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The finalization of the acquisition of L&H and Kurzweil will accelerate development work for continuous dictation products for the vertical and horizontal markets. The continuous dictation market is estimated by John Oberteuffer, president of Voice Information Associates, a speech technology industry research group, to reach $3 billion by 2001. The company expects to install a beta version of its continuous dictation pathology product with its key customers in September, and anticipates to begin shipping products for the pathology and other vertical markets and horizontal markets later this year. Additionally, the company will bring to market this fall a continuous dictation editing tool.
In a related move, L&H also announced today that it has adapted the prices of Kurzweil's discrete retail dictation products to maintain its leadership position. Effective July 13, 1997, L&H will offer the cutting-edge Kurzweil "VoicePad(TM)" product for $49.95, and effective immediately Kurzweil VoicePlus, priced at $99 and Kurzweil VoicePro, priced at $199. Kurzweil VoicePlus and Kurzweil VoicePro are speech recognition tools for complete dictation directly into Word documents, enabling people to talk with their desktop computers and eliminating the need to electronically "cut and paste" the text into Word format.
"During the last few months, the company has prepared the integration of the two companies into one effective unit that can bring breakthrough continuous dictation products to market," said Gaston Bastiaens, president and CEO of Lernout & Hauspie. "Our priority is now the execution of this plan so our customers will reap the rewards afforded by this alliance, including our ability to offer a comprehensive product offering, competitive pricing and accelerated product introductions."
Kurzweil AI, which will be known as Kurzweil, a division of Lernout & Hauspie, will operate as a fully integrated division of L&H, effective immediately. Kurzweil AI's staff, including a team of 67 highly-trained research and development engineers, will continue to operate in its established Waltham location while the company researches a new site for the US headquarters. Tom Doherty, former CFO of Kurzweil AI, has been appointed as vice president of finance and planning of Lernout & Hauspie.
"The synergies afforded by this alliance are expected to enable us to ship our first continuous dictation product this fall, well in advance of our original expectations," said Koen Bouwers, president of L&H's dictation division. "Another significant benefit of this combination is the strengthening of our global positioning. Kurzweil's strong reputation and track record in North America will complement L&H's well-established international profile. In particular, we are looking forward to capitalizing on and further developing Kurzweil's solid US retail and US medical direct sales channels."
Under the terms of the agreement, L&H acquired Kurzweil AI for approximately $53 million of which eighty percent of the purchase price will be paid in cash and 20 percent in newly issued shares of L&H common stock. Kurzweil's shareholders will receive approximately $40.7 million in cash and 460,000 shares of L&H stock. It is expected that approximately seventy-five percent of the purchase price will be allocated to in-process research and development which will be written off during the second quarter of 1997. The remaining twenty-five percent is expected to be paid as goodwill which will be amortized over the next seven years, also beginning in the second quarter. The acquisition is expected to be non-dilutive to L&H's earnings per share in 1997, and to be accretive in 1998. It is expected that an additional charge of $1.6 million will be incurred in the second quarter of 1997 for the costs associated with completing the merging of the two companies.
About Kurzweil AI
Kurzweil AI, headquartered in Waltham, MA, was founded in 1982. The company develops, markets and supports automated speech recognition software used to create documents and interact with customers by voice. Kurzweil Voice is an easy to use voice recognition system for Window-based PCs, and Kurzweil VoicePad is a voice-enabled word processing application. The company's medical reporting systems, VoiceMED and Kurzweil Clinical Reporter, are used in more than 500 healthcare institutions nationwide.
About Lernout & Hauspie
Lernout & Hauspie Speech Products (L&H) is an international leader in the development of advanced speech technology for various commercial applications and products. The company offers four core technologies -- automatic speech recognition (ASR), text-to-speech (TTS), text-to-text (translation) and digital speech compression. Its ASR, TTS and digital speech compression technologies are licensed to some of the world's best-known companies in the telecommunications, computers and multimedia, consumer electronics and automotive electronics industries. Its text-to-text (translation) services are provided to information technology (IT) companies and vertical and automation markets. Among other efforts, the company is currently working on development of a large vocabulary, speaker-independent, continuous dictation engine.
A recipient of Byte magazine's Best Technology award at CeBIT '97, L&H offers its full range of speech technologies on multiple platforms in multiple languages.
The company has its worldwide headquarters in Ieper, Belgium, its U.S. headquarters in Burlington, Massachusetts and international sales offices throughout Asia. Lernout & Hauspie became a public company in 1995 and is traded on both Nasdaq under the symbol LHSPF, and Nasdaq under the symbol LHSP.ED.
This news release contains forward-looking information that involves risks and uncertainties, including statements about the Company's plans, objectives, expectations and intentions. Such statements include, without limitation, (i) discussions concerning the ability of the Company to develop dictation products within the time frame and with the capabilities set forth in this release and to market those products successfully once developed, (ii) discussions concerning the ability of the Company to integrate Kurzweil's business and operations successfully and (iii) statements that the acquisition of Kurzweil will be first nondilutive and then accretive to the Company's earnings per share. Investors are cautioned that such forward-looking statements involve risk and uncertainties, including without limitation, the risk that the company will be able to develop products on a timely basis, and within budget, if at all, that any products once developed will meet the performance goals sought by the Company, and that even if such goals are met that any such products will be commercially successful. The Company's ability to effectively integrate and operate Kurzweil is subject to many risks and uncertainties that may cause the actual results, performance or achievements of Lernout & Hauspie to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained herein speak only as of the date of this news release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based. For further information refer to the risk factors detailed from time to time in the Company's filings with the Securities and Exchange Commission.
Lernout & Hauspie can be found on the World Wide Web at www.lhs.com. Kurzweil AI can be found on the World Wide Web at www.kurzweil.com. All product names and trademarks mentioned herein are trademarks of their respective companies.
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