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 September 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		(I.R.S. Employer
Incorporation or Organization)		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 November 1, 2007: 8,724,616

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Nine months ended						Three months ended
(in thousands, except per-share amounts)	September 30						September 30
(Unaudited)	2007			2006			2007			2006

Revenue	$	116,340		$	109,983		$	40,798		$	38,712

Costs and expenses
Direct operating costs (exclusive of depreciation and amortization of $7,198, $6,222, $2,312, and $2,073, respectively, and amortization of program rights of $16,804, $16,418, $7,370, and $7,082, respectively, reported separately below)		41,920			38,993			13,870			13,595
Selling, general and administrative expenses		43,285			40,139			15,052			13,689
Amortization of program rights		16,804			16,418			7,370			7,082
Depreciation and amortization		8,668			7,515			2,811			2,488

		110,677			103,065			39,103			36,854

Income from operations		5,663			6,918			1,695			1,858
Other income, net		3,683			2,814			1,387			1,047
Interest expense, net		(10,222	)		(10,396	)		(3,318	)		(3,574	)

Loss from continuing operations before income taxes		(876	)		(664	)		(236	)		(669	)
Provision for federal and state income taxes		294			115			365			115

Loss from continuing operations		(1,170	)		(779	)		(601	)		(784	)
Income from discontinued operations, net of income taxes		1,648			675			68			113

Net income (loss)	$	478		$	(104	)	$	(533	)	$	(671	)


Income (loss) per share:
From continuing operations	$	(0.14	)	$	(0.09	)	$	(0.07	)	$	(0.09	)
From discontinued operations		0.19			0.08			0.01			0.01

Basic and diluted net income (loss) per share	$	0.05		$	(0.01	)	$	(0.06	)	$	(0.08	)


Shares used in computation of basic and diluted net income (loss) per share		8,722			8,711			8,724			8,716

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per-share amounts)	September 30			December 31
(Unaudited)	2007			2006

ASSETS
Current Assets
Cash and cash equivalents	$	7,479		$	7,477
Restricted cash					8,473
Receivables, net		32,342			30,131
Deferred income taxes		686			690
Prepaid expenses and other assets		3,168			3,592
Television and radio broadcast rights		7,768			6,676
Assets held for sale		12			19

Total current assets		51,455			57,058
Marketable securities, at market value		184,394			188,307
Cash value of life insurance and retirement deposits		16,566			15,959
Television and radio broadcast rights		21			1,041
Goodwill, net		37,361			32,714
Intangible assets		42,799			41,142
Investment in equity investee		2,597			2,789
Deferred financing fees and other assets		9,212			7,748
Assets held for sale		2,045			2,612
Property, plant and equipment, net		146,499			148,207

Total Assets	$	492,949		$	497,577


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	4,113		$	4,600
Accrued payroll and related benefits		6,077			7,567
Interest payable		540			3,809
Television and radio broadcast rights payable		6,809			5,667
Income taxes payable		388			486
Other current liabilities		4,861			3,626
Liabilities of businesses held for sale		117			289

Total current liabilities		22,905			26,044
Long-term debt		150,000			150,000
Accrued retirement benefits		19,003			19,027
Deferred income taxes		53,651			54,414
Other liabilities		9,343			8,527

Commitments and Contingencies

Stockholders’ Equity
Common stock, shares authorized 12,000,000, $1.25 par value; issued and outstanding 8,723,649 as of September 30, 2007 and 8,720,091 as of December 31, 2006		10,905			10,900
Capital in excess of par		9,997			9,454
Accumulated other comprehensive income, net of income taxes:
Unrealized gain on marketable securities		118,852			121,441
Accumulated loss		(1,714	)		(1,735	)
Prior service cost		(188	)		(212	)
Retained earnings		100,195			99,717

Total Stockholders’ Equity		238,047			239,565

Total Liabilities and Stockholders’ Equity	$	492,949		$	497,577

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine months ended
(in thousands)	September 30
(Unaudited)	2007			2006

Cash flows from operating activities
Net income (loss)	$	478		$	(104	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization		8,668			7,623
Deferred income taxes		(167	)		462
Dividends from equity investee		150
Amortization of deferred financing fees		474			474
Amortization of program rights		16,804			16,418
Payments for television and radio broadcast rights		(15,740	)		(15,493	)
Gain on sale of radio station		(1,491	)
Equity in operations of equity investees		42			(10	)
Stock-based compensation		514			349
Other		40			43
Change in operating assets and liabilities
Receivables		(2,199	)		(1,821	)
Prepaid expenses and other current assets		431			693
Cash value of life insurance and retirement deposits		(607	)		(477	)
Other assets		711			(329	)
Trade accounts payable, accrued payroll and related benefits, interest payable, and other current liabilities		(4,235	)		(2,838	)
Income taxes receivable and payable		(98	)
Accrued retirement benefits		(23	)		89
Other liabilities		(418	)		3,184

Net cash provided by operating activities		3,334			8,263

Cash flows from investing activities
Purchase of investments available-for-sale		(182	)
Proceeds from sale of investments available-for-sale		133
Decrease in restricted cash		8,473
Proceeds from sale of radio station		2,869
Payments for options to purchase television stations					(1,100	)
Deposits paid for purchase of television stations		(2,750	)		(9,728	)
Purchase of television stations		(4,931	)		(16,142	)
Purchase of online news service		(1,482	)
Proceeds from sale of property, plant & equipment		1,250
Purchase of property, plant and equipment		(6,740	)		(12,633	)

Net cash used in investing activities		(3,360	)		(39,603	)

Cash flows from financing activities
Borrowings under borrowing agreements		6,000			15,000
Payments on borrowing agreements		(6,000	)		(2,000	)
Payment of capital lease obligation		(11	)
Proceeds from exercise of stock options		39			546
Excess tax benefit from exercise of stock options					23

Net cash provided by financing activities		28			13,569

Net increase (decrease) in cash and cash equivalents		2			(17,771	)
Cash and cash equivalents, beginning of period		7,477			19,622

Cash and cash equivalents, end of period	$	7,479		$	1,851

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. The requirements of SFAS 159 are effective for the Company’s fiscal year beginning January 1, 2008. 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.

In July 2007, the Company entered into an asset purchase agreement with Pegasus News, Inc. (“Pegasus”) to acquire, for approximately $1.5 million, substantially all of the assets used or held for use by Pegasus in connection with its business and operations. Pegasus is a multimedia local news service, specializing in providing personalized online local news, information and advertising. The primary assets acquired in the acquisition include intellectual property, software and licenses. The excess of the purchase price of the assets over the fair value of the tangible and intangible net assets was recorded as goodwill. The Company’s purchase price allocation as reflected in the accompanying condensed consolidated balance sheet is preliminary and has not been finalized. The Company does not anticipate any significant differences between current values recorded and the fair values upon finalizing the purchase price allocation.

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):


	Nine months ended						Three months ended
	September 30						September 30
	2007			2006			2007			2006

Revenue	$	1,477		$	7,830		$	500		$	1,781
Income from discontinued operations:
Discontinued operating activities	$	242		$	1,046		$	105		$	178
Gain on sale		2,294

		2,536			1,046			105			178
Income tax effect		(888	)		(371	)		(37	)		(65	)

	$	1,648		$	675		$	68		$	113

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


	September 30		December 31
	2007		2006
Goodwill, net	$	645	$	1,129
Property, plant and equipment, net		635		718
Intangible assets		765		765
Other assets		12		19

	$	2,057	$	2,631


Liabilities of businesses held for sale	$	117	$	289

6. Television and Radio Broadcast Rights and Other Broadcast Commitments

The Company acquires television and radio broadcast rights. 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. It is possible that the cost of commitments for program rights may ultimately exceed direct revenue from the program. 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 September 30, 2007, the Company had commitments under license agreements amounting to $38.7 million for future rights to broadcast television and radio programs through 2013, and $2.4 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 $8.7 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):


	Nine months ended				Three months ended
	September 30				September 30
	2007		2006		2007		2006
Interest cost	$	798	$	779	$	266	$	259
Amortization of loss		32		116		10		39

Net periodic pension cost	$	830	$	895	$	276	$	298

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 (loss) per share has been computed as follows (in thousands, except per-share amounts):


	Nine months						Three months
	ended September 30						ended September 30
	2007			2006			2007			2006

Loss from continuing operations	$	(1,170	)	$	(779	)	$	(601	)	$	(784	)
Income from discontinued operations, net of income taxes		1,648			675			68			113

Net income (loss)	$	478		$	(104	)	$	(533	)	$	(671	)


Shares used in computation of basic and diluted net income (loss) per share		8,722			8,711			8,724			8,716

Income (loss) per share:
From continuing operations	$	(0.14	)	$	(0.09	)	$	(0.07	)	$	(0.09	)
From discontinued operations		0.19			0.08			0.01			0.01

Basic and diluted net income (loss) per share	$	0.05		$	(0.01	)	$	(0.06	)	$	(0.08	)

The effect of 20,770 restricted stock rights and options to purchase 199,505 shares are excluded from the calculation of weighted average shares outstanding for the nine and three-month periods ended September 30, 2007, because such rights and options were anti-dilutive due to the loss from continuing operations for the periods; therefore, there is no difference in the calculation between basic and diluted per-share amounts.

The effect of 7,900 restricted stock rights and options to purchase 219,425 shares are excluded from the calculation of weighted average shares outstanding for the nine and three-month periods ended September 30, 2006, because such rights and options were anti-dilutive due to the loss from continuing operations for the periods; therefore, there is no difference in the calculation between basic and diluted per-share amounts.

9. Stock-Based Compensation

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


	Nine months				Three months
	ended September 30				ended September 30
	2007		2006		2007		2006
Stock-based compensation expense	$	514	$	349	$	186	$	62

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 the Company agreed on and paid 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. A net reduction in interest expense of $6,000 and an increase in interest expense of $202,000 was recognized for the nine months ended September 30, 2007 and 2006, respectively. A net reduction in interest expense of $99,000 and an increase in interest expense of $152,000 was recognized for the three months ended September 30, 2007 and 2006, respectively. The revisions to interest expense are a result of final settlement of the IRS examination of the Company’s 1999 – 2002 income tax returns. As of September 30, 2007 and December 31, 2006, the Company had approximately $218,000 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 benefit based upon its estimated annual effective tax rate, which is estimated as 19% and 23% for the nine months ended September 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. In addition, during the three month periods ended September 30, 2007 and 2006, the company recognized additional federal income tax expense of $448,000 and $388,000, respectively, as a result of IRS examinations of prior year tax returns.

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):


	Nine months					Three months
	ended September 30					ended September 30
	2007			2006		2007			2006
Television	$	77,110		$	73,322	$	25,532		$	24,472
Radio		30,844			29,986		12,493			11,814
Fisher Plaza		8,500			6,662		2,811			2,370
Corporate and eliminations		(114	)		13		(38	)		56

	$	116,340		$	109,983	$	40,798		$	38,712

Inter-segment sales amounted to $114,000 and $156,000 for the nine months ended September 30, 2007 and 2006, respectively, and $38,000 and $52,000 for the three months ended September 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):


	Nine months						Three months
	ended September 30						ended September 30
	2007			2006			2007			2006
Television	$	9,822		$	12,303		$	3,405		$	3,619
Radio		(514	)		(539	)		(472	)		(332	)
Fisher Plaza		3,215			1,602			1,019			513
Corporate and eliminations		(3,177	)		(3,634	)		(870	)		(895	)

	$	9,346		$	9,732		$	3,082		$	2,905

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


	Nine months						Three months
	ended September 30						ended September 30
	2007			2006			2007			2006
Total segment income from continuing operations before interest and income taxes	$	9,346		$	9,732		$	3,082		$	2,905
Interest expense		(10,222	)		(10,396	)		(3,318	)		(3,574	)

Consolidated loss from continuing operations before income taxes	$	(876	)	$	(664	)	$	(236	)	$	(669	)

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


	September 30		December 31
	2007		2006
Total assets

Television	$	135,230	$	130,994
Radio		23,119		24,436
Fisher Plaza		118,310		119,872
Corporate and eliminations		214,233		219,644

		490,892		494,946
Assets held for sale		2,057		2,631

	$	492,949	$	497,577

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

12. Commitments

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 $55.0 million may be paid through the use of available cash, additional financing or a combination. As of September 30, 2007 a deposit of $2.75 million was held in escrow on this transaction and is included in deferred financing fees and other assets in the Condensed Consolidated Balance Sheet.

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 nine and three months ended September 30, 2007 and 2006, and cash flows for the nine months ended September 30, 2007 and 2006. Also presented are the condensed consolidated balance sheets as of September 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 nine months ended September 30, 2007


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
(in thousands)	Inc.			Subsidiaries			Eliminations			Subsidiaries

Revenue	$			$	116,454		$	(114	)	$	116,340
Costs and expenses
Direct operating costs					40,510			1,410			41,920
Selling, general and administrative expenses		6,399			38,410			(1,524	)		43,285
Amortization of program rights					16,804						16,804
Depreciation and amortization		217			8,451						8,668

		6,616			104,175			(114	)		110,677

Income (loss) from operations		(6,616	)		12,279			—			5,663
Other income, net		3,413			270						3,683
Equity in income of subsidiaries		9,578						(9,578	)		—
Interest expense, net		(10,214	)		(8	)					(10,222	)

Income (loss) from continuing operations before income taxes		(3,839	)		12,541			(9,578	)		(876	)
Provision (benefit) for federal and state income taxes		(4,317	)		4,611						294

Income (loss) from continuing operations		478			7,930			(9,578	)		(1,170	)
Income from discontinued operations, net of income taxes					1,648						1,648

Net income (loss)	$	478		$	(9,578	)	$	9,578		$	478

Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the nine months ended September 30, 2006


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
(in thousands)	Inc.			Subsidiaries			Eliminations			Subsidiaries

Revenue	$			$	110,139		$	(156	)	$	109,983
Costs and expenses
Direct operating costs					37,753			1,240			38,993
Selling, general and administrative expenses		6,144			35,391			(1,396	)		40,139
Amortization of program rights					16,418						16,418
Depreciation and amortization		184			7,331						7,515

		6,328			96,893			(156	)		103,065

Income (loss) from operations		(6,328	)		13,246						6,918
Other income, net		2,551			263						2,814
Equity in income of subsidiaries		9,207						(9,207	)		—
Interest expense, net		(10,391	)		(5	)					(10,396	)

Income (loss) from continuing operations before income taxes		(4,961	)		13,504			(9,207	)		(664	)
Provision (benefit) for federal and state income taxes		(4,857	)		4,972						115

Income (loss) from continuing operations		(104	)		8,532			(9,207	)		(779	)
Income from discontinued operations, net of income taxes					675						675

Net income (loss)	$	(104	)	$	9,207		$	(9,207	)	$	(104	)

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


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
(in thousands)	Inc.			Subsidiaries			Eliminations			Subsidiaries

Revenue	$			$	40,836		$	(38	)	$	40,798
Costs and expenses
Direct operating costs					13,391			479			13,870
Selling, general and administrative expenses		2,152			13,417			(517	)		15,052
Amortization of program rights					7,370						7,370
Depreciation and amortization		71			2,740						2,811

		2,223			36,918			(38	)		39,103

Income (loss) from operations		(2,223	)		3,918						1,695
Other income, net		1,344			43						1,387
Equity in income of subsidiaries		2,623						(2,623	)		—
Interest expense, net		(3,310	)		(8	)					(3,318	)

Income (loss) from continuing operations before income taxes		(1,566	)		3,953			(2,623	)		(236	)
Provision (benefit) for federal and state income taxes		(1,033	)		1,398						365

Income (loss) from continuing operations		(533	)		2,555			(2,623	)		(601	)
Income from discontinued operations, net of income taxes					68						68

Net income (loss)	$	(533	)	$	2,623		$	(2,623	)	$	(533	)

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


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
(in thousands)	Inc.			Subsidiaries		Eliminations			Subsidiaries

Revenue	$			$	38,764	$	(52	)	$	38,712
Costs and expenses
Direct operating costs					13,166		429			13,595
Selling, general and administrative expenses		1,921			12,249		(481	)		13,689
Amortization of program rights					7,082					7,082
Depreciation and amortization		60			2,428					2,488

		1,981			34,925		(52	)		36,854

Income (loss) from operations		(1,981	)		3,839					1,858
Other income, net		975			72					1,047
Equity in income of subsidiaries		2,543					(2,543	)		—
Interest expense, net		(3,574	)							(3,574	)

Income (loss) from continuing operations before income taxes		(2,037	)		3,911		(2,543	)		(669	)
Provision (benefit) for federal and state income taxes		(1,366	)		1,481					115

Income (loss) from continuing operations		(671	)		2,430		(2,543	)		(784	)
Income from discontinued operations, net of income taxes					113					113

Net income (loss)	$	(671	)	$	2,543	$	(2,543	)	$	(671	)

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


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
(in thousands)	Inc.			Subsidiaries		Eliminations			Subsidiaries

ASSETS
Current Assets
Cash and cash equivalents	$	7,042		$	437	$			$	7,479
Receivables, net		663			31,679					32,342
Due from affiliate					33,487		(33,487	)		—
Deferred income taxes		106			580					686
Prepaid expenses and other assets		436			2,732					3,168
Television and radio broadcast rights					7,768					7,768
Assets held for sale					12					12

Total current assets		8,247			76,695		(33,487	)		51,455
Marketable securities, at market value		183,846			548					184,394
Investment in consolidated subsidiaries		263,212					(263,212	)		—
Cash value of life insurance and retirement deposits		16,566								16,566
Television and radio broadcast rights					21					21
Goodwill, net					37,361					37,361
Intangible assets					42,799					42,799
Investment in equity investee					2,597					2,597
Deferred financing fees and other assets		4,074			5,138					9,212
Assets held for sale					2,045					2,045
Property, plant and equipment, net		872			145,627					146,499

Total Assets	$	476,817		$	312,831	$	(296,699	)	$	492,949


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	1,052		$	3,061				$	4,113
Payable to affiliate		33,487					(33,487	)		—
Accrued payroll and related benefits		812			5,265					6,077
Interest payable		540								540
Television and radio broadcast rights payable					6,809					6,809
Income taxes payable					388					388
Other current liabilities		967			3,894					4,861
Liabilities of businesses held for sale					117					117

Total current liabilities		36,858			19,534		(33,487	)		22,905
Long-term debt		150,000								150,000
Accrued retirement benefits		18,973			30					19,003
Deferred income taxes		32,874			20,777					53,651
Other liabilities		65			9,278					9,343

Stockholders’ Equity
Common stock		10,905			1,131		(1,131	)		10,905
Capital in excess of par		9,997			164,234		(164,234	)		9,997
Accumulated other comprehensive income, net of income taxes:
Unrealized gain on marketable securities	118,852									118,852
Accumulated loss		(1,714	)							(1,714	)
Prior service cost		(188	)							(188	)
Retained earnings		100,195			97,847		(97,847	)		100,195

Total Stockholders’ Equity		238,047			263,212		(263,212	)		238,047

Total Liabilities and Stockholders’ Equity	$	476,817		$	312,831	$	(296,699	)	$	492,949

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


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
(in thousands)	Inc.			Subsidiaries		Eliminations			Subsidiaries

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 nine months ended September 30, 2007


				100%						Fisher
	Fisher			Owned						Communications,
	Communications,			Guarantor						Inc. and
(in thousands)	Inc.			Subsidiaries			Eliminations			Subsidiaries

Net cash provided by (used in) operating activities	$	(1,264	)	$	3,531		$	1,067		$	3,334

Cash flows from investing activities
Purchase of investments available-for-sale					(182	)					(182	)
Proceeds from sale of investments available-for-sale					133						133
Decrease in restricted cash					8,473						8,473
Proceeds from sale of radio station					2,869						2,869
Deposit paid for purchase of television stations					(2,750	)					(2,750	)
Purchase of television stations					(4,931	)					(4,931	)
Purchase of online news service					(1,482	)					(1,482	)
Proceeds from sale of property, plant and equipment					1,250						1,250
Purchase of property, plant and equipment		(277	)		(6,463	)					(6,740	)

Net cash used in investing activities		(277	)		(3,083	)		—			(3,360	)


Cash flows from financing activities
Borrowings under borrowing agreements		6,000									6,000
Payments on borrowing agreements		(6,000	)								(6,000	)
Payment of capital lease obligation					(11	)					(11	)
Proceeds from exercise of stock options		39									39

Net cash provided by (used in) financing activities		39			(11	)		—			28

Net increase (decrease) in cash and cash equivalents		(1,502	)		437			1,067			2
Cash and cash equivalents, beginning of period		8,544						(1,067	)		7,477

Cash and cash equivalents, end of period	$	7,042		$	437		$	—		$	7,479

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


				100%					Fisher
	Fisher			Owned					Communications,
	Communications,			Guarantor					Inc. and
(in thousands)	Inc.			Subsidiaries			Eliminations		Subsidiaries

Net cash provided by (used in) operating activities	$	(15,577	)	$	23,840				$	8,263

Cash flows from investing activities
Payment of options for purchase of television stations					(1,100	)				(1,100	)
Purchase of television stations					(16,142	)				(16,142	)
Deposit paid for purchase of television stations					(9,728	)				(9,728	)
Purchase of property, plant and equipment		(169	)		(12,464	)				(12,633	)

Net cash used in investing activities		(169	)		(39,434	)		—		(39,603	)


Cash flows from financing activities
Borrowings under borrowing agreements		15,000								15,000
Payments on borrowing agreements		(2,000	)							(2,000	)
Excess tax benefit from exercise of stock options		23								23
Proceeds from exercise of stock options		546								546

Net cash provided by financing activities		13,569			—			—		13,569

Net decrease in cash and cash equivalents		(2,177	)		(15,594	)		—		(17,771	)
Cash and cash equivalents, beginning of period		3,660			15,962					19,622

Cash and cash equivalents, end of period	$	1,483		$	368		$	—	$	1,851

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 nine-month periods ended September 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.

In July 2007, we entered into an asset purchase agreement with Pegasus News, Inc. (“Pegasus”) to acquire, for approximately $1.5 million, substantially all of the assets used or held for use by Pegasus in connection with its business and operations. Pegasus is a multimedia local news service, specializing in providing personalized online local news, information and advertising.

In August 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 $55.0 million may be paid through the use of available cash, additional financing or a combination. A deposit on this transaction of $2.75 million 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. In October 2007 the option was amended to, among other things, increase the number of stations under option to five and extend the term of the option.

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 September 30, 2007, approximately 96% 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.


	Nine months												Three months
	ended September 30						Variance						ended September 30						Variance
(Dollars in thousands)	2007			2006			$			%			2007			2006			$			%
Revenue
Television	$	77,110		$	73,322		$	3,788			5.2	%	$	25,532		$	24,472		$	1,060			4.3	%
Radio		30,844			29,986			858			2.9	%		12,493			11,814			679			5.7	%
Fisher Plaza		8,500			6,662			1,838			27.6	%		2,811			2,370			441			18.6	%
Corporate and eliminations		(114	)		13			(127	)					(38	)		56			(94	)

Consolidated		116,340			109,983			6,357			5.8	%		40,798			38,712			2,086			5.4	%
Direct operating costs
Television		30,353			27,825			2,528			9.1	%		10,138			9,708			430			4.4	%
Radio		7,650			7,579			71			0.9	%		2,417			2,538			(121	)		-4.8	%
Fisher Plaza		2,507			2,349			158			6.7	%		836			920			(84	)		-9.1	%
Corporate and eliminations		1,410			1,240			170			13.7	%		479			429			50			11.7	%

Consolidated		41,920			38,993			2,927			7.5	%		13,870			13,595			275			2.0	%
Selling, general and administrative expenses
Television		25,577			22,838			2,739			12.0	%		8,353			7,729			624			8.1	%
Radio		12,521			12,118			403			3.3	%		4,960			4,360			600			13.8	%
Fisher Plaza		311			391			(80	)		-20.5	%		104			144			(40	)		-27.8	%
Corporate and eliminations		4,876			4,792			84			1.8	%		1,635			1,456			179			12.3	%

Consolidated		43,285			40,139			3,146			7.8	%		15,052			13,689			1,363			10.0	%
Amortization of program rights
Television		6,304			6,168			136			2.2	%		2,030			2,033			(3	)		-0.1	%
Radio		10,500			10,250			250			2.4	%		5,340			5,049			291			5.8	%

Consolidated		16,804			16,418			386			2.4	%		7,370			7,082			288			4.1	%
Depreciation and amortization
Television		5,257			4,361			896			20.5	%		1,635			1,426			209			14.7	%
Radio		726			649			77			11.9	%		253			207			46			22.2	%
Fisher Plaza		2,468			2,321			147			6.3	%		852			795			57			7.2	%
Corporate and eliminations		217			184			33			17.9	%		71			60			11			18.3	%

Consolidated		8,668			7,515			1,153			15.3	%		2,811			2,488			323			13.0	%
Income (loss) from operations
Television		9,619			12,130			(2,511	)					3,376			3,576			(200	)
Radio		(553	)		(610	)		57						(477	)		(340	)		(137	)
Fisher Plaza		3,214			1,601			1,613						1,019			511			508
Corporate and eliminations		(6,617	)		(6,203	)		(414	)					(2,223	)		(1,889	)		(334	)

Consolidated		5,663			6,918			(1,255	)					1,695			1,858			(163	)

Other income, net		3,683			2,814			869						1,387			1,047			340
Interest expense, net		(10,222	)		(10,396	)		174						(3,318	)		(3,574	)		256

Loss from continuing operations before income taxes		(876	)		(664	)		(212	)					(236	)		(669	)		433
Provision for federal and state income taxes		294			115			179						365			115			250

Loss from continuing operations		(1,170	)		(779	)		(391	)					(601	)		(784	)		183
Income from discontinued operations, net of income taxes		1,648			675			973						68			113			(45	)

Net income (loss)	$	478		$	(104	)	$	582					$	(533	)	$	(671	)	$	138

Comparison of Fiscal Nine and Three-Month Periods Ended September 30, 2007 and September 30, 2006

Revenue

Television revenue increased in the three and nine-month periods ended September 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 $669,000 and $2.8 million in additional television revenue in the three and nine-month periods ended September 30, 2007, respectively. In addition, revenues from our growing Internet business (which is included in our television segment) have increased significantly. Revenues from our ABC-affiliated stations decreased 0.9% and 1.3% in the three and nine-month periods ended September 30, 2007, respectively, as compared to the same periods in 2006, due primarily to lower political advertising. Revenues from our CBS-affiliated stations increased 2.7% and 3.3%, respectively, over the same periods, due primarily to increased non-political local and national 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 our Spanish-language television stations for terms extending into 2011.

Radio revenue increased in the three and nine-month periods ended September 30, 2007, as compared to the same periods in 2006, primarily as a result of increases in non-political national revenue. Excluding revenue specifically attributable to our agreement to broadcast Mariners baseball games, radio revenue increased 10.5% and 8.5% in the three and nine-month periods ended September 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 nine-month periods ended September 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 nine-month periods ended September 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.

Decreased direct operating costs at our radio segment in the three-month period ended September 30, 2007 as compared to the same period in 2006, was attributable to reduced promotional costs. Increased direct operating costs in the first nine 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 nine months ended September 30, 2007 compared to the same 2006 period is primarily attributable to increased property tax and utilities expenses. The decrease in direct operating costs in the three months ended September 30, 2007 compared to the same 2006 period is due to decreased 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 nine-month periods ended September 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 commissions, market research and development expenses and selling costs associated with our growing Internet business.

The increase in selling, general and administrative expenses in the radio segment in the three and nine-month periods ended September 30, 2007 compared to the same periods in 2006 was due primarily to increases in Mariners merchandising expense and commissions.

Selling, general and administrative expenses at Fisher Plaza decreased for the three and nine-month periods ended September 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 three and nine-month periods ended September 30, 2007, compared to the same periods in 2006, due primarily to higher legal and professional services fees and stock-based compensation, partially offset by reductions in severance and recruiting costs.

Amortization of program rights

Amortization of program rights for the television segment increased 2% in the nine-month period ended September 30, 2007, compared to the same period in 2006. Amortization of program rights for the television segment in the three-month period ended September 30, 2007 was similar to the same period in 2006.

Amortization of program rights for the radio segment are related to the agreement to broadcast Seattle Mariners baseball games, and increased 2.4% and 5.8% in the three and nine-month periods ended September 30, 2007 compared to the same periods in the prior year.

Depreciation and amortization

Depreciation for all segments increased in the three and nine-month periods ended September 30, 2007 compared to the same periods in 2006, due primarily to significant television broadcast and Plaza 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 nine-months ended September 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 nine-month periods ended September 30, 2007 remained comparable to the same periods in 2006.

Provision (benefit) for federal and state income taxes

The provision 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 benefit based upon our estimated annual effective tax rate, which is estimated as 19% and 23% for the nine months ended September 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. In addition, during the three month periods ended September 30, 2007 and 2006, the company recognized additional federal income tax expense of $448,000 and $388,000, respectively, as a result of IRS examinations of prior year tax returns.

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 September 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 nine-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 September 30, 2007 included cash and cash equivalents totalling $7.5 million, and we had working capital of $28.6 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 September 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.

In August 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 $55.0 million may be paid through the use of available cash, additional financing or a combination. A deposit on this transaction of $2.75 million 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. In October 2007, the option was amended to, among other things, increase the number of stations under option to five and extend the term of the option.

Net cash provided by operating activities during the nine months ended September 30, 2007 was $3.3 million, compared to $8.3 million in the comparable period in 2006. Net cash provided by operating activities consists of our net income (loss), 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 used in investing activities during the nine month period ended September 30, 2007 was $3.4 million, compared to $39.6 million in the comparable period in 2006. During the nine months ended September 30, 2007, cash flows related to investing activities consisted primarily of $6.7 million in purchases of property, plant and equipment, $4.9 million paid for the purchase of television stations, $2.75 million paid as a deposit on the purchase of television stations and $1.5 million paid for the purchase of an online news service, partially offset by proceeds of $2.9 million from the sale of a radio station, $1.25 million in proceeds from the sale of property, plant and equipment, and a decrease of $8.5 million in restricted cash. During the nine months ended September 30, 2006, cash flows related to investing activities consisted of $12.6 million in purchases of property plant and equipment, $16.1 million paid for the purchase of television stations, $9.7 million paid as a deposit on the purchase of television stations and $1.1 million paid for options to purchase television stations. Broadcasting is a capital-intensive business; however, we have no significant commitments for the purchase of capital items, except as related to the potential acquisition of two Bakersfield, California television stations as discussed above.

Net cash provided by financing activities in the nine months ended September 30, 2007 was $28,000, compared to $13.6 million in the comparable period in 2006. Net cash provided by financing activities in the nine months ended September 30, 2006 consisted primarily of net borrowing against our revolving credit facility.

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 September 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. The requirements of SFAS 159 are effective for our fiscal year beginning January 1, 2008. 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 September 30, 2007 is at a fixed rate. As of September 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 September 30, 2007 was approximately $154.9 million, which was approximately $4.9 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 September 30, 2007, amounted to approximately $6.5 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 September 30, 2007 was $184.4 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 September 30, 2007, these shares represented 3.1% 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 $18.4 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 September 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 September 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 third 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 September 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

None

Item 5. Other Information

None

Item 6. Exhibits

(a) Exhibits:

	10.1		Asset Purchase Agreement dated August 3, 2007 between Westwind Communications L.L.C. and Fisher Broadcasting Company.

	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.


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 nine months ended September 30, 2007 and 2006

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

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

4. Condensed Consolidated Statements of Comprehensive Income: Three and nine months ended September 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 10.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2


	Nine months ended						Three months ended
(in thousands)	September 30						September 30
(Unaudited)	2007			2006			2007			2006

Net income (loss)	$	478		$	(104	)	$	(533	)	$	(671	)

Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities		(3,961	)		7,343			(3,121	)		7,766
Effect of income taxes		1,386			(2,570	)		1,092			(2,718	)
Accumulated loss		32						11
Effect of income taxes		(11	)					(4	)
Prior service cost		36						12
Effect of income taxes		(12	)					(4	)
Reclassification adjustment for gains included in net income (loss)		(22	)					(14	)
Effect of income taxes		8						5

Other comprehensive income (loss)		(2,544	)		4,773			(2,023	)		5,048

Comprehensive income (loss)	$	(2,066	)	$	4,669		$	(2,556	)	$	4,377


	FISHER COMMUNICATIONS, INC. (Registrant)
Dated: November 8, 2007	/s/ S. Mae Fujita Numata
	S. Mae Fujita Numata
	Senior Vice President Chief Financial Officer and Corporate Secretary

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Exhibit No.		Description

10.1		Asset Purchase Agreement dated August 3, 2007 between Westwind Communications L.L.C. and Fisher Broadcasting Company.

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.