-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IiFT8aJQGvmAVfrrtxHIY8ZQGdHFcJOiifapy8If9pvvGXBiLBaGsq/cs/9l41mx prbPqSInMg+7QuXRcS8wLg== 0001032210-99-000776.txt : 19990517 0001032210-99-000776.hdr.sgml : 19990517 ACCESSION NUMBER: 0001032210-99-000776 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISHER COMPANIES INC CENTRAL INDEX KEY: 0001034669 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 910222175 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22439 FILM NUMBER: 99622479 BUSINESS ADDRESS: STREET 1: 1525 ONE UNION SQU STREET 2: 600 UNIVERSITY ST CITY: SEATTLE STATE: WA ZIP: 98101-3185 BUSINESS PHONE: 2066242752 MAIL ADDRESS: STREET 1: 1525 ONE UNION SQU STREET 2: 600 UNIVERSITY ST CITY: SEATTLE STATE: WA ZIP: 98101-3185 10-Q 1 FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 [_] Transition Report Under Section 13 or 15(d) of the Exchange Act For the transition period from ________________ to ____________________ Commission File Number 0-22439 FISHER COMPANIES 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) 1525 One Union Square 600 University Street Seattle, Washington 98101-3185 (Address of Principal Executive Offices) (Zip Code) (206) 624-2752 (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 X No --------- --------- 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 March 31, 1999: 8,542,384 PART I FINANCIAL INFORMATION Item 1. Financial Statements The following Consolidated Financial Statements are presented for the Registrant, Fisher Companies Inc. and wholly owned subsidiaries. 1. Consolidated Statement of Income: Three months ended March 31, 1999 and 1998. 2. Consolidated Balance Sheet: March 31, 1999 and December 31, 1998. 3. Consolidated Statement of Cash Flows: Three months ended March 31, 1999 and 1998. 4. Consolidated Statement of Comprehensive Income: Three months ended March 31, 1999 and 1998. 5. Notes to Consolidated Financial Statements. 2 ITEM 1 - FINANCIAL STATEMENTS FISHER COMPANIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31 1999 1998 - ----------------------------------------------------------------- ------------------ (In thousands except per share amounts) (Unaudited) Sales and other revenue: Broadcasting $28,122 $27,754 Milling 26,999 26,467 Real estate 3,179 3,026 Corporate and other, primarily dividends and interest income 1,098 990 - ----------------------------------------------------------------- ------- ------- 59,398 58,237 ------- ------- Costs and expenses: Cost of products and services sold 39,720 37,973 Selling expenses 4,964 4,518 General, administrative and other expenses 10,872 9,479 - ----------------------------------------------------------------- ------- ------- 55,556 51,970 ------- ------- Income from operations Broadcasting 3,790 4,809 Milling (590) 336 Real estate 1,033 982 Corporate and other (391) 140 - ----------------------------------------------------------------- ------- ------- 3,842 6,267 Interest expense 1,049 1,277 - ----------------------------------------------------------------- ------- ------- Income before provision for income taxes 2,793 4,990 Provision for federal and state income taxes 803 1,615 - ----------------------------------------------------------------- ------- ------- Net income $ 1,990 $ 3,375 - ----------------------------------------------------------------- ------- ------- Net income per share $.23 $.40 Net income per share assuming dilution $.23 $.39 Weighted average number of shares outstanding 8,542 8,536 Weighted average number of shares outstanding assuming dilution 8,573 8,583 Dividends declared per share $.26 $.25
See accompanying notes to consolidated financial statements. 3 FISHER COMPANIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
March 31 December 31 1999 1998 ----------- ------------ (In thousands except share amounts) (Unaudited) ASSETS Current Assets: Cash and short-term cash investments $ 3,926 $ 3,968 Receivables 38,620 44,481 Inventories 9,534 11,009 Prepaid expenses 6,328 6,993 Television and radio broadcast rights 4,843 8,190 - -------------------------------------------------------------- -------- -------- Total current assets 63,251 74,641 - -------------------------------------------------------------- -------- -------- Marketable Securities, at market value 125,085 132,281 - -------------------------------------------------------------- -------- -------- Other Assets: Cash value of life insurance and retirement deposits 11,152 10,900 Television and radio broadcast rights 49 49 Intangible assets, net of amortization 48,321 48,650 Investments in equity investees 15,923 15,126 Other 3,874 3,285 - -------------------------------------------------------------- -------- -------- 79,319 78,010 -------- -------- Property, Plant and Equipment, net 157,129 154,590 - -------------------------------------------------------------- -------- -------- $424,784 $439,522 -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable $ 8,757 $ 13,479 Trade accounts payable 7,987 8,454 Accrued payroll and related benefits 4,085 5,071 Television and radio broadcast rights payable 4,795 7,675 Income taxes payable 805 457 Dividends payable 2,221 2,221 Other current liabilities 1,857 3,030 - -------------------------------------------------------------- -------- -------- Total current liabilities 30,507 40,387 - -------------------------------------------------------------- -------- -------- Long-term Debt, net of current maturities 65,890 63,257 - -------------------------------------------------------------- -------- -------- Other Liabilities: Accrued retirement benefits 12,980 13,298 Deferred income taxes 52,623 55,048 Deposits and retainage payable 1,050 951 - -------------------------------------------------------------- -------- -------- 66,653 69,297 -------- -------- Minority Interests 33 33 - -------------------------------------------------------------- -------- -------- Stockholders' Equity: Common stock, shares authorized 12,000,000, $1.25 par value; issued 8,542,384 10,678 10,678 Capital in excess of par 2,013 1,792 Deferred compensation (863) (733) Accumulated other comprehensive income - unrealized gain on marketable securities, net of deferred income taxes of $43,378 in 1999 and $45,935 in 1998 80,559 85,236 Retained earnings 169,314 169,575 - -------------------------------------------------------------- -------- -------- 261,701 266,548 -------- -------- $424,784 $439,522 -------- --------
See accompanying notes to consolidated financial statements 4 FISHER COMPANIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31 1999 1998 - -------------------------------------------------------------- -------- ----------- (In thousands) (Unaudited) Cash flows from operating activities: Net income $ 1,990 $ 3,375 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,389 3,289 Increase in noncurrent deferred income taxes 94 102 Issuance of stock pursuant to vested stock rights and related tax benefit 284 Amortization of deferred compensation 91 Loss in equity investee 385 Change in operating assets and liabilities: Receivables 5,861 8,692 Inventories 1,475 (2,643) Prepaid expenses 665 3,083 Cash value of life insurance and retirement deposits (252) (2,744) Income taxes payable 348 784 Trade accounts payable, accrued payroll and related benefits and other current liabilities (2,626) (4,753) Other assets (589) 258 Accrued retirement benefits (318) 362 Deposits and retainage payable 99 12 Amortization of television and radio broadcast rights 3,347 2,840 Payments for television and radio broadcast rights (2,880) (2,653) - -------------------------------------------------------------- ------- ------- Net cash provided by operating activities 11,079 10,288 - -------------------------------------------------------------- ------- ------- Cash flows from investing activities: Investments in equity investees (1,182) (2,498) Purchase of property, plant and equipment (5,599) (3,166) - -------------------------------------------------------------- ------- ------- Net cash used in investing activities (6,781) (5,664) - -------------------------------------------------------------- ------- ------- Cash flows from financing activities: Net borrowings under notes payable 3,190 2,104 Payments on borrowing agreements and mortgage loans (5,279) (8,085) Cash dividends paid (2,251) (2,162) - -------------------------------------------------------------- ------- ------- Net cash used in financing activities (4,340) (8,143) - -------------------------------------------------------------- ------- ------- Net decrease in cash and short-term cash investments (42) (3,519) Cash and short-term cash investments, beginning of period 3,968 6,337 - -------------------------------------------------------------- ------- ------- Cash and short-term cash investments, end of period $ 3,926 $ 2,818 - -------------------------------------------------------------- ------- -------
See accompanying notes to consolidated financial statements FISHER COMPANIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three months ended March 31 1999 1998 - --------------------------------------------------------------------------- -------- ----------- (In thousands) (Unaudited) Net income $ 1,990 $ 3,375 Other comprehensive income unrealized gain on securities net of deferred income taxes of $(2,519) in 1999 and $6,379 in 1998 (4,677) 11,846 - --------------------------------------------------------------------------- ------- ------- Comprehensive income $(2,687) $15,221 - --------------------------------------------------------------------------- ------- -------
See accompanying notes to consolidated financial statements 5 FISHER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. 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 Companies Inc. (the "Company") as of and for the periods indicated. 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 Form 10-K for the year ended December 31, 1998 filed on March 25, 1999 by the Company have been omitted. The financial information herein is not necessarily representative of a full year's operations. 2. Inventories are summarized as follows (in thousands): March 31 December 31 1999 1998 -------- ----------- Finished products $ 4,084 $ 3,906 Raw materials 5,364 6,983 Spare parts and supplies 86 120 --------- ----------- 9,534 $11,009 ========= =========== 3. In June 1998, Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133), was issued. This pronouncement standardizes the accounting for derivative instruments by requiring that an entity recognize those items as assets or liabilities in the financial statements and measure them at fair value. FAS 133 is required to be adopted by the Company for the year ended December 31, 2000. Early adoption is permitted. The Company is currently reviewing the requirements of FAS 133 and assessing its impact on the Company's financial statements. The Company has not made a decision regarding the period of adoption. 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS This discussion is intended to provide an analysis of significant trends and material changes in the Company's financial position and operating results during the three month period ended March 31, 1999 compared with the similar period in 1998. Consolidated Results of Operations - ---------------------------------- Sales and other revenue - ------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $59,398,000 2.0% $58,237,000 Increases in sales and other revenue during the three months ended March 31, 1999, compared with the similar period of 1998, were 1.3% for broadcasting operations, 2.0% for milling operations, 5.0% for real estate operations, and 10.9% for the corporate segment. The increase in corporate segment revenue is principally attributable to increases in dividends from marketable securities. Cost of products and services sold - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $39,720,000 4.6% $37,973,000 Percentage of revenue 66.9% 65.2% The increase in cost of products and services sold in 1999 is attributable to increased costs to acquire and produce broadcast programming, increased volume of flour and bakery products sold by the milling segment, and higher costs to operate and maintain real estate properties. Selling expenses - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $4,964,000 9.9% $4,518,000 Percentage of revenue 8.4% 7.8% Selling expenses increased as a result of increased commissions and related expenses resulting from increased broadcasting and milling revenue. General and administrative expenses - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $10,872,000 14.7% $9,479,000 Percentage of revenue 18.3% 16.3% General and administrative expenses increased in the broadcasting, milling and corporate segments, while the real estate segment reported a modest decline. The increase in general and administrative expenses at the broadcasting segment is largely attributable to personnel and employee benefits. The milling segment incurred a loss from the 50%-owned Blackfoot milling facility during the start- up phase of the new conventional flour mill, which began operations in December 1998. The corporate segment incurred increased costs in connection with a new corporate marque and brand identity program in February, and new strategic initiatives. 7 Interest expense - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $1,049,000 -17.8% $1,277,000 Interest expense declined in 1999 compared with 1998. Average borrowing was greater in 1999; however, interest in the amount of $188,000 relating to borrowings for construction for the Fisher Plaza project was capitalized as a cost of the project. The average interest rate was 6.9% in 1999 and 7.2% in 1998. Provision for federal and state income taxes - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $803,000 -50.3% $1,615,000 Effective tax rate 28.7% 32.4% The provision for federal and state income taxes varies directly with pre-tax income. The effective tax rate is less than the statutory rate for both periods primarily due to a deduction for dividends received, offset by the impact of state income taxes, net of the federal income tax benefit. Broadcasting Operations Sales and other revenue - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $28,122,000 1.3% $27,754,000 Revenue from KOMO Television in Seattle declined approximately $700,000 during the three months ended March 31, 1999. Declines in all advertising categories were partially offset by revenue from paid programming. Revenue from KATU Television in Portland increased approximately $100,000. Declines in local and political advertising were offset by increases in national advertising sales and revenue from paid programming. Revenue from radio operations increased approximately $900,000, including $640,000 from the Company's Seattle radio stations (KOMO AM, KVI AM and KPLZ-FM), $70,000 from Portland radio operations (KWJJ-FM and KOTK), and $175,000 from the nineteen small market stations in Montana and Eastern Washington. Income from operations - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $3,790,000 -21.2% $4,809,000 Percentage of revenue 13.5% 17.3% The decline in operating income is due to the decline in revenue at KOMO Television, and to higher operating expenses, in particular costs to acquire and produce broadcast programming, and general and administrative expenses. 8 Milling Operations Sales and other revenue - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $26,999,000 2.0% $26,467,000 Flour prices are largely dependent on the cost of wheat purchased to produce flour. During 1999 average wheat prices were lower than in 1998, with the result that average flour prices in 1999 were 9% lower than in 1998. Revenue of the milling division declined $820,000, notwithstanding that flour sales volume increased 9% during the first quarter of 1999. Revenue from the food distribution division increased $1,350,000 or 14%, as each of the Company's three distribution facilities reported increased sales. Income from operations - ------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $(590,000) N/M $336,000 Percentage of revenue N/M 1.3% Income from operations is determined by deducting operating expenses from gross margin on sales. During the first quarter of 1999 the milling division experienced low flour and millfeed margins, largely offset by improved margins at all three distribution facilities. Operating expenses increased more than 30% compared with 1998, due in large measure to continued start-up costs associated with the new conventional mill in Blackfoot, Idaho. That mill, which is owned by the Koch Fisher Mills L.L.C. in which Fisher Mills has a 50% ownership interest, began operations in December 1998. Real Estate Operations Sales and other revenue - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $3,179,000 5.0% $3,026,000 Real estate revenue increased in 1999 due to rental rate adjustments associated with lease renewal activity, and contracted rent escalations. Average occupancy during the three months ended March 31, 1999 and 1998 was 97.5% and 98.4%, respectively. Income from operations - -------------------------------------------------------------------------------- Three months ended March 31 1999 % Change 1998 $1,033,000 5.2% $982,000 Percentage of revenue 32.5% 32.4% The improvement in operating income is attributable to increased revenue, partially offset by higher costs to operate and maintain the Company's real estate developments. Depreciation expense declined modestly from 1998. Liquidity and Capital Resources As of March 31, 1999, the Company had working capital of $32,744,000 and cash and short-term cash investments totaling $3,926,000. The Company intends to finance working capital, debt 9 service, capital expenditures, and dividend requirements primarily through operating activities. However, the Company will consider using available lines of credit to fund acquisition activities and significant real estate project development activities. In this regard, the Company has obtained a five-year unsecured revolving line of credit from a bank in a maximum amount of $100,000,000 to finance construction of a new digital broadcasting facility for KOMO Television (to be called Fisher Plaza), and for general corporate purposes. The revolving line of credit is governed by a credit agreement which provides that borrowings under the line will bear interest at a variable rate not to exceed the bank's publicly announced reference rate. The agreement also places limitations on the disposition or encumbrance of certain assets and requires the Company to maintain certain financial ratios. The Company has a commitment from a bank for eight-year senior secured credit facilities in the amount of $230,000,000 to finance the Retlaw acquisition and for general corporate purposes. See Note 12 to the Company's 1998 consolidated financial statements for information concerning the acquisition. The senior credit facilities will be secured by a first priority perfected security interest in the voting capital stock of the broadcasting subsidiary. The facilities will also place limitations on the disposition or encumbrance of certain assets and require the Company to maintain certain financial ratios. In addition to an amortization schedule which will require repayment of all borrowings under the facilities by June 2007, the amount available under the facilities will reduce each year beginning in 2002. Amounts borrowed under the facilities will bear interest at variable rates based on the Company's ratio of funded debt to operating cash flow, but will not exceed the bank's prime rate plus 75 basis points. Net cash provided by operating activities during the three months ended March 31, 1999 was $11,079,000. Net cash provided by operating activities consists of the Company's net income, increased by non-cash expenses such as depreciation and amortization, and adjusted by changes in operating assets and liabilities. Net cash used in investing activities during the period was $6,781,000, principally $5,599,000 for purchase of property, plant and equipment used in operations (including the Fisher Plaza project). Net cash used in financing activities was $4,340,000, including payment of $5,279,000 due on borrowing agreements and mortgage loans, and cash dividends paid to stockholders totaling $2,251,000 or $.26 per share. $3,190,000 was borrowed under lines of credit and notes from shareholders and directors. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The market risk in the Company's financial instruments represents the potential loss arising from adverse changes in financial and commodity market prices and rates. The Company is exposed to market risk in the areas of interest rates, securities prices and grain prices. These exposures are directly related to its normal funding and investing activities and to its use of agricultural commodities in its operations. Interest Rate Exposure The Company's strategy in managing exposure to interest rate changes is to maintain a balance of fixed- and variable-rate instruments. See Note 5 to the Company's 1998 consolidated financial statements for information regarding the contractual interest rates of the Company's debt. The Company will also consider entering into interest rate swap agreements at such times as it deems appropriate. At March 31, 1999, the fair value of the Company's debt is estimated to approximate the carrying amount. Market risk is estimated as the potential change in fair value 10 resulting from a hypothetical 10 percent change in interest rates, and on the Company's fixed rate debt, amounts to $2,062,000 at March 31, 1999. The Company also has $22,371,000 in variable-rate debt outstanding at March 31, 1999. A hypothetical 10 percent change in interest rates underlying these borrowings would result in a $118,000 annual change in the Company's pre-tax earnings and cash flows. Marketable Securities Exposure The fair value of the Company's investments in marketable securities at March 31, 1999 is $125,085,000. Marketable securities consist of equity securities traded on a national securities exchange or reported on the NASDAQ securities market. A significant portion of the marketable securities consists of 3,002,376 shares of SAFECO Corporation. As of March 31, 1999, these shares represented 2.2% of the outstanding common stock of SAFECO Corporation. While the Company has no intention to dispose of its investments in marketable securities, it has classified its investments as available-for-sale under applicable accounting standards. Mr. William W. Krippaehne, Jr., President, CEO, and a Director of the Company, is a Director of SAFECO Corporation. A hypothetical 10 percent change in market prices underlying these securities would result in a $12,509,000 change in the fair value of the marketable securities portfolio. Although changes in securities prices would affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the investments are sold. Commodity Price Exposure The Company has exposure to adverse price fluctuations associated with its grain and flour inventories, product gross margins, and certain anticipated transactions in its milling operations. Commodities such as wheat are purchased at market prices that are subject to volatility. As an element of its strategy to manage the risk of market price fluctuations, the Company enters into various exchange-traded futures contracts. The Company closely monitors and manages its exposure to market risk on a daily basis in accordance with formal policies established for this activity. These policies limit the level of exposure to be hedged. All transactions involving derivative financial instruments are required to have a direct relationship to the price risk associated with existing inventories or future purchase and sales of its products. The Company enters into both forward purchase and sales commitments for wheat and flour. At the same time, the Company enters into generally matched transactions using offsetting forward commitments and/or exchange-traded futures contracts to hedge against price fluctuations in the market price of wheat. The Company determines the fair value of its exchange-traded contracts based on the settlement prices for open contracts, which are established by the exchange on which the instruments are traded. The margin accounts for open commodity futures contracts, which reflect daily settlements as market values change, represent the Company's basis in those contracts. As of March 31, 1999, the carrying value of the Company's investment in commodities futures contracts and the total net deferred gains and losses on open contracts were immaterial. At March 31, 1999, the actual open positions of these instruments and the potential near-term losses in earnings, fair value, and/or cash flows from changes in market rates or prices were not material. 11 Year 2000 The Year 2000 or Y2K problem is somewhat predictable in its timing, but unpredictable in its effects. In order to conserve limited computer memory, many computer systems, software programs, and other microprocessor dependent devices were created using only two digit dates, such that 1998 was represented as 98. These systems may not recognize certain 1999 dates, and the year 2000 and beyond, with the result that processors and programs may fail to complete the processing of information or revert back to the year 1900. As we approach the year 2000, we expect computer systems and software used by many companies in a wide variety of applications to experience operating difficulties unless they are modified or upgraded to process information involving, related to, or dependent upon the century change. Failures could incapacitate systems essential to the functioning of commerce, building systems, consumer products, utilities, and government services locally as well as worldwide. Significant uncertainty exists concerning the scope and magnitude of problems associated with Y2K. State of Readiness The Company recognized the need to reduce the risks of Year 2000 related failures, and in August 1998 established a Y2K Task Force to address these risks. The Y2K Task Force, comprised of senior management from each of the Company's business segments and third party consultants, is leading the Year 2000 risk management efforts. The Y2K Task Force is coordinating the identification and testing of computer hardware and software applications, with a goal to ensure availability and integrity of the information systems and the reliability of the operational systems and manufacturing processes utilized by the Company and its subsidiaries. The Company has adopted a five-step process toward Year 2000 readiness:
Projected Completion Date ------------------------- Internal Systems Inventory 2nd Quarter 1999 Systems Testing and Repairs 2nd Quarter 1999 External Risk Assessment 2nd Quarter 1999 Contingency Planning 4th Quarter 1999 Financial Risk Transfer On-going
The Company has approached the first two items in its five-step process (Internal systems Inventory and Systems Testing and Repair) as a single task, and has divided this task into four major categories: . Building Systems . Information Systems . Broadcast Equipment . Milling Equipment The Company has conducted a comprehensive evaluation of a majority of its building systems, related computer equipment and components that could be potentially impacted. Building computer system testing is also underway. To date, problems discovered in our building systems are minor and usually relate to building security systems. These problems are being addressed. 12 Information systems are being tested with a licensed software program; a diagnostic tool designed for personal computers and servers that will identify Y2K issues related to computer hardware, software and data. To date, this testing appears to have been successful and has yielded no significant problems. With the constant introduction of new computer equipment and software, information systems testing will continue throughout the year. The Company has arranged with a systems integration company to provide a comprehensive Y2K assessment program for television and radio broadcast equipment. The systems integration company has considerable experience in the design and integration of conventional and digital communications, computer and broadcast facilities, as well as in large system integration. The systems integration company also has extensive experience working with major television networks and broadcasting companies in systems assessment. The Company is nearing completion of a comprehensive inventory of potential Y2K effected equipment at each of the milling locations. Compliance letters have been received from key vendors and testing of equipment will begin early in the second quarter, and will continue throughout the year as we increase our knowledge base. Risks The Company also faces risk to the extent suppliers of products, services, and systems relied upon by the Company and others with whom the Company or its subsidiaries transact business do not comply with Year 2000 requirements. In the event such third parties cannot provide the Company or its subsidiaries with products, services, or systems that meet the Year 2000 requirements on a timely basis, or in the event Year 2000 issues prevent such third parties from timely delivery of products or services required by the Company or its subsidiaries, the Company's results of operations could be materially adversely affected. To the extent Year 2000 issues cause significant delays in, or cancellation of, decisions to purchase the Company's products or services, the Company's business, results of operations, and financial position would be materially adversely affected. The Company is assessing these risks and in some cases has initiated formal communications with significant suppliers and customers to determine the extent to which the Company is vulnerable to these third parties' failure to remediate their own Year 2000 issues. There can be no assurance the Company will identify and remediate all significant Year 2000 risks, or that such risks will not have a material adverse effect on the Company's business, results of operations, or financial position. Accordingly, the Company will continue to develop contingency plans in anticipation of unexpected Year 2000 events. Based on its assessment of year 2000 risks to date, the Company does not believe any material exposure to significant business interruption exists as a result of Year 2000 compliance issues. Contingency Plans Since the Year 2000 problem is pervasive, few, if any, companies can make absolute assurances that they will identify and remediate all Y2K risks. Accordingly, the Company expects the risk assessment and contingency planning to remain an ongoing process leading up to and beyond the year 2000. In addition, the potential Year 2000 problem is being addressed as part of the Company's overall emergency preparedness program that includes contingency planning for other potential major catastrophes like earthquakes, fires and floods. The Companies approach to Financial Risk Transfer has two main areas of focus. 13 . Secure the broadest insurance coverage available at a reasonable cost and avoid exclusions or restrictions of coverage. . Explore other Financial Risk Transfer products and/or Y2K specific insurance coverage to the extent that it becomes available at economically feasible levels. Estimated Costs The Company is continuing to assess the potential impact of the century change on its business, results of operations, and financial position. The total cost of these Year 2000 compliance activities is not anticipated to be material to the Company's financial position or its results of operations. The cost of internal resources dedicated to the Year 2000 has not been estimated at this time. The Company currently estimates that the cost of assessment and testing of broadcast equipment will approximate $300,000. Private Securities Litigation Reform Act Of 1995 The discussion above under "Year 2000" includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). This statement is included for the express purpose of availing the Company of the protections of the safe harbor provisions of the PSLRA. Management's ability to predict results or the effect of future plans is inherently uncertain, and is subject to factors that may cause actual results to differ materially from those projected. Factors that could affect the actual results include the possibility that remediation programs will not operate as intended, the Company's failure to timely or completely identify all software or hardware applications requiring remediation, unexpected costs, and the uncertainty associated with the impact of year 2000 issues on the Company's customers, vendors and others with whom it does business. 14 PART II OTHER INFORMATION Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11, Statement re Computation of Per Share Earnings Exhibit 27, Financial Data Schedule (b) Reports on Form 8-K: None 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FISHER COMPANIES INC. (Registrant) Dated May 13, 1999 /s/ William W. Krippaehne, Jr. ---------------- --------------------------------------- William W. Krippaehne, Jr. President and Chief Executive Officer Dated May 13, 1999 /s/ David D. Hillard ---------------- --------------------------------------- David D. Hillard Senior Vice President and Chief Financial Officer 16 EX-11 2 STATEMENT RE COMPUTATION PER SHARE EARNINGS EXHIBIT 11 FISHER COMPANIES INC. Computation of Per Share Earnings
Three Months Ended March 31 1999 1998 ------------- ------------ Weighted average of common shares outstanding during the period 8,542,384 8,536,357 Dilutive effect of: Restricted stock rights 16,117 24,990 Stock options 14,481 21,799 ---------- ---------- Weighted average shares outstanding assuming dilution 8,572,982 8,583,146 ========== ========== Net income $1,990,000 $3,375,000 ========== ========== Net income per common share $ .23 $ .40 ========== ========== Net income per common share assuming dilution $ .23 $ .39 ========== ==========
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 3,926 125,085 39,982 1,362 9,534 63,251 267,851 110,722 424,784 30,507 0 0 0 10,678 251,023 424,784 58,300 59,398 39,720 39,720 15,601 235 1,049 2,793 803 1,990 0 0 0 1,990 .23 .23
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