e10vq

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2007


o		Transition Report Under Section 13 or 15(d) of the Exchange Act

For the transition period from to

Commission File Number 0-22439

FISHER COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)


WASHINGTON		91-0222175

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

100 Fourth Ave. N., Suite 510
Seattle, Washington 98109
(Address of Principal Executive Offices) (Zip Code)

(206) 404-7000
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $1.25 par value, outstanding as of August 1, 2007: 8,723,529

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Six months ended						Three months ended
	June 30						June 30
	2007			2006			2007			2006
(in thousands, except per-share amounts)
(Unaudited)
Revenue	$	75,542		$	71,271		$	41,299		$	40,190

Costs and expenses
Direct operating costs (exclusive of depreciation and amortization of $4,886, $4,149, $2,593, and $2,073, respectively, and amortization of program rights of $9,434, $9,336, $7,011, and $7,065, respectively, reported separately below)		28,050			25,398			13,775			12,567
Selling, general and administrative expenses		28,233			26,450			14,195			13,110
Amortization of program rights		9,434			9,336			7,011			7,065
Depreciation and amortization		5,857			5,027			3,016			2,511

		71,574			66,211			37,997			35,253

Income from operations		3,968			5,060			3,302			4,937
Other income, net		2,296			1,767			1,126			881
Interest expense, net		(6,904	)		(6,822	)		(3,410	)		(3,368	)

Income (loss) from continuing operations before income taxes		(640	)		5			1,018			2,450
Provision (benefit) for federal and state income taxes		(71	)					319			658

Income (loss) from continuing operations		(569	)		5			699			1,792
Income from discontinued operations, net of income taxes		1,580			562			1,557			476

Net income	$	1,011		$	567		$	2,256		$	2,268


Income (loss) per share:
From continuing operations	$	(0.06	)	$	—		$	0.08		$	0.21
From discontinued operations		0.18			0.07			0.18			0.05

Net income per share	$	0.12		$	0.07		$	0.26		$	0.26


Income (loss) per share assuming dilution:
From continuing operations	$	(0.06	)	$	—		$	0.08		$	0.21
From discontinued operations		0.18			0.07			0.18			0.05

Net income per share assuming dilution	$	0.12		$	0.07		$	0.26		$	0.26


Weighted average shares outstanding		8,721			8,708			8,722			8,710

Weighted average shares outstanding assuming dilution		8,727			8,716			8,729			8,719

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30			December 31
	2007			2006
(in thousands, except share and per-share amounts)
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	9,789		$	7,477
Restricted cash					8,473
Receivables, net		31,846			30,131
Deferred income taxes		686			690
Prepaid expenses and other assets		4,731			3,592
Television and radio broadcast rights		3,231			6,676
Assets held for sale		3			19

Total current assets		50,286			57,058
Marketable securities, at market value		187,510			188,307
Cash value of life insurance and retirement deposits		16,355			15,959
Television and radio broadcast rights		535			1,041
Goodwill, net		36,054			32,714
Intangible assets		42,542			41,142
Investment in equity investee		2,617			2,789
Deferred financing fees and other assets		6,713			7,748
Assets held for sale		2,045			2,612
Property, plant and equipment, net		147,214			148,207

Total Assets	$	491,871		$	497,577


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	2,753		$	4,600
Accrued payroll and related benefits		6,062			7,567
Interest payable		3,773			3,809
Television and radio broadcast rights payable		1,449			5,667
Income taxes payable		385			486
Other current liabilities		4,576			3,626
Liabilities of businesses held for sale		99			289

Total current liabilities		19,097			26,044
Long-term debt		150,000			150,000
Accrued retirement benefits		19,067			19,027
Deferred income taxes		54,860			54,414
Other liabilities		8,436			8,527

Commitments and Contingencies

Stockholders’ Equity
Common stock, shares authorized 12,000,000, $1.25 par value; issued and outstanding 8,722,471 as of June 30, 2007 and 8,720,091 as of December 31, 2006		10,903			10,900
Capital in excess of par		9,807			9,454
Accumulated other comprehensive income, net of income taxes:
Unrealized gain on marketable securities		120,890			121,441
Accumulated loss		(1,721	)		(1,735	)
Prior service cost		(196	)		(212	)
Retained earnings		100,728			99,717

Total Stockholders’ Equity		240,411			239,565

Total Liabilities and Stockholders’ Equity	$	491,871		$	497,577

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six months ended
	June 30
	2007			2006
(in thousands)
(Unaudited)
Cash flows from operating activities
Net income	$	1,011		$	567
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		5,857			5,155
Deferred income taxes		(56	)		295
Dividends from equity investee		150
Amortization of deferred financing fees		316			316
Amortization of program rights		9,434			9,336
Payments for television and radio broadcast rights		(9,704	)		(9,494	)
Gain on sale of radio station		(1,491	)
Equity in operations of equity investees		22			8
Stock-based compensation		328			287
Other		91			40
Change in operating assets and liabilities
Receivables		(1,584	)		(3,167	)
Prepaid expenses and other current assets		(1,123	)		(944	)
Cash value of life insurance and retirement deposits		(396	)		(292	)
Other assets		619			(275	)
Trade accounts payable, accrued payroll and related benefits, interest payable, and other current liabilities		(2,643	)		(665	)
Income taxes receivable and payable		(101	)
Accrued retirement benefits		40			80
Other liabilities		(88	)		1,860

Net cash provided by operating activities		682			3,107

Cash flows from investing activities
Purchases of investments available-for-sale		(177	)
Proceeds from sale of radio station		2,869
Purchase of television stations		(4,931	)
Investment in equity investee					(4,000	)
Deposit paid for purchase of Oregon television stations					(3,500	)
Decrease in restricted cash		8,473
Purchase of property, plant and equipment		(4,638	)		(6,903	)

Net cash provided by (used in) investing activities		1,596			(14,403	)

Cash flows from financing activities
Borrowings under borrowing agreements		6,000
Payments on borrowing agreements		(6,000	)
Proceeds from exercise of stock options		34			177
Excess tax benefit from exercise of stock options					10

Net cash provided by financing activities		34			187

Net increase (decrease) in cash and cash equivalents		2,312			(11,109	)
Cash and cash equivalents, beginning of period		7,477			19,622

Cash and cash equivalents, end of period	$	9,789		$	8,513

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The unaudited financial information furnished herein, in the opinion of management, reflects all adjustments which are necessary to state fairly the consolidated financial position, results of operations, and cash flows of Fisher Communications, Inc. and its consolidated subsidiaries (the “Company”) as of and for the periods indicated. Any adjustments are of a normal recurring nature. Fisher Communications, Inc.’s principal wholly owned subsidiaries include Fisher Broadcasting Company and Fisher Media Services Company. The Company presumes that users of the interim financial information herein have read or have access to the Company’s audited consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies or recent subsequent events, may be determined in that context. Accordingly, footnote and other disclosures which would substantially duplicate the disclosures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed by the Company have been omitted. The financial information herein is not necessarily representative of a full year’s operations.

Reclassifications

Certain amounts in the 2006 condensed consolidated financial statements have been reclassified to conform to the 2007 presentation. The reclassifications have no effect on shareholders’ equity, cash flows from operating, investing or financing activities or net income (loss). The reclassifications impact the Company’s condensed consolidated statements of operations in the following ways:

	•		“Direct operating costs” has replaced the caption previously labeled “Cost of services sold”;

	•		“Amortization of program rights” are now reported separately, whereas previously these amounts were reported within “Cost of services sold”; and

	•		“Selling, general and administrative expenses” now include amounts previously reported separately under the captions “Selling expenses” and “General and administrative expenses”.

2. Summary of Significant Accounting Policies

The significant accounting policies used in preparation of the consolidated financial statements are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. Additional significant accounting policies for 2007 are disclosed below.

Income taxes

The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) – an interpretation of FASB Statement No. 109 (“SFAS 109”). FIN 48 clarifies a recognition threshold that a tax position is required to meet before being recognized in the financial statements. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are sometimes ambiguous. As such, the Company is required to make certain subjective assumptions and judgments regarding its income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in the Company’s subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations. See Note 10 for additional detail on the Company’s uncertain tax positions.

3. Recent Accounting Pronouncements

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment to FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose, at specific election dates, to measure eligible financial assets and liabilities at fair value (referred to as the “fair value option”) and report associated unrealized gains and losses in earnings. SFAS 159 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. SFAS 159 does not eliminate disclosure requirements of other accounting standards, including fair value measurement disclosures in SFAS 157. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the implications of SFAS 159, and its impact on the Company’s financial statements has not yet been determined.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. SFAS 157 does not expand or require any new fair value measures; however, the application of this statement may change current practice. The requirements of SFAS 157 are effective for the Company’s fiscal year beginning January 1, 2008. The Company is in the process of evaluating this guidance and therefore has not yet determined the impact that SFAS 157 will have on its financial statements upon adoption.

4. Acquisitions

In July 2006, the Company entered into a Local Marketing Agreement (“LMA”) with WatchTV, Inc. to manage four of their television stations located in Eastern Washington. The stations provide Spanish-language programming to the Yakima-Pasco-Richland-Kennewick television market through an affiliation with Univision. Contemporaneously with the LMA, the Company entered into an option agreement with WatchTV to acquire the stations. On February 15, 2007 the Company exercised its option to purchase these television stations for $5.0 million, and on April 26, 2007 the Company finalized the purchase of the stations.

The primary assets acquired in these acquisitions are FCC licenses and property, plant and equipment. The excess of the purchase price of the stations over the fair value of the tangible and identifiable intangible net assets was recorded as goodwill. The Company’s purchase price allocations as reflected in the accompanying condensed consolidated balance sheet are preliminary and have not been finalized. The Company does not anticipate any significant differences between current values recorded and the fair values upon finalizing the purchase price allocations.

5. Discontinued Operations

On May 30, 2006, the Company entered into an agreement to sell its 24 small-market radio stations located in Montana and Eastern Washington. This agreement was amended in the third quarter of 2006 to reduce the number of stations being sold to 19, at a revised sales price of $29.1 million. On October 31, 2006, the Company completed the sale of 18 small-market radio stations for $26.1 million. The sale of one additional Montana station to the same buyer closed on June 1, 2007, for $3.0 million. The remaining five stations were excluded from this agreement in order to secure FCC approval, but continue to be actively marketed and held for sale. In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company has reported the results of operations of these small-market stations as discontinued operations in the accompanying financial statements. These stations were included in the Company’s radio segment.

Operational data for the radio stations is summarized as follows (in thousands):


	Six months ended						Three months ended
	June 30						June 30
	2007			2006			2007			2006
Revenue	$	977		$	6,049		$	533		$	3,302
Income from discontinued operations:
Discontinued operating activities	$	137		$	868		$	102		$	734
Gain on sale		2,294						2,294

		2,431			868			2,396			734
Income tax effect		(851	)		(306	)		(839	)		(258	)

	$	1,580		$	562		$	1,557		$	476

The following table summarizes the classes of assets and liabilities held for sale (in thousands):


	June 30		December 31
	2007		2006
Goodwill, net	$	645	$	1,129
Property, plant and equipment, net		635		718
Intangible assets		765		765
Other assets		3		19

	$	2,048	$	2,631


Liabilities of businesses held for sale	$	99	$	289

6. Television and Radio Broadcast Rights and Other Broadcast Commitments

The Company acquires television and radio broadcast rights, and may make commitments for program rights where the cost exceeds the projected direct revenue from the program. The impact of such contracts on the Company’s overall financial results is dependent on a number of factors, including popularity of the program, increased competition from other programming, and strength of the advertising market. Estimates of future revenue can change significantly and, accordingly, are reviewed periodically to determine whether impairment is expected over the life of the contract.

At June 30, 2007, the Company had commitments under license agreements amounting to $48.3 million for future rights to broadcast television and radio programs through 2012, and $2.9 million in related fees primarily associated with the Company’s contract to broadcast Seattle Mariners baseball games through the 2008 season. The Company has exclusive rights to sell available advertising time for two radio stations in Seattle (“Joint Sales Agreements”). Under the Joint Sales Agreements, the Company has commitments for monthly payments totaling $9.2 million through 2011.

7. Retirement Benefits

The Company has a noncontributory supplemental retirement program for key management. No new participants have been admitted to this program since 2001. The program provides for vesting of benefits under certain circumstances. Funding is not required, but generally the Company has acquired annuity contracts and life insurance on the lives of the individual participants to assist in payment of retirement benefits. The Company is the owner and beneficiary of such policies; accordingly, the cash values of the policies as well as the accrued liability are reported in the financial statements. The program requires continued employment through the date of expected retirement. The cost of the program is accrued over the average expected future lifetime of the participants.

In June 2005, the program was amended to freeze accrual of all benefits to active participants provided under the program. The Company will continue to recognize periodic pension cost related to the program.

The net periodic pension cost for the Company’s supplemental retirement program is as follows (in thousands):


	Six months ended				Three months ended
	June 30				June 30
	2007		2006		2007		2006
Interest cost	$	532	$	520	$	266	$	260
Amortization of loss		22		77		11		39

Net periodic pension cost	$	554	$	597	$	277	$	299

The discount rate used to determine net periodic pension cost was 5.80% and 5.48% for 2007 and 2006, respectively.

8. Income (loss) Per Share

Net income (loss) per share represents net income (loss) divided by the weighted average number of shares outstanding during the period. Net income (loss) per share assuming dilution represents net income (loss) divided by the weighted average number of shares outstanding, including the potentially dilutive impact of stock options and restricted stock rights issued under the Company’s incentive plans. Common stock options and restricted stock rights are converted using the treasury stock method.

Basic and diluted net income per share has been computed as follows (in thousands, except per-share amounts):


	Six months					Three months
	ended June 30					ended June 30
	2007			2006		2007		2006
Income (loss) from continuing operations	$	(569	)	$	5	$	699	$	1,792
Income from discontinued operations, net of income taxes		1,580			562		1,557		476

Net income	$	1,011		$	567	$	2,256	$	2,268


Weighted average shares outstanding — basic		8,721			8,708		8,722		8,710
Weighted effect of dilutive options and rights		6			8		7		9

Weighted average shares outstanding assuming dilution		8,727			8,716		8,729		8,719


Income (loss) per share:
From continuing operations	$	(0.06	)	$	—	$	0.08	$	0.21
From discontinued operations		0.18			0.07		0.18		0.05

Net income per share	$	0.12		$	0.07	$	0.26	$	0.26


Income (loss) per share assuming dilution:
From continuing operations	$	(0.06	)	$	—	$	0.08	$	0.21
From discontinued operations		0.18			0.07		0.18		0.05

Net income per share assuming dilution	$	0.12		$	0.07	$	0.26	$	0.26

The effect of options to purchase 200,685 and 282,730 shares are excluded from the calculation of weighted average shares outstanding for the six months ended June 30, 2007 and 2006, respectively, because such options were anti-dilutive. The effect of options to purchase 176,625 and 244,825 shares are excluded for the three months ended June 30, 2007 and 2006, respectively, because such options were anti-dilutive.

9. Stock-Based Compensation

Stock-based compensation expense related to stock-based awards under SFAS 123(R) is as follows (in thousands):


	Six months				Three months
	ended June 30				ended June 30
	2007		2006		2007		2006
Stock-based compensation expense	$	328,000	$	287,000	$	181,000	$	144,000

Stock-based compensation expense is included in selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Operations.

10. Income Taxes

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized no adjustment in the liability for unrecognized income tax benefits. The U.S. federal statute of limitations remains open for the year 2003 and onward. In April 2007, the IRS completed their fieldwork with regards to its examination of the consolidated federal income tax returns for tax years 1999 – 2002, and we received final settlement. The IRS is currently conducting a field examination of the Company’s 2003 – 2005 U.S. tax returns. The Company anticipates that this matter could be resolved within the next 12 months. The Company recognizes tax expense related to agreed-upon tax adjustments currently as part of its income tax provision. The Company continues to recognize interest and penalties related to uncertain tax positions in interest expense. This interest expense totaled $93,000 and $50,000 for the six months ended June 30, 2007 and 2006, respectively. A net reduction in interest expense of $20,000 and $36,000 was recognized for the three months ended June 30, 2007 and 2006, respectively, as a result of final settlement of the IRS examination of the Company’s 1999 – 2002 income tax returns. As of June 30, 2007 and December 31, 2006, the Company had approximately $640,000 and $547,000, respectively, of accrued interest related to uncertain tax positions.

As required by accounting rules for interim financial reporting, the Company records its income tax provision or benefits based upon its estimated annual effective tax rate of 20% and 23% for the six months ended June 30, 2007 and 2006, respectively. The estimated effective tax rate in the 2007 period was lower than in the same period in 2006 due primarily to the relationship between the amount of estimated annual permanent differences and the Company’s estimated annual pretax income or loss.

11. Segment Information

The Company reports financial data for three segments: television, radio, and Fisher Plaza. The television segment includes the operations of the Company’s owned or operated 19 network-affiliated television stations (including a 50%-owned television station). The radio segment includes the operations of the Company’s three Seattle radio stations, while operations of the Company’s small-market radio stations are reported as discontinued operations. Corporate expenses of the broadcasting business unit are allocated to the television and radio segments based on actual expenditures incurred or based on a ratio that approximates historic revenue and operating expenses of the segments. The Fisher Plaza segment includes the operations of a communications center located near downtown Seattle that serves as home of the Company’s Seattle television and radio operations, the Company’s corporate offices, and third-party tenants.

Revenue for each segment is as follows (in thousands):


	Six months						Three months
	ended June 30						ended June 30
	2007			2006			2007			2006
Television	$	51,578		$	48,850		$	26,980		$	25,991
Radio		18,351			18,172			11,443			12,081
Fisher Plaza		5,689			4,292			2,914			2,128
Corporate and eliminations		(76	)		(43	)		(38	)		(10	)

	$	75,542		$	71,271		$	41,299		$	40,190

Inter-segment sales amounted to $76,000 and $104,000 for the six months ended June 30, 2007 and 2006, respectively, and $38,000 and $52,000 for the three months ended June 30, 2007 and 2006, respectively, relating primarily to telecommunications fees charged from Fisher Plaza.

Income (loss) from continuing operations before interest and income taxes for each segment is as follows (in thousands):


	Six months						Three months
	ended June 30						ended June 30
	2007			2006			2007			2006
Television	$	6,417		$	8,684		$	4,498		$	6,085
Radio		(42	)		(207	)		(343	)		183
Fisher Plaza		2,196			1,089			1,272			579
Corporate and eliminations		(2,307	)		(2,739	)		(999	)		(1,029	)

	$	6,264		$	6,827		$	4,428		$	5,818

The following table reconciles total segment income from continuing operations before interest and income taxes shown above to consolidated income (loss) from continuing operations before income taxes (in thousands):


	Six months						Three months
	ended June 30						ended June 30
	2007			2006			2007			2006
Total segment income from continuing operations before interest and income taxes	$	6,264		$	6,827		$	4,428		$	5,818
Interest expense		(6,904	)		(6,822	)		(3,410	)		(3,368	)

Consolidated income (loss) from continuing operations before income taxes	$	(640	)	$	5		$	1,018		$	2,450

Identifiable assets for each segment are as follows (in thousands):


			December 31
Total assets	June 30 2007		2006
Television	$	127,610	$	130,994
Radio		23,122		24,436
Fisher Plaza		119,369		119,872
Corporate and eliminations		219,722		219,644

		489,823		494,946
Assets held for sale		2,048		2,631

	$	491,871	$	497,577

Identifiable assets by segment are those assets used in the operations of each segment. Corporate assets are principally marketable securities.

12. Subsequent Event

On August 3, 2007 the Company signed an agreement to purchase two television stations in the Bakersfield, California Designated Market Area (“DMA”), pending FCC approval and other closing conditions. The purchase price of $55 million may be paid through the use of existing cash and additional financing. A deposit on this transaction of $2,750,000 was paid and is being held in escrow.

13. Financial Information for Guarantors

The Company has $150.0 million of 8.625% senior notes outstanding, due 2014. The notes are unconditionally guaranteed, jointly and severally, on an unsecured, senior basis by the 100% owned subsidiaries of the Company.

Presented below are condensed consolidated statements of operations for the six and three months ended June 30, 2007 and 2006, and cash flows for the six months ended June 30, 2007 and 2006. Also presented are the condensed consolidated balance sheets as of June 30, 2007 and December 31, 2006. The condensed consolidated information is presented for the Company (issuer) with its investments accounted for under the equity method, the 100% owned guarantor subsidiaries, eliminations, and the Company on a consolidated basis. The Company (issuer) information consists primarily of corporate oversight and administrative personnel and related activities, as well as certain investments in marketable securities.

Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the six months ended June 30, 2007


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
	Inc.			Subsidiaries		Eliminations			Subsidiaries
(in thousands)
Revenue	$			$	75,618	$	(76	)	$	75,542

Costs and expenses
Direct operating costs					27,119		931			28,050
Selling, general and administrative expenses		4,247			24,993		(1,007	)		28,233
Amortization of program rights					9,434					9,434
Depreciation and amortization		146			5,711					5,857

		4,393			67,257		(76	)		71,574

Income (loss) from operations		(4,393	)		8,361					3,968

Other income, net		2,069			227					2,296

Equity in income of subsidiaries		6,955					(6,955	)		—

Interest expense, net		(6,904	)							(6,904	)

Income (loss) from continuing operations before income taxes		(2,273	)		8,588		(6,955	)		(640	)

Provision (benefit) for federal and state income taxes		(3,284	)		3,213					(71	)

Income (loss) from continuing operations		1,011			5,375		(6,955	)		(569	)

Income from discontinued operations, net of income taxes					1,580					1,580

Net income (loss)	$	1,011		$	6,955	$	(6,955	)	$	1,011

Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the six months ended June 30, 2006


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
	Inc.			Subsidiaries			Eliminations			Subsidiaries
(in thousands)
Revenue	$			$	71,375		$	(104	)	$	71,271

Costs and expenses
Direct operating costs					24,587			811			25,398
Selling, general and administrative expenses		4,223			23,142			(915	)		26,450
Amortization of program rights					9,336						9,336
Depreciation and amortization		124			4,903						5,027

		4,347			61,968			(104	)		66,211

Income (loss) from operations		(4,347	)		9,407						5,060

Other income, net		1,576			191						1,767

Equity in income of subsidiaries		6,664						(6,664	)

Interest expense, net		(6,817	)		(5	)					(6,822	)

Income (loss) from continuing operations before income taxes		(2,924	)		9,593			(6,664	)		5

Provision (benefit) for federal and state income taxes		(3,491	)		3,491

Income (loss) from continuing operations		567			6,102			(6,664	)		5

Income from discontinued operations, net of income taxes					562						562

Net income (loss)	$	567		$	6,664		$	(6,664	)	$	567

Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the three months ended June 30, 2007


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
	Inc.			Subsidiaries		Eliminations			Subsidiaries
(in thousands)
Revenue	$			$	41,337	$	(38	)	$	41,299

Costs and expenses
Direct operating costs					13,310		465			13,775
Selling, general and administrative costs		2,018			12,680		(503	)		14,195
Amortization of program rights					7,011					7,011
Depreciation and amortization		74			2,942					3,016

		2,092			35,943		(38	)		37,997

Income (loss) from operations		(2,092	)		5,394					3,302

Other income, net		1,089			37					1,126

Equity in income of subsidiaries		4,911					(4,911	)		—

Interest expense, net		(3,410	)							(3,410	)

Income (loss) from continuing operations before income taxes		498			5,431		(4,911	)		1,018

Provision (benefit) for federal and state income taxes		(1,758	)		2,077					319

Income (loss) from continuing operations		2,256			3,354		(4,911	)		699

Income from discontinued operations, net of income taxes					1,557					1,557

Net income (loss)	$	2,256		$	4,911	$	(4,911	)	$	2,256

Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the three months ended June 30, 2006


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
	Inc.			Subsidiaries			Eliminations			Subsidiaries
(in thousands)
Revenue	$			$	40,242		$	(52	)	$	40,190

Costs and expenses
Direct operating costs					12,167			400			12,567
Selling, general and administrative expenses		1,782			11,780			(452	)		13,110
Amortization of program rights					7,065						7,065
Depreciation and amortization		62			2,449						2,511

		1,844			33,461			(52	)		35,253

Income (loss) from operations		(1,844	)		6,781						4,937

Other income, net		789			92						881

Equity in income of subsidiaries		4,846						(4,846	)

Interest expense, net		(3,366	)		(2	)					(3,368	)

Income (loss) from continuing operations before income taxes		425			6,871			(4,846	)		2,450

Provision (benefit) for federal and state income taxes		(1,843	)		2,501						658

Income (loss) from continuing operations		2,268			4,370			(4,846	)		1,792

Income from discontinued operations, net of income taxes					476						476

Net income (loss)	$	2,268		$	4,846		$	(4,846	)	$	2,268

Financial Information for Guarantors
Condensed Consolidated Balance Sheet
as of June 30, 2007


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
	Inc.			Subsidiaries		Eliminations			Subsidiaries
(in thousands)
ASSETS
Current Assets
Cash and cash equivalents	$	9,489		$	300	$			$	9,789
Receivables, net		875			30,971					31,846
Due from affiliate					28,253		(28,253	)		—
Deferred income taxes		106			580					686
Prepaid expenses and other assets		352			4,379					4,731
Television and radio broadcast rights					3,231					3,231
Assets held for sale					3					3

Total current assets		10,822			67,717		(28,253	)		50,286
Marketable securities, at market value		186,977			533					187,510
Investment in consolidated subsidiaries		260,589					(260,589	)		—
Cash value of life insurance and retirement deposit		16,355								16,355
Television and radio broadcast rights					535					535
Goodwill, net					36,054					36,054
Intangible assets					42,542					42,542
Investment in equity investee					2,617					2,617
Deferred financing fees and other assets		4,235			2,478					6,713
Assets held for sale					2,045					2,045
Property, plant and equipment, net		714			146,500					147,214

Total Assets	$	479,692		$	301,021	$	(288,842	)	$	491,871


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	955		$	1,798	$			$	2,753
Payable to affiliate		28,253					(28,253	)		—
Accrued payroll and related benefits		867			5,195					6,062
Interest payable		3,773								3,773
Television and radio broadcast rights payable					1,449					1,449
Income taxes payable					385					385
Other current liabilities		1,399			3,177					4,576
Liabilities of businesses held for sale					99					99

Total current liabilities		35,247			12,103		(28,253	)		19,097
Long-term debt		150,000								150,000
Accrued retirement benefits		18,983			84					19,067
Deferred income taxes		34,986			19,874					54,860
Other liabilities		65			8,371					8,436

Stockholders’ Equity
Common stock		10,903			1,131		(1,131	)		10,903
Capital in excess of par		9,807			164,234		(164,234	)		9,807
Accumulated other comprehensive income, net of income taxes:
Unrealized gain on marketable securities		120,890								120,890
Accumulated loss		(1,721	)							(1,721	)
Prior service cost		(196	)							(196	)
Retained earnings		100,728			95,224		(95,224	)		100,728

Total Stockholders’ Equity		240,411			260,589		(260,589	)		240,411

Total Liabilities and Stockholders’ Equity	$	479,692		$	301,021	$	(288,842	)	$	491,871

Financial Information for Guarantors
Condensed Consolidated Balance Sheet
as of December 31, 2006


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
	Inc.			Subsidiaries		Eliminations			Subsidiaries
(in thousands)
ASSETS
Current Assets
Cash and cash equivalents	$	8,544				$	(1,067	)	$	7,477
Restricted cash					8,473					8,473
Receivables, net		768			29,363					30,131
Due from affiliate					17,357		(17,357	)
Deferred income taxes		106			584					690
Prepaid expenses and other assets		438			3,154					3,592
Television and radio broadcast rights					6,676					6,676
Assets held for sale					19					19

Total current assets		9,856			65,626		(18,424	)		57,058
Marketable securities, at market value		187,833			474					188,307
Investment in consolidated subsidiaries		253,632					(253,632	)
Cash value of life insurance and retirement deposits		15,959								15,959
Television and radio broadcast rights					1,041					1,041
Goodwill, net					32,714					32,714
Intangible assets					41,142					41,142
Investment in equity investee					2,789					2,789
Deferred financing fees and other assets		4,538			3,210					7,748
Assets held for sale					2,612					2,612
Property, plant and equipment, net		813			147,394					148,207

Total Assets	$	472,631		$	297,002	$	(272,056	)	$	497,577


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	1,543		$	4,124	$	(1,067	)	$	4,600
Due to affiliate		17,357					(17,357	)
Accrued payroll and related benefits		1,841			5,726					7,567
Interest payable		3,809								3,809
Television and radio broadcast rights payable					5,667					5,667
Income taxes payable					486					486
Other current liabilities		950			2,676					3,626
Liabilities of businesses held for sale					289					289

Total current liabilities		25,500			18,968		(18,424	)		26,044
Long-term debt		150,000								150,000
Accrued retirement benefits		18,942			85					19,027
Deferred income taxes		38,559			15,855					54,414
Other liabilities		65			8,462					8,527

Stockholders’ Equity
Common stock		10,900			1,131		(1,131	)		10,900
Capital in excess of par		9,454			164,234		(164,234	)		9,454
Accumulated other comprehensive income — net of income taxes:
Unrealized gain on marketable securities		121,441								121,441
Accumulated loss		(1,735	)							(1,735	)
Prior service cost		(212	)							(212	)
Retained earnings		99,717			88,267		(88,267	)		99,717

Total Stockholders’ Equity		239,565			253,632		(253,632	)		239,565

Total Liabilities and Stockholders’ Equity	$	472,631		$	297,002	$	(272,056	)	$	497,577

Financial Information for Guarantors
Condensed Consolidated Statement of Cash Flows
for the six months ended June 30, 2007


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
	Inc.			Subsidiaries			Eliminations			Subsidiaries
(in thousands)
Net cash provided by (used in) operating activities	$	958		$	(1,343	)	$	1,067		$	682

Cash flows from investing activities
Proceeds from sale of radio station					2,869						2,869
Purchase of television stations					(4,931	)					(4,931	)
Decrease in restricted cash					8,473						8,473
Purchases of investments available-for-sale					(177	)					(177	)
Purchase of property, plant and equipment		(47	)		(4,591	)					(4,638	)

Net cash provided by (used in) investing activities		(47	)		1,643			—			1,596


Cash flows from financing activities
Borrowings under borrowing agreements		6,000									6,000
Payments on borrowing agreements		(6,000	)								(6,000	)
Proceeds from exercise of stock options		34									34

Net cash provided by financing activities		34			—			—			34

Net increase in cash and cash equivalents		945			300			1,067			2,312
Cash and cash equivalents, beginning of period		8,544						(1,067	)		7,477

Cash and cash equivalents, end of period	$	9,489		$	300		$	—		$	9,789

Financial Information for Guarantors
Condensed Consolidated Statement of Cash Flows
for the six months ended June 30, 2006


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
	Inc.			Subsidiaries			Eliminations		Subsidiaries
(in thousands)
Net cash provided by operating activities	$	1,420		$	1,687		$		$	3,107

Cash flows from investing activities
Investment in equity investee					(4,000	)				(4,000	)
Deposit paid for purchase of Oregon television stations					(3,500	)				(3,500	)
Purchase of property, plant and equipment		(26	)		(6,877	)				(6,903	)

Net cash used in investing activities		(26	)		(14,377	)		—		(14,403	)


Cash flows from financing activities
Excess tax benefit from exercise of stock options		10								10
Proceeds from exercise of stock options		177								177

Net cash provided by financing activities		187			—			—		187

Net increase (decrease) in cash and cash equivalents		1,581			(12,690	)		—		(11,109	)
Cash and cash equivalents, beginning of period		3,660			15,962					19,622

Cash and cash equivalents, end of period	$	5,241		$	3,272		$	—	$	8,513

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Financial Statements and related Notes thereto included elsewhere in this quarterly report on Form 10-Q. Some of the statements in this quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as `aims, anticipates, believes, estimates, expects, hopes, intends, plans, predicts, projects or targets’ or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. There are many risks and uncertainties that could cause actual results to differ materially from those predicted in our forward-looking statements, including, without limitation, those factors discussed under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which was filed with the Securities and Exchange Commission on March 14, 2007. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations. As used herein, unless the context requires otherwise, when we say “we”, “us”, “our”, or the “Company”, we are referring to Fisher Communications, Inc. and its consolidated subsidiaries.

This discussion is intended to provide an analysis of significant trends and material changes in our financial condition and operating results during the three and six-month periods ended June 30, 2007, compared with the corresponding periods in 2006.

Overview

We are an integrated media company. We own and operate twelve full power (including a 50%-owned television station) and seven low power network-affiliated television stations and eight radio stations. Our television and radio stations are located in Washington, Oregon, Idaho and Montana. We also own and operate Fisher Plaza, a communications facility located near downtown Seattle that serves as the home for our corporate offices and our Seattle television and radio stations, and also houses a variety of unaffiliated companies, including media and communications companies. We also own approximately 3.0 million shares of common stock of Safeco Corporation, a publicly traded insurance company.

Our broadcasting operations receive revenue from the sale of local, regional and national advertising and, to a much lesser extent, from network compensation, satellite and fiber transmission services, tower rental and commercial production activities. Our operating results are therefore sensitive to broad economic trends that affect the broadcasting industry in general, as well as local and regional trends, such as those in the Northwest economy. Excluding revenue derived from seasonal sports rights, the advertising revenue of our stations is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring, and retail advertising in the period leading up to and including the holiday season. In addition, advertising revenue is generally higher during national election years due to spending by political candidates and advocacy groups. This political spending typically is heaviest during the fourth quarter.

Our television revenue is significantly affected by network affiliation and the success of programming offered by those networks. Our two largest television stations, which account for approximately seventy percent of our television broadcasting revenue, are affiliated with the ABC Television Network. Eight of our television stations are affiliated with the CBS Television Network (including a 50%-owned television station), and the remainder of our television stations are affiliated with Univision or Telefutura, a division of Univision. Our broadcasting operations are subject to competitive pressures from traditional broadcasting sources, as well as from alternative methods of delivering information and entertainment, and these pressures may cause fluctuations in operating results.

On October 31, 2006, we completed the sale of 18 of 24 small-market radio stations located in Montana and Eastern Washington for $26.1 million. The sale of one additional Montana station to the same buyer closed on June 1, 2007, for $3.0 million. The remaining five stations were excluded from this agreement in order to secure FCC approval, but continue to be actively marketed and held for sale. The small-market radio stations are treated as discontinued operations in the accompanying financial statements.

In July 2006, we entered into a Local Marketing Agreement (“LMA”) with WatchTV, Inc. to manage four of their television stations located in Eastern Washington. The stations provide Spanish-language programming to the Yakima-Pasco-Richland-Kennewick television market through an affiliation with Univision. Contemporaneously with the LMA, we entered into an option agreement with WatchTV to acquire the stations. On February 15, 2007 we exercised our option to purchase these television stations for $5.0 million, and on April 26, 2007 we finalized the purchase of the stations.

On August 3, 2007 we signed an agreement to purchase two television stations in the Bakersfield, California Designated Market Area (“DMA”), pending FCC approval and other closing conditions. The purchase price of $55 million may be paid through the use of existing cash and additional financing. A deposit on this transaction of $2,750,000 was paid and is being held in escrow.

In November 2006 we finalized the purchase of two Oregon television stations. A second amendment to that purchase agreement in September 2006 included a one year option to purchase one to three additional television stations in the Northwest. In July 2007 this option was amended to, among other things, change the number of stations under option to two and change the expiration date of the option to August 29, 2007.

In May 2002, we entered into a radio rights agreement (the “Rights Agreement”) to broadcast Seattle Mariners baseball games on KOMO AM for the 2003 through 2008 baseball seasons. The impact of the Rights Agreement is greater during periods that include the broadcast of Mariners baseball games; therefore, the impact on the first and fourth quarters of each calendar year is less than what is expected for the second and third quarters of the calendar year. The success of this programming is dependent, in part, on factors beyond our control, such as the competitiveness of the Seattle Mariners and the successful marketing of the team.

In addition to our broadcasting operations, we own and operate Fisher Plaza, and we lease space to other companies that are attracted by the property location and the infrastructure provided at this facility. As of June 30, 2007, approximately 91% of Fisher Plaza was occupied or committed for occupancy (42% was occupied by Fisher entities), compared to 93% occupied or committed for occupancy at December 31, 2006. Revenue and operating income from Fisher Plaza are dependent upon the general economic climate, the Seattle economic climate, the outlook of the telecommunications and technology sectors and real estate conditions, including the availability of space in other competing properties.

In 2004, we completed an offering of $150.0 million of 8.625% senior notes due 2014 and used the net cash proceeds to retire our previous debt facilities and terminate the forward sales contract covering shares of our investment in Safeco Corporation. The notes are unconditionally guaranteed, jointly and severally, on an unsecured, senior basis by the current and future material domestic subsidiaries of the Company. Interest on the notes is payable semiannually in arrears on March 15 and September 15 of each year.

Management focuses on key metrics from operational data within our broadcasting and Fisher Plaza operations. Information on significant trends is provided in the section entitled “Consolidated Results of Operations.”

Critical Accounting Policies

The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies and estimates include the estimates used in determining the recoverability of goodwill and other indefinite-lived intangible assets, the recoverability of long-lived tangible assets, the value of derivative instruments, the value of television and radio broadcast rights, the cost of pension programs, the amount of tax accruals, the amount of the allowance for doubtful accounts, the existence of and accounting for variable interest entities and the amount of stock-based compensation. For a detailed discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2006. There have been no material changes in the application of our critical accounting policies and estimates subsequent

to that report, except as disclosed below. We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors.

Income taxes. We account for uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) – an interpretation of FASB Statement No. 109 (“SFAS 109”). FIN 48 clarifies a recognition threshold that a tax position is required to meet before being recognized in the financial statements. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are sometimes ambiguous. As such, we are required to make certain subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations. See Note 10 to the condensed consolidated financial statements for additional detail on our uncertain tax positions.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Consolidated Results of Operations

We report financial data for three segments: television, radio and Fisher Plaza. The television segment includes the operations of the Company’s owned and operated 19 network-affiliated television stations (including a 50%-owned television station). The radio segment includes the operations of the Company’s three Seattle radio stations, while operations of the Company’s small-market radio stations are reported as discontinued operations. Corporate expenses of the broadcasting business unit are allocated to the television and radio segments based on a ratio that approximates historic revenue and operating expenses of the segments. The Fisher Plaza segment consists of the operations of Fisher Plaza. Fisher-owned entities that reside at Fisher Plaza do not pay rent; however, these entities do pay common-area maintenance expenses. The segmental data includes additional allocation of depreciation and certain operating expenses from Fisher Plaza to the Seattle-based television and radio operations.

Percentage comparisons have been omitted within the following table where they are not considered meaningful.


	Six months												Three months
	ended June 30						Variance						ended June 30						Variance
	2007			2006			$			%			2007			2006			$			%
(Dollars in thousands)
(Unaudited)
Revenue
Television	$	51,578		$	48,850		$	2,728			5.6	%	$	26,980		$	25,991		$	989			3.8	%
Radio		18,351			18,172			179			1.0	%		11,443			12,081			(638	)		-5.3	%
Fisher Plaza		5,689			4,292			1,397			32.5	%		2,914			2,128			786			36.9	%
Corporate and eliminations		(76	)		(43	)		(33	)					(38	)		(10	)		(28	)

Consolidated		75,542			71,271			4,271			6.0	%		41,299			40,190			1,109			2.8	%
Direct Operating Costs
Television		20,215			18,117			2,098			11.6	%		10,099			9,036			1,063			11.8	%
Radio		5,233			5,041			192			3.8	%		2,436			2,490			(54	)		-2.2	%
Fisher Plaza		1,671			1,429			242			16.9	%		775			641			134			20.9	%
Corporate and eliminations		931			811			120			14.8	%		465			400			65			16.3	%

Consolidated		28,050			25,398			2,652			10.4	%		13,775			12,567			1,208			9.6	%
Selling, general and administrative expenses
Television		17,224			15,109			2,115			14.0	%		8,374			7,410			964			13.0	%
Radio		7,561			7,758			(197	)		-2.5	%		4,226			4,215			11			0.3	%
Fisher Plaza		207			247			(40	)		-16.2	%		80			141			(61	)		-43.3	%
Corporate and eliminations		3,241			3,336			(95	)		-2.8	%		1,515			1,344			171			12.7	%

Consolidated		28,233			26,450			1,783			6.7	%		14,195			13,110			1,085			8.3	%
Amortization of program rights
Television		4,274			4,135			139			3.4	%		2,128			2,066			62			3.0	%
Radio		5,160			5,201			(41	)		-0.8	%		4,883			4,999			(116	)		-2.3	%

Consolidated		9,434			9,336			98			1.0	%		7,011			7,065			(54	)		-0.8	%
Depreciation and amortization
Television		3,622			2,935			687			23.4	%		1,907			1,464			443			30.3	%
Radio		473			442			31			7.0	%		248			219			29			13.2	%
Fisher Plaza		1,616			1,526			90			5.9	%		787			766			21			2.7	%
Corporate and eliminations		146			124			22			17.7	%		74			62			12			19.4	%

Consolidated		5,857			5,027			830			16.5	%		3,016			2,511			505			20.1	%
Income (loss) from operations
Television		6,243			8,554			(2,311	)					4,472			6,015			(1,543	)
Radio		(76	)		(270	)		194						(350	)		158			(508	)
Fisher Plaza		2,195			1,090			1,105						1,272			580			692
Corporate and eliminations		(4,394	)		(4,314	)		(80	)					(2,092	)		(1,816	)		(276	)

Consolidated		3,968			5,060			(1,092	)					3,302			4,937			(1,635	)

Other income, net		2,296			1,767			529						1,126			881			245
Interest expense, net		(6,904	)		(6,822	)		(82	)					(3,410	)		(3,368	)		(42	)

Income (loss) from continuing operations before income taxes		(640	)		5			(645	)					1,018			2,450			(1,432	)
Provision (benefit) for federal and state income taxes		(71	)		—			(71	)					319			658			(339	)

Income (loss) from continuing operations		(569	)		5			(574	)					699			1,792			(1,093	)
Income from discontinued operations, net of income taxes		1,580			562			1,018						1,557			476			1,081

Net income	$	1,011		$	567		$	444					$	2,256		$	2,268		$	(12	)

Comparison of Fiscal Six and Three-Month Periods Ended June 30, 2007 and June 30, 2006

Revenue

Television revenue increased in the three and six-month periods ended June 30, 2007 compared to the same periods in 2006, primarily due to the acquisition of Spanish-language television stations late in 2006. These recently-purchased stations contributed $1.2 million and $2.2 million in additional television revenue in the three and six-month periods ended June 30, 2007, respectively. Revenues from our ABC-affiliated stations decreased 3.7% and 1.5% in the three and six-month periods ended June 30, 2007, respectively, as compared to the same periods in 2006, due primarily to lower political advertising. Revenues from our CBS-affiliated stations increased 1.2% and 3.5%, respectively, over the same periods, due primarily to increased non-political local revenue.

In May 2005, we signed agreements with ABC to renew that network’s affiliation at KOMO TV in Seattle and KATU TV in Portland through August 2009. In January 2006, we also renewed affiliation agreements with CBS through February 2016. The terms of the renewals include decreasing network compensation, and we are recognizing network compensation revenue on a straight-line basis over the terms of the agreements. In November 2006, we entered into affiliation agreements with Univision for five of our Spanish-language television stations for terms extending into 2011.

Radio revenue decreased in the three-month period ended June 30, 2007, as compared to the same period in 2006, primarily as a result of reduced revenues associated with our agreement to broadcast Seattle Mariners baseball games. Radio revenue in the six-month period ended June 30, 2007 was comparable to the same period in 2006, increasing 1.0%. Excluding revenue specifically attributable to our agreement to broadcast Mariners baseball games, radio revenue increased 2.6% and 7.5% in the three and six-month periods ended June 30, 2007, respectively, as compared to the same periods in 2006. We attribute this increase to improved ratings and a more aggressive sales strategy. Revenue and expenses from our small-market radio operations have been included in the discontinued operations category due to the held-for-sale status of those stations.

The revenue increase at Fisher Plaza in the three and six-month periods ended June 30, 2007, as compared to the same periods in 2006, was due primarily to increased rental and service fees, as well as increased electrical infrastructure fees and tenant reimbursements.

Direct operating costs

Direct operating costs consist primarily of costs to produce and promote broadcast programming for the television and radio segments, and costs to operate Fisher Plaza. Many of these costs are relatively fixed in nature and do not necessarily vary on a proportional basis with revenue.

The increase in direct operating costs for the television segment in the three and six-month periods ended June 30, 2007 compared to the same periods in 2006, is primarily the result of costs associated with operating our new Spanish-language television stations, as well as increased promotion expenses. In addition, expenses have risen as we have invested in our television news product and incurred news costs associated with our growing Internet business (which is included in our television segment).

Decreased direct operating costs at our radio segment in the three-month period ended June 30, 2007 as compared to the same period in 2006 was attributable to reduced promotional costs. Increased direct operating costs in the first six months of 2007 compared to the same period in 2006, was primarily attributable to increased labor costs.

The increase in direct operating costs at Fisher Plaza in the three and six-months ended June 30, 2007 compared to the same 2006 periods, was primarily attributable to increased engineering support.

The corporate and eliminations category consists primarily of the reclassification and elimination of certain operating expenses between operating segments. For example, KOMO TV and Seattle Radio recognize facilities-related expenses as selling, general and administrative, while Fisher Plaza records the reimbursement of these intercompany expenses as a reduction of direct operating costs.

Selling, general and administrative expenses

The increase in selling, general and administrative expenses in the television segment in the three and six-month periods ended June 30, 2007 compared to the same periods in 2006, was due primarily to the addition of the Spanish-language stations, as well as an increase in news research and development expenses and selling costs associated with our growing Internet business.

The decrease in selling, general and administrative expenses in the radio segment in the six-month period ended June 30, 2007 compared to the same period in 2006, was due primarily to decreased fees under a Joint Sales Agreement. Selling, general and administrative expenses in the three-month period ended June 30, 2007 were similar to the same period in 2006.

Selling, general and administrative expenses at Fisher Plaza decreased for the three and six-month periods ended June 30, 2007 compared to the same periods in 2006, due primarily to a reduction in marketing costs.

The corporate group incurred higher selling, general and administrative expenses in the second quarter of 2007, as compared to the second quarter of 2006, due primarily to higher accounting fees. Selling, general and administrative expenses were lower in the six months ended June 30, 2007 as compared to the first half of 2006, due primarily to reductions in consulting fees and severance-related expenses.

Amortization of program rights

Amortization of program rights for the television segment increased 3% in both the three and six-month periods ended June 30, 2007 compared to the same periods in 2006.

Amortization of program rights for the radio segment are related to the agreement to broadcast Seattle Mariners baseball games, and decreased a minimal amount in the three and six-month periods ended June 30, 2007 compared to the same periods in the prior year.

Depreciation and amortization

Depreciation for all segments increased in the three and six-month periods ended June 30, 2007 compared to the same periods in 2006, due primarily to significant television broadcast asset additions in late 2006.

Other income, net

Other income, net, includes dividends received on marketable securities and, to a lesser extent, interest and miscellaneous income. The increase in the three and six-months ended June 30, 2007 compared to the same periods in 2006 was due primarily to an increase in the dividend rate of our investment in Safeco shares.

Interest expense, net

Interest expense consists primarily of interest on our $150 million senior notes and amortization of loan fees. Interest expense in the three and six-month periods ended June 30, 2007 remained comparable to the same periods in 2006.

Provision (benefit) for federal and state income taxes

The benefit for federal and state income taxes varies with pre-tax income or loss. Consequently, the changes in provision and benefit for federal and state income taxes were primarily due to fluctuating income and loss from continuing operations before income taxes. The effective tax rate varies from the statutory rate primarily due to a deduction for dividends received from our investment in Safeco corporate common stock (70% exclusion rate), changes in cash surrender value of life insurance policies held by the Company (for which proceeds are received tax-free if held to maturity), and the impact of state income taxes. As required by accounting rules for interim financial reporting, we record our income tax provision or benefits based upon our estimated annual effective tax rate of 20% and 23% for the six months ended June 30, 2007 and 2006, respectively. The estimated effective tax

rate in the 2007 period was lower than in the same period in 2006 due primarily to the relationship between the amount of estimated annual permanent differences and our estimated annual pretax income or loss.

Income from discontinued operations, net of income taxes

The income from discontinued operations is related to our small-market radio stations sold or held for sale, and is presented net of income taxes. On June 1, 2007 we closed the sale of one of these stations and recognized a gain on sale of $1.5 million, net of tax. The remaining five stations remain classified as held for sale as of June 30, 2007 (see Note 5 to the condensed consolidated financial statements).

Liquidity and capital resources

In 2004, we completed a $150.0 million offering of 8.625% senior notes due 2014 and used $143.9 million of the initial $144.5 million net proceeds to retire existing debt and to settle other outstanding obligations. The notes are unconditionally guaranteed, jointly and severally, on an unsecured, senior basis by our current and future material domestic subsidiaries. Interest on the notes is payable semiannually in arrears on March 15 and September 15 of each year. In 2004, we also entered into a new six-year senior credit facility with a financial institution for borrowings of up to $20.0 million. The credit facility is collateralized by substantially all of our assets (excluding certain real property and our investment in shares of Safeco Corporation common stock).

Our current assets as of June 30, 2007 included cash and cash equivalents totalling $9.8 million, and we had working capital of $31.2 million. As of December 31, 2006, our current assets included cash and cash equivalents and restricted cash totalling $16.0 million, and we had working capital of $31.0 million. We intend to finance working capital, debt service and capital expenditures primarily through operating activities and use of the senior credit facility. As of June 30, 2007, no cash was restricted and $20.0 million was available under the credit facility.

In October 2006, we completed the sale of 18 of 24 small-market radio stations located in Montana and Eastern Washington for $26.1 million. The sale of one additional Montana station to the same buyer closed June 1, 2007, for $3.0 million. The remaining five stations continue to be actively marketed and held for sale. The small-market radio stations are treated as discontinued operations in the accompanying financial statements.

In July 2006, we entered into an LMA with WatchTV, Inc. to manage four of their television stations located in Eastern Washington. The stations provide Spanish-language programming to the Yakima-Pasco-Richland-Kennewick television market through an affiliation with Univision. Contemporaneously with the LMA, we entered into an option agreement with WatchTV to acquire the stations. On February 15, 2007 we exercised our option to purchase these television stations for $5.0 million, and on April 26, 2007, we finalized the purchase of the stations.

On August 3, 2007 we signed an agreement to purchase two television stations in the Bakersfield, California DMA, pending FCC approval and other closing conditions. The purchase price of $55 million may be paid through the use of existing cash and additional financing. A deposit on this transaction of $2,750,000 was paid and is being held in escrow.

Net cash provided by operating activities during the six months ended June 30, 2007 was $682,000, compared to $3.1 million in the comparable period in 2006. Net cash provided by operating activities consists of our net income, adjusted by non-cash expenses such as depreciation and amortization, further adjusted by gain on sale of radio station (for the 2007 period), changes in deferred income tax and changes in operating assets and liabilities.

Net cash provided by investing activities during the six month period ended June 30, 2007 was $1.6 million, compared to net cash used in investing activities of $14.4 million in the comparable period in 2006. During the six months ended June 30, 2007, cash flows related to investing activities consisted primarily of $4.6 million in purchases of property, plant and equipment, $4.9 million paid for the purchase of television stations, proceeds of $2.9 million from the sale of a radio station and a decrease of $8.5 million in restricted cash. During the six months

ended June 30, 2006, cash flows related to investing activities consisted of $6.9 million in purchases of property plant and equipment, $4.0 million paid as an investment in equity investee and $3.5 million paid as a deposit on the purchase of Oregon television stations. Broadcasting is a capital-intensive business; however, we have no significant commitments for the purchase of capital items.

Net cash provided by financing activities in the six months ended June 30, 2007 was $34,000, compared to $187,000 in the comparable period in 2006. Net cash provided by financing activities consists primarily of proceeds from the exercise of stock options.

We are subject to various debt covenants and other restrictions – including the requirement for early payments upon the occurrence of certain events, including the sale of assets – the violation of which could require repayment of outstanding borrowings and affect our credit rating and access to other financing. The Company was in compliance with all debt covenant requirements at June 30, 2007.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment to FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose, at specific election dates, to measure eligible financial assets and liabilities at fair value (referred to as the “fair value option”) and report associated unrealized gains and losses in earnings. SFAS 159 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. SFAS 159 does not eliminate disclosure requirements of other accounting standards, including fair value measurement disclosures in SFAS 157. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the implications of SFAS 159, and its impact on our financial statements has not yet been determined.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. SFAS 157 does not expand or require any new fair value measures; however, the application of this statement may change current practice. The requirements of SFAS 157 are effective for our fiscal year beginning January 1, 2008. We are in the process of evaluating this guidance and therefore have not yet determined the impact that SFAS 157 will have on our financial statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The market risk in our financial instruments represents the potential loss arising from adverse changes in financial rates. We are exposed to market risk in the areas of interest rates and securities prices. These exposures are directly related to our normal funding and investing activities.

Interest Rate Exposure

As a result of our September 20, 2004 placement of $150.0 million of 8.625% senior notes due 2014, substantially all of our debt as of June 30, 2007 is at a fixed rate. As of June 30, 2007, our fixed-rate debt totaled $150.0 million. The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of our long-term debt at June 30, 2007 was approximately $160.1 million, which was approximately $10.1 million more than its carrying value. Market risk is estimated as the potential change in fair value resulting from a hypothetical 10% change in interest rates and, as of June 30, 2007, amounted to approximately $6.6 million. Fair market values are determined based on estimates made by investment bankers based on the fair value of our fixed rate long-term debt. For fixed rate debt, interest rate changes do not impact book value, operations or cash flows.

Marketable Securities Exposure

The fair value of our investments in marketable securities as of June 30, 2007 was $187.5 million, compared to $188.3 million as of December 31, 2006. Marketable securities consist primarily of 3.0 million shares of Safeco Corporation common stock, valued based on the closing per-share sale price on the specific-identification basis as reported on the New York Stock Exchange. As of June 30, 2007, these shares represented 2.9% of the outstanding common stock of Safeco Corporation. We have classified the investments as available-for-sale under applicable accounting standards. A hypothetical 10% change in market prices underlying these securities would result in a $18.8 million change in the fair value of the marketable securities portfolio. Although changes in securities prices would affect the fair value of the marketable securities and cause unrealized gains or losses, such gains or losses would not be realized unless the investments are sold.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and, based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the Company’s fiscal quarter ended June 30, 2007, these disclosure controls and procedures are effective in ensuring that the information that the Company is required to disclose in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that, as of the end of the Company’s fiscal quarter ended June 30, 2007, the disclosure controls and procedures are effective in ensuring that the information required to be reported is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We made no changes in internal control over financial reporting during the second fiscal quarter of 2007 that materially affected or is reasonably likely to materially affect our internal control over financial reporting. We intend to continue to refine our internal control on an ongoing basis, as we deem appropriate with a view towards continuous improvement.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are parties to various claims, legal actions and complaints in the ordinary course of their businesses. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

Item 1A. Risk Factors

There have not been any material changes during the quarter ended June 30, 2007 to the risk factors set forth in Part 1, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on March 14, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders was held April 26, 2007.

The three nominees elected to the Board of Directors for three-year terms expiring in 2010 are listed below. There were no broker non-votes with respect to any of the nominees.


	Votes for		Votes withheld
Colleen B. Brown		5,590,317		2,486,549
Donald G. Graham, III		6,084,266		1,992,600
Brian P. McAndrews		5,595,641		2,481,225

Continuing as Directors are Richard L. Hawley, George F. Warren, Jr. and William W. Warren, Jr., whose terms expire in 2008 and Phelps K. Fisher, Deborah L. Bevier and Jerry St. Dennis whose terms expire in 2009. In addition, Mr. Michael D. Wortsman was elected to the Board of Directors of the Company on July 26, 2007, while the retirement of James W. Cannon as a Director became effective that same date. Mr. Wortsman’s initial term will expire in 2008.

The following additional matter brought for vote at the 2007 annual meeting of shareholders passed by the vote indicated:


	Votes for		Votes against		Votes abstain		Non votes
Amendments to the Incentive Plan of 2001		4,489,974		2,600,021		2,695		984,176


PART I
FINANCIAL INFORMATION

Item 1.		Financial Statements

The following Condensed Consolidated Financial Statements (unaudited) are presented for the Registrant, Fisher Communications, Inc., and its subsidiaries.

1.		Condensed Consolidated Statements of Operations:
		Three and six months ended June 30, 2007 and 2006

2.		Condensed Consolidated Balance Sheets:
		June 30, 2007 and December 31, 2006

3.		Condensed Consolidated Statements of Cash Flows:
		Six months ended June 30, 2007 and 2006

4.		Condensed Consolidated Statements of Comprehensive Income:
		Three and six months ended June 30, 2007 and 2006

5.		Notes to Condensed Consolidated Financial Statements

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures about Market Risks
Item 4.		Controls and Procedures

PART II
OTHER INFORMATION

Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.		Defaults upon Senior Securities
Item 4.		Submission of Matters to a Vote of Security Holders
Item 5.		Other Information
Item 6.		Exhibits

SIGNATURES
EXHIBIT INDEX
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2


31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


Exhibit No.		Description

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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		FISHER COMMUNICATIONS, INC. (Registrant)

Dated: August 8, 2007		/s/ S. Mae Fujita Numata S. Mae Fujita Numata Senior Vice President Chief Financial Officer and Corporate Secretary


		/s/ Colleen B. Brown Colleen B. Brown President and Chief Executive Officer

	(1)		The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

	(2)		The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.