EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF SALEM HOLDING
The following unaudited pro forma condensed consolidated financial
statements of Salem Holding give effect to the Dividend, the accrued interest
income and expense relating to the November 30, 2000 loan of $48.3 million from
Salem Holding to Parent, proceeds of $2.8 million from the Settlement and use of
such proceeds to repay borrowings under Salem Holding's credit facility, and the
proposed financing, including the application of the net proceeds therefrom. The
Dividend and loan to Parent transactions have no impact on the Parent's
financial statements since these transactions are eliminated by consolidation.
Prior to the closing of the proposed financing, Salem Holding will effect
the Dividend. The Dividend will be accounted for as an exchange of assets among
entities under common control and accordingly, the assets exchanged are recorded
at their historical cost in a manner similar to the pooling of interest method
of accounting.
On June 1, 2001, Salem Radio Properties, Inc., a wholly owned subsidiary of
Salem Holding, entered into an agreement with the Port of Seattle to settle the
Port of Seattle's Petition in Eminent Domain seeking condemnation of the
property rights used in the operation of radio station KKOL-AM, Seattle,
Washington. Pursuant to the settlement agreement, Salem Radio Properties, Inc.
will be paid approximately $2.8 million as just compensation for the property
rights taken by the Port of Seattle and must surrender the property rights on or
before December 31, 2001. Salem Holding does not anticipate that the Settlement
will have a significant impact the operations of KKOL-AM. Salem Holding intends
to use the $2.8 million from the settlement to repay borrowings under its credit
facility.
The accompanying unaudited pro forma condensed consolidated balance sheet
gives effect to the Dividend, proceeds of $2.8 million from the Settlement and
use of such proceeds to reduce Salem Holding's debt, and this offering,
including the application of the net proceeds therefrom, as if they occurred at
March 31, 2001.
The accompanying unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2000 and the three months ended March
31, 2001 give effect to the Dividend, the interest income and expense related to
the loan to Parent, proceeds of $2.8 million from the Settlement and use of such
proceeds to reduce Salem Holding's debt, and the proposed financing, including
the application of the net proceeds therefrom, as if these transactions had
occurred as of January 1, 2000.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements of Parent and
Salem Holding. The unaudited pro forma condensed consolidated financial
statements are not necessarily indicative of the actual results of operations or
financial position that would have occurred had these transactions occurred on
the dates indicated nor are they necessarily indicative of future operating
results.
AS OF MARCH 31, 2001
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DIVIDEND PRO FORMA FOR SETTLEMENT OFFERING
ACTUAL ADJUSTMENT(1) DIVIDEND ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------- ------------- ------------- ----------- ----------- -----------
BALANCE SHEET:
Current assets:
Cash and equivalents.................. $ 2,674 $ (427) $ 2,247 $ 2,758(2) $ -- $ 2,247
(2,758)(2)
Accounts receivable................... 21,505 (1,620) 19,885 -- -- 19,885
Other receivables..................... 1,032 (427) 605 -- -- 605
Prepaid expenses...................... 1,989 (335) 1,654 -- -- 1,654
Due from stockholders................. 450 -- 450 -- -- 450
Deferred income taxes................. 170 (170) -- -- -- --
-------- -------- -------- ------- --------- --------
Total current assets.................... 27,820 (2,979) 24,841 -- -- 24,841
Property, plant, equipment and software,
net................................... 74,142 (2,164) 71,978 -- -- 71,978
Intangible assets, net.................. 255,810 (7,197) 248,613 -- -- 248,613
Bond issue costs........................ 2,307 -- 2,307 -- 4,500(3) 6,807
Deferred income taxes................... 7,912 (282) 7,630 (1,103)(4) -- 6,527
Other assets............................ 60,469 865 61,334 -- -- 61,334
-------- -------- -------- ------- --------- --------
Total assets............................ $428,460 $(11,757) $416,703 $(1,103) $ 4,500 $420,100
======== ======== ======== ======= ========= ========
Current liabilities:
Accounts payable and accrued
expenses............................ $ 5,908 $ (889) $ 5,019 $ -- $ -- $ 5,019
Accrued compensation and other........ 3,565 (272) 3,293 -- -- 3,293
Accrued interest...................... 7,847 -- 7,847 -- -- 7,847
Deferred subscription revenue......... 1,529 (1,529) -- -- -- --
Income taxes.......................... 74 -- 74 -- -- 74
Capital lease obligations............. 74 (74) -- -- -- --
-------- -------- -------- ------- --------- --------
Total current liabilities............... 18,997 (2,764) 16,233 -- -- 16,233
Long-term debt.......................... 287,050 -- 287,050 (2,758)(2) 150,000(3) 288,792
-- -- (145,500)(3)
Other liabilities....................... 1,361 (1,612) (251) -- -- (251)
Stockholder's equity.................... 121,052 (7,381) 113,671 1,655(4) -- 115,326
-------- -------- -------- ------- --------- --------
Total liabilities and stockholder's
equity................................ $428,460 $(11,757) $416,703 $(1,103) $ 4,500 $420,100
======== ======== ======== ======= ========= ========
YEAR ENDED DECEMBER 31, 2000
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SETTLEMENT
LOAN AND
DIVIDEND PRO FORMA FOR TO PARENT OFFERING
ACTUAL ADJUSTMENT(1) DIVIDEND ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS:
Net broadcasting revenue........... $107,786 $ 450(5) $108,236 $ -- $ -- $108,236
Other media revenue................ 7,916 (7,916) -- -- -- --
-------- -------- -------- ------- ------- --------
Total revenue...................... 115,702 (7,466) 108,236 -- -- 108,236
Operating expenses:
Broadcasting operating
expenses....................... 60,121 -- 60,121 -- -- 60,121
Other media operating expenses... 14,863 (14,863) -- -- -- --
Corporate expenses............... 10,457 (712)(6) 9,745 -- -- 9,745
Depreciation and amortization.... 23,243 (2,490) 20,753 -- -- 20,753
-------- -------- -------- ------- ------- --------
Total operating expenses........... 108,684 (18,065) 90,619 -- -- 90,619
-------- -------- -------- ------- ------- --------
Operating income (loss)............ 7,018 10,599 17,617 -- -- 17,617
Interest income.................. 504 (86) 418 -- -- 418
Interest income from related
parties........................ 1,249 -- 1,249 6,485(7) 7,734
Gain (loss) on sale of assets.... 773 3,481 4,254 -- -- 4,254
Gain on sale of assets to related
party.......................... 28,794 -- 28,794 -- -- 28,794
Interest expense................. (15,572) 66 (15,506) (3,911)(8) 263(9) (23,875)
(4,721)(10)
Other income (expense), net...... (856) (38) (894) -- -- (894)
-------- -------- -------- ------- ------- --------
Total other income (expense)....... 14,892 3,423 18,315 2,574 (4,458) 16,431
-------- -------- -------- ------- ------- --------
Income (loss) before income
taxes............................ 21,910 14,022 35,932 2,574 (4,458) 34,048
Provision (benefit) for income
taxes............................ 8,249 5,609 13,858 1,030(11) (1,783)(11) 13,105
-------- -------- -------- ------- ------- --------
Net income (loss).................. $ 13,661 $ 8,413 $ 22,074 $ 1,544 $(2,675) $ 20,943
======== ======== ======== ======= ======= ========
THREE MONTHS ENDED MARCH 31, 2001
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SETTLEMENT
AND
DIVIDEND PRO FORMA FOR OFFERING
ACTUAL ADJUSTMENT(1) DIVIDEND ADJUSTMENTS PRO FORMA
-------- ------------- ------------- ----------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS:
Net broadcasting revenue............................. $ 29,724 $ -- $ 29,724 $ -- $ 29,724
Other media revenue.................................. 1,965 (1,965) -- -- --
-------- -------- -------- ------- --------
Total revenue........................................ 31,689 (1,965) 29,724 -- 29,724
Operating expenses:
Broadcasting operating expenses.................... 19,556 -- 19,556 -- 19,556
Other media operating expenses..................... 2,536 (2,536) -- -- --
Corporate expenses................................. 3,847 (177)(6) 3,670 -- 3,670
Depreciation and amortization...................... 6,964 (572) 6,392 -- 6,392
-------- -------- -------- ------- --------
Total operating expenses............................. 32,903 (3,285) 29,618 -- 29,618
-------- -------- -------- ------- --------
Operating income (loss).............................. (1,214) 1,320 106 -- 106
Interest income.................................... 85 (48) 37 -- 37
Interest income from related parties............... 1,986 -- 1,986 -- 1,986
Gain (loss) on sale of assets...................... (8) -- (8) -- (8)
Gain on sale of assets to related party............ -- -- -- -- --
Interest expense................................... (6,467) -- (6,467) 57(9) (6,973)
(563)(10)
Other income (expense), net........................ (42) 34 (8) -- (8)
-------- -------- -------- ------- --------
Total other income (expense)......................... (4,446) (14) (4,460) (506) (4,966)
-------- -------- -------- ------- --------
Income (loss) before income taxes.................... (5,660) 1,306 (4,354) (506) (4,860)
Provision (benefit) for income taxes................. (2,012) 522 (1,490) (202)(11) (1,692)
-------- -------- -------- ------- --------
Net income (loss).................................... $ (3,648) $ 784 $ (2,864) $ (304) $ (3,168)
======== ======== ======== ======= ========
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(1) Represents the adjustment to remove the revenues, operating expenses, other
income and expense and the related tax effects and the assets, liabilities
and net equity of OnePlace and CCM for the applicable period.
(2) Represents the receipt of the proceeds from the Settlement and use of the
proceeds therefrom to repay debt under the credit facility.
(3) Represents the proposed financing, repayment of $145.5 million of
borrowings under Salem Holding's credit facility and $4.5 million in
estimated expenses related to the proposed financing.
(4) Represents the recording of deferred tax effects associated with the gain
on the Settlement and the related increase to retained earnings for the
gain, net of income tax effect.
(5) Represents revenue for the sale of advertising to OnePlace that was
previously eliminated in consolidation.
(6) Represents adjustment to reflect intercompany charge to OnePlace and CCM
for management costs incurred on behalf of OnePlace and CCM based upon
management's estimate of such costs and anticipated future charges for such
management services as a result of the Dividend.
(7) Reflects additional interest income on the $48.3 million promissory note
from Parent, based on the interest rate of 15.8%, as if the promissory note
was executed at January 1, 2000.
(8) Reflects additional interest expense on Salem Holding's borrowing of $48.3
million under its credit facility to fund the loan to Parent, based on a
weighted average borrowing rate of approximately 9.5% as if the borrowing
occurred as of January 1, 2000.
(9) Represents the reduction of interest expense resulting from the use of the
proceeds from the Settlement to repay debt under the credit facility based
on a weighted average interest rate of 9.5% for the year ended December 31,
2000 and 8.4% for the three months ended March 31, 2001.
(10) Represents the incremental interest expense assuming the issuance of $150.0
million of notes under the proposed financing and the application of the
proceeds therefrom to pay down $145.5 million of borrowings under Salem
Holding's credit facility occurred as of January 1, 2000. The amount for
the year ended December 31, 2000 is net of the interest expense per
footnote 8 to avoid duplication since the $48.3 million would not have been
borrowed had the $150 million from the proposed financing been received.
(11) Represents tax effect of incremental interest expense described in
footnotes 9 and 10 above and the tax effects of adjustments described in
footnotes 7 and 8 above for the loan to Parent transaction.