - 13,694
Contract manufacturing sales - 7,997 (7,997) - - -
------------ -------- ------- -------- -------- ------------
Total cost of revenues 25,848 54,190 (7,997) 46,193 - 72,041
Selling, general and administrative 30,715 26,148 (169) 25,979 (2,444)k 54,250
Research and development, net 16,279 1,777 - 1,777 3,840 k 21,896
Amortization of goodwill and other
business acquisition intangibles 11,130 2,209 (562) 1,647 19,970 k 31,100
(1,647)k
Amortization of deferred financing costs - - - - 52 l (235)
(287)p
------------ -------- ------- -------- -------- ------------
Total operating expenses 83,972 84,324 (8,728) 75,596 19,484 179,052
------------ -------- ------- -------- -------- ------------
Operating income (loss) 26,722 (3,066) (426) (3,492) (19,484) 3,746
Other expenses (income):
Interest and other financing expenses 2,151 10,494 (954) 9,540 (3,636)m 12,408
4,353 n
Interest income (2,248) - - - - (2,248)
Foreign exchange gains and losses, net (5,817) - - - - (5,817)
Share in losses of unconsolidated affiliates 3,056 - - - - 3,056
Other - (210) - (210) - (210)
------------ -------- ------- -------- -------- ------------
Total other expenses (income) (2,858) 10,284 (954) 9,330 717 7,189
------------ -------- ------- -------- -------- ------------
Income before income taxes and minority interests 29,580 (13,350) 528 (12,822) (20,201) (3,443)
Provision for income taxes (benefit) 12,123 5 - 5 (1,001)q 11,127
------------ -------- ------- -------- -------- ------------
Income before minority interests 17,457 (13,355) 528 (12,827) (19,200) (14,570)
Minority interests 1,010 - - - - 1,010
------------ -------- ------- -------- -------- ------------
Net income (loss) 16,447 (13,355) 528 (12,827) (19,200) (15,580)
Dividends on preferred stock - 1,649 - 1,649 (1,649)r -
------------ -------- ------- -------- -------- ------------
Net loss applicable to common stock $ 16,447 $(15,004) $ 528 $(14,476) $(17,551) $ (15,580)
============ ======== ======= ======== ======== ============
Basic net loss per common share $ 0.14 $ (0.12)
============ ============
Diluted net loss per common share $ 0.13 $ (0.12)
============ ============
Basic weighted average number of
shares outstanding 118,582,950 s 127,967,148
============ ============
Diluted weighted average number of
shares outstanding 127,865,778 s 127,967,148
============ ============
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
LERNOUT & HAUSPIE SPEECH PRODUCTS NV AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2000
HISTORICAL HISTORICAL PRO FORMA
THE COMPANY DICTAPHONE ADJUSTMENTS PRO FORMA
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Current Assets
Cash and cash equivalents $ 178,850 $ 5,002 $ 10,222 c $ 194,074
Accounts receivable 129,803 100,242 (5,357)g 224,688
Inventory 5,085 39,470 (20,283)g 24,272
Prepaid expenses and other current assets 19,895 6,321 (2,124)e 24,080
(12)g
Assets to be disposed - - 31,028 g 31,028
------------ -------- --------- ------------
Total current assets 333,633 151,035 13,474 498,142
------------ -------- --------- ------------
Deferred tax assets 7,435 40,220 (40,220)e 7,435
Property and equipment, net 36,870 38,888 (6,177)g 69,581
Deferred financing costs, net - 7,538 1,435 d 6,773
(2,200)e
Goodwill and other intangibles, net 417,340 192,489 (192,489)e 1,161,608
744,268 b
Software development costs, net 8,054 16,755 (16,755)e 84,854
76,800 b
Other noncurrent assets 25 872 1,604 1,676 e 29,152
------------ -------- --------- ------------
$ 829,204 $448,529 $ 579,812 $ 1,857,545
============ ======== ========= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 14,454 $ - $ 230,000 c $ 244,454
Current portion of long-term debt 8,208 788 (628)c 8,368
Accounts payable 21,803 11,251 (2,319)g 30,735
Accrued expenses 65,962 24,584 12,407 a 161,997
(247)c
1,435 d
4,925 a
(3,694)g
56,625 f
Deferred revenue 8,315 56,625 (56,625)f 8,315
------------ -------- --------- ------------
Total current liabilities 118,742 93,248 241,879 453,869
------------ -------- --------- ------------
Long-term debt, less current portion 18,120 363,965 (163,878)c 218,207
Other noncurrent liabilities - 22,376 (18,694)e 3,682
------------ -------- --------- ------------
Total Liabilities 136,862 479,589 59,307 675,758
------------ -------- --------- ------------
Minority interests 183 - - 183
Company-obligated mandatorily redeemable
security of subsidiary trust holding solely
parent convertible subordinated debentures 130,997 - - 130,997
14% PIK preferred stock, at liquidation value - 28,404 (28,404)c -
12% PIK preferred stock, at liquidation value - 22,975 (22,975)b -
Shareholders' equity (deficit) 561,162 (82,439) 489,445 a 1,050,607
82,439 b
------------ -------- --------- ------------
$ 829,204 $448,529 $579,812 $ 1,857,545
============ ======== ========= ============
</TABLE>
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