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Exhibit 99.2
May 10, 2001
Hugh Ward
Office of the United States Trustee
Curtis Center, Suite 950 West
601 Walnut Street
Philadelphia, Pennsylvania 19106
Dear Mr. Ward:
RE: MONTHLY OPERATING REPORT
DICTAPHONE CORPORATION
CASE NO. 00-4397 (JHW)
DISTRICT OF DELAWARE
Enclosed is the Monthly Operating Report of Dictaphone Corporation for
the period of January 1, 2001 through January 31, 2001.
Please contact me with any questions or comments.
Yours truly,
DICTAPHONE CORPORATION
/s/ Tim Ledwick
- -------------------------------------
Tim Ledwick
Chief Financial Officer
Lernout & Hauspie Speech Products N.V.
cc: Clerk of the Bankruptcy Court
Philippe Bodson Lernout & Hauspie Speech Products N.V.
Thomas Denys Lernout & Hauspie Speech Products N.V.
Luc A. Despins Milbank, Tweed, Hadley & McCloy LLP
Allan S. Brilliant Milbank, Tweed, Hadley & McCloy LLP
Matthew S. Barr Milbank, Tweed, Hadley & McCloy LLP
Claude Gonthier Liedekerke Wolters Waelbroeck Kirpatrick & Cerfontaine
Robert Dehney Morris, Nichols, Arsht & Tunnell
Daniel H. Golden Akin, Gump, Strauss, Hauer & Feld, LLP
Bruce Zirinsky Cadwalader, Wickersham & Taft
Bill Lenhart BDO Seidman
Frans Samyn BDO Seidman
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TRANSMITTAL OF FINANCIAL REPORTS AND
CERTIFICATION OF COMPLIANCE WITH
UNITED STATES TRUSTEE OPERATING REQUIREMENTS
FOR THE PERIOD OF JANUARY 1 - JANUARY 31, 2001
DEBTOR NAME: Dictaphone Corporation
CASE NUMBER: Case No. 00-4397 (JHW)
As Chief Financial Officer - Lernout & Hauspie Speech Products
N.V., a corporation organized under the laws of the State of Delaware as the
debtor and debtor in possession in the above-referenced Chapter 11 case (the
"Debtor"), I hereby affirm that:
1. I have reviewed the following statements (the
"Statements") attached hereto, consisting of a:
- Balance Sheet
- Statement of Operations
- Statement of Cash Flows
- Summary of Bank Accounts
- Statement of Payments to Insiders
2. The Statements have been prepared in accordance with
normal and customary accounting practices, and fairly
and accurately reflect the Debtor's financial
activity for the applicable period.
3. The insurance described in Section 3 of the Operating
Guidelines and Reporting Requirements for Chapter 11
Cases (the "Operating Guidelines") remains in force.
4. All postpetition taxes, as described in Section 4 of
the Operating Guidelines, are current and have been
paid in the ordinary course of business.
5. No professional fees have been paid in connection
with applications submitted to the court or in the
ordinary course.
The attached Statements were prepared by Dictaphone
Corporation under my direction and supervision. Dictaphone Corporation verifies
that, to the best of its knowledge, the information set forth in the Statements
is true and correct. Please be advised that the attached Statements may be
subject to certain closing adjustments as well as other modifications. If any of
the attached figures are restated or modified, an amended operating report will
be filed with the U.S. Trustee.
Dated: May 10, 2001 /s/ Tim Ledwick
------------------------------
Tim Ledwick
Chief Financial Officer
Lernout & Hauspie Speech Products N.V.
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DICTAPHONE CORPORATION
CASE NO. 00-4397 (JHW)
MONTHLY OPERATING REPORT
DICTAPHONE CORPORATION
(Debtor in Possession)
BALANCE SHEET
AS OF JANUARY 31, 2001
(Unaudited)
($000s)
----------
ASSETS
Current Assets:
Cash & Cash Equivalents $ 8,022
Unused cash borrowed under GECC DIP Facility (NOTE 6) 1,470
Accounts Receivable, net - Trade (NOTE 9) 57,027
Inventories 7,909
Prepaids and Other Current Assets 4,476
Assets held for disposal (NOTE 7) 42,751
----------
Total Current Assets 121,655
----------
Property, Plant and Equipment $ 60,192
Less: Accumulated Depreciation (31,065)
---------
Property, Plant and Equipment, net 29,127
Investment in Affiliated Companies (equity) (NOTE 5) 35,159
Accounts Receivable - Intercompany 14,462
Deferred Financing Fees 423
Goodwill, net (NOTE 5) 525,507
Other Intangibles, net 234,320
----------
TOTAL ASSETS $ 960,653
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LIABILITIES
Current Liabilities:
Accounts Payable - Trade $ 2,244
Accounts Payable - Intercompany 2,535
Accrued Liabilities 10,512
Advance Billings (NOTE 8) 57,030
----------
Total Current Liabilities 72,321
----------
Liabilities Subject to Compromise under Chapter 11 (NOTE 10) 416,083
Borrowing on behalf of L&H Group under GECC DIP Facility: (NOTE 6) $ 10,585
Less: Amount due from Lernout & Hauspie Speech Products N.V. (4,071)
Amount due from L&H Holdings USA, Inc. (4,459) 2,055
-------- ----------
TOTAL LIABILITIES 490,459
----------
STOCKHOLDER'S EQUITY
Common Stock 1
Capital in Excess of Par Value 593,444
Accumulated Deficit (NOTE 3) (123,251)
----------
TOTAL STOCKHOLDER'S EQUITY 470,194
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 960,653
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DICTAPHONE CORPORATION
CASE NO. 00-4397 (JHW)
MONTHLY OPERATING REPORT
DICTAPHONE CORPORATION
(Debtor in Possession)
STATEMENT OF OPERATIONS
FOR THE MONTH ENDED JANUARY 31, 2001
(Unaudited)
($000s)
---------
REVENUE
Product and Service Sales $ 19,156
Intercompany Sales 546
---------
TOTAL REVENUE 19,702
---------
COST OF SALES
Cost of Sales 9,067
Intercompany Cost of Sales 436
---------
TOTAL COST OF SALES 9,503
---------
GROSS PROFIT 10,199
---------
OTHER EXPENSES
Selling, General & Administrative 6,376
Research & Development 1,173
Interest and Fees on GECC DIP Facility 155
Depreciation & Amortization 8,546
Other 442
---------
TOTAL OTHER EXPENSES 16,692
---------
NET LOSS $ (6,493)
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DICTAPHONE CORPORATION
CASE NO. 00-4397 (JHW)
MONTHLY OPERATING REPORT
DICTAPHONE CORPORATION
(Debtor in Possession)
STATEMENT OF CASH FLOWS
FOR THE MONTH ENDED JANUARY 31, 2001
(Unaudited)
($000S)
---------
OPERATING ACTIVITIES
Net Loss $ (6,493)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation & Amortization 8,546
Changes in Assets & Liabilities:
Accounts Receivable (1,436)
Inventories 928
Other Current Assets (2,407)
Accounts Payable & Accrued Liabilities 2,211
Advance Billings (1,814)
Intercompany Payables/Receivables 143
Other Assets & Liabilities (397)
---------
NET CASH USED IN OPERATING ACTIVITIES (719)
---------
INVESTING ACTIVITIES
Net Investment in Fixed Assets 2
---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2
---------
FINANCING ACTIVITIES
Borrowing on behalf of L&H Group under GECC DIP Facility, Net (6,338)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (6,338)
---------
INCREASE/(DECREASE) IN CASH DURING THE PERIOD $ (7,055)
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Cash, beginning of period (NOTE 4) $ 16,547
Cash, end of period $ 9,492
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CASE NO. 00-4397 (JHW)
DICTAPHONE CORPORATION
NOTES TO MONTHLY OPERATING REPORT
1. THE MONTHLY OPERATING REPORT ("MOR") OF DICTAPHONE CORPORATION
("DICTAPHONE"), INCLUDES ONLY THE ASSETS, LIABILITIES AND OPERATIONS OF
DICTAPHONE AND EXCLUDES ANY OF ITS SUBSIDIARIES. ASSETS AND LIABILITIES ARE
STATED AT THEIR HISTORICAL COST; THUS, SUCH AMOUNTS DO NOT REFLECT THEIR
FAIR MARKET VALUE.
2. The financial information is unaudited and is subject to further review and
potential adjustment. Dictaphone has not yet determined the amount, if any,
of royalties due to Lernout & Hauspie Speech Products N.V. ("L&H NV"), L&H
Holdings USA, Inc. ("Holdings") or any of their subsidiaries. In addition,
Dictaphone has not yet completed its review of cash disbursements to
determine the portion of any such disbursements, including the allocation
of interest and fees on the GE Capital Corporation ("GECC") DIP Facility,
that should be allocated to L&H NV, Holdings or any of their subsidiaries.
As Dictaphone closes its books and evaluates the net realizable value of
its assets, including receivables, other adjustments may be required.
3. Subsequent to the filing of the December 2000 MOR, Dictaphone identified
certain adjustments relating to Dictaphone 2000 or prior. Such adjustments
have now been made to prior periods, the net effect of which is to increase
the operating loss for the year ended December 31, 2000 by approximately
$2,855,000. An amended MOR for December 2000 will be filed with the court
at a later date after all adjustments are identified and finalized.
4. Cash, beginning of period (December 31, 2000) as reflected in the December
MOR should have been reduced by outstanding checks totaling $1,596,000,
which Dictaphone included in Current Liabilities. The January MOR now
reflects outstanding checks as a reduction of the cash balance.
Additionally, the balance in a London bank account at December 31, 2000 was
revised downwards by $243,000 to account for December's activity in this
account, which was not readily available at the time of the filing of the
December MOR.
5. The Investment in Affiliated Companies and Goodwill have been adjusted by
$18,168,000 as of December 31, 2000 to reflect the final allocation of the
L&H NV purchase price associated with the net assets of Dictaphone's
subsidiaries. Goodwill amortization was also adjusted for the year ended
December 31, 2000.
6. Each of Dictaphone, L&H NV and Holdings are jointly and severally liable
for amounts due to GECC under the GECC DIP Facility. Therefore, any of
these entities could be called upon to pay the full amount outstanding
under such facility, and any of them was able to use the funds borrowed
from GECC. However, for ease of reference, this report reflects the $10.0
million borrowed from the GECC DIP Facility (plus fees of $585,000 that
were added to the principal borrowed) as a liability of
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CASE NO. 00-4397 (JHW)
Dictaphone, reduced by any use made of a portion of this amount by L&H NV
and Holdings. Dictaphone will allocate all interest and fees under the DIP
only to those entities that have used the proceeds of the DIP in accordance
with the related Bankruptcy Court Order. Such allocations have not yet been
made.
7. Assets held for disposal represents the net book value of assets related to
Dictaphone's manufacturing operations in Melbourne, Florida. This line item
was revised upwards by $6,379,000 as Melbourne's pre-petition accounts
payable were reclassified to the Liabilities Subject to Compromise line
item.
8. Maintenance contracts (support services) are billed in advance; the related
revenue is included in advance billings and amortized ratably into income
as earned.
9. Net accounts receivable includes a $6,710,000 increase in maintenance
contract reserves. The increase in reserves is in response to the company's
practice of maintenance billing one year in advance, and the resulting
increase in service contract cancellations that have occurred since the
company entered Chapter 11.
10. Liabilities subject to compromise under Chapter 11 include the following:
$000s
--------
Accounts Payable $ 13,225
Accrued Liabilities 16,741
Subordinated Debentures 142,416
Revolver 12,200
Accrued Interest 6,156
Intercompany Debt 212,825
Other 12,520
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TOTAL $416,083
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Dictaphone is also contingently liable on a guarantee for the benefit of
certain banks in the maximum amount of $208 million. For any payments that
might be made under this guarantee, the Intercompany Long-Term Debt due to
L&H N.V. will be reduced dollar for dollar.
Intercompany Long-Term Debt was adjusted downward to reflect L&H NV's
agreement with Dictaphone in September 2000, to convert $54 million of such
debt to Capital in Excess of Par Value. This adjustment was not reflected
in the December 2000 MOR. Dictaphone is in the process of reviewing all
intercompany transactions to determine appropriateness, accuracy, and
proper classification of such charges.
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DICTAPHONE CORPORATION
CASE NO. 00-4397 (JHW)
SUMMARY OF BANK ACCOUNTS
AS OF JANUARY 31, 2001
(in US $)
($000s)
BANK NAME ACCOUNT # DESCRIPTION BOOK BALANCE
- --------- --------- ----------- ------------
National City 70975505 Lock Box for U.S. customers' checks $ 1,248
Fleet Concentration 0062-1496 Main "Hub" for cash activity. Treasury 9,163
uses this account for various activities
such as wire transfers, interest payment,
payroll, and other accounts payable
activities. Checks mailed to Dictaphone are
deposited in this account. The unused cash
borrowed under the GECC DIP Facility are
included in this account.
Various Petty Cash Accounts 24
Fleet Disbursing 0062-1496 Account payable distribution for --
Melbourne Service Distribution
0062-4143 Account payable distribution for (1,495)
Melbourne Service Distribution
0069-3854 Account payable distribution for --
Melbourne Service Distribution
00-69-4858 Account payable distribution for --
Melbourne Service Distribution
Fleet Flexible Spending 9417-546-739 Holding account for a specific medical --
plan. Little movement in this account.
United Health Holding account for a specific medical 31
insurance benefits.
DB London Int'l Dealer Concentration 298494-001 Agent for international payments. The 127
agent is in charge of the billing and
collecting.
DB London Sterling Disbursing 298494-002 Account used for foreign payments that 112
require the British Pound
DB London Dollar Disbursing 298494-003 Account used for foreign payments that 58
require the U.S. dollar
Chase Dental Claims (Dormant) 022-429948 Account used for dental claims --
Chase Concentration 910-1-01-2053 Holding account before the money is 340
released to Chase Payroll or Chase Dental
Claims.
Chase Payroll 601-2-25774 Account used to disburse payroll checks (182)
for employees that are not Bank of
America customers
Bankers Trust Letter/Credit Payments 00-320-127 Holding account for Trade letter of --
credit
Bankers Trust Letter/Credit Payments 08-483-668 Holding account for Standby letter of --
credit
Bankers Trust Corporation 00-320-151 Main holding account for various accounts 66
Bankers Trust Overnight Sweep 00-621-579 Sweep account --
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TOTAL $ 9,492
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DICTAPHONE CORPORATION
CASE NO. 00-4397 (JHW)
SUMMARY OF PAYMENTS TO INSIDERS
FOR THE MONTH ENDED JANUARY 31, 2001
(in US $)
Name Amount Reason
- ---- --------- ------
John H. Duerden $ 46,423 Salary
John H. Duerden 20,600 Expense Reimbursement
Joseph D. Skrzypczak -- Salary & Vacation Pay
Joseph D. Skrzypczak 334 Expense Reimbursement
Daniel P. Hart 29,373 Salary
Daniel P. Hart 4,261 Expense Reimbursement
Robert G. Schwager 28,896 Salary
Robert G. Schwager 8,886 Expense Reimbursement
Ronald A. Elwell 24,500 Salary
Ronald A. Elwell 3,041 Expense Reimbursement
Joseph J. Delaney 20,667 Salary
Joseph J. Delaney 956 Expense Reimbursement
George M. Carpenter 11,500 Salary
George M. Carpenter -- Expense Reimbursement
Stephen J. Walcutt 10,000 Salary
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TOTAL PAYMENTS TO INSIDERS $ 209,435
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