10-Q

UNITED STATES

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 June 30, 2009

or

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

For the transition period from             to             

Commission File Number: 0-22439

FISHER COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

WASHINGTON	91-0222175
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

100 Fourth Ave. N., Suite 510

Seattle, Washington 98109

(Address of Principal Executive Offices) (Zip Code)

(206) 404-7000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

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

Common Stock, $1.25 par value, outstanding as of August 4, 2009: 8,754,040

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

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

1.	Condensed Consolidated Statements of Operations (unaudited): Three and six months ended June 30, 2009 and 2008	3
2.	Condensed Consolidated Balance Sheets: June 30, 2009 (unaudited) and December 31, 2008	4
3.	Condensed Consolidated Statements of Cash Flows (unaudited): Six months ended June 30, 2009 and 2008	5
4.	Condensed Consolidated Statements of Comprehensive Loss (unaudited): Three and six months ended June 30, 2009 and 2008	6
5.	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		30
EXHIBIT INDEX		31

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Fisher Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Six months ended June 30,						Three months ended June 30,
(in thousands, except per-share amounts)	2009			2008			2009			2008
Revenue	$	60,496		$	83,749		$	31,983		$	45,694
Operating expenses
Direct operating costs		31,678			35,090			15,850			17,729
Selling, general and administrative expenses		24,954			35,189			12,514			21,332
Amortization of program rights		4,577			9,461			2,281			7,015
Depreciation and amortization		6,723			6,213			3,391			3,104
		67,932			85,953			34,036			49,180
Loss from operations		(7,436	)		(2,204	)		(2,053	)		(3,486	)
Gain on extinguishment of senior notes, net		2,965			—			1,173			—
Other income, net		829			105,762			535			104,732
Interest expense		(6,203	)		(6,902	)		(2,938	)		(3,544	)
Income (loss) from continuing operations before income taxes		(9,845	)		96,656			(3,283	)		97,702
Provision (benefit) for income taxes		(3,446	)		33,546			(1,149	)		33,772
Income (loss) from continuing operations		(6,399	)		63,110			(2,134	)		63,930
Loss from discontinued operations, net of income taxes		—			(502	)		—			(256	)
Net income (loss)	$	(6,399	)	$	62,608		$	(2,134	)	$	63,674
Income (loss) per share:
From continuing operations	$	(0.73	)	$	7.23		$	(0.24	)	$	7.32
From discontinued operations		—			(0.06	)		—			(0.03	)
Basic and diluted net income (loss) per share	$	(0.73	)	$	7.17		$	(0.24	)	$	7.29
Income (loss) per share assuming dilution:
From continuing operations	$	(0.73	)	$	7.23		$	(0.24	)	$	7.32
From discontinued operations		—			(0.06	)		—			(0.03	)
Net income (loss) per share assuming dilution	$	(0.73	)	$	7.17		$	(0.24	)	$	7.29
Weighted average shares outstanding		8,772			8,730			8,774			8,731
Weighted average shares outstanding assuming dilution		8,772			8,732			8,774			8,735

See accompanying notes to condensed consolidated financial statements.

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Fisher Communications, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	(unaudited)
(in thousands)	June 30, 2009			December 31, 2008
ASSETS
Current Assets
Cash and cash equivalents	$	58,467		$	31,835
Short-term investments		—			59,697
Receivables, net		22,116			26,044
Income taxes receivable		6,353			2,763
Deferred income taxes		1,763			1,763
Prepaid expenses and other assets		2,173			2,200
Television and radio broadcast rights		1,558			6,106
Total current assets		92,430			130,408
Cash value of life insurance and retirement deposits		17,758			17,425
Goodwill		13,293			13,293
Intangible assets		40,897			41,015
Other assets		6,045			6,955
Deferred income taxes		13,537			13,757
Property, plant and equipment, net		148,843			148,440
Total Assets	$	332,803		$	371,293
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	3,572		$	4,339
Accrued payroll and related benefits		6,254			4,301
Interest payable		3,237			3,773
Television and radio broadcast rights payable		1,573			6,124
Current portion of accrued retirement benefits		1,254			1,254
Other current liabilities		6,169			5,712
Total current liabilities		22,059			25,503
Long-term debt		122,050			150,000
Accrued retirement benefits		19,415			19,439
Other liabilities		10,395			11,607
Commitments and Contingencies
Stockholders’ Equity
Common stock, shares authorized 12,000,000, $1.25 par value; issued and outstanding 8,754,040 in 2009 and 8,737,281 in 2008		10,943			10,922
Capital in excess of par		11,578			11,140
Accumulated other comprehensive income (loss), net of income taxes:
Unrealized loss on marketable securities		(124	)		(158	)
Accumulated loss		(2,518	)		(2,545	)
Prior service cost		(159	)		(178	)
Retained earnings		139,164			145,563
Total Stockholders’ Equity		158,884			164,744
Total Liabilities and Stockholders’ Equity	$	332,803		$	371,293

See accompanying notes to condensed consolidated financial statements.

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Fisher Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended June 30,
(in thousands)	2009			2008
Cash flows from operating activities
Net income (loss)	$	(6,399	)	$	62,608
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization		6,723			6,253
Deferred income taxes		203			74
Amortization of deferred financing fees		247			316
Amortization of broadcast rights		4,577			9,461
Gain on extinguishment of senior notes, net		(2,965	)		—
Payments for broadcast rights		(4,593	)		(9,588	)
Amortization of short-term investment discount		(303	)		—
Gain on sale of marketable securities		—			(103,621	)
Net non-cash contract termination fee		—			4,990
Amortization of non-cash contract termination fee		(731	)		(533	)
Equity in operations of equity investees		73			(1	)
Stock-based compensation		495			426
Other		63			182
Change in operating assets and liabilities
Receivables		3,928			(3,062	)
Prepaid expenses and other current assets		27			(618	)
Cash value of life insurance and retirement deposits		(333	)		(413	)
Other assets		92			1,005
Trade accounts payable, accrued payroll and related benefits, interest payable, and other current liabilities		(648	)		818
Income taxes receivable and payable		(3,591	)		16,253
Accrued retirement benefits		(23	)		11
Other liabilities		(384	)		(483	)
Net cash used in operating activities		(3,542	)		(15,922	)
Cash flows from investing activities
Purchases of marketable securities		—			(56	)
Proceeds from sale of marketable securities		—			89,845
Purchase of television stations		—			(52,365	)
Decrease in restricted cash		—			52,365
Redemption of short-term investments		60,000			—
Purchase of property, plant and equipment		(5,322	)		(5,436	)
Net cash provided by investing activities		54,678			84,353
Cash flows from financing activities
Borrowings under borrowing agreements		—			14,000
Payments on borrowing agreements		—			(14,000	)
Repurchase of senior notes		(24,428	)		—
Payments on capital lease obligations		(76	)		(70	)
Net cash used in financing activities		(24,504	)		(70	)
Net increase in cash and cash equivalents		26,632			68,361
Cash and cash equivalents, beginning of period		31,835			6,510
Cash and cash equivalents, end of period	$	58,467		$	74,871

See accompanying notes to condensed consolidated financial statements.

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Fisher Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	Six months ended June 30,						Three months ended June 30,
(in thousands)	2009			2008			2009			2008
Net income (loss)	$	(6,399	)	$	62,608		$	(2,134	)	$	63,674
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities		51			26,491			88			53,722
Effect of income taxes		(17	)		(9,272	)		(30	)		(18,803	)
Accumulated loss		41			27			20			14
Effect of income taxes		(14	)		(9	)		(7	)		(5	)
Prior service cost		30			24			15			12
Effect of income taxes		(11	)		(8	)		(6	)		(4	)
Reclassification adjustment for (gains) losses included in net income (loss)		—			(103,611	)		—			(103,622	)
Effect of income taxes		—			36,264			—			36,268
Other comprehensive income (loss)		80			(50,094	)		80			(32,418	)
Comprehensive income (loss)	$	(6,319	)	$	12,514		$	(2,054	)	$	31,256

See accompanying notes to condensed consolidated financial statements.

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Fisher Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Fisher Communications, Inc. and its wholly-owned subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included in the periods presented. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009, or for any other period. The balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for annual financial statements. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2008 (“2008 Form 10-K”).

The condensed consolidated financial statements include the accounts of Fisher Communications, Inc and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the condensed consolidated financial statements in the prior year to conform to the current year presentation.

Variable interest entities The Company may enter into Local Marketing Agreements (“LMAs”) with non-owned stations. Under the terms of these agreements, the Company makes specific periodic payments to the station’s owner-operator in exchange for the right to provide programming and sell advertising on the station. Nevertheless, the owner-operator retains control and responsibility for the operation of the station. Generally, the Company’s rights to provide programming and sell advertising continues until the termination of such agreement. As a result of these agreements, the Company may determine the station is a Variable Interest Entity (“VIE”) as defined by the Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 46R, Consolidation of Variable Interest Entities, and the Company is the primary beneficiary of the variable interest. This typically occurs if the Company has an agreement to acquire all stations or assets in the legal entity, there is significant certainty regarding the Company’s intention to acquire the station and the conditions to close are considered to be perfunctory.

Reclassifications The results of operations of Pegasus News, Inc., which the Company sold on December 31, 2008, have been reclassified from continuing operations to discontinued operations in the condensed consolidated statement of operations for the three and six months ended June 30, 2008. Additionally, the results of operations of five small-market radio stations in Montana, previously classified as discontinued operations in the condensed consolidated statement of operations for the three and six months ended June 30, 2008, have been presented as continuing operations. See Note 8 to the condensed consolidated financial statements for further information. The reclassifications had no effect on net income (loss), shareholders’ equity or cash flows from operating, investing or financing activities.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The significant accounting policies used in preparation of the condensed consolidated financial statements are disclosed in the Company’s 2008 Form 10-K. With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2009, as compared to the recent accounting pronouncements described in the Company’s 2008 Form 10-K, that are of significance, or potential significance, to the Company.

Effective January 1, 2009, the Company adopted FASB Staff Position (“FSP”) No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”) that amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). FSP 142-3 requires a consistent approach between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of an asset under SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). The FSP also requires enhanced disclosures when an intangible asset’s expected future cash flows are affected by an entity’s intent and/or ability to renew or extend the arrangement. The adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.

Effective January 1, 2009, the Company adopted SFAS 141(R). Under SFAS 141(R), an entity that completes a business combination is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and that

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changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for taxes. For the Company, SFAS 141(R) is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of January 1, 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired contingencies under SFAS No. 109, Accounting for Income Taxes. The adoption of SFAS 141(R) did not have any impact on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted FSP 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”). FSP 157-2 delayed the effective date of SFAS No. 157, Fair Value Measurements (“SFAS 157”) for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of 2009. These include goodwill and other non-amortizable intangible assets. The adoption of SFAS 157 to non-financial assets and liabilities did not have a significant impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial Instruments (“FSP FAS 107-1”). FSP FAS 107-1 requires fair value disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. FSP FAS 107-1 is effective for interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

In May 2009, the FASB issued SFAS 165, Subsequent Events (“SFAS 165”). SFAS 165 provides guidance on management’s assessment of subsequent events and incorporates this guidance into accounting literature. SFAS 165 is effective prospectively for interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition. The Company has evaluated subsequent events through August 7, 2009, the date of issuance of our consolidated financial position and results of operations.

In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”). The Codification will become the single source for all authoritative GAAP recognized by the FASB for financial statements issued for periods ending after September 15, 2009. The Codification does not change GAAP and will not have an impact on the Company’s consolidated results of operations or financial condition.

3. Fair Value Measurements

The Company measures certain financial assets at fair value on a recurring basis, including cash equivalents and marketable securities. The fair value of these financial assets was determined based on three levels of inputs, of which, the first two levels are considered observable and the last unobservable. The three levels of inputs that may be used to measure fair value are as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis consist solely of marketable securities. As of June 30, 2009 and December 31, 2008, the reported fair value of marketable securities, using Level 1 inputs, was $835,000 and $769,000, respectively. Marketable securities are included in other assets on the Company’s condensed consolidated balance sheets.

As of June 30, 2009 and December 31, 2008, all of the Company’s debt was at a fixed rate and totaled $122.1 million and $150.0 million, respectively. The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of the Company’s long-term debt at June 30, 2009 and December 31, 2008 was $108.0 million and $123.0 million, respectively, Fair market values are determined based on market quotes by brokers. For fixed rate debt, interest rate changes do not impact book value, operations or cash flows.

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4. Goodwill and Intangible Assets

The following table summarizes the carrying amount of goodwill and intangible assets (in thousands):

	June 30, 2009							December 31, 2008
	Gross carrying amount		Accumulated amortization			Net		Gross carrying amount		Accumulated amortization			Net
Goodwill (1)	$	13,293	$	—		$	13,293	$	13,293	$	—		$	13,293
Intangible assets:
Broadcast licenses (1)	$	37,430	$	—		$	37,430	$	37,430	$	—		$	37,430
Other intangible assets		285		—			285		285		—			285
Intangible assets subject to amortization (2)
Network affiliation agreement		3,560		(378	)		3,182		3,560		(260	)		3,300
Total intangible assets	$	41,275	$	(378	)	$	40,897	$	41,275	$	(260	)	$	41,015

(1) Goodwill and broadcast licenses are considered indefinite-lived assets for which no periodic amortization is recognized. The television and radio broadcast licenses are issued by the Federal Communications Commission (“FCC”) and provide the Company with the exclusive right to utilize certain frequency spectrum to air its stations’ programming. While FCC licenses are issued for only a fixed time, renewals of FCC licenses have occurred routinely and at nominal cost. Moreover, the Company has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of its FCC licenses.

(2) Intangible assets subject to amortization are amortized on a straight-line basis. Total amortization expense for intangible assets subject to amortization for the three and six months ended June 30, 2009 was $59,000 and $118,000, respectively. Total amortization expense for intangible assets subject to amortization for the three and six months ended June 30, 2008 was $65,000 and $130,000, respectively. An additional $17,000 and $34,000 of amortization expense is included in discontinued operations for the three and six months ended June 30, 2008, respectively.

The Company follows SFAS 142, which requires it to test goodwill and intangible assets for impairment at least annually, or whenever events indicate that impairment may exist. The Company has determined that the impairment test should be conducted at the operating segment level (which is at a reporting unit level), which, with respect to the broadcast operations, requires separate assessment of each of the Company’s television and radio station groups. The Company determines fair value based on valuation methodologies that include an analysis of market transactions for comparable businesses, discounted cash flows, and a review of the underlying assets of the reporting unit.

The following table presents the estimated amortization expense for the Company’s intangible assets for the remainder of 2009 and each of the next five years and thereafter (in thousands):

Year ending December 31,
2009	$	118
2010		236
2011		236
2012		236
2013		236
2014		236
Thereafter		1,884
	$	3,182

5. Local Marketing Agreement

In May 2009, the Company entered into a three year LMA with South Sound Broadcasting LLC (“South Sound”) to manage one of South Sound’s FM radio stations licensed to Oakville, Washington. The station broadcasts the Company’s KOMO NewsRadio programming to FM listeners in the Seattle – Tacoma radio market. Contemporaneously with the LMA, the Company entered into an option agreement with South Sound, whereby the Company has the right to acquire the station until May 8, 2012. If the Company does not exercise the option prior to its expiration date, the Company is obligated to pay South Sound up to approximately $1.4 million. This LMA does not meet the criteria for consolidation. Advertising revenue earned under this LMA is recorded as operating revenue and LMA fees and programming expenses are recorded as operating costs.

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6. Short-Term Investments

The Company’s short-term investments are comprised of commercial paper with original maturities of greater than 91 days but less than one year. The Company has classified its short-term investments as held-to-maturity as the Company has the intent and ability to hold these securities to maturity. The securities are carried at amortized cost using the specific identification method and interest income is recorded using an effective interest rate with the associated discount amortized to interest income. During the quarter ended June 30, 2009, the Company redeemed the entire principal upon maturity of its remaining investment in commercial paper.

7. Extinguishment of Senior Notes

During the three months ended June 30, 2009, the Company repurchased $12.8 million aggregate principal amount of its 8.625% senior notes due in 2014 (“Senior Notes”), at an average price of $888.91 per $1,000 principal amount. The total consideration for the repurchase was $11.4 million in cash plus accrued interest of $139,000. A gain on extinguishment of debt was recorded net of a charge for related unamortized debt issuance costs of $249,000, resulting in a net gain of approximately $1.2 million. During the six months ended June 30, 2009, the Company repurchased $28.0 million of aggregate principal amount of its Senior Notes for total consideration of $24.4 million in cash plus accrued interest of $637,000. The Company recorded a gain on extinguishment of debt, net of a charge for related unamortized debt issuance costs of $557,000, resulting in a net gain of approximately $3.0 million on the extinguishment of Senior Notes for the six months ended June 30, 2009. The gain is presented as “Gain on extinguishment of senior notes, net” in the Company’s condensed consolidated statement of operations.

8. Discontinued Operations

During the fourth quarter of 2008, the Company determined that, in view of the uncertainty surrounding the timing or probability of a sale of five radio stations in Montana, the requirements of SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, necessary to classify the radio stations as discontinued operations were no longer met. As a result, the assets and liabilities of the five stations have been classified as held for use in the condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008, and the results of operations of the five stations have been classified as continuing operations in the Company’s condensed consolidated statements of operations for all periods presented.

On December 31, 2008, the Company sold Pegasus News, Inc. (“Pegasus”), a local news service specializing in providing personalized online local news, information and advertising in Dallas, Texas. Net proceeds of the sale were $1.5 million. As consideration for the sale, the buyer paid the Company $1.5 million in cash and granted the Company and its affiliates a royalty-free, non-exclusive, non-transferable license to use certain related technology in its existing television and radio markets to deliver personalized online local news, information and advertising. In accordance with SFAS 144, the Company has reported the results of operations of Pegasus as discontinued operations in the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2008. The operations of Pegasus were previously included in the Company’s television segment.

Operational data for Pegasus included in discontinued operations is summarized as follows (in thousands):

	Six months ended June 30, 2008			Three months ended June 30, 2008
Revenue	$	77		$	51
Loss from discontinued operations before income taxes		(770	)		(393	)
Provision (benefit) for income taxes		(268	)		(137	)
Loss from discontinued operations	$	(502	)	$	(256	)

9. Television and Radio Broadcast Rights and Other Broadcast Commitments

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

As of June 30, 2009, the Company had commitments under various agreements of $34.3 million for future rights to broadcast television programs and rights to sell available advertising time on a third party radio station through 2013.

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10. Retirement Benefits

The Company has a noncontributory supplemental retirement program for former key members of management. No new participants have been admitted since 2001 and no current Company executive officers participate in this program. In June 2005, the program was amended to freeze the accrual of all benefits to active participants provided under the program. The program provides for vesting of benefits under certain circumstances. Funding is not required, but generally, the Company has acquired annuity contracts and life insurance on the lives of the individual participants to assist in the payment of retirement benefits. The Company is the owner and beneficiary of such policies; accordingly, the cash values of the policies as well as the accrued liability are reported in the Company’s condensed consolidated financial statements. The program requires continued employment through the date of expected retirement. The cost of the program is accrued over the average expected future lifetime of the participants.

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

	Six months ended June 30				Three months ended June 30
	2009		2008		2009		2008
Interest cost	$	542	$	550	$	271	$	275
Amortization of loss		57		30		28		15
Net periodic pension cost	$	599	$	580	$	299	$	290

The discount rate used to determine net periodic pension cost was 5.5% and 5.88% for both the three and six month period ended June 30, 2009 and 2008, respectively.

11. Income (loss) per share

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

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

	Six months ended June 30						Three months ended June 30
	2009			2008			2009			2008
Income (loss) from continuing operations	$	(6,399	)	$	63,110		$	(2,134	)	$	63,930
Loss from discontinued operations, net of income taxes		—			(502	)		—			(256	)
Net income (loss)	$	(6,399	)	$	62,608		$	(2,134	)	$	63,674
Weighted average shares outstanding - basic		8,772			8,730			8,750			8,731
Weighted effect of dilutive options and rights		—			2			—			4
Weighted average shares outstanding assuming dilution		8,772			8,732			8,750			8,735
Income (loss) per share:
From continuing operations	$	(0.73	)	$	7.23		$	(0.24	)	$	7.32
From discontinued operations		—			(0.06	)		—			(0.03	)
Net income (loss) per share	$	(0.73	)	$	7.17		$	(0.24	)	$	7.29
Income (loss) per share assuming dilution:
From continuing operations	$	(0.73	)	$	7.23		$	(0.24	)	$	7.32
From discontinued operations		—			(0.06	)		—			(0.03	)
Net income (loss) per share assuming dilution	$	(0.73	)	$	7.17		$	(0.24	)	$	7.29

For the three and six months ended June 30, 2009, due to the net loss the effect of 99,394 restricted stock rights/units and options to purchase 273,921 shares are excluded from the calculation of weighted average shares outstanding, because such rights/units and options were anti-dilutive. For the three and six months ended June 30, 2008, the effect of options to purchase 257,465 shares are excluded from the calculation of weighted average shares outstanding, because such rights/units and options were anti-dilutive.

11

12. Stock-Based Compensation

The Company records stock-based compensation expense related to stock-based awards under SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”). Stock-based compensation expense for the three and six months ended June 30, 2009 was $196,000 and $495,000, respectively. Stock-based compensation expense for the three and six months ended June 30, 2008 was $261,000 and $426,000, respectively. Stock-based compensation expense is included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

13. Income Taxes

The Company records its income tax provision or benefit based upon its estimated annual effective tax rate, which is estimated at 35% for the six months ended June 30, 2009 and 2008.

The IRS completed a field examination of the Company’s 2003, 2004 and 2005 U.S. tax returns during March 2008, and the Company paid $68,000 pursuant to a final notice of settlement. The Company recognizes tax expense related to agreed-upon tax adjustments currently as part of its income tax provision and recognizes interest related to uncertain tax positions in interest expense. The U.S. federal statute of limitations remains open for the year 2006 and onward. The Internal Revenue Service (“IRS”) has completed the field examination of the Company’s 2006 and 2007 U.S. tax returns. The Company recognized interest expense in the amount of $79,000 and $0 related to uncertain tax positions for the six months ended June 30, 2009 and 2008, respectively. In addition, the Company reclassified $860,000 from deferred tax liability to taxes payable during the six months ended June 30, 2009. As of June 30, 2008 and December 31, 2008, the Company had not accrued any amounts for interest or penalties related to uncertain tax positions.

14. Segment Information

The Company reports financial data for three segments: television, radio, and Fisher Plaza. The television segment includes the operations of the Company’s 20 owned and operated television stations (including a 50%-owned television station) and internet business. The radio segment includes the operations of the Company’s eight radio stations and two managed radio stations. Corporate expenses are allocated to the television and radio segments based on actual expenditures incurred or based on a pro-rata basis of actual costs. The Fisher Plaza segment includes the operations of a communications center located near downtown Seattle that serves as home of the Company’s Seattle television and radio operations, the Company’s corporate offices, and third-party tenants.

Certain reclassifications have been made to prior period financial information to conform to the current presentation. Reclassifications include the results of Pegasus from continuing operations to discontinued operations, and the results of the five remaining small-market radio stations from discontinued operations to continuing operations. See Note 8 for further information. These reclassifications have no effect on the previously reported net income (loss).

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

	Six months ended June 30,						Three months ended June 30,
	2009			2008			2009			2008
Television	$	43,004		$	58,808		$	22,721		$	30,899
Radio		10,797			18,478			5,909			11,603
Fisher Plaza		6,778			6,505			3,436			3,192
Corporate and eliminations		(83	)		(42	)		(83	)		—
	$	60,496		$	83,749		$	31,983		$	45,694

For both the three and six months ended June 30, 2009, inter-segment sales amounted to $83,000 relating primarily to inter-segment revenue between television and radio. For the three and six months ended June 30, 2008, inter-segment sales amounted to $0 and $42,000, respectively, relating primarily to telecommunications fees charged from Fisher Plaza.

12

Income (loss) from continuing operations for each segment is as follows (in thousands):

	Six months ended June 30,						Three months ended June 30,
	2009			2008			2009			2008
Television	$	(5,771	)	$	2,697		$	(2,178	)	$	152
Radio		857			(1,807	)		931			(1,434	)
Fisher Plaza		3,168			2,699			1,659			1,285
Corporate and eliminations		(5,690	)		(5,793	)		(2,465	)		(3,489	)
Total segment loss from continuing operations		(7,436	)		(2,204	)		(2,053	)		(3,486	)
Gain on extinguishment of senior notes		2,965			—			1,173			—
Other income, net		829			105,762			535			104,732
Interest expense		(6,203	)		(6,902	)		(2,938	)		(3,544	)
Consolidated income (loss) from continuing operations before income taxes	$	(9,845	)	$	96,656		$	(3,283	)	$	97,702

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

	June 30, 2009		December 31, 2008
Television	$	142,200	$	125,633
Radio		15,461		16,838
Fisher Plaza		110,311		112,683
Corporate and eliminations		64,831		116,139
	$	332,803	$	371,293

Identifiable assets by segment are those assets used in the operations of each segment. Corporate assets include approximately $22.8 million of cash and cash equivalents, short-term investments as of June 30, 2009 ($90.8 million as of December 31, 2008), cash value of life insurance and retirement deposits and deferred income taxes.

15. Financial Information for Guarantors

As of June 30, 2009, the Company had $122.1 million aggregate principal amount of Senior Notes outstanding. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured, senior basis by the current and future 100% owned subsidiaries of the Company.

Presented below are condensed consolidated statements of operations for the three and six months ended June 30, 2009 and 2008, and cash flows for the six months ended June 30, 2009 and 2008. Also presented are the condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008. The condensed consolidated information is presented for the Company (issuer) with its investments accounted for under the equity method, the 100%-owned guarantor subsidiaries, eliminations, and the Company on a consolidated basis. The Company (issuer) information consists primarily of corporate oversight and administrative personnel and related activities, as well as certain investments.

13

Financial Information for Guarantors

Condensed Consolidated Statement of Operations

For the Three Months Ended June 30, 2009

(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations			Fisher Communications, Inc. and Subsidiaries
Revenue	$	—		$	31,983		$	—		$	31,983
Operating expenses
Direct operating costs		108			15,692			50			15,850
Selling, general and administrative expenses		2,097			10,467			(50	)		12,514
Amortization of program rights		—			2,281			—			2,281
Depreciation and amortization		401			2,990			—			3,391
		2,606			31,430			—			34,036
Income (loss) from operations		(2,606	)		553			—			(2,053	)
Gain on extinguishment of senior notes, net		1,173			—			—			1,173
Other income, net		382			153			—			535
Equity in income of subsidiaries		464			—			(464	)		—
Interest expense		(2,918	)		(20	)		—			(2,938	)
Income (loss) before income taxes		(3,505	)		686			(464	)		(3,283	)
Provision (benefit) for income taxes		(1,371	)		222			—			(1,149	)
Net income (loss)	$	(2,134	)	$	464		$	(464	)	$	(2,134	)
Financial Information for Guarantors Condensed Consolidated Statement of Operations For the Six Months Ended June 30, 2009
(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations			Fisher Communications, Inc. and Subsidiaries
Revenue	$	—		$	60,496		$	—		$	60,496
Operating expenses
Direct operating costs		211			31,366			101			31,678
Selling, general and administrative expenses		5,003			20,052			(101	)		24,954
Amortization of program rights		—			4,577			—			4,577
Depreciation and amortization		751			5,972			—			6,723
		5,965			61,967			—			67,932
Loss from operations		(5,965	)		(1,471	)		—			(7,436	)
Gain on extinguishment of senior notes, net		2,965			—			—			2,965
Other income, net		684			145			—			829
Equity in income of subsidiaries		(911	)		—			911			—
Interest expense		(6,163	)		(40	)		—			(6,203	)
Income (loss) before income taxes		(9,390	)		(1,366	)		911			(9,845	)
Benefit for income taxes		(2,991	)		(455	)		—			(3,446	)
Net income (loss)	$	(6,399	)	$	(911	)	$	911		$	(6,399	)

14

Financial Information for Guarantors

Condensed Consolidated Statement of Operations

For the Three Months Ended June 30, 2008

(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations			Fisher Communications, Inc. and Subsidiaries
Revenue	$	—		$	45,694		$	—		$	45,694
Operating expenses
Direct operating costs		77			17,598			54			17,729
Selling, general and administrative expenses		4,287			17,099			(54	)		21,332
Amortization of program rights		—			7,015			—			7,015
Depreciation and amortization		232			2,872			—			3,104
		4,596			44,584			—			49,180
Income (loss) from operations		(4,596	)		1,110			—			(3,486	)
Other income, net		104,675			57			—			104,732
Equity in income of subsidiaries		417			—			(417	)		—
Interest expense		(3,522	)		(22	)		—			(3,544	)
Income before income taxes		96,974			1,145			(417	)		97,702
Provision for income taxes		33,300			472			—			33,772
Income (loss) from continuing operations		63,674			673			(417	)		63,930
Loss from discontinued operations, net of income taxes		—			(256	)		—			(256	)
Net income (loss)	$	63,674		$	417		$	(417	)	$	63,674
Financial Information for Guarantors Condensed Consolidated Statement of Operations For the Six Months Ended June 30, 2008
(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations			Fisher Communications, Inc. and Subsidiaries
Revenue	$	—		$	83,755		$	(6	)	$	83,749
Operating expenses
Direct operating costs		147			34,846			97			35,090
Selling, general and administrative expenses		6,780			28,512			(103	)		35,189
Amortization of program rights		—			9,461			—			9,461
Depreciation and amortization		463			5,750			—			6,213
		7,390			78,569			(6	)		85,953
Income (loss) from operations		(7,390	)		5,186			—			(2,204	)
Other income, net		105,712			50			—			105,762
Equity in income of subsidiaries		2,713			—			(2,713	)		—
Interest expense		(6,857	)		(45	)		—			(6,902	)
Income (loss) before income taxes		94,178			5,191			(2,713	)		96,656
Provision for income taxes		31,570			1,976			—			33,546
Income (loss) from continuing operations		62,608			3,215			(2,713	)		63,110
Loss from discontinued operations, net of income taxes		—			(502	)		—			(502	)
Net income (loss)	$	62,608		$	2,713		$	(2,713	)	$	62,608

15

Financial Information for Guarantors

Condensed Consolidated Balance Sheet

As of June 30, 2009

(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations			Fisher Communications, Inc. and Subsidiaries
ASSETS
Current Assets
Cash and cash equivalents	$	22,823		$	35,644		$	—		$	58,467
Receivables, net		6			22,110			—			22,116
Due from affiliate		15,327			19,673			(35,000	)		—
Income taxes receivable		5,340			1,013			—			6,353
Deferred income taxes		521			1,242			—			1,763
Prepaid expenses and other assets		712			1,461			—			2,173
Television and radio broadcast rights		—			1,558			—			1,558
Total current assets		44,729			82,701			(35,000	)		92,430
Cash value of life insurance and retirement deposits		17,758			—			—			17,758
Goodwill		—			13,293			—			13,293
Intangible assets		—			40,897			—			40,897
Other assets		2,319			3,726			—			6,045
Deferred income taxes		8,419			5,118			—			13,537
Investment in consolidated subsidiaries		230,246			—			(230,246	)		—
Property, plant and equipment, net		3,376			145,467			—			148,843
Total Assets	$	306,847		$	291,202		$	(265,246	)	$	332,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	112		$	3,460		$	—		$	3,572
Accrued payroll and related benefits		610			5,644			—			6,254
Interest payable		3,237			—			—			3,237
Television and radio broadcast rights payable		—			1,573			—			1,573
Current portion of accrued retirement benefits		1,254			—			—			1,254
Other current liabilities		969			5,200			—			6,169
Total current liabilities		6,182			15,877			—			22,059
Long-term debt		122,050			—			—			122,050
Accrued retirement benefits		19,415			—			—			19,415
Other liabilities		316			10,079			—			10,395
Stockholders’ Equity
Common stock		10,943			1,131			(1,131	)		10,943
Capital in excess of par		11,578			199,234			(199,234	)		11,578
Accumulated other comprehensive income - net of income taxes:
Unrealized gain on marketable securities		(124	)		(124	)		124			(124	)
Accumulated loss		(2,518	)		—			—			(2,518	)
Prior service cost		(159	)		—			—			(159	)
Retained earnings		139,164			65,005			(65,005	)		139,164
Total Stockholders’ Equity		158,884			265,246			(265,246	)		158,884
Total Liabilities and Stockholders’ Equity	$	306,847		$	291,202		$	(265,246	)	$	332,803

16

Financial Information for Guarantors

Condensed Consolidated Balance Sheet

As of December 31, 2008

(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries		Eliminations			Fisher Communications, Inc. and Subsidiaries
ASSETS
Current Assets
Cash and cash equivalents	$	31,141		$	694	$	—		$	31,835
Short-term investments		59,697			—		—			59,697
Receivables, net		—			26,044		—			26,044
Due from affiliate		—			14,473		(14,473	)		—
Income taxes receivable		2,462			301		—			2,763
Deferred income taxes		520			1,243		—			1,763
Prepaid expenses and other assets		176			2,024		—			2,200
Television and radio broadcast rights		—			6,106		—			6,106
Total current assets		93,996			50,885		(14,473	)		130,408
Cash value of life insurance and retirement deposits		17,425			—		—			17,425
Goodwill		—			13,293		—			13,293
Intangible assets		—			41,015		—			41,015
Other assets		3,123			3,832		—			6,955
Deferred income taxes		8,622			5,135		—			13,757
Investment in consolidated subsidiaries		231,282			—		(231,282	)		—
Property, plant and equipment, net		2,908			145,532		—			148,440
Total Assets	$	357,356		$	259,692	$	(245,755	)	$	371,293
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	1,002		$	3,337	$	—		$	4,339
Due to affiliate		14,473			—		(14,473	)		—
Accrued payroll and related benefits		499			3,802		—			4,301
Interest payable		3,773			—		—			3,773
Television and radio broadcast rights payable		—			6,124		—			6,124
Current portion of accrued retirement benefits		1,254			—		—			1,254
Other current liabilities		1,855			3,857		—			5,712
Total current liabilities		22,856			17,120		(14,473	)		25,503
Long-term debt		150,000			—		—			150,000
Accrued retirement benefits		19,439			—		—			19,439
Other liabilities		317			11,290		—			11,607
Stockholders’ Equity
Common stock		10,922			1,131		(1,131	)		10,922
Capital in excess of par		11,140			164,234		(164,234	)		11,140
Accumulated other comprehensive income - net of income taxes:
Unrealized gain on marketable securities		(158	)		—		—			(158	)
Accumulated loss		(2,545	)		—		—			(2,545	)
Prior service cost		(178	)		—		—			(178	)
Retained earnings		145,563			65,917		(65,917	)		145,563
Total Stockholders’ Equity		164,744			231,282		(231,282	)		164,744
Total Liabilities and Stockholders’ Equity	$	357,356		$	259,692	$	(245,755	)	$	371,293

17

Financial Information for Guarantors

Condensed Consolidated Statement of Cash Flows

For the Six Months Ended June 30, 2009

(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations			Fisher Communications, Inc. and Subsidiaries
Net cash used in operating activities	$	(7,938	)	$	4,396		$	—		$	(3,542	)
Cash flows from investing activities
Capital contribution to subsidiary		(35,000	)		—			35,000			—
Redemption of short-term investments		60,000			—			—			60,000
Purchase of property, plant and equipment		(952	)		(4,370	)		—			(5,322	)
Net cash provided by (used in) investing activities		24,048			(4,370	)		35,000			54,678
Cash flows from financing activities
Capital contribution from parent		—			35,000			(35,000	)		—
Repurchase of senior notes		(24,428	)		—			—			(24,428	)
Payment of capital lease obligation		—			(76	)		—			(76	)
Net cash used in financing activities		(24,428	)		34,924			(35,000	)		(24,504	)
Net increase (decrease) in cash and cash equivalents		(8,318	)		34,950			—			26,632
Cash and cash equivalents, beginning of period		31,141			694			—			31,835
Cash and cash equivalents, end of period	$	22,823		$	35,644		$	—		$	58,467

Financial Information for Guarantors

Condensed Consolidated Statement of Cash Flows

For the Six Months Ended June 30, 2008

(In thousands)	Fisher Communications, Inc.			100% Owned Guarantor Subsidiaries			Eliminations		Fisher Communications, Inc. and Subsidiaries
Net cash used in operating activities	$	(20,545	)	$	4,623		$	—	$	(15,922	)
Cash flows from investing activities
Purchase of marketable securities		—			(56	)		—		(56	)
Proceeds from sale of marketable securities		89,735			110			—		89,845
Purchase of television stations		(52,365	)		—			—		(52,365	)
Decrease in restricted cash		52,365			—			—		52,365
Purchase of property, plant and equipment		(746	)		(4,690	)		—		(5,436	)
Net cash provided by (used in) investing activities		88,989			(4,636	)		—		84,353
Cash flows from financing activities
Borrowings under borrowing agreements		14,000			—			—		14,000
Payments under borrowing agreements		(14,000	)		—			—		(14,000	)
Payment of capital lease obligation		—			(70	)		—		(70	)
Net cash used in financing activities		—			(70	)		—		(70	)
Net increase (decrease) in cash and cash equivalents		68,444			(83	)		—		68,361
Cash and cash equivalents, beginning of period		5,804			706			—		6,510
Cash and cash equivalents, end of period	$	74,248		$	623		$	—	$	74,871

18

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

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q. Some of the statements in this quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as “aims”, “anticipates”, “believes”, “estimates”, “expects”, “hopes”, “intends”, “plans”, “predicts”, “projects” or “targets” or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. There are many risks and uncertainties that could cause actual results to differ materially from those predicted in our forward-looking statements, including, without limitation, those factors discussed under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 16, 2009, as supplemented by the “Risk Factors” contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, which was filed with the Securities and Exchange Commission on May 11, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, 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”, or “our”, we are referring to Fisher Communications, Inc. and its consolidated subsidiaries.

This discussion is intended to provide an analysis of significant trends and material changes in our financial condition and operating results during the three and six months ended June 30, 2009, compared with the corresponding periods in 2008.

Overview

We are a communications company. We own and operate 13 full power (including a 50%-owned television station) and seven low power television stations and ten owned or managed radio stations. Our television stations are located in Washington, Oregon, Idaho and California, and our radio stations are located in Washington and Montana. We also own and operate Fisher Plaza, a mixed-use commercial facility located near downtown Seattle that serves as the home for our corporate offices and our Seattle television and radio stations. We lease a majority of the space at Fisher Plaza to a variety of unaffiliated companies

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

Our television revenue is significantly affected by network affiliation and the success of programming offered by those networks. Our two largest television stations, KOMO TV and KATU TV, account for approximately 60% of our television broadcasting revenue and are affiliated with the ABC Television Network. Nine of our television stations are affiliated with the CBS Television Network (including a 50%-owned television station), six of our television stations are affiliated with Univision, two of our television stations are affiliated with the ABC Television Network, one of our television stations is affiliated with the FOX Television Network and the remainder of our television stations are either simulcast or independent. Our broadcasting operations are subject to competitive pressures from traditional broadcasting sources, as well as from alternative methods of delivering information and entertainment, and these pressures may cause fluctuations in operating results.

In addition to our broadcasting operations, we own and operate Fisher Plaza, and we lease space to other companies that are attracted by the property location and the infrastructure provided at this facility. As of June 30, 2009 approximately 96% of Fisher Plaza was occupied or committed for occupancy (43% was occupied by Fisher entities). Revenue and operating income from Fisher Plaza are dependent upon the general economic climate, the Seattle economic climate, the outlook of the telecommunications and technology sectors and real estate conditions, including the availability of space in other competing properties.

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

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Significant Developments

The following significant developments affect the comparability of our financial statements for the three and six months ended June 30, 2009 and 2008.

Repurchase of Senior Notes During the three months ended June 30, 2009, we repurchased $12.8 million aggregate principal amount of our 8.625% senior notes due 2014 (“Senior Notes”), for total consideration of $11.4 million in cash plus accrued interest of $139,000. A gain on extinguishment of debt was recorded net of a charge for related unamortized debt issuance costs of $249,000, resulting in a net gain of approximately $1.2 million. During the six months ended June 30, 2009, we repurchased $28.0 million aggregate principal amount of our Senior Notes for a total consideration of $24.4 million in cash plus accrued interest of $637,000. We recorded a gain on extinguishment of debt, net of a charge for related unamortized debt issuance costs of $557,000, resulting in a net gain of approximately $3.0 million on the extinguishment of debt for the six months ended June 30, 2009. We did not repurchase any of our Senior Notes during the three and six months ended June 30, 2008.

Local Marketing Agreement In May 2009, we entered into a three year Local Marketing Agreement (“LMA”) with South Sound Broadcasting LLC (“South Sound”) to manage one of South Sound’s FM radio stations licensed to Oakville, Washington. The station broadcasts our KOMO News Radio programming to FM listeners in the Seattle – Tacoma radio market. Contemporaneously with the LMA, we entered into an option agreement with South Sound, whereby we have the right to acquire the station until May 8, 2012. If we do not exercise the option prior to its expiration date, we are obligated to pay South Sound up to approximately $1.4 million. Advertising revenue earned under this LMA is recorded as operating revenue and LMA fees and programming expenses are recorded as operating costs.

Dividends on Safeco Corporation Common Stock During the three and six months ended June 30, 2008, we recorded dividends on our shares of Safeco Corporation common stock in the amount of $921,000 and $1.8 million, respectively. No dividend income was recorded in the three and six months ended June 30, 2009, as we sold our remaining Safeco shares in 2008.

Sale of Safeco Corporation Common Stock During the three months ended June 30, 2008, we sold approximately 1.5 million shares of Safeco Corporation common stock, which represented 67% of our total Safeco holdings, for total pre-tax proceeds of approximately $104.1 million. The pre-tax gain on sale of $103.6 million is included in other income, net for the three and six month periods ended June 30, 2008.

Expiration of Seattle Mariners Radio Rights Agreement In July 2008, we announced that we would not renew our radio rights agreement with the Seattle Mariners (the “Mariners Agreement”). Accordingly, the 2008 season was the final year of our commitments under the Mariners Agreement. Our results for the first six months of 2008 reflect $4.5 million of advertising revenue and $8.1 million of expenses related to the Mariners Agreement. No such advertising revenue or expenses are reflected in our results for the six months ended June 30, 2009.

Termination of National Advertising Representation Agreement In April 2008, we terminated the agreement with our national advertising representation firm. The successor firm will satisfy our contractual termination obligation to the predecessor firm with no cash payment made by us. In the second quarter of 2008, we recognized a net non-cash charge of $5.0 million to selling, general and administrative expenses, and we are amortizing the related net liability as a non-cash benefit over the five-year term of the new agreement. We recognized a $366,000 and $731,000 benefit due to this amortization for the three and six months ended June 30, 2009, respectively.

Reclassifications The results of operations of Pegasus News, Inc. have been reclassified from continuing operations to discontinued operations in the condensed consolidated statement of operations for the three and six months ended June 30, 2008 to reflect our sale of Pegasus on December 31, 2008. Additionally, the results of operations of five small-market radio stations in Montana, previously classified as discontinued operations in the condensed consolidated statement of operations for the three and six months ended June 30, 2008, have been presented as continuing operations. See Note 8 to the condensed consolidated financial statements. The reclassifications had no effect on net income (loss), shareholders’ equity or cash flows from operating, investing or financing activities.

Critical Accounting Policies

        Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including, but not limited to, those affecting revenue, goodwill and intangibles impairment, the useful lives of tangible and intangible assets, valuation allowances for deferred tax assets, accounts receivables and broadcast rights, stock-based compensation expense, income tax provisions and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many risks and uncertainties, including those discussed in our Form 10-K for the year ended December 31, 2008 and elsewhere in this quarterly report on Form 10-Q. Except as otherwise required by law, we do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances.

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For a detailed discussion of our critical accounting policies and estimates, please refer to our Form 10-K for the year ended December 31, 2008.

There have been no material changes in the application of our critical accounting policies and estimates subsequent to that report. We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors.

Consolidated Results of Operations

We report financial data for three segments: television, radio and Fisher Plaza. The television segment includes the operations of 20 owned and operated television stations (including a 50%-owned television station) and internet business. The radio segment includes the operations of three Seattle radio stations and five Montana radio stations and two managed radio stations. Corporate expenses are allocated to the television and radio segments based on actual expenditures incurred or based on a pro-rata basis of actual costs. The Fisher Plaza segment consists of the operations of Fisher Plaza, a communications center located near downtown Seattle that serves as the home of our Seattle-based television and radio operations, our corporate offices, and third-party tenants. Fisher-owned entities that reside at Fisher Plaza do not pay rent, but do pay common-area maintenance expenses. The segment data includes additional allocation of depreciation and certain operating expenses from Fisher Plaza to our Seattle-based television and radio operations.

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The following table sets forth our results of operations for the three and six months ended June 30, 2009 and 2008, including the dollar and percentage variances between such periods. Percentage variances have been omitted where they are not considered meaningful.

(dollars in thousands) (unaudited)	Six Months Ended June 30,						Variance					Three Months Ended June 30,						Variance
	2009			2008			$			%		2009			2008			$			%
Revenue
Television	$	43,004		$	58,808		$	(15,804	)	-27	%	$	22,721		$	30,899		$	(8,178	)	-26	%
Radio		10,797			18,478			(7,681	)	-42	%		5,909			11,603			(5,694	)	-49	%
Fisher Plaza		6,778			6,505			273		4	%		3,436			3,192			244		8	%
Corporate and eliminations		(83	)		(42	)		(41	)	98	%		(83	)		—			(83	)
Consolidated		60,496			83,749			(23,253	)	-28	%		31,983			45,694			(13,711	)	-30	%
Direct operating costs
Television		24,406			26,063			(1,657	)	-6	%		12,348			13,208			(860	)	-7	%
Radio		4,413			6,240			(1,827	)	-29	%		2,128			3,142			(1,014	)	-32	%
Fisher Plaza		1,867			1,774			93		5	%		920			847			73		9	%
Corporate and eliminations		992			1,013			(21	)	-2	%		454			532			(78	)	-15	%
Consolidated		31,678			35,090			(3,412	)	-10	%		15,850			17,729			(1,879	)	-11	%
Selling, general and administrative expenses
Television		15,453			22,093			(6,640	)	-30	%		8,087			13,544			(5,457	)	-40	%
Radio		5,155			8,114			(2,959	)	-36	%		2,676			4,652			(1,976	)	-42	%
Fisher Plaza		216			400			(184	)	-46	%		93			260			(167	)	-64	%
Corporate and eliminations		4,130			4,582			(452	)	-10	%		1,658			2,876			(1,218	)	-42	%
Consolidated		24,954			35,189			(10,235	)	-29	%		12,514			21,332			(8,818	)	-41	%
Amortization of program rights
Television		4,577			3,979			598		15	%		2,281			1,988			293		15	%
Radio		—			5,482			(5,482	)	-100	%		—			5,027			(5,027	)	-100	%
Fisher Plaza		—			—			—					—			—			—
Corporate and eliminations		—			—			—					—			—			—
Consolidated		4,577			9,461			(4,884	)	-52	%		2,281			7,015			(4,734	)	-67	%
Depreciation and amortization
Television		4,339			3,976			363		9	%		2,183			2,007			176		9	%
Radio		372			449			(77	)	-17	%		174			216			(42	)	-19	%
Fisher Plaza		1,527			1,632			(105	)	-6	%		764			800			(36	)	-5	%
Corporate and eliminations		485			156			329		211	%		270			81			189		233	%
Consolidated		6,723			6,213			510		8	%		3,391			3,104			287		9	%
Income (loss) from operations
Television		(5,771	)		2,697			(8,468	)				(2,178	)		152			(2,330	)
Radio		857			(1,807	)		2,664					931			(1,434	)		2,365
Fisher Plaza		3,168			2,699			469					1,659			1,285			374
Corporate and eliminations		(5,690	)		(5,793	)		103					(2,465	)		(3,489	)		1,024
Consolidated		(7,436	)		(2,204	)		(5,232	)				(2,053	)		(3,486	)		1,433
Gain on extinguishment of senior notes		2,965			—			2,965					1,173			—			1,173
Other income, net		829			105,762			(104,933	)				535			104,732			(104,197	)
Interest expense		(6,203	)		(6,902	)		699					(2,938	)		(3,544	)		606
Income (loss) from continuing operations before income taxes		(9,845	)		96,656			(106,501	)				(3,283	)		97,702			(100,985	)
Provision (benefit) for income taxes		(3,446	)		33,546			(36,992	)				(1,149	)		33,772			(34,921	)
Income (loss) from continuing operations		(6,399	)		63,110			(69,509	)				(2,134	)		63,930			(66,064	)
Loss from discontinued operations, net of income taxes		—			(502	)		502					—			(256	)		256
Net income (loss)	$	(6,399	)	$	62,608			(69,007	)			$	(2,134	)	$	63,674			(65,808	)

Comparison of Three and Six Months Ended June 30, 2009 and 2008

Revenue

The current U.S. financial crisis and broader economic recession and the resulting sharp declines in advertising spending have negatively impacted our television and radio revenue for the three and six months ended June 30, 2009.

Automotive-related advertising, our largest advertising category, decreased 58% and 60% for the three and six months ended June 30, 2009 as compared to the same periods in 2008, respectively. Other similar major categories including, retailing (down 29% year-to-date) and professional services (down 24% year-to-date) have followed a consistent downward trend over the past year. This trend is primarily due to the current adverse condition of the automotive industry and the ongoing economic recession and resulting decline in the demand for advertising from these and other business categories. A continued pattern of deterioration in advertising revenue from these sources could materially and adversely affect our future results of operations.

Television revenue decreased in the three and six months ended June 30, 2009 compared to the same periods in 2008, primarily due to sharp declines in local, national and political advertising spending in this broad economic recession and the absence of our stations from DISH Network (“DISH”) due to the expiration of our retransmission agreement with DISH in December 2008. Political advertising revenue decreased 89% and 90% for the three and six months ended June 2009 as compared to the same periods in 2008, respectively. The decrease in advertising spending was offset by an increase in retransmission revenue. The decrease in local advertising revenue was due to general economic pressure now impacting a number of local economies, including those on the West Coast, primarily in the home products, automobile, professional services and retail segments. The decrease in national advertising sales was due to the same general negative economic conditions, which have impacted most national advertising categories, particularly automotive spending.

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Revenue from our ABC-affiliated stations decreased 30% and 31% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008, primarily due to reduced local and national advertising revenue given the ongoing economic recession, reduce political advertising revenue and the absence of our stations from DISH Network. Revenue from our CBS-affiliated stations decreased 23% for both the three and six months ended June 30, 2009, as compared to the same periods in 2008, also primarily due to reduced local and national advertising revenue given the ongoing recession and reduced political advertising revenue and the absence of our stations from DISH Network. Revenue from our Spanish-language television stations decreased 8% and 4% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008, primarily due to reduced local and national advertising revenue given the ongoing economic recession.

We completed negotiations for new retransmission consent agreements with over 50 distribution partners in the fourth quarter of 2008 and the first half of 2009. As a result, retransmission revenue increased 6% and 22% in the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008. These increases exclude expected cable provider retransmission fees of approximately $2.0 million in the first half of 2009 that are attributable to retransmission agreements which remained unexecuted at June 30, 2009. In July 2009, we executed those cable provider retransmission agreements that remained unexecuted at June 30, 2009. For each of these contracts, we will record the retransmission fees for the period from January 1, 2009 through the date of contract execution as revenue during the third quarter of 2009. Additionally, on June 10, 2009, we executed a new multi-year retransmission agreement with DISH. As part of the agreement, we agreed to release all prior legal claims against DISH. Retransmission fees under the new DISH agreement began accruing as of the date of execution.

Radio revenue decreased 49% and 42% in the three and six months ended June 30, 2009, respectively compared to the same periods in 2008, primarily due to a decline in advertising revenue related to our non-renewal of the Mariners Agreement and decreased local, national and non-traditional advertising revenue resulting from the ongoing economic recession. Radio revenue for the three and six months ended June 30, 2008 included advertising revenue from the Mariners Agreement, which was not renewed for 2009.

The revenue increase at Fisher Plaza in the three and six months ended June 30, 2009 as compared to the same periods in 2008, was primarily due to increased rental revenue and service fees, as well as increased electrical infrastructure fees and tenant reimbursements. As of June 30, 2009, approximately 96% of Fisher Plaza was occupied or committed for occupancy (43% was occupied by Fisher entities).

Direct operating costs

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

The decrease in direct operating costs for the television segment in the three and six months ended June 30, 2009 compared to the same periods in 2008, resulted primarily from our efforts to reduce operating expenses, such as headcount costs and administrative costs, in this difficult economic environment. We continue to look at cost efficiencies in our operating cost base.

Direct operating costs decreased for the radio segment in the three and six months ended June 30, 2009 as compared to the same periods in 2008. The decrease was primarily due to our non-renewal of the Mariners Agreement in 2008, as well as decreased compensation-related costs associated with news and programming.

Direct operating costs increased at Fisher Plaza in the three and six months ended June 30, 2009 as compared to the same periods in 2008, primarily due to higher repair costs.

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

Selling, general and administrative expenses

The decrease in selling, general and administrative expenses in our television segment in the three and six months ended June 30, 2009 compared to the same periods in 2008, was primarily due to reduced marketing costs, compensation and administrative costs. These costs decreased primarily from our reduced headcount. Our 2009 results also reflect the benefit related to the amortization of the liability recorded upon the termination of our national advertising representation agreement.

The decrease in selling, general and administrative expenses in our radio segment in the three and six months ended June 30, 2009 compared to the same periods in 2008 was primarily due to our non-renewal of the Mariners Agreement in 2008, as well as decreased compensation and marketing costs.

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Selling, general and administrative expenses decreased at Fisher Plaza in the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to reduced tenant marketing expenses for Fisher Plaza.

Our corporate selling, general and administrative expenses decreased in the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due primarily to decreased compensation and consulting costs.

Amortization of program rights

Amortization of program rights for our television segment increased in the three and six months ended June 30, 2009 compared to the same periods in 2008, primarily due to programming costs incurred for our two Bakersfield, California stations, which were partially offset by the renewal of several syndicated television programming contracts at reduced rates.

Amortization of program rights for our radio segment in the three and six months ended June 30, 2008 was related to the Mariners Agreement.

Depreciation and amortization

Depreciation and amortization for our television segment increased in the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily due to investments in upgrading our broadcasting equipment at KOMO and KATU.

Depreciation and amortization for our radio and Fisher Plaza segments decreased in the three and six months ended June 30, 2009 compared to the same periods in 2008, as certain assets have become fully depreciated.

Corporate depreciation and amortization increased in the three and six months ended June 30, 2009 compared to the same periods in 2008, primarily due to asset additions associated with information technology infrastructure replacements.

Other income, net

Other income, net, consists primarily of interest income for the three and six months ended June 30, 2009 and of interest and Safeco Corporation dividend income for the three and months ended June 30, 2008. Other income, net for the three and six months ended June 30, 2008 also includes the proceeds of our June 2008 sale of 1.5 million shares of Safeco Corporation common stock, resulting in a pre-tax gain of $103.6 million.

Gain on extinguishment of senior notes, net

During the three months ended June 30, 2009, we repurchased $12.8 million aggregate principal amount of our Senior Notes, for total consideration of $11.4 million in cash plus accrued interest of $139,000. A gain on extinguishment of debt was recorded net of a charge for related unamortized debt issuance costs of $249,000, resulting in a net gain of approximately $1.2 million. During the six months ended June 30, 2009, we repurchased $28.0 million aggregate principal amount of Senior Notes for total consideration of $24.4 million in cash plus accrued interest of $637,000. A gain on extinguishment of debt was recorded net of a charge for related unamortized debt issuance costs of $557,000, resulting in a net gain of approximately $3.0 million.

Interest expense, net

Interest expense, net, consists primarily of interest on our Senior Notes and amortization of the related loan fees, as well as interest during the three and six months ended June 30, 2008 on outstanding borrowings under our former $20 million revolving credit facility. Interest expense in the three and six months ended June 30, 2009 decreased from the same periods in 2008, primarily due to our repurchase of Senior Notes during such periods. We terminated the revolving credit facility in December 2008.

Provision (benefit) for income taxes

Our effective tax was 35% for both 2009 and 2008 primarily due to a decrease in permanent differences. Our effective tax rate is calculated on the statutory rate of 35%, increased or decreased for estimated permanent differences, including non-deductible expenses, and changes in discrete or other non recurring items, including federal or state tax audit adjustments. We record our income tax provision or benefit based upon our estimated annual effective tax rate.

Due to the uncertainty of our ability to generate sufficient state taxable income to realize our deferred state tax assets, we have established 100% valuation allowance for these deferred tax assets. As a result, our effective tax rate is not affected by changes in the state tax rates.

Loss from discontinued operations, net of income taxes

        The loss from discontinued operations for the three and six months ended June 30, 2008 was related to the operations of Pegasus News, Inc., a local news service, specializing in providing personalized online local news, information and advertising in Dallas, Texas, and is presented net of income taxes. See Note 8 to our condensed consolidated financial statements for more information on our discontinued operations.

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Liquidity and Capital Resources

Liquidity

Our liquidity is primarily dependent upon our net cash from operating activities and our cash and cash equivalents. Our net cash from operating activities is sensitive to many factors, including changes in working capital, and the timing of cash receipts and payments and the timing and magnitude of capital expenditures. Working capital at any specific point in time is dependent upon many variables, including operating results, receivables, capital expenditures and the timing of cash receipts and payments. We currently intend to finance our working capital, debt service and capital expenditures primarily through operating activities and cash on hand. Given the ongoing economic recession and its effect on the broadcasting industry and our business we are closely monitoring our capital spending plan and have reduced overall capital spending by postponing certain anticipated projects. We do not believe the postponement of these projects will have a material impact on revenue or our operations.

The current economic recession and tightening investment and credit markets have had a significant impact on advertising spending by our customers in various categories. If the current difficult general economic conditions continue, we believe that our revenue, cash flow from operations and net income will continue to be negatively impacted and may continue to decline.

On July 2, 2009, a small electrical fire contained within a garage level equipment room of the east building of Fisher Plaza disrupted city-supplied electrical service to that building. The cause of the incident remains under investigation. We currently expect that the building will be on 100% city electricity later in August 2009 and that all final repairs will be completed in the fourth quarter of 2009. The building is currently being powered by city-provided electricity and building generators. Based on current information we do not expect the financial impact of the incident to be material to the Company.

We expect cash flows from operations and our cash and cash equivalents to provide sufficient liquidity to meet our cash requirements for operations, projected working capital requirements and planned capital expenditures and commitments for at least the next 12 months.

Capital Resources

Cash and cash equivalents were approximately $58.5 million as of June 30, 2009 compared to cash, cash equivalents and short-term investments of $91.5 million as of December 31, 2008. The decrease was primarily due to the repurchase of our Senior Notes for $28.0 million and the use of cash for operations during the six month period ended June 30, 2009.

In December 2008, we terminated our $20.0 million revolving senior credit facility. The credit facility was collateralized by substantially all of our assets (excluding certain real property). In the future, we may obtain a replacement facility depending on market conditions and our current needs. Under our Senior Notes Indenture, we currently have the ability to incur up to $40 million of additional indebtedness. The Senior Notes Indenture contains certain restrictive and financial covenants applicable to our business, and we analyze our compliance with those covenants on a ongoing basis.

As of December 31, 2008 we had outstanding $150 million aggregate principal amount of our Senior Notes. See “Description of Indebtedness” below. In the first half of 2009, we repurchased $28.0 million aggregate principal amount of Senior Notes for total consideration of $24.4 million in cash plus accrued interest of $637,000. As a result the aggregate principal amount of Senior Notes outstanding as of June 30, 2009 decreased to $122.1 million. We may repurchase additional Senior Notes during the remainder of 2009 using cash on hand.

Net cash used in operating activities

Net cash used in operating activities in the six months ended June 30, 2009 was $3.5 million compared to $15.9 million in the six months ended June 30, 2008. Net cash used in operating activities consists of our net loss, adjusted by non-cash expenses such as depreciation and amortization, stock-based compensation, and deferred income tax, further adjusted for the changes in operating assets and liabilities. Additionally, in the six-month period ended June 30, 2009, we recognized a non-cash gain of approximately $3.0 million on the extinguishment of $28.0 million aggregate principal amount of Senior Notes.

Net cash provided by investing activities

Net cash provided by investing activities in the six months ended June 30, 2009 was $54.7 million compared to $84.4 million in the six months ended June 30, 2008. During the first half of 2009, cash flows provided by investing activities consisted primarily of proceeds of $60.0 million from the redemption of commercial paper, offset by $5.3 million in purchases of property, plant and equipment. During the six months ended June 30, 2008, cash flows provided by investing activities consisted primarily of proceeds from the sale of marketable securities of $89.8 million, a decrease in restricted cash of $52.4 million, offset by $52.4 million for the purchase of television stations and $5.4 million in purchases of property, plant and equipment.

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Net cash used in financing activities

Net cash used in financing activities in the six months ended June 30, 2009 was $24.5 million, primarily due to the retirement of $28.0 million aggregate principal amount of Senior Notes. Net cash used in financing activities in the six months ended June 30, 2008 was $70,000, consisting of payments on a capital lease obligation.

Description of Indebtedness

As of June 30, 2009, we had $122.1 million aggregate principal amount of our Senior Notes outstanding. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured, senior basis by our current and future material domestic subsidiaries. Interest on the Senior Notes is payable semiannually in arrears on March 15 and September 15 of each year. The Senior Notes are due on September 15, 2014.

Our Senior Notes indenture contains provisions that limit our ability to distribute proceeds from asset sales. In the event that we do not use the proceeds from asset sales for qualifying purposes (as specified in the indenture) within 360 days from the date of sale, we will be required to offer to repurchase outstanding Senior Notes at par value to the extent of such unused proceeds. Under the indenture, qualifying purposes include: (i) repayment of secured indebtedness; (ii) purchase of assets used or useful in our business; (iii) certain acquisitions of other companies; (iv) expenditures used or useful in our business; and (v) certain investments in our company or our subsidiaries.

We are subject to various debt covenants and other restrictions under the Senior Notes indenture, including the requirement for early payments upon the occurrence of certain events, the violation of which could require repayment of the Senior Notes and affect our credit rating and access to other financing. We were in compliance with all debt covenant requirements at June 30, 2009.

Recent Accounting Pronouncements

Refer to Note 2 to our condensed consolidated financial statements included in Part 1, Item 1 of this report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk in our financial instruments represents the potential loss arising from adverse changes in financial rates. We are exposed to market risk primarily in the area of interest rates. This exposure is directly related to our normal funding and investing activities.

As of June 30, 2009 and December 31, 2008, all of our debt was at a fixed rate and totaled $122.1 million and $150.0 million, respectively. The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of our long-term debt at June 30, 2009 was $108.0 million, which was approximately $14 million less than its carrying value. The estimated fair value of our long-term debt at December 31, 2008 was approximately $123.0 million, which was approximately $27.0 million less than its carrying value. Market risk is estimated as the potential change in fair value resulting from a hypothetical 10% change in interest rates and, as of June 30, 2009, amounted to $5.2 million. Fair market values are determined based on market quotes by brokers. For fixed rate debt, interest rate changes do not impact book value, operations or cash flows.

Our short-term investments are comprised of commercial paper with original maturities of greater than 91 days but less than one year, and we have classified our short-term investments as held-to-maturity. The securities are carried at amortized cost using the specific identification method, and interest income is recorded using an effective interest rate with the associated discount amortized to interest income. Commercial paper prices are susceptible to changes in market interest rates. However, the relatively short-term nature of our commercial paper minimizes interest rate risk. Because our short-term investments are classified as held-to-maturity and carried at amortized cost, fluctuations in market interest rates do not affect the carrying value or interest income recognized. Due to the short duration and nature of these instruments, we do not believe that we have a significant exposure to interest rate risk related to our short-term investments. As of June 30, 2009 and December 31, 2008, our short-term investment carrying value of $0 and $59.7 million, respectively, approximated fair value. Fair values for these instruments are estimated using best available evidence including broker quotes, prices for similar investments, interest rates and credit risk.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our 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”)) as of the end of our fiscal quarter ended June 30, 2009. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of our fiscal quarter ended June 30, 2009, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We made no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We intend to continue to refine our internal control over financial reporting on an ongoing basis, as we deem appropriate with a view towards continuous improvement.

27

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are parties to various claims, legal actions and complaints in the ordinary course of our businesses. In management’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 our consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have not been any material changes to the risk factors set forth in Part 1, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 16, 2009, as updated in our Quarterly Report on Form 10-Q for the first quarter of 2009filed with the Securities and Exchange Commission on May 11, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our Annual Meeting of Shareholders was held on April 28, 2009 and the voting results from the meeting are as follows:

The three nominees elected to our Board of Directors for three-year terms expiring in 2012 are listed below. There were no broker non-votes with respect to any of the nominees.

	Votes for	Votes withheld
Deborah L. Bevier	5,998,412	2,196,175
Paul A. Bible	7,988,410	206,177
David A. Lorber	7,432,459	762,128

Continuing as Directors after the Annual Meeting were Richard L. Hawley, George F. Warren Jr., William W. Warren Jr. and Michael D. Wortsman, whose terms expire in 2011, and Colleen B. Brown, Donald G. Graham, III and Brian P. McAndrews, whose terms expire in 2010.

The following additional matters brought for vote at our 2009 Annual Meeting of Shareholders passed by the vote indicated:

	Votes for	Votes against	Votes abstain	Broker non-votes
Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2009	8,148,362	41,661	4,564	—
Shareholder proposal requesting the declassification of the Company’s Board of Directors	3,705,236	3,697,539	175,634	616,178

ITEM 5. OTHER INFORMATION

None.

28

ITEM 6. EXHIBITS

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Section 1350 Certification of Chief Executive Officer.
32.2	Section 1350 Certification of Chief Financial Officer.

29

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.
Date: August 7, 2009	/s/    Joseph L. Lovejoy
	Joseph L. Lovejoy
	Senior Vice President and
	Chief Financial Officer
	(Signing on behalf of the registrant and as
	Principal Financial Officer)

30

EXHIBIT INDEX

Exhibit No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Section 1350 Certification of Chief Executive Officer.
32.2	Section 1350 Certification of Chief Financial Officer.

31

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Colleen B. Brown, certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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: August 7, 2009

/s/    Colleen B. Brown

Colleen B. Brown

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Joseph L. Lovejoy, certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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: August 7, 2009

/s/    Joseph L. Lovejoy

Joseph L. Lovejoy

Senior Vice President and

Chief Financial Officer

EX-32.1

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 June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Colleen B. Brown, 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.

Date: August 7, 2009

/s/    Colleen B. Brown

Colleen B. Brown

President and Chief Executive Officer

EX-32.2

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 June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Joseph L. Lovejoy, 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:

(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.

Date: August 7, 2009

/s/    Joseph L. Lovejoy

Joseph L. Lovejoy

Senior Vice President and

Chief Financial Officer