Quarterly Report For Period Ended September 30, 2003

-----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, IktSZRljDehHgcfpAE/enbjz4Mk7ny9ntwBtIlxEgu7A8ZMxS3hFiAVDA1m9Uw03 XUsdS1TSyH4EUjujQ8JWAg== 0001193125-03-081940.txt : 20031114 0001193125-03-081940.hdr.sgml : 20031114 20031114154914 ACCESSION NUMBER: 0001193125-03-081940 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISHER COMMUNICATIONS INC CENTRAL INDEX KEY: 0001034669 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 910222175 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22439 FILM NUMBER: 031004416 BUSINESS ADDRESS: STREET 1: 100 FOURTH AVENUE NORTH STREET 2: SUITE 440 CITY: SEATTLE STATE: WA ZIP: 98109-4932 BUSINESS PHONE: 2064047000 MAIL ADDRESS: STREET 1: 100 FOURTH AVENUE NORTH STREET 2: SUITE 440 CITY: SEATTLE STATE: WA ZIP: 98109-4932 FORMER COMPANY: FORMER CONFORMED NAME: FISHER COMPANIES INC DATE OF NAME CHANGE: 19970226 10-Q 1 d10q.htm QUARTERLY REPORT FOR PERIOD ENDED SEPTEMBER 30, 2003 Quarterly Report For Period Ended September 30, 2003

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 September 30, 2003

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

For the transition period from to

Commission File Number 0-22439

FISHER COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

WASHINGTON

91-0222175

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

100 Fourth Ave. N

Suite 440

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 x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 October 31, 2003: 8,608,288

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, 2003 and 2002

2.		Condensed Consolidated Balance Sheets: September 30, 2003 and December 31, 2002

3.		Condensed Consolidated Statements of Cash Flows: Nine months ended September 30, 2003 and 2002

4.		Condensed Consolidated Statements of Comprehensive Income (Loss): Three and nine months ended September 30, 2003 and 2002

5.		Notes to Condensed Consolidated Financial Statements

ITEM 1 – FINANCIAL STATEMENTS

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

*(in thousands, except per share amounts)* (Unaudited)	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
Revenue	$	103,858		$	90,219		$	36,226		$	30,183

Costs and expenses

Cost of services sold (exclusive of depreciation reported separately below, amounting to $10,691, $10,269, $3,561, and $3,973, respectively		54,108			44,164			19,006			14,731
Selling expenses		19,082			13,979			6,916			5,156
General and administrative expenses		30,666			26,967			9,626			10,027
Depreciation		11,787			11,775			3,859			4,509

		115,643			96,885			39,407			34,423


Loss from operations		(11,785	)		(6,666	)		(3,181	)		(4,240	)

Net gain on derivative instruments		460			7,592			49			1,489

Loss from extinguishment of long-term debt					(3,264	)

Other income, net		5,737			7,536			651			6,188

Equity in operations of equity investee		9			45			7			13

Interest expense, net		(9,023	)		(8,101	)		(2,811	)		(2,816	)

Income (loss) from continuing operations before income taxes		(14,602	)		(2,858	)		(5,285	)		634

Provision (benefit) for federal and state income taxes		(5,829	)		(1,317	)		(2,007	)		152

Income (loss) from continuing operations		(8,773	)		(1,541	)		(3,278	)		482

Income (loss) from discontinued operations, net of income tax:
Real estate operations sold and held for sale		(336	)		151			(382	)		29
Property management business held for sale		(234	)		(1,287	)		(350	)		(508	)
Milling business					(500	)					(500	)
Georgia television stations held for sale		281			(40	)		148			64
Portland radio stations held for sale		(897	)		(543	)		(245	)		(214	)
Media Services operations closed		(1,572	)		(1,396	)		(191	)		(271	)


Loss before cumulative effect of change in accounting principle		(11,531	)		(5,156	)		(4,298	)		(918	)

Cumulative effect of change in accounting principle, net of income tax benefit of $34,662					(64,373	)

Net loss	$	(11,531	)	$	(69,529	)	$	(4,298	)	$	(918	)

Income (loss) per share:
From continuing operations	$	(1.02	)	$	(0.18	)	$	(0.38	)	$	0.06
From discontinued operations		(0.32	)		(0.42	)		(0.12	)		(0.16	)
Cumulative effect of change in accounting principle					(7.50	)

Net loss per share	$	(1.34	)	$	(8.10	)	$	(0.50	)	$	(0.10	)

Income (loss) per share assuming dilution:
From continuing operations	$	(1.02	)	$	(0.18	)	$	(0.38	)	$	0.06
From discontinued operations		(0.32	)		(0.42	)		(0.12	)		(0.16	)
Cumulative effect of change in accounting principle					(7.50	)

Net income (loss) per share assuming dilution	$	(1.34	)	$	(8.10	)	$	(0.50	)	$	(0.10	)

Weighted average shares outstanding		8,595			8,593			8,597			8,594

Weighted average shares outstanding assuming dilution		8,595			8,593			8,597			8,615

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)* (Unaudited)	September 30 2003			December 31 2002
ASSETS

Current Assets
Cash and short-term cash investments	$	10,182		$	23,515
Restricted cash					12,778
Receivables		28,468			30,943
Deferred income taxes		7,956			6,034
Prepaid expenses		4,888			4,376
Television and radio broadcast rights		8,601			7,146
Assets held for sale		2,645			3,114

Total current assets		62,740			87,906

Marketable Securities, at market value		106,133			107,352

Other Assets
Cash value of life insurance and retirement deposits		13,978			13,876
Television and radio broadcast rights		4,566			5,253
Goodwill, net		38,354			38,354
Intangible assets		1,232			765
Investments in equity investee		2,807			2,922
Other		10,262			16,416
Assets held for sale		109,153			108,129

		180,352			185,715

Property, Plant and Equipment, net		161,258			165,018

	$	510,483		$	545,991

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Notes payable	$	7,151		$	4,821
Trade accounts payable		4,654			4,607
Accrued payroll and related benefits		10,241			6,719
Television and radio broadcast rights payable		8,234			6,179
Other current liabilities		1,275			1,553
Liabilities of businesses held for sale		3,372			3,595

Total current liabilities		34,927			27,474

Long-term Debt, net of current maturities		224,651			248,459

Other Liabilities
Accrued retirement benefits		17,656			19,093
Deferred income taxes		31,450			33,116
Television and radio broadcast rights payable, long-term portion		110			111
Other liabilities		2,661			6,163
Liabilities of businesses held for sale		37,541			38,840

		89,418			97,323

Commitments and Contingencies

Stockholders’ Equity
Common stock, shares authorized 12,000,000, $1.25 par value; issued 8,608,288 in 2003 and 8,594,060 in 2002		10,760			10,743
Capital in excess of par		4,030			3,488
Deferred compensation		(2	)		(11	)
Accumulated other comprehensive income - net of income taxes:
Unrealized gain on marketable securities		68,325			69,020
Minimum pension liability		(1,773	)		(2,183	)
Retained earnings		80,147			91,678

		161,487			172,735

	$	510,483		$	545,991

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

*(in thousands)* (Unaudited)	Nine months ended September 30
*(in thousands)* (Unaudited)	2003			2002
Cash flows from operating activities
Net loss	$	(11,531	)	$	(69,529	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation		14,055			15,759
Deferred income taxes		(3,214	)		(20,010	)
Cumulative effect of change in accounting principle					99,035
Gain on sales of real estate		(1,555	)		(5,511	)
Equity in operations of equity investee		(9	)		(45	)
Increase in fair value of derivative instruments		(460	)		(10,228	)
Gain on sale of marketable securities		(3,675	)
Amortization of deferred loan costs		861			704
Loss from extinguishment of debt					3,264
Amortization of television and radio broadcast rights		17,009			11,168
Payments for television and radio broadcast rights		(15,670	)		(16,188	)
Other		519			140

Change in operating assets and liabilities
Receivables		2,832			5,279
Prepaid expenses		(674	)		(1,579	)
Cash value of life insurance and retirement deposits		(102	)		(1,130	)
Other assets		1,223			245
Trade accounts payable, accrued payroll and related benefits and other current liabilities		3,146			169
Accrued retirement benefits		(1,437	)		1,248
Other liabilities		1,940			4,604

Net cash provided by operating activities		3,258			17,395

Cash flows from investing activities
Proceeds from sale of discontinued milling business assets					2,800
Proceeds from sale of real estate and property, plant and equipment		136			13,210
Proceeds from sale of marketable securities		5,169
Proceeds from collection of note receivable		3,185
Dividends from equity investee		125
Restricted cash		12,778			(15,146	)
Purchase of radio station license		(467	)
Purchase of property, plant and equipment		(10,771	)		(30,892	)

Net cash provided by (used in) investing activities		10,155			(30,028	)

Cash flows from financing activities
Net payments under notes payable		(828	)		(8,474	)
Borrowings under borrowing agreements and mortgage loans					268,131
Net payments on borrowing agreements and mortgage loans		(25,794	)		(233,039	)
Payment of deferred loan costs		(614	)		(5,090	)
Proceeds from exercise of stock options		490			21
Cash dividends paid					(4,468	)

Net cash provided by (used in) financing activities		(26,746	)		17,081

Net increase (decrease) in cash and short-term cash investments		(13,333	)		4,448

Cash and short-term cash investments, beginning of period		23,515			3,568

Cash and short-term cash investments, end of period	$	10,182		$	8,016

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands) (Unaudited)	Nine months ended September 30						Three months ended Setpember 30
(in thousands) (Unaudited)	2003			2002			2003			2002
Net loss	$	(11,531	)	$	(69,529	)	$	(4,298	)	$	(918	)

Other comprehensive income (loss):
Unrealized gain on marketable securities		2,045			1,209			180			1,343
Effect of income taxes		(716	)		(423	)		(63	)		(470	)

Net gain on interest rate swap					835
Effect of income taxes					(292	)
Loss on settlement of interest rate swap reclassified to operations					2,636
Effect of income taxes					(923	)

Unrealized gain on marketable securities reclassified to operations		(3,114	)
Effect of income taxes		1,090

Adjustment to minimum pension liability,		630
Effect of income taxes		(220	)

		(285	)		3,042			117			873

Comprehensive loss	$	(11,816	)	$	(66,487	)	$	(4,181	)	$	(45	)

See accompanying notes to condensed consolidated financial statements.

FISHER COMMUNICATIONS, INC.

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 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, Fisher Media Services Company, and Fisher Properties Inc. 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/A for the year ended December 31, 2002 filed by the Company have been omitted. The financial information herein is not necessarily representative of a full year’s operations.

2. New Accounting Pronouncements

In May 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 145 “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS 145 updates, clarifies, and simplifies existing accounting pronouncements and became effective for the Company’s 2003 financial statements. Accordingly, a loss from extinguishment of long-term debt reported as an extraordinary item in the 2002 financial statements has been reclassified to continuing operations.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - - Transition and Disclosure.” SFAS 148 amends SFAS 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based compensation. It also amends the disclosure provisions of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. The disclosure provisions of SFAS 148 are effective for financial statements issued for fiscal periods beginning after December 15, 2002 and became effective for the Company commencing with the first quarter of the 2003 fiscal year. Disclosures required by SFAS 148 are provided in Note 7 to these condensed consolidated financial statements. The Company does not currently have plans to change to the fair value method of accounting for its stock-based compensation plans.

On January 1, 2003, the Company adopted SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS 143 requires entities to record the fair value of future liabilities for asset retirement obligations as an increase in the carrying amount of the related long-lived asset if a reasonable estimate of fair value can be made. Over time, the liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. The Company has certain legal obligations, principally related to leases on locations used for broadcast system assets, which fall within the scope of SFAS 143. These legal obligations include a responsibility to remediate the leased sites on which these assets are located. The adoption of SFAS 143 did not have a material impact on the Company’s financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS 149 did not have a material impact on the Company’s financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. For public entities, SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the statement and still existing at the beginning of the interim period of adoption. The adoption of SFAS 150 did not have a material impact on the Company’s financial statements.

3. Discontinued Operations

The Company’s real estate subsidiary concluded the sale of one industrial property in October 2002, three industrial properties in December 2002, certain remaining real estate holdings in May 2003, and its final two commercial office properties in October 2003. The Company intends to discontinue the property management operations conducted by the real estate subsidiary through sale or other transfer of the remaining property management contracts to a third party.

On January 29, 2003, the broadcasting subsidiary signed an asset purchase agreement for the sale of its two Georgia television stations, WFXG-TV, Augusta and WXTX-TV, Columbus, for a purchase price of $40 million plus working capital. Completion of the sale is subject to finality of the Federal Communications Commission (“FCC”) approval dated October 3, 2003 and satisfaction of other customary closing conditions. The sale is expected to be completed in the fourth quarter of 2003.

On May 29, 2003, the broadcasting subsidiary signed an asset purchase agreement for the sale of its two Portland, Oregon radio stations, KWJJ-FM and KOTK-AM, for a purchase price of $44 million. Completion of the sale is subject to satisfaction of customary closing conditions. The sale is expected to be completed in the fourth quarter of 2003.

In connection with the Company’s restructuring, two of the businesses operated by the Company’s Media Services subsidiary, Fisher Entertainment LLC (“Fisher Entertainment”) and Civia, Inc. (“Civia”), ceased operations during the second quarter of 2003, and those businesses were closed.

The aforementioned real estate properties that were sold in 2002 and October 2003, the pending sale or closure of property management operations, the pending sale of the Company’s Georgia and Portland stations, as well as the closure of Fisher Entertainment and Civia, meet the criteria of a “component of an entity” as defined in SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” The operations and cash flow of those components have been or will be eliminated from the ongoing operations of the Company as a result of the disposal, and the Company does not have (or will not have) any significant involvement in the operations of those components after the disposal transaction. Accordingly, in accordance with the provisions of SFAS 144, the results of operations of these components are reported as discontinued operations in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2003. The prior-year results of operations for these components have been reclassified to conform to the 2003 presentation.

In accordance with Emerging Issues Task Force Issue No. 87-24, “Allocation of Interest to Discontinued Operations,” the income (loss) from discontinued operations of certain of these components includes an allocation of interest expense relating to corporate debt that is required to be repaid from the net proceeds from sales, in addition to interest expense relating to mortgage loans on the properties held for sale. This corporate debt has not been reclassified in the accompanying Condensed Consolidated Balance Sheets; however, mortgage obligations that relate to properties held for sale have been reclassified to Liabilities of businesses held for sale.

Operational data for discontinued real estate properties is summarized as follows (in thousands):

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
	(Unaudited)
Revenue	$	4,821		$	8,435		$	1,428		$	2,791

Income (loss) from discontinued operations:
Before income taxes	$	14		$	1,091		$	(419	)	$	318
Income tax effect		(5	)		(404	)		152			(118	)

		9			687			(267	)		200
Corporate interest allocation, net of income taxes		(345	)		(536	)		(115	)		(171	)

	$	(336	)	$	151		$	(382	)	$	29

The corporate interest allocation is based on an estimated $14 million in net proceeds (after estimated income taxes, closing costs, reimbursement from the buyer of certain other items, and retirement of mortgage obligations) that will be used to pay down corporate debt as a result of the October 2003 sale of real estate properties. The corporate interest allocation calculation for the 2002 periods also includes $6.2 million used to pay down corporate debt resulting from the fourth-quarter 2002 sales of real estate properties.

Gain on sale of the real estate sold in October and December 2002 amounted to $7,203,000 after income taxes, and was reported in the fourth quarter of 2002.

Operational data for the property management operations is summarized as follows (in thousands):

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
	(Unaudited)
Revenue	$	272		$	1,160		$	145		$	299

Income (loss) from discontinued operations:
Before income taxes	$	(122	)	$	(1,777	)	$	(470	)	$	(695	)
Income tax effect		(112	)		490			120			187

	$	(234	)	$	(1,287	)	$	(350	)	$	(508	)

Operational data for the Georgia television stations to be sold is summarized as follows (in thousands):

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
	(Unaudited)
Revenue	$	6,346		$	6,245		$	2,061		$	2,194

Income (loss) from discontinued operations:
Before income taxes	$	2,161		$	1,798		$	801		$	731
Income tax effect		(756	)		(667	)		(280	)		(270	)

		1,405			1,131			521			461
Corporate interest allocation, net of income taxes		(1,124	)		(1,171	)		(373	)		(397	)

	$	281		$	(40	)	$	148		$	64

The corporate interest allocation is based on an estimated $41 million in net proceeds (including estimated working capital at closing, net of estimated closing costs) that will be used to pay down corporate debt as a result of the pending sale.

Operational data for the Portland radio stations to be sold is summarized as follows (in thousands):

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
	(Unaudited)
Revenue	$	2,460		$	4,880		$	16		$	1,626

Income (loss) from discontinued operations:
Before income taxes	$	84		$	739		$	113		$	194
Income tax effect		(31	)		(292	)		(42	)		(73	)

		53			447			71			121
Corporate interest allocation, net of income taxes		(950	)		(990	)		(316	)		(335	)

	$	(897	)	$	(543	)	$	(245	)	$	(214	)

Upon signing the agreement to sell the Portland radio stations, the Company entered into an agreement whereby the buyer operates the radio stations under a separate agreement prior to closing the transaction and remits monthly amounts specified in the contract. Such payments commenced in June 2003 and totaled $467,000 and $567,000, respectively, in the three- and nine-month periods ended September 2003; these amounts are included within Income from discontinued operations but are not reported as revenue in the table shown above.

The corporate interest allocation is based on an estimated $35 million in net proceeds (after estimated income taxes and closing costs) that will be used to pay down corporate debt as a result of the pending sale.

Operational data for the media businesses closed is summarized as follows (in thousands):

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
	(Unaudited)
Revenue	$	1,556		$	1,216					$	536

Loss from discontinued operations:
Before income taxes	$	(2,234	)	$	(2,154	)	$	(304	)	$	(402	)
Income tax effect		662			758			113			131

	$	(1,572	)	$	(1,396	)	$	(191	)	$	(271	)

As required by SFAS 144, assets and liabilities relating to the two real estate properties sold in October 2003, the pending sale or closure of property management operations, the Georgia television stations, and the Portland radio stations are classified as held for sale in the accompanying condensed consolidated financial statements.

During 2001 substantially all of the assets and working capital used in the Company’s flour milling and food distributions operations were sold. In September 2002, land and a building in Portland, Oregon used in the Company’s food distributions operations were sold. Net proceeds from the sale were $2,800,000. During the quarter ended September 30, 2002, estimates of the net realizable value of property, plant and equipment not included in the sales described above and certain liabilities relating to the wind-up of discontinued milling operations were revised, resulting in a loss from discontinued operations amounting to $500,000, net of $269,000 in income taxes.

4. Derivative Instruments

The Company is a party to a variable forward sales transaction (“Forward Transaction”) with a financial institution. The Company’s obligations under the Forward Transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by the Company. A portion of the Forward Transaction is considered a derivative

and, as such, the Company periodically measures its fair value and recognizes the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. The Company may in the future designate the Forward Transaction as a hedge and, accordingly, the change in fair value would be recorded in the income statement or in other comprehensive income depending on its effectiveness. The Company may borrow up to $70,000,000 under the Forward Transaction. The Forward Transaction will mature in five separate six-month intervals beginning March 15, 2005 through March 15, 2007. The amount due at each maturity date will be determined based on the market value of SAFECO common stock on such maturity date. Although the Company will have the option of settling the amount due in cash, or by delivery of shares of SAFECO common stock, the Company currently intends to settle in cash rather than by delivery of shares. The Company may prepay amounts due in connection with the Forward Transaction. During the term of the Forward Transaction, the Company will continue to receive dividends paid by SAFECO; however, any increase in the dividend amount above the present rate must be paid to the financial institution that is a party to the Forward Transaction. At September 30, 2003 the derivative portion of the Forward Transaction had a fair market value of $3,223,000, which is included in other assets in the accompanying Condensed Consolidated Balance Sheet. At September 30, 2003, $58,187,000 was outstanding under the Forward Transaction including accrued interest amounting to $6,596,000.

In March 2002, the broadcasting subsidiary entered into an interest rate swap agreement fixing the interest rate at 6.87%, plus a margin based on the broadcasting subsidiary’s ratio of consolidated funded debt to consolidated EBITDA, on a portion of the floating-rate debt outstanding under the broadcast facility. The notional amount of the swap is $63,675,000, which reduces as payments are made on principal outstanding under the broadcast facility, until termination of the contract in March 2004. At September 30, 2003 the fair market value of the swap agreement was a liability of $1,831,000, which is included in other liabilities in the accompanying Condensed Consolidated Balance Sheet.

Changes in the fair market value of the Forward Transaction and the interest rate swap agreement are reported in Net gain on derivative instruments in the accompanying Condensed Consolidated Statements of Operations.

5. Television and Radio Broadcast Rights and Other Broadcast Commitments

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

At September 30, 2003 the broadcasting subsidiary has commitments under license agreements amounting to $71,967,000 for future rights to broadcast television and radio programs through 2008, and $10,334,000 in related fees. As these programs will not be available for broadcast until after September 30, 2003, they have been excluded from the financial statements in accordance with provisions of SFAS No. 63, “Financial Reporting by Broadcasters.” In 2002, the broadcasting subsidiary acquired exclusive rights to sell available advertising time for a radio station in Seattle (“Joint Sales Agreement”). Under the Joint Sales Agreement, the broadcasting subsidiary has commitments for monthly payments totaling $11,768,000 through 2007.

6. 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. Stock options and restricted stock rights are converted using the treasury stock method.

The weighted average number of shares outstanding for the nine- and three-month periods ended September 30, 2003 was 8,595,190 and 8,596,596, respectively. The dilutive effect of 460 restricted stock rights and options to purchase 456,623 shares are excluded for the nine-month and three-month periods ended September 30, 2003 because such rights and options were anti-dilutive; therefore, there is no difference in the calculation between basic and diluted per-share amounts.

The weighted average number of shares outstanding for the nine- and three-month periods ended September 30, 2002 was 8,592,818 and 8,594,060, respectively. The dilutive effect of 1,474 restricted stock rights and options to purchase 442,933 shares are excluded for the nine months ended September 30, 2002 because such rights and

options were anti-dilutive. For the three months ended September 30, 2002, weighted average shares outstanding assuming dilution includes 21,053 weighted average shares for the dilutive effect of stock options and restricted stock rights.

7. Stock-Based Compensation

The Company accounts for common stock options and restricted common stock rights in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based compensation is generally reflected in net loss, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. During the third quarter of 2003, the Company recognized stock-based compensation expense of $77,000, net of tax, relating to the acceleration of certain stock options specified in the severance agreement of a former Company executive.

The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation (in thousands, except per share amounts):

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
	(Unaudited)						(Unaudited)
Net loss, as reported	$	(11,531	)	$	(69,529	)	$	(4,298	)	$	(918	)
Deduct total stock-based employee compensation expense determined under the fair value based method for all awards, net of related income tax effect		(641	)		(619	)		(253	)		(203	)

Adjusted net income (loss)	$	(12,172	)	$	(70,148	)	$	(4,551	)	$	(1,121	)

Loss per share:
As reported	$	(1.34	)	$	(8.10	)	$	(0.50	)	$	(0.10	)
Adjusted	$	(1.41	)	$	(8.17	)	$	(0.53	)	$	(0.12	)

Loss per share, assuming dilution:
As reported	$	(1.34	)	$	(8.10	)	$	(0.50	)	$	(0.10	)
Adjusted	$	(1.41	)	$	(8.17	)	$	(0.53	)	$	(0.12	)

8. Segment Information

The Company operates its continuing operations as two principal business units: broadcasting and media services. Under the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company reports financial data for three reportable segments: television, radio (included in the broadcasting business unit), Fisher Plaza (included in the media services business unit), and a remaining “all other” category. The television reportable segment includes the operations of the Company’s nine network-affiliated television stations (excluding the Georgia television stations, which are included in discontinued operations), and a 50% interest in a company that owns a tenth television station. The radio reportable segment includes the operations of the Company’s 27 radio stations (excluding the Portland radio stations, which are included in discontinued operations). Corporate expenses of the broadcasting business unit are allocated to the television and radio reportable segments based on a ratio that approximates historic revenue and operating expenses of the segments. The Fisher Plaza reportable segment includes the operations of a communications center located in Seattle that serves as home of the Company’s Seattle television and radio operations, the Company’s corporate offices, and third-party tenants. The operations of Fisher Pathways, Inc., a provider of satellite transmission services, which is also included in the media services business unit, as well as the expenses of Fisher Media Services Company’s corporate group, are included in an “all other” category. The results of operations of the Company’s commercial real estate and property management operations, as well as Fisher Entertainment and Civia, are reported as discontinued operations as discussed in Note 3 to the condensed consolidated financial statements.

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

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
Television	$	63,227		$	62,743		$	20,579		$	20,525
Radio		35,273			23,800			14,311			8,414
Fisher Plaza		4,496			3,061			1,059			1,006
All other		901			641			289			249
Corporate and eliminations		(39	)		(26	)		(12	)		(11	)

	$	103,858		$	90,219		$	36,226		$	30,183

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

	Nine months ended September 30						Three months ended September 30
	2003			2002			2003			2002
Television	$	2,712		$	(1,610	)	$	1,009		$	(1,457	)
Radio		(1,337	)		277			311			(947	)
Fisher Plaza		2,009			1,116			335			490
All other		(1,764	)		4,185			(429	)		4,967
Corporate and eliminations		(7,199	)		1,275			(3,700	)		397

Total segment income (loss) from continuing operations before income taxes		(5,579	)		5,243			(2,474	)		3,450
Interest expense		(9,023	)		(8,101	)		(2,811	)		(2,816	)

Consolidated income (loss) from continuing operations before income taxes	$	(14,602	)	$	(2,858	)	$	(5,285	)	$	634

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

	September 30 2003		December 31 2002
	September 30 2003		December 31 2002
Television	$	95,398	$	103,762
Radio		47,707		44,818
Fisher Plaza		124,225		119,710
All other		3,692		18,348
Corporate and eliminations		127,663		148,110

Continuing operations		398,685		434,748

Discontinued operations - net		111,798		111,243

	$	510,483	$	545,991

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

9. Other Commitments

In connection with a review of strategic alternatives conducted during the fall of 2002 and winter of 2003, the Company entered into agreement with certain officers and employees, which require payments of $3,844,000 in January 2004 if the officers and employees continue their employment until that date. The Company is recognizing the cost of this obligation over the period covered by the agreements and, as of September 30, 2003, $2,839,000 was accrued. General and administrative expenses in the nine months ended September 30, 2003 include $2,450,000

related to these agreements. The agreements also provide that if a change in control should occur, certain officers will receive additional severance payments totaling approximately $2,100,000 as well as health and welfare benefits. The Company would recognize this obligation when it is probable the executives are entitled to such benefits.

10. Subsequent and Other Events

On August 21, 2003 the Company received a letter from The Nasdaq National Market informing the Company that it was in violation of Nasdaq Rule 4310(c)(14), which requires the Company to file required reports with the Securities and Exchange Commission. Nasdaq had determined that the Company was in violation of this rule as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003. On September 15, 2003, the Company filed its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003. On September 16, 2003, the Company received notification from Nasdaq that the Company had evidenced compliance with the filing requirements and all other requirements necessary for its continued listing on The Nasdaq National Market.

11. Reclassifications

Certain prior-period balances have been reclassified to conform to the current-period presentation. Such reclassifications had no effect on net loss or stockholders’ equity.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION 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 “Additional Factors That May Affect Our Business, Financial Condition And Future Results,” and those discussed in our annual report on Form 10-K/A for the year ended December 31, 2002. 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, if any, and material changes in our financial position and operating results of our business units during the three- and nine-month periods ended September 30, 2003 compared with the corresponding periods in 2002.

On July 30, 2003, the Company’s real estate subsidiary entered into an asset purchase agreement for the sale of West Lake Union Center and Fisher Business Center, the real estate subsidiary’s two remaining commercial properties. The sale closed in October 2003. The aggregate purchase price for the sale of the properties was $62 million, and the sale produced proceeds, after income taxes, closing costs and reimbursement from the buyer of certain other items, of approximately $52 million. The Company used the proceeds of the sale to retire the mortgages on the properties sold and to reduce other corporate debt. The Company intends to discontinue the property management operations conducted by the real estate subsidiary through sale or other transfer of the remaining property management contracts to a third party; therefore, all real estate operations are presented as discontinued operations in the Company’s condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

The SEC has defined a company’s critical accounting policies as those 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 are presented below. We also have other accounting policies which involve the use of estimates, judgments and assumptions that are significant to understanding our financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1 to the Consolidated Financial Statements contained in our annual report on Form 10-K/A for the year ended December 31, 2002.

Estimates. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Allowance for doubtful accounts. We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize reserves for bad debts based on historical experience of bad debts as a percent of accounts receivable for each business unit, adjusted for relative improvements or deteriorations in the aging and changes in current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional charges may be required.

Television and radio broadcast rights. Television and radio broadcast rights are recorded as assets at the gross amount of the related obligations when the license period begins and the programs are available for broadcasting. Costs incurred in connection with the purchase of programs to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast after one year are considered noncurrent. The costs are charged to operations over their estimated broadcast periods using the straight-line method. Program obligations are classified as current or noncurrent in accordance with the payment terms of the license agreement. Costs of programs which are not available for broadcast are not recorded as assets and are disclosed as commitments.

The cost of television and radio broadcasting rights is reported in the Condensed Consolidated Balance Sheet at the lower of unamortized cost or estimated net realizable value, and is periodically reviewed for impairment. We estimate the net realizable value of our broadcasting rights based on techniques that rely on significant assumptions. If management’s expectations of programming usefulness are revised downward, it may be necessary to write down unamortized cost to estimated net realizable value.

Accounting for derivative instruments. We utilize an interest rate swap in the management of our variable rate exposure on corporate debt. The interest rate swap is held at fair value, with the change in fair value being recorded in our results of operations.

We have entered into a variable forward sales transaction with a financial institution. Our obligations under this Forward Transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by us. A portion of the Forward Transaction is considered a derivative and, as such, we periodically measure its fair value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in our results of operations. We may in the future designate the Forward Transaction as a hedge and, accordingly, the change in fair value would be recorded in the operating results or in other comprehensive income, depending on its effectiveness.

Goodwill and long-lived assets. Goodwill represents the excess of purchase price of certain broadcast properties over the fair value of tangible and identifiable intangible net assets acquired, and is accounted for under the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, which we adopted as of January 1, 2002. Under SFAS 142, goodwill and intangible assets with indefinite useful lives are no longer amortized but are tested for impairment at least on an annual basis.

The goodwill impairment test involves a comparison of the fair value of each of our reporting units, with the carrying amounts of net assets, including goodwill, related to each reporting unit. If the carrying amount exceeds a reporting unit’s fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The impairment loss is measured based on the amount by which the carrying value of goodwill exceeds the implied fair value of goodwill in the reporting unit being tested. Fair values are determined based on valuations prepared by third-party valuation consultants that rely primarily on the discounted cash flow method. This method uses future projections of cash flows from each of our reporting units and includes, among other estimates, projections of future advertising revenue and operating expenses, market supply and demand, projected capital spending and an assumption of our weighted average cost of capital. To the extent they have been separately identified, our indefinite-lived assets (broadcast licenses) are tested for impairment on an annual basis by applying a fair-value-based test as required by SFAS 142. Our evaluations of fair values include analyses based on the future cash flows to be generated by the underlying assets, estimated trends and other relevant determinants of fair value for these assets. If the fair value of the asset determined is less than its carrying amount, a loss is recognized for the difference between the fair value and its carrying value. Changes in any of these estimates, projections and assumptions could have a material effect on the fair value of these assets in future measurement periods and result in an impairment of goodwill or indefinite-lived intangibles which could materially affect our results of operations.

We evaluate the recoverability of the carrying amount of long-lived tangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable as required by SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We use our judgment when applying the impairment rules to determine when an impairment test is necessary. Factors we consider which could trigger an impairment review include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, and significant negative cash flows or industry trends.

Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value, which is based primarily on future discounted cash flows. In estimating these future cash flows we use projections of cash flows directly associated with, and that were expected to arise as a direct result of, the use and eventual disposition of the assets. These projections rely on significant assumptions. If we determine that a long-lived asset is not recoverable, an impairment loss would be calculated based on the excess of the carrying amount of the long-lived asset over its fair value, primarily determined based on discounted cash flows. Changes in any of our estimates could have a material effect on the estimated future cash flows expected to be generated by the asset and result in a future impairment of the involved assets which could have a material effect on our future results of operations.

Pension benefits. We maintain a noncontributory supplemental retirement program for key management. We also maintained a qualified defined benefit plan covering our non-broadcasting employees, which ceased accruing benefits in 2001 with plan assets distributed to participants between 2001 and the first half of 2003. The cost of these plans is reported and accounted for in accordance with Financial Accounting Standards Board Statements 87, 88 and 132. These Statements require significant assumptions regarding discount rates, salary increases and asset returns. We believe that our estimates are reasonable for these key actuarial assumptions; however future actual results will likely differ from our estimates, and these differences could materially affect our future results of operation either unfavorably or favorably.

CONSOLIDATED RESULTS OF OPERATIONS

Revenue

	Nine Months Ended September 30								Three Months Ended September 30
($ in thousands)	2003			% Change		2002			2003			% Change		2002
Television	$	63,227		0.8	%	$	62,743		$	20,579		0.3	%	$	20,525
Radio		35,273		48.2	%		23,800			14,311		70.1	%		8,414
Fisher Plaza		4,496		46.9	%		3,061			1,059		5.3	%		1,006
All other		901		40.6	%		641			289		16.1	%		249
Corporate and eliminations		(39	)	50.0	%		(26	)		(12	)	9.1	%		(11	)

Consolidated	$	103,858		15.1	%	$	90,219		$	36,226		20.0	%	$	30,183

Television and radio revenues fluctuate based on various factors, including the popularity of our programming, overall economic trends nationally and in the specific economies in which we operate, the success of our sales and promotional efforts, the actions of our competitors, as well as the level of national and local political advertising during any period.

Television revenues for the nine months ended September 30, 2003 increased modestly in comparison to the same period in 2002 due primarily to overall increased local advertising at our Seattle, Portland, Washington (smaller-market), and Idaho Falls television stations, offset somewhat by lower local advertising revenues from other stations and overall lower political advertising revenues at all television stations. We also experienced overall lower revenue from national advertising and paid-programming in comparison to the nine months ended September 30, 2002.

During the nine-month period ended September 30, 2003, net revenue for our Seattle television station increased 1.4%, while our Portland television station experienced an increase of 0.9%. Our smaller-market television operations experienced mixed revenue results with the Oregon and Boise, Idaho smaller-market stations reporting decreased revenue of 7.2% and 8.3%, respectively and the Washington and Idaho Falls smaller-market stations each reporting increased revenues of 15.2% and 13.1%, respectively.

Net revenue at our Seattle television station increased 1.4% during the third quarter of 2003, while our Portland station reported a decrease of 1.1%, both in comparison to the third quarter of 2002. Our smaller-market television operations experienced mixed revenue results with the Oregon and Boise, Idaho smaller-market stations reporting decreased net revenue of 7.7% and 8.6%, respectively, and the Washington and Idaho Falls smaller-market stations reporting increased revenues of 14.4% and 9.2%, respectively, in comparison to the three months ended September 30, 2002.

Based on information published by Miller, Kaplan, Arase & Co. LLP (Miller Kaplan), local and national revenue for the overall Seattle spot television market increased 4.2% and overall Portland spot revenue increased 0.6% for the nine months ended September 30, 2003, in comparison to the nine months ended September 30, 2002. In comparison, our Seattle television station spot revenue increased 1.2% while our Portland television station spot revenue decreased 3.4% during the same nine-month periods.

During the nine-month period ended September 30, 2003, our Seattle radio operation experienced a 67.8% increase in net revenue, as compared to the same period in 2002, due primarily to revenue from broadcast of the Seattle Mariners baseball games under a six-year contract that began with the 2003 baseball season. Miller Kaplan data, which excludes sports revenue, indicates that local and national radio revenues for the Seattle radio market increased 2.9% during the first nine months of 2003. Excluding sports revenue, local and national revenue for our Seattle radio operations decreased 2.6% for the same period. As a result of increased local and national sales, net revenue increased 8.8% at our smaller-market radio stations in Eastern Washington and Montana in the first nine months of 2003, as compared to the same period in 2002.

The increase in Radio revenues for the three months ended September 30, 2003, as compared to the three months ended September 30, 2002, is due primarily to the contract to broadcast Seattle Mariners baseball games.

The revenue increase for Fisher Plaza for the nine months ended September 30, 2003 is primarily due to a significant penalty paid by a tenant during the first quarter of 2003 for early termination of premises agreements.

Revenue in the all other category is attributable to Fisher Pathways. The increases in revenue during the three- and nine-month periods ended September 30, 2003, as compared to the same periods in 2002, are due primarily to increased demand for Fisher Pathways’ transmission and studio facilities.

Cost of services sold

	Nine Months Ended September 30								Three Months Ended September 30
($ in thousands)	2003			% Change		2002			2003			% Change		2002
Television	$	32,525		-4.7	%	$	34,116		$	10,669		-7.9	%	$	11,581
Radio		19,545		133.5	%		8,372			7,837		180.4	%		2,795
Fisher Plaza		1,277		70.0	%		751			307		189.6	%		106
All other		389		25.9	%		309			106		5.0	%		101
Corporate and eliminations		372		-39.6	%		616			87		-41.2	%		148

Consolidated	$	54,108		22.5	%	$	44,164		$	19,006		29.0	%	$	14,731

Percentage of revenue		52.1	%				49.0	%		52.5	%				48.8	%

The cost of services sold consists primarily of costs to acquire, produce, promote, and broadcast television and radio programming, and operating costs of Fisher Plaza. These costs are relatively fixed in nature, and do not necessarily vary on a proportional basis with revenue.

The decrease in the cost of services sold in the television segment during the three- and nine-month periods ended September 30, 2003, as compared to the comparable prior-year periods, is primarily due to a reduction in the cost of syndicated programming as a result of replacing The Rosie O’Donnell show with less costly programs and lower costs for other syndicated programs. That decline was partially offset by increased engineering and news expenses.

The increase in the cost of services sold in the radio segment during the three- and nine-month periods ended September 30, 2003, as compared to the comparable prior-year periods, is primarily related to increased costs at our Seattle radio operations associated with the broadcast of Seattle Mariners baseball and the 24-hour news format adopted by KOMO AM in the fall of 2002.

The increase in the year-to-date 2003 cost of services sold at Fisher Plaza, as compared to the 2002 year-to-date amount, is due primarily to increased operating costs at that facility, including increases in insurance expense and property taxes, and to lower reimbursement from tenants as a result of a vacancy.

The all other category includes the cost of operations of Fisher Pathways. These expenses increased primarily due to costs associated with increased revenue.

Selling expenses

	Nine Months Ended September 30								Three Months Ended September 30
($ in thousands)	2003			% Change		2002			2003			% Change		2002
Television	$	8,218		19.6	%	$	6,871		$	2,871		21.1	%	$	2,370
Radio		10,428		49.9	%		6,957			3,930		43.3	%		2,743
All other		436		188.7	%		151			115		167.4	%		43

Consolidated	$	19,082		36.5	%	$	13,979		$	6,916		34.1	%	$	5,156

Percentage of revenue		18.4	%				15.5	%		19.1	%				17.1	%

Nearly all of our television stations experienced an increase in selling expenses during the three- and nine-month periods ended September 30, 2003, as compared to the comparable prior-year periods. The largest increase occurred at our Portland station, which experienced increased costs for salaries, commissions, advertising, and rating services. Our Seattle television station also experienced increases in consulting and salaries in comparison to the 2002 periods.

For the radio segment, selling expenses increased significantly at our Seattle radio operations for the three- and nine-month periods ended September 30, 2003, in comparison to the same period in 2002, due primarily to additional sales personnel and other costs related to the rights agreement to broadcast Seattle Mariners baseball games on KOMO AM and a joint sales agreement that became effective in March 2002.

The increase in selling expenses in the all other category is due to increased marketing efforts for Fisher Plaza by the media services corporate group.

General and administrative expenses

	Nine Months Ended September 30								Three Months Ended September 30
($ in thousands)	2003			% Change		2002			2003			% Change		2002
Television	$	13,031		-5.8	%	$	13,839		$	3,983		-18.0	%	$	4,857
Radio		6,286		-3.4	%		6,507			2,109		-24.3	%		2,786
All other		1,109		0.6	%		1,102			263		-27.9	%		365
Corporate and eliminations		10,240		85.5	%		5,519			3,271		62.0	%		2,019

Consolidated	$	30,666		13.7	%	$	26,967		$	9,626		-4.0	%	$	10,027

Percentage of revenue		29.5	%				29.9	%		26.6	%				33.2	%

The decline in general and administrative expenses at the television segment during the three- and nine-month periods ended September 30, 2003, as compared to the corresponding prior-year periods, is primarily due to the Company’s focus on expense control.

The decline in general and administrative expenses at the radio segment during the three- and nine-month periods ended September 30, 2003, as compared to the corresponding prior-year periods, is also primarily attributable to the corporate-wide focus on controlling costs. The overall decreases were offset somewhat by increased payroll taxes and employee benefits at our Seattle radio operations as a result of additional personnel required for the all-news format and broadcast of Seattle Mariners baseball.

The increase in corporate general and administrative expenses during the nine-month period ended September 30, 2003, as compared to the corresponding prior-year period, is primarily related to legal and consulting fees incurred in connection with a review of strategic alternatives that concluded in February 2003, pension plan termination expenses incurred in the first half of 2003, severance as the result of restructuring, and fees and expenses relating to the restatement of our financial statements during the summer of 2003. Corporate general and administrative expenses in the first nine months of 2003 also include $2,450,000 related to agreements with certain officers and employees which are payable in January 2004, including the following amounts relating to other segments: $825,000 television, $480,000 radio, and $120,000 all other. The increase in corporate general and administrative expenses during the three months ended September 30, 2003, in comparison to the corresponding period in 2002, is primarily attributable to the aforementioned agreements with certain officers and employees, for which third-quarter 2003 expense was $861,000, and fees and expenses relating to the restatement of our financial statements during the summer of 2003, partially offset by lower costs for salaries.

Depreciation

	Nine Months Ended September 30								Three Months Ended September 30
($ in thousands)	2003			% Change		2002			2003			% Change		2002
Television	$	8,537		-1.6	%	$	8,675		$	2,732		-3.9	%	$	2,842
Radio		1,152		-12.6	%		1,318			429		-52.8	%		908
Fisher Plaza		1,210		1.3	%		1,194			415		1.2	%		410
All other		744		83.3	%		406			235		-17.5	%		285
Corporate and eliminations		144		-20.9	%		182			48		-25.0	%		64

Consolidated	$	11,787		0.1	%	$	11,775		$	3,859		-14.4	%	$	4,509

Percentage of revenue		11.3	%				13.1	%		10.7	%				14.9	%

The decrease in depreciation at the radio segment during the three- and nine-month periods ended September 30, 2003, as compared to the corresponding prior-year periods, is primarily attributable to the relocation of Seattle radio operations to Fisher Plaza in the fall of 2002 and a corresponding acceleration of depreciation on certain capitalized items at the prior facility. Income (loss) from operations

	Nine Months Ended September 30								Three Months Ended September 30
($ in thousands)	2003			% Change		2002			2003			% Change		2002
Television	$	916		-220.8	%	$	(758	)	$	324		-128.8	%	$	(1,125	)
Radio		(2,138	)	-431.0	%		646			6		-100.7	%		(818	)
Fisher Plaza		2,009		80.0	%		1,116			730		49.0	%		490
All other		(1,777	)	33.9	%		(1,327	)		(824	)	51.2	%		(545	)
Corporate and eliminations		(10,795	)	70.2	%		(6,343	)		(3,417	)	52.4	%		(2,242	)

Consolidated	$	(11,785	)	76.8	%	$	(6,666	)	$	(3,181	)	-25.0	%	$	(4,240	)

Income (loss) from operations by segment consists of revenue less operating expenses. In computing income from operations by segment, other income, net, net gain on derivative instruments, and equity in operations of equity investee have not been included, and loss from extinguishment of long-term debt, interest expense, and income taxes have not been deducted. Net gain on derivative instruments

	Nine Months Ended September 30								Three Months Ended September 30
(in thousands)	2003					2002			2003					2002
	$	460				$	7,592		$	49				$	1,489
We record derivative instruments as assets and liabilities in our Condensed Consolidated Balance Sheets and recognize changes in fair values in our Condensed Consolidated Statements of Operations. As described in Note 4 to our unaudited condensed consolidated financial statements, we have two derivative instruments: (i) an interest rate swap, which is included in Other liabilities and (ii) the derivative portion of a variable forward transaction, which is included in Other assets. The fair value of our derivatives is based on quotations from third parties. During the first nine months of 2003, net gain on derivative instruments includes unrealized gain from an increase in the fair value of an interest rate swap agreement amounting to $2,464,000, partially offset by unrealized loss resulting from a decrease in fair value of a variable forward sales transaction amounting to $2,004,000. The third quarter of 2003 includes unrealized gain from an increase in the fair value of an interest rate swap agreement amounting to $957,000, partially offset by unrealized loss resulting from a decrease in fair value of a variable forward sales transaction amounting to $908,000. The amounts for 2002 include unrealized gain resulting from an increase in fair value of a variable forward sales transaction amounting to $11,682,000 in the first nine months of 2002 and $2,005,000 in the third quarter of 2002,

and unrealized loss from a decline in fair value of an interest rate swap agreement amounting to $1,454,000 in the first nine months and $516,000 in the third quarter of 2002. The net gain for the nine months ended September 30, 2002 also is net of a realized loss amounting to $2,636,000 from termination, in March 2002, of an interest rate swap agreement.

Loss from extinguishment of long-term debt

	Nine Months Ended September 30						Three Months Ended September 30
(in thousands)	2003			2002			2003			2002
				$	3,264
We repaid certain loans in March 2002 and, as a result, expensed deferred loan costs amounting to $3,264,000. Other income, net
	Nine Months Ended September 30						Three Months Ended September 30
(in thousands)	2003			2002			2003			2002
	$	5,737		$	7,536		$	651		$	6,188
Other income, net includes dividends received on marketable securities, gains on the sale of marketable securities, gains on the sale of properties and, to a lesser extent, interest and miscellaneous income. The decreases in the three- and nine-month periods ended September 30, 2003, as compared to the same periods in 2002, are primarily the result of a September 2002 sale of real estate properties resulting in a gain of $5,511,000. The year-to-date 2003 period includes a gain on sale of marketable securities amounting to $3,675,000. Interest expense, net

	Nine Months Ended September 30						Three Months Ended September 30
(in thousands)	2003			2002			2003			2002
	$	(9,023	)	$	(8,101	)	$	(2,811	)	$	(2,816	)
Interest expense is shown net of certain allocations of interest expense to discontinued operations relating to corporate debt and mortgage loans that are required to be repaid with the net proceeds from sales. The increase in interest expense for the nine months ended September 30, 2003, as compared to the corresponding prior-year period, resulted from several factors, including: higher interest rates on some borrowings; higher interest paid under an interest rate swap agreement; and a premium paid in February 2003 in connection with prepayment of certain long-term debt. Interest capitalized in connection with the Fisher Plaza project amounted to $2,231,000 and $1,701,000 during the nine months ended September 30, 2003 and 2002, respectively. Interest capitalized for the three months ended September 30, 2003 and 2002 was $685,000 and $674,000, respectively. Provision (benefit) for federal and state income taxes

	Nine Months Ended September 30						Three Months Ended September 30
(in thousands)	2003			2002			2003			2002
	$	(5,829	)	$	(1,317	)	$	(2,007	)	$	152

Effective tax rate		39.9	%		46.1	%		38.0	%		24.0	%

The provision (benefit) for federal and state income taxes varies directly with pre-tax income. The effective tax rate varies from the statutory rate primarily due to a deduction for dividends received, offset by the impact of state income taxes.

Other comprehensive income (loss)

Nine Months Ended

September 30

Three Months Ended

September 30

(in thousands)

2003

2002

2003

2002

$ (285)

3,042

117

873

Other comprehensive income (loss) is net of income taxes and consists primarily of unrealized gain on our marketable securities. The 2003 amount also includes an adjustment to a minimum pension liability relating to a defined benefit pension plan that was terminated in 2003. During a portion of 2002, the effective portion of the change in fair value of an interest rate swap agreement is also included. Other comprehensive income or losses are reported as accumulated other comprehensive income, a separate component of stockholders’ equity.

During the nine months ended September 30, 2003, the value of our marketable securities increased $1,329,000, net of tax. Also during the period, we realized gain amounting to $2,024,000, net of tax, from sale of our investment in Weyerhaeuser Company common stock.

At September 30, 2003, our marketable securities consisted of 3,002,376 shares of SAFECO Corporation. The per-share market price of SAFECO Corporation common stock was as follows

December 31, 2002	$34.67	December 31, 2001	$31.15
March 31, 2003	$34.97	March 31, 2002	$32.04
June 30, 2003	$35.29	June 30, 2002	$30.89
September 30, 2003	$35.35	September 30, 2002	$31.78

During the period from January 1, 2002 through March 21, 2002, we used an interest rate swap, designated as a cash flow hedge, to manage exposure to interest rate risks. During this period the fair value of the swap increased $543,000, net of tax, which is recorded in other comprehensive income. In connection with the refinancing of our long-term debt in March of 2002, the swap agreement was terminated and the remaining negative fair market value of $2,636,000 ($1,713,000 net of tax benefit) was reclassified to operations.

During the nine months ended September 30, 2003 we also recorded changes in our additional minimum pension liability amounting to $410,000, net of income taxes, in connection with one of our defined benefit pension plans that was settled in 2003.

Liquidity and Capital Resources

As of September 30, 2003, we had working capital of $27,813,000, including cash and short-term cash investments totaling $10,182,000. As of September 30, 2003, approximately $32,000,000 is available under existing credit facilities. We intend to finance working capital, debt service, capital expenditures, and dividend requirements (if so declared) primarily through operating activities.

Net cash provided by operating activities during the nine months ended September 30, 2003 was $3,258,000, compared to $17,395,000 in the nine months ended September 30, 2002. The decline in cash provided by operating activities was due primarily to lower net operating performance in the 2003 period. Net cash provided by operating activities consists of our net loss, increased by non-cash expenses such as depreciation and the 2002 cumulative change in accounting principle, increased by certain gains that are not considered operating activities (and for which the cash flows pertaining to such items are from investing activities) and adjusted by changes in operating assets and liabilities.

Net cash provided by investing activities during the year-to-date period ended September 30, 2003 was $10,155,000, compared to a usage of cash for investing activities of $30,028,000 in the same period in 2002. The 2003 nine-month period includes restricted cash of $12,778,000 that became available for general corporate purposes during the first quarter of 2003, proceeds from sale of marketable securities of $5,169,000, and proceeds from collection of an installment note receivable of $3,185,000, all reduced by $10,771,000 invested for purchase of property, plant and equipment (including the Fisher Plaza project) and purchase of a radio station license. The 2002 nine-month period includes proceeds from the sale of certain discontinued operations and real estate properties and equipment totaling $16,010,000, offset by $15,146,000 reclassified to restricted cash and $30,892,000 invested for purchase of property, plant and equipment (including the Fisher Plaza project).

Net cash used in financing activities in the nine-months ended September 30, 2003, was $26,746,000, primarily resulting from payments on borrowing agreements and mortgage loans. During the period ended September 30, 2002, $17,081,000 was provided from financial activities due primarily to net borrowings during the period in excess of repayments, offset in part by dividend payments of $4,468,000, or $0.52 per share, during the period. At a meeting held on July 3, 2002, the Company’s board of directors voted to suspend payment of the quarterly dividend.

On January 29, 2003, the broadcasting subsidiary signed an asset purchase agreement for the sale of its two Georgia television stations, WFXG-TV, Augusta and WXTX-TV, Columbus, for a purchase price of $40 million plus working capital. Completion of the sale is subject to finality of the FCC approval dated October 3, 2003 and satisfaction of other customary closing conditions. The sale is expected to be completed in the fourth quarter of 2003, and the Company plans to use the net proceeds to pay down corporate debt.

As of September 30, 2003, future maturities of notes payable and long-term debt, and obligations for television and radio broadcast rights are as follows, including amounts that have been reclassified as held for sale in the accompanying Condensed Consolidated Balance Sheets (in thousands):

	Notes Payable and Long-Term Debt		Broadcast Rights
2003	$	2,418	$	2,715
2004		8,784		6,353
2005		86,489		329
2006		50,292		80
2007		24,897		28
Thereafter		97,038		5

	$	269,918	$	9,510

ADDITIONAL FACTORS THAT MAY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FUTURE RESULTS

The following risk factors and other information included in this quarterly report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition and future results could be materially adversely affected.

A continuing economic downturn in the Seattle, Washington or Portland, Oregon areas or in the national economy could adversely affect our operations, revenue, cash flow and earnings.

Our operations are concentrated primarily in the Pacific Northwest. The Seattle, Washington and Portland, Oregon markets are particularly important to our financial well being. Operating results during 2002 and 2003 have been adversely impacted by a soft economy, and a continuing economic downturn in these markets could have a material adverse effect on our operations and financial condition. Because our costs of services are relatively fixed, we may be unable to significantly reduce costs if our revenues continue to decline. If our revenues do not increase we could continue to suffer net losses or such net losses could increase. In addition, a continued downturn in the national economy may result in overall decreased national advertising sales. This could have an adverse affect on our results of operations because national advertising sales represent a significant portion of our television advertising net revenue.

Our restructuring may cause disruption of operations and distraction of management, and may not achieve the desired results.

We continue to implement a restructuring of our corporate enterprise. This restructuring may disrupt operations and distract management, which could have a material adverse effect on our operating results. We cannot predict whether this restructuring will achieve the desired benefits, or whether our Company will be able to fully integrate our broadcast communications and other operations. Because we do not control all aspects of the proposed sales or shut down activities we cannot assure you that all such activities will occur. We cannot assure you that the restructuring will be completed in a timely manner or that any benefits of the restructuring will justify its costs. We may incur costs in connection with the restructuring in a number of areas, including professional fees, marketing expenses, employment expenses, and administrative expenses. In addition, we may incur additional costs, which we are unable to predict at this time. Our proposed restructuring involves the upstream merger of Fisher Broadcasting Company into Fisher Communications. We may determine that there are regulatory or contractual restrictions that may cause us to choose not to consummate this merger.

Our proposed sale of the Georgia television stations and the Portland radio stations may not take place.

In January 2003, we announced that we executed agreements to sell our Georgia television stations to a third party. We subsequently announced that we executed an agreement to sell our Portland radio station to a different third party. Completion of the sale of the Georgia stations is currently subject to finality of the FCC approval dated October 3, 2003 and satisfaction of other customary closing conditions. Completion of the sale of the Portland stations is subject to satisfaction of customary closing conditions. We may be unable to close the sale of the Georgia stations or the Portland stations or the sales may not take place on the same terms that were previously announced.

Our debt service consumes a substantial portion of the cash we generate, but our ability to generate cash depends on many factors beyond our control.

We currently use a significant portion of our operating cash flow to service our debt. Our leverage makes us vulnerable to an increase in interest rates or a downturn in the operating performance of our businesses or a decline in general economic conditions. It further limits our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, and may limit our ability to pay dividends in the future. Finally, it inhibits our ability to compete with competitors who are less leveraged than we are, and it constrains our ability to react to changing market conditions, changes in our industry and economic downturns.

Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, may affect our ability to satisfy our debt obligations and our goals to reduce our debt. If in the future we cannot generate sufficient cash flow from operations to meet our obligations, we may need to refinance our debt, obtain additional financing, forego capital expenditures, or sell assets. Any of these actions could adversely affect the value of our common stock. We cannot assure you that we will generate sufficient cash flow or be able to obtain sufficient funding or take other actions to satisfy our debt service requirements.

In addition, our debt instruments contain covenants that require us to maintain certain financial ratios. If we are unable to generate sufficient revenue and are unable to reduce expenses we may be deemed in breach of these covenants, which could result in an acceleration of our debt.

Foreign hostilities and further terrorist attacks may affect our revenues and results of operations.

Our broadcasting operations experienced a loss of advertising revenue and incurred additional operating expenses during the recent war with Iraq. In the future, we may experience a loss of advertising revenue and incur additional broadcasting expenses in the event the United States engages in foreign hostilities or in the event there is a terrorist attack against the United States. A significant news event like a war or terrorist attack will likely result in the preemption of regularly scheduled programming by network news coverage of the event. As a result, advertising may not be aired and the revenue for such advertising may be lost unless the broadcasting station is able to run the advertising at agreed-upon times in the future. There can be no assurance that advertisers will agree to run such advertising in future time periods or that space will be available for such advertising. We cannot predict the duration of such preemption of local programming if it occurs. In addition, our broadcasting stations may incur additional expenses as a result of expanded local news coverage of the local impact of a war or terrorist attack. The loss of revenue and increased expenses could negatively affect our results of operations.

The performance of the television networks could harm our operating results.

The operating results of our broadcasting operations are primarily dependent on advertising revenues. Our Seattle and Portland television stations are affiliated with the ABC Television Network. Popularity of programming on ABC lagged behind other networks during 2002 and 2003, and contributed to a decline in audience ratings, which negatively impacted revenues for our Seattle and Portland television stations. Continued weak performance by ABC, an increase in performance by CBS or FOX, or a positive change in performance by other networks or network program suppliers, could harm our business and results of operations.

Competition in the broadcasting industry and the rise of alternative entertainment and communications media may result in loss of audience share and advertising revenue by our stations.

We cannot assure you that any of our stations will maintain or increase its current audience ratings or advertising revenues. Fisher Broadcasting’s television and radio stations face intense competition from local network affiliates and independent stations, as well as from cable and alternative methods of broadcasting brought about by technological advances and innovations. The stations compete for audiences on the basis of programming popularity, which has a direct effect on advertising rates. Additional significant factors affecting a station’s competitive position include assigned frequency and signal strength. The possible rise in popularity of competing entertainment and communications media could also have a materially adverse effect on Fisher Broadcasting’s audience share and advertising revenues. In addition, our principal marketing representative for the sale of national advertising for our Seattle and Portland television and radio stations is owned by a competitor, and the success of their efforts in selling national advertising is beyond our control. We cannot predict either the extent to which such competition will materialize or, if such competition materializes, the extent of its effect on our business.

Syndication agreements are subject to cancellation, and such cancellations may affect a station’s programming schedule. The syndicator for talk radio programs aired by our Seattle radio stations recently acquired radio stations in the Seattle market, and competes with our Seattle radio stations. We can give no assurance that we will be able to retain the rights to such programs once our current contracts for these programs expire. The syndication agreement for one of the most popular programs broadcast by one of our radio stations was recently cancelled. We cannot predict the effect of this cancellation on our revenues, cash flows, or results of operations.

The FCC recently adopted modifications to its national and local television ownership limitations, its prohibition on common ownership of newspapers and broadcast stations in the same market, as well as its local radio ownership limitations. If the rules are implemented as adopted, large broadcast groups would be allowed to expand further their ownership on a national basis, a single entity would be permitted to own more than one television station in markets with fewer independently owned stations, and the rules would allow consolidated newspaper and broadcast ownership and operation in several of our markets. As a result of the rules change, our existing operations could face increased competition from entities with significantly greater resources, and greater economies of scale, than Fisher Broadcasting. The new radio multiple ownership rules could limit our ability to acquire additional radio stations in existing markets which we serve. There are several proposals pending in Congress to modify or repeal the new FCC

rules, several parties have filed petitions seeking FCC reconsideration of the new rules, and a number of Notices of Appeal have been filed seeking court review of the rules, On September 3, 2003, the United States Court of Appeals for the Third Circuit issued an Order staying the effectiveness of the new media ownership rules pending review on appeal. On September 5, 2003, the FCC issued an order placing a freeze until further notice on the filing of all applications on certain FCC forms used to obtain consent to the construction or modification of radio and television stations or the assignment or transfer of control of such stations. We cannot predict when the freeze will be lifted or whether or when the new rules will be implemented as adopted, modified, reversed by the Courts or repealed in their entirety.

Our operating results are dependent on the success of programming aired by our television and radio stations.

We make significant commitments to acquire rights to television and radio programs under multi-year agreements. The success of such programs is dependent partly upon unpredictable and volatile factors beyond our control such as audience preferences, competing programming, and the availability of other entertainment activities. Audience preferences could cause our programming not to gain popularity or decline in popularity, which could cause our advertising revenues to decline. In some instances, we may have to replace programs before their costs have been fully-amortized, resulting in write-offs that increase operating costs.

In April 2002 we acquired the radio broadcast rights for the Seattle Mariners baseball team for a term of six years. The success of this programming is dependent on some factors beyond our control, such as the continued competitiveness of the Seattle Mariners and the successful marketing of the team by the team’s owners. If the Seattle Mariners fail to maintain their current fan base, the number of listeners to our radio broadcasts will likely decrease, which would harm our ability to generate anticipated advertising dollars.

We converted one of our Seattle radio stations, KOMO AM, to an “all news” format which has higher costs than the previous format. If we are unable to successfully increase the number of listeners, our margins could be adversely affected. In March 2002, we entered into a joint sales agreement with KING FM, which is owned and operated by a third-party. Our success in selling advertising under this agreement is closely tied to the station’s programming performance, which is not under our control. If the station’s ratings performance does not improve consistently, it will harm our ability to recoup our costs and generate a profit from this agreement.

The FCC’s extensive regulation of the broadcasting industry limits our ability to own and operate television and radio stations and other media outlets.

The broadcasting industry is subject to extensive regulation by the FCC under the Communications Act of 1934, as amended. Compliance with and the effects of existing and future regulations could have a material adverse impact on us. Issuance, renewal or transfer of broadcast station operating licenses requires FCC approval, and we cannot operate our stations without FCC licenses. Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short-term (i.e., less than the full eight years) license renewals or, for particularly egregious violations, the denial of a license renewal application or revocation of a license. While the majority of such licenses are renewed by the FCC, there can be no assurance that Fisher Broadcasting’s licenses will be renewed at their expiration dates, or, if renewed, that the renewal terms will be for eight years. If the FCC decides to include conditions or qualifications in any of our licenses, we may be limited in the manner in which we may operate the affected stations.

The Communications Act and FCC rules impose specific limits on the number of stations and other media outlets an entity can own in a single market. The FCC attributes interests held by, among others, an entity’s officers, directors, certain stockholders, and in some circumstances, lenders, to that entity for purposes of applying these ownership limitations. The new ownership rules may prevent us from acquiring additional stations in a particular market. We may also be prevented from engaging in a swap transaction if the swap would cause the other company to violate these rules, and the inability to enter into a swap transaction could inhibit our ability to implement our business strategies.

We may lose audience share and advertising revenue if we are unable to reach agreement with cable companies regarding the retransmission of signals of our television stations.

Many viewers of our television stations receive their signals via retransmissions by cable television systems. All television stations are generally entitled to be carried on cable television systems in their local markets without compensation from the cable system (“must-carry”). Alternatively, commercial television stations may choose to require cable television systems to obtain their permission (“retransmission consent”) to carry the signal of their

station. In such cases, the terms of carriage, including compensation, are subject to negotiation between the station and the cable system. The decision as to whether a television station’s relationship with each local cable system will be governed by must-carry or by retransmission consent arrangements is binding for a three-year period.

On October 1, 2002, each of Fisher Broadcasting’s television stations sent notices to cable systems in their market electing must-carry or retransmission consent status for the period from January 1, 2003 through December 31, 2005. We elected retransmission consent status with respect to a number of key cable systems. We have granted temporary permission for such cable systems to continue to retransmit the signal of the station involved while a retransmission consent agreement is under negotiation. We have executed retransmission consent agreements with several major systems in the Seattle and Portland television markets granting major cable systems permission to carry our local analog television stations on those cable systems, but we are in continuing negotiations with other systems in the Seattle and Portland markets, as well as with cable systems in markets served by our other television stations. There is no assurance, however, that retransmission consent agreements can be negotiated successfully with any cable system. If we cannot reach agreement regarding the terms under which a station will be retransmitted by a cable system, the cable system will be prohibited by law from continuing to carry the signal of that station. This could have an adverse effect on the ability of the public to receive the signal of the affected station, ultimately resulting in reduced audience share and advertising revenue.

A write-down of goodwill to comply with new accounting standards would harm our operating results.

Approximately $38 million (excluding amounts classified as held for sale), or 8% of our total assets as of September 30, 2003, consists of unamortized goodwill. On January 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” SFAS 142 changed the accounting for goodwill from an amortization method to an impairment-only approach. As a result of our adoption of SFAS 142, we recorded a charge for impairment of goodwill amounting to $99 million before income tax benefit or $64 million after income taxes. Goodwill is to be tested at the reporting unit level annually or whenever events or circumstances occur indicating that goodwill might be impaired. If impairment is indicated as a result of future annual testing, we will be required to record an additional impairment charge when such impairment occurs.

Dependence on key personnel may expose us to additional risks.

Our business is dependent on the performance of certain key employees, including our chief executive officer and other executive officers. We also employ several on-air personalities who have significant loyal audiences in their respective markets. We can give no assurance that all such key personnel will remain with us. The loss of any key personnel could harm our operations and financial results.

The non-renewal or modification of affiliation agreements with major television networks could harm our operating results.

Our television stations’ affiliation with one of the four major television networks (ABC, CBS, NBC and FOX) has a significant impact on the composition of the stations’ programming, revenues, expenses and operations. We cannot give any assurance that we will be able to renew our affiliation agreements with the networks at all, or on satisfactory terms. In recent years, the networks have been attempting to change affiliation arrangements in manners that would disadvantage affiliates. The non-renewal or modification of any of the network affiliation agreements could harm our operating results.

A network might acquire a television station in one of our markets, which could harm our business and operating results.

If a network acquires a television station in a market in which we own a station affiliated with that network, the network will likely decline to renew the affiliation agreement for our station in that market, which could harm our business and results of operations.

Our operations may be adversely affected by power outages, severe weather, increased energy costs or earthquakes in the Pacific Northwest.

Our corporate headquarters and a significant portion of our operations are located in the Pacific Northwest. The Pacific Northwest has from time-to-time experienced earthquakes and experienced a significant earthquake on February 28, 2001. We do not know the ultimate impact on our operations of being located near major earthquake faults, but an earthquake could harm our operating results. Severe weather, such as high winds, can also damage our television and radio transmission towers, which could result in loss of transmission, and a corresponding loss of

advertising revenue, for a significant period of time. In addition, the Pacific Northwest may experience power shortages or outages and increased energy costs. Power shortages or outages could cause disruptions to our operations, which in turn may result in a material decrease in our revenues and earnings and have a material adverse effect on our operating results. Power shortages or increased energy costs in the Northwest could harm the region’s economy, which could reduce our advertising revenues. Our insurance coverage may not be adequate to cover the losses and interruptions caused by earthquakes, severe weather and power outages.

Our computer systems are vulnerable to viruses and unauthorized tampering.

Despite our implementation of network security measures, our servers and computer systems are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems. Any of these events could cause system interruption, delays and loss of critical data. Our recovery planning may not be sufficient for all eventualities.

Our efforts to develop new business opportunities are subject to technological risk and may not be successful, or results may take longer than expected to realize.

We are developing new opportunities for creating, aggregating and distributing content through non-broadcast media channels, such as the Internet, cell phones, and web-enabled personal digital assistants. The success of our efforts is subject to technological innovations and risks beyond our control, so that the anticipated benefits may take longer than expected to realize. In addition, we have limited experience in non-broadcast media, which may result in errors in the conception, design or implementation of a strategy to take advantage of the opportunities available in that area. We therefore cannot give any assurance that our efforts will result in successful products or services.

Our ownership and operation of Fisher Plaza is subject to risks, including those relating to the economic climate, local real estate conditions, potential inability to provide adequate management, maintenance and insurance, potential collection problems, reliance on significant tenants, and regulatory risks.

Revenue and operating income from Fisher Plaza and the value of that property may be adversely affected by the general economic climate, the local economic climate and local real estate conditions, including prospective tenants’ perceptions of attractiveness of the property and the availability of space in other competing properties. We have developed the second building at Fisher Plaza, which entailed a significant investment. The softened economy in the Seattle area could adversely affect our ability to lease the space of Fisher Plaza on attractive terms or at all, which could harm our operating results. In addition, a continuing of the severe downturn in the telecom and high-tech sectors may significantly affect our ability to attract tenants to Fisher Plaza, since space at Fisher Plaza is marketed in significant part to organizations from these sectors. Other risks relating to our Fisher Plaza operations include the potential inability to provide adequate management, maintenance and insurance, and the potential inability to collect rent due to bankruptcy or insolvency of tenants or otherwise. Real estate income and values may also be adversely affected by such factors as applicable laws and regulations, including tax and environmental laws, interest rate levels and the availability of financing. We carry comprehensive liability, fire, extended coverage and rent loss insurance with respect to our properties. There are, however, certain losses that may be either uninsurable, not economically insurable or in excess of our current insurance coverage limits. If an uninsured loss occurs with respect to a property, it could harm our operating results.

A reduction on the periodic dividend on the common stock of SAFECO may adversely affect our revenue, cash flow and earnings.

We are a 2.2% stockholder of the common stock of SAFECO Corporation. If SAFECO reduces its periodic dividends, it will negatively affect our cash flow and earnings. In February 2001, SAFECO reduced its quarterly dividend from $0.37 to $0.185 per share.

Antitrust law and other regulatory considerations could prevent or delay our business activity or adversely affect our revenues.

The completion of any future transactions we may consider may be subject to the notification filing requirements, applicable waiting periods and possible review by the Department of Justice or the Federal Trade Commission under the Hart-Scott-Rodino Act. Any television or radio station acquisitions or dispositions will be subject to the license transfer approval process of the FCC. Review by the Department of Justice or the Federal Trade Commission may cause delays in completing transactions and, in some cases, result in attempts by these agencies to prevent completion of transactions or to negotiate modifications to the proposed terms. Review by the FCC, particularly

review of concentration of market share, may also cause delays in completing transactions. Any delay, prohibition or modification could adversely affect the terms of a proposed transaction or could require us to abandon a transaction opportunity. In addition, campaign finance reform laws or regulations could result in a reduction in funds being spent on advertising in certain political races, which would adversely affect our revenues and results of operations in election years.

We may be required to make additional unanticipated investments in HDTV technology, which could harm our ability to fund other operations or lower our outstanding debt.

Although our Seattle, Portland, Eugene and Boise television stations currently comply with FCC rules requiring stations to broadcast in high definition television (HDTV), our stations in smaller markets do not because they are operating pursuant to Special Temporary Authority to utilize low power digital facilities. These Special Temporary Authorizations must be renewed every six months, and there is no assurance that the FCC will continue to extend those authorizations. If the FCC does not extend the authorizations for Fisher’s smaller stations, then we may be required to make substantial additional investments in digital broadcasting to maintain the licenses of our smaller market stations. This could result in less cash being available to fund other aspects of our business or decrease our debt load.

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

Our strategy in managing exposure to interest rate changes is to maintain a balance of fixed- and variable-rate instruments. We will also consider entering into interest rate swap agreements at such times as we deem appropriate. At September 30, 2003, the fair value of our fixed-rate debt is estimated to be approximately $928,000 greater than the carrying amount of $96,157,000. Market risk is estimated as the potential change in fair value resulting from a hypothetical 10 percent change in interest rates and, at September 30, 2003, amounted to $1,513,000 on our fixed rate debt.

We also had $173,586,000 in variable-rate debt outstanding at September 30, 2003. A hypothetical 10 percent change in interest rates underlying these borrowings would result in a $989,000 annual change in our pre-tax earnings and cash flows.

We are a party to an interest rate swap agreement fixing the interest rate at 6.87%, plus a margin based on the broadcasting subsidiary’s ratio of consolidated funded debt to consolidated EBITDA, on a portion of our floating rate debt outstanding under an eight-year credit facility (“Broadcast Facility”). The notional amount of the swap reduces as payments are made on principal outstanding under the broadcast facility until termination of the contract on March 22, 2004. At September 30, 2003, the notional amount of the swap was $63,675,000 and the fair value of the swap agreement was a liability of $1,831,000. A hypothetical 10 percent change in interest rates would change the fair value of our swap agreement by approximately $17,000 at September 30, 2003. We have not designated the swap as a cash flow hedge; accordingly changes in the fair value of the swap are included in Net gain on derivative instruments in the accompanying Condensed Consolidated Statements of Operations.

Marketable Securities Exposure

The fair value of our investments in marketable securities at September 30, 2003 was $106,133,000. Marketable securities consist of 3,002,376 shares of SAFECO Corporation, which is reported on the NASDAQ securities market. As of September 30, 2003, these shares represented 2.2% of the outstanding common stock of SAFECO Corporation. While we currently do not intend to dispose of our investments in marketable securities, we have classified the 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 $10,613,000 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.

As of September 30, 2003, 3,000,000 shares of SAFECO Corporation stock owned by the Company were pledged as collateral under a variable forward sales transaction with a financial institution. A portion of the Forward Transaction is considered a derivative and, as such, we periodically measure its fair value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. As of September 30, 2003 the derivative portion of the Forward Transaction had a fair market value of $3,223,000, which is included in Other assets in the accompanying Condensed Consolidated Balance Sheet. A hypothetical 10 percent change in the market price of SAFECO Corporation stock would change the market value of the Forward Transaction by approximately $7,500,000. A hypothetical 10 percent change in volatility would change the market value of the Forward Transaction by approximately $200,000. A hypothetical 10 percent change in interest rates would change the market value of the Forward Transaction by approximately $400,000.

ITEM 4 - CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of its 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 fiscal quarter covered by this report, 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 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 have made no significant changes in internal controls over financial reporting during the last fiscal quarter that materially affected or are reasonably likely to materially affect our internal controls over financial reporting. We intend to continue to refine our internal controls on an ongoing basis as we deem appropriate with a view towards continuous improvements.

Management and PricewaterhouseCoopers LLP, our independent accountants, have reported to our Audit Committee certain matters involving internal controls that PricewaterhouseCoopers LLP considers to be reportable conditions under standards established by the American Institute of Certified Public Accountants. These matters relate to internal controls with respect to the identification of pension liability, the timing and recording of settlement losses and the classification of cash flows.

These matters have been discussed among management, PricewaterhouseCoopers LLP and our Audit Committee. We have assigned the highest priority to the correction of these reportable conditions and are committed to addressing them as soon as possible. We have recently hired additional corporate accounting staff and we intend to respond to the reportable conditions by hiring additional accounting staff.

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 or results of operations of the Company.

Item 2. Changes in 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 and Reports on Form 8-K

(a)

Exhibits:


10.1		Agreement dated September 2, 2003 between Robert Bateman and Fisher Communications, Inc.

31.1		Certification of Chief Executive Officer.

31.2		Certification of Chief Financial Officer.

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

(b)	Reports on Form 8-K:

A report on Form 8-K dated July 18, 2003 was filed with the Commission announcing that the Company had revised its accounting for the impairment of goodwill and accordingly would restate its financial results for 2002 and the first quarter of 2003. The report responded to Items 5, 7, and 9 of Form 8-K.

A report on Form 8-K dated August 4, 2003 was filed with the Commission announcing the retirement of board members Jean F. McTavish and Jacklyn F. Meurk and the appointment of two new board members, Deborah L. Bevier and Richard L. Hawley, to fill the vacancies. The Company also announced its financial results for the fiscal quarter ended June 30, 2003, as well as the sale of two of its commercial real estate properties. The report responded to Items 5, 7, 9, and 12 of Form 8-K. Other than the information provided in response to Item 5, the information contained in this report shall be deemed furnished to and not filed with the Commission.

A report on Form 8-K dated August 25, 2003 was filed with the Commission announcing that it has received a notice of potential delisting from the Nasdaq National Market. The report responded to Item 5 and 7 of Form 8-K.

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 COMMUNICATIONS, INC.
		(Registrant)

Dated November 14, 2003		/s/ David D. Hillard
		David D. Hillard
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description
10.1		Agreement dated September 2, 2003 between Robert Bateman and Fisher Communications, Inc.

31.1		Certification of Chief Executive Officer.

31.2		Certification of Chief Financial Officer.

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

EX-10.1 3 dex101.htm AGREEMENT WITH ROBERT BATEMAN Agreement with Robert Bateman

Exhibit 10.1

September 2, 2003

Mr. Robert Bateman

Fisher Communications, Inc.

100 Fourth Avenue North, Suite 440

Seattle, WA 98109

Dear Robert:

Fisher Communications, Inc. (the “Corporation”) expects that your contribution to the growth and success of the Corporation will be significant. In this connection, the Board of Directors of the Corporation (the “Board”) recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the distraction of management personnel to the detriment of the Corporation and its shareholders.

Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation.

The Corporation agrees that, notwithstanding your status as an at-will employee, you will receive the severance benefits set forth in this letter agreement (“Agreement”) in accordance with the circumstances described below.

1. Term of Agreement. This Agreement will commence on the date hereof and shall continue in effect until January 15, 2004, or until the termination of your employment, whichever shall occur first. As long as you remain employed by the Corporation, this Agreement shall automatically renew for consecutive one-year periods unless terminated by the Corporation on not less than thirty (30) days’ notice. Notwithstanding the above, the following apply:

(a) The Corporation may not terminate this Agreement following a Potential Change of Control (as defined in Section 2(b) hereof) unless the Board makes a good faith determination that the risk of the associated Change in Control (as defined in Section 2(a) hereof) has terminated.

Mr. Robert Bateman

September 2, 2003

Page 2

(b) Upon a Change in Control, this Agreement shall automatically terminate on the second anniversary of the date of the Change in Control, prior to which time this Agreement may not be terminated by the Corporation, except as provided herein.

(c) Neither your death nor the termination of this Agreement shall effect the payment of any benefits under Section 4(d), provided your right to receive such benefits arose prior to the earlier of (i) your death or (ii) the termination of this Agreement.

(d) Section 11 shall survive the termination of this Agreement.

2. Change in Control and Potential Change in Control.

(a) For purposes of this Agreement, a “Change in Control” shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Corporation is then subject to such reporting requirement; provided, that, without limitation, such a change in control shall be deemed to have occurred if:

(i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (a “Person”) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation (not including in the amount of the securities beneficially owned by such person any such securities acquired directly from the Corporation or its affiliates) representing twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding voting securities; provided, however, that for purposes of this Agreement the term “Person” shall not include (A) the Corporation or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) a corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation; and provided, further, however, that for purposes of this paragraph (i), there shall be excluded any Person who becomes such a beneficial owner in connection with an Excluded Transaction (as defined in paragraph (iii) below); or

(ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest including, but not limited

Mr. Robert Bateman

September 2, 2003

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to, a consent solicitation, relating to the election of directors of the Corporation) whose appointment or election by the Board or nomination for election by the Corporation’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

(iii) there is consummated a merger or consolidation of the Corporation or any direct or indirect subsidiary thereof with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving corporation or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the entity surviving the merger or consolidation (or the parent of such surviving entity) immediately after such merger or consolidation (an “Excluded Transaction”), or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation, or there is consummated the sale or other disposition, in one or more related transactions, of at least the lesser of seventy percent (70%) of the fair market value of Corporation’s gross assets or ninety percent (90%) of the fair market value of the Corporation’s net assets, as measured on the date hereof.

(b) For purposes of this Agreement, a “Potential Change in Control” shall be deemed to have occurred, if:

(i) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(ii) any Person (including the Corporation) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; or

(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

3. Termination Following a Change in Control or Potential Change in Control. If any of the events described in Section 2(a) hereof constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 4(d) hereof upon the termination of your employment during the term of this Agreement unless such termination is (i) because of your death or Disability (as defined in Section 3(a)), (ii) by the Corporation for Cause, or (iii) by you other than for Good Reason. You shall also be entitled to the benefits provided in Section 4(d) hereof if your employment is terminated prior to a Change in Control, if such termination is other than (i) because of your death or Disability, (ii) by the

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September 2, 2003

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Corporation for Cause, or (iii) due to your voluntary resignation, unless such resignation is for Good Reason, and you reasonably demonstrate that such termination was at the request of or as a result of actions by a third party who has taken steps reasonably calculated to effect a Change in Control, you shall be entitled to the benefits provided in Section 4(d) hereof. With respect to the foregoing, the following definitions apply:

(a) Disability. If prior to your retirement and while in the employ of the Corporation, you are incapacitated due to physical or mental illness that in the opinion of a licensed physician renders you totally and permanently incapable of performing your assigned duties with the Corporation, and as a result of such incapacitation you are absent from the full-time performance of your duties with the Corporation for six (6) consecutive months, the Corporation may terminate your employment for “Disability.”

(b) Cause. Termination by the Corporation of your employment for “Cause” shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from termination by you for Good Reason or any such failure resulting from your incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you that specifically identifies the manner in which the Corporation believes that you have not substantially performed your duties, and you have failed to resume substantial performance of your duties on a continuous basis within fourteen (14) days of receiving such demand, (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise, including, but not limited to, any breach of the confidentiality obligations you have in connection with this Agreement, a Change in Control or a Potential Change in Control, or (iii) your conviction of a felony or conviction of a misdemeanor which impairs your ability substantially to perform your duties with the Corporation. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done. by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation.

(c) Good Reason. For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence after a Change in Control, or after and at the request of or as a result of actions by a third party who has taken steps reasonably calculated to effect a Change in Control (each an “Applicable Event”), of any one or more of the following:

(i) the assignment to you of duties (other than those reasonably necessary to address the Applicable Event) inconsistent with your position immediately prior to the Applicable Event or a reduction or alteration in the nature of your position, duties, status or responsibilities from those in effect immediately prior to the Applicable Event;

Mr. Robert Bateman

September 2, 2003

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(ii) a reduction by the Corporation in your annualized and monthly or semi-monthly rate of base salary (“Base Salary”) as in effect on the date hereof or as the same shall be increased from time to time prior to a Change in Control;

(iii) the Corporation’s requiring you to be based at a location in excess of fifty (50) miles from the location where you are based immediately prior to the Applicable Event;

(iv) the failure by the Corporation to continue, substantially as in effect immediately prior to the Applicable Event, all of the Corporation’s employee benefit, incentive compensation, bonus, stock option and stock award plans, programs, policies, practices or arrangements in which you participate (or substantially equivalent successor plans, programs, policies, practices or arrangements) or the failure by the Corporation to continue your participation therein on substantially the same basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to the Applicable Event;

(v) the failure of the Corporation to obtain an agreement from any successor to the Corporation to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; and

(vi) any purported termination by the Corporation of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (d) below, and for purposes of this Agreement, no such purported termination shall be effective.

Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

(d) Notice of Termination. Any termination by the Corporation for Cause or for Disability or by you for Good Reason shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

(e) Date of Termination. “Date of Termination” shall mean the date specified in the Notice of Termination, when such a notice is required, or in any other case upon ceasing to perform services to the Corporation; provided, however, that if within thirty (30) days after any Notice of Termination one party notifies the other party that a dispute

Mr. Robert Bateman

September 2, 2003

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exists concerning the termination, the Date of Termination shall be the date finally determined to be the Date of Termination in an arbitration award that has been confirmed or enforced by a final, non-appealable judgment of a court of competent jurisdiction.

4. Compensation Upon Termination or During Disability. After an Applicable Event has occurred, if, during the term of this Agreement, your employment is terminated or you are in a period of Disability the following shall be applicable:

(a) During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness, your total compensation, including your Base Salary, bonus and any benefits, will continue unaffected until either you return to the full-time performance of your duties or your employment is terminated pursuant to Section 3(a) hereof. In the event you return to the full-time performance of your duties, you shall continue to receive your full Base Salary and bonus plus all other amounts to which you are entitled under any compensation or other employee benefit plan of the Corporation without interruption. In the event your employment is terminated pursuant to Section 3(a) hereof, your benefits shall be determined in accordance with the Corporation’s retirement, insurance and other applicable programs and plans then in effect.

(b) If your employment shall be terminated by the Corporation for Cause or by you other than for Good Reason, the Corporation shall pay you your full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given or on the Date of Termination if no Notice of Termination is required hereunder, plus all other amounts to which you are entitled under any compensation or benefit plan of the Corporation at the time such payments are due, and, except as otherwise required by law, the Corporation shall have no further obligations to you under this Agreement.

(c) If your employment terminates by reason of your death, your benefits shall be determined in accordance with the Corporation’s retirement, survivor’s benefits, insurance and other applicable programs and plans then in effect.

(d) If your employment by the Corporation is either terminated by the Corporation (other than for Cause or Disability) or terminated by you for Good Reason you shall be entitled to the following benefits:

(i) Accrued Compensation and Benefits. The Corporation shall provide you:

(A) the compensation, reimbursements and benefits accrued through the Date of Termination to the extent not theretofore provided;

Mr. Robert Bateman

September 2, 2003

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(B) a lump sum cash amount equal to the value of your unused vacation days accrued through the Date of Termination; and

(C) your normal post-termination compensation and benefits under the Corporation’s retirement, insurance and other compensation and benefit plans as in effect immediately prior to the Date of Termination, or if more favorable to you, immediately prior to the Applicable Event.

(ii) Lump Sum Severance Payment. The Corporation shall provide to you a severance payment in the form of a cash lump sum distribution equal to your annual Base Salary.

(iii) Continuation of Health Care Benefits. Subject to the benefits offset described below, you will be eligible to continue participation in the Corporation’s group health care benefits pursuant to COBRA for up to eighteen (18) months (or longer if applicable under the COBRA regulations) following the Date of Separation. The health care benefits for which you will be eligible will be in accordance with the written plan documents in effect from time to time governing the plans provided to active employees of the Corporation. These benefits will be provided at a cost, which the Corporation agrees to pay for a period of twelve (12) months from the Date of Separation, that is no greater than the amount paid for such health care benefits by active employees who participate in such plans. The benefits otherwise receivable by you pursuant to this paragraph (iii) shall be reduced to the extent you receive similar coverage under any other group health coverage (as an employee or otherwise). For the purpose of complying with the terms of this offset, you are obligated to report to the Corporation the amount of any such benefits which you receive.

(iv) Timing. The payments provided for in this paragraph (d) shall be made not later than the fifteenth day following the Date of Termination.

5. Successors; Binding Agreement.

(a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation or of any division or subsidiary thereof employing you to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled hereunder if you terminate your employment for Good Reason following an Applicable Event, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

Mr. Robert Bateman

September 2, 2003

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(b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement.

7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Washington.

8. Confidentiality. You agree that, except (i) with the prior written consent of the Corporation, (ii) in connection with review by retained legal or financial counsel, and (iii) as required by law, you and your permitted representatives will at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information or knowledge related to this Agreement or the terms herein. You agree that this Agreement and the terms herein are deemed confidential information. Breach of this provision shall constitute a breach of this Agreement, and this Agreement shall terminate immediately and automatically upon such breach.

9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

11. Claims and Arbitration. The parties shall resolve any dispute arising out of or relating to this Agreement by final and binding arbitration by a single neutral arbitrator located in Seattle, Washington.

(a) To commence an arbitration arising under this Agreement, either you or the Corporation shall serve upon the other, a demand for arbitration, specifying in reasonable

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September 2, 2003

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detail the basis for the demand and any relief sought. Within ten (10) days after a receiving party receives a demand for arbitration, the receiving party shall serve upon the demanding party a response, specifying in reasonable detail the party’ defenses to the claims asserted, and identifying in reasonable detail any counterclaims asserted or counter-relief sought. The demanding party shall respond to any counterclaim or request for counter-relief within five (5) days, specifying in reasonable detail any defenses it asserts.

(b) Within fifteen (15) days after the service of a response to the initial demand or, if applicable, to the counterclaim, you and the Corporation shall select the arbitrator who will resolve the dispute. You and the Corporation shall select an arbitrator with no current or past attorney-client or business relationship with either party or either party’s attorney, but with experience in executive compensation. If you and the Corporation cannot agree on an arbitrator within such fifteen (15) days, then the demanding party must petition a state or federal court in King County, Washington to identify an arbitrator, and the arbitrator identified by such court will administer the dispute resolution process in accordance with the terms of this Section 11.

(c) The parties shall self-administer the arbitration. The arbitrator shall not charge a filing fee, administrative fee, or any other fee beyond his or her usual hourly rate plus applicable costs, nor shall a third party act as administrator. You and the Corporation shall bear the fees of the arbitrator equally and in no event shall the arbitrator’s fee be shifted to one party, regardless of outcome. The American Arbitration Association’s expedited rules for commercial arbitrations shall govern the arbitration, except as modified to be consistent with the terms of this clause. You and the Corporation may conduct only the following discovery: a maximum of two (2) one-day (1-day) (no more than seven (7) hours) depositions; ten (10) interrogatories; ten (10) requests for production of documents; and ten (10) requests for admission per party. The arbitration hearing will occur no later than ninety (90) days after service of the initial demand for arbitration. Each party shall have a maximum of two (2) seven-hour (7-hour) days to present its case at the arbitration hearing, including opening arid closing arguments and all examinations. The arbitrator shall render his or her final decision within ten (10) days after the conclusion of the arbitration hearing and, in so doing, shall follow the substantive law of the state of Washington. The parties expressly agree that, other than for manifest disregard of the law, the arbitrator’s decision shall be final and non-appealable; judgment upon the arbitration may be entered and enforced in any court with jurisdiction over the parties.

(d) If the arbitrator determines that either you or the Corporation substantially prevailed on all of the claims or defenses at the arbitration, then the arbitrator shall award to the substantially prevailing party reasonable costs and attorney fees incurred in the arbitration. Costs awarded shall not include fees paid to the arbitrator or to experts retained in connection with the arbitration.

Mr. Robert Bateman

September 2, 2003

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12. Entire Agreement. This Agreement supersedes any other agreement or understanding between the parties hereto with respect to the issues that are the subject matter of this Agreement.

13. Effective Date. This Agreement shall become effective as of the date set forth above. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

FISHER COMMUNICATIONS, INC.

By		/s/ William W. Krippaehne Jr.
		William W. Krippaehne Jr.,
		President and Chief Executive Officer

Agreed to this 15th day of September , 2003

By		/s/ Robert C. Bateman
		ROBERT BATEMAN

EX-31.1 4 dex311.htm CEO CERTIFICATION PERSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT CEO Certification Persuant to Section 302 of the Sarbanes-Oxley Act

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, William W. Krippaehne, Jr., President and Chief Executive Officer of Fisher Communications, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Fisher Communications, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2003

/s/ William W. Krippaehne, Jr.

William W. Krippaehne, Jr.

President and Chief Executive Officer

EX-31.2 5 dex312.htm CFO CERTIFICATION PERSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT CFO Certification Persuant to Section 302 of the Sarbanes-Oxley Act

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, David D. Hillard, Chief Financial Officer of Fisher Communications, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Fisher Communications, Inc.;

a) All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2003

/s/ David D. Hillard

David D. Hillard

Senior Vice President

Chief Financial Officer

EX-32.1 6 dex321.htm CEO CERTIFICATION PERSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT CEO Certification Persuant to Section 906 of the Sarbanes-Oxley Act

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fisher Communications, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, William W. Krippaehne Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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

(2)

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

Dated: November 14, 2003

/s/ William W. Krippaehne Jr.

William W. Krippaehne Jr.

President and Chief Executive Officer

EX-32.2 7 dex322.htm CFO CERTIFICATION PERSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT CFO Certification Persuant to Section 906 of the Sarbanes-Oxley Act

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fisher Communications, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, David D. Hillard, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(3)

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

(4)

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

Dated: November 14, 2003

/s/ David D. Hillard

David D. Hillard

Senior Vice President

Chief Financial Officer

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