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
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For the quarterly period ended September 30, 2011
or
¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from
to
Commission File Number: 0-22439
FISHER COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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WASHINGTON
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91-0222175
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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140 Fourth Ave. N., Suite 500
Seattle, Washington 98109
(Address of Principal Executive Offices) (Zip Code)
(206) 404-7000
(Registrants 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
x
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.
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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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 issuers classes of common stock, as of the latest practicable date:
Common Stock, $1.25 par value, outstanding as of November 2, 2011: 8,829,490
2
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
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Three months ended September 30,
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Nine months ended September 30,
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(in thousands, except per-share amounts)
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2011
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2010
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2011
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2010
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Revenue
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$
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39,700
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$
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41,831
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$
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117,602
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$
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117,227
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Operating expenses
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Direct operating costs
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17,704
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17,441
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52,595
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51,834
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Selling, general and administrative expenses
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12,642
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13,720
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40,809
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41,340
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Amortization of broadcast rights
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2,449
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2,953
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8,324
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8,886
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Depreciation and amortization
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2,697
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3,525
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8,027
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10,843
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Gain on sale of real estate, net
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(4,089
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)
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Plaza fire reimbursements, net
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(40
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)
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(2,919
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)
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(223
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)
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(3,319
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)
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Gain on asset exchange, net
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(275
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)
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(2,057
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)
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Total operating expenses
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35,452
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34,445
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105,443
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107,527
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Income from continuing operations
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4,248
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7,386
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12,159
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9,700
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Loss on extinguishment of senior notes, net
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(298
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)
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(1,356
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)
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(72
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)
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Other income, net
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34
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31
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214
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194
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Interest expense
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(1,572
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)
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(2,368
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)
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(5,697
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)
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(7,630
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)
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Income from continuing operations before income taxes
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2,412
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5,049
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5,320
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2,192
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Provision for income taxes
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893
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1,785
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1,978
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|
802
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Income from continuing operations, net of income taxes
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1,519
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3,264
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3,342
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1,390
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Income (loss) from discontinued operations, net of income taxes
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(75
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)
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56
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(9
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)
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79
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Net income
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$
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1,444
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$
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3,320
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$
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3,333
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$
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1,469
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Net income (loss) per share:
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From continuing operations
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$
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0.17
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$
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0.37
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$
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0.38
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$
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0.16
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From discontinued operations
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(0.01
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)
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0.01
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|
|
|
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0.01
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Net income per share
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$
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0.16
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$
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0.38
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$
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0.38
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$
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0.17
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Net income (loss) per share assuming dilution:
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From continuing operations
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$
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0.17
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$
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0.37
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$
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0.38
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$
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0.16
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From discontinued operations
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(0.01
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)
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0.01
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(0.01
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)
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0.01
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Net income per share
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$
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0.16
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$
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0.38
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$
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0.37
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$
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0.17
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Weighted average shares outstanding
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8,836
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8,801
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8,827
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8,797
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Weighted average shares outstanding assuming dilution
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8,900
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8,845
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8,898
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8,837
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See accompanying notes to condensed consolidated financial statements.
3
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
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September
30,
2011
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December
31,
2010
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(in thousands, except share and per-share amounts)
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ASSETS
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Current Assets
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Cash and cash equivalents
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$
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27,286
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$
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52,945
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Receivables, net
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28,992
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30,755
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Income taxes receivable
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92
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1,353
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Deferred income taxes, net
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1,649
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1,649
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Prepaid expenses and other
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2,072
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2,863
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Cash surrender value of annuity contracts
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2,397
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Television broadcast rights
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9,325
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7,855
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Current assets held for sale
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23
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52
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Total current assets
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69,439
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99,869
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Cash surrender value of life insurance and annuity contracts
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17,077
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16,499
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Goodwill, net
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13,293
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13,293
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Intangible assets, net
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40,366
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|
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40,543
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Other assets
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6,439
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|
|
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7,376
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Assets held for sale
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|
611
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|
|
|
485
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Property, plant and equipment, net
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140,119
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|
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142,827
|
|
|
|
|
|
|
|
|
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Total Assets
|
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$
|
287,344
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|
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$
|
320,892
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current Liabilities
|
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|
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Accounts payable
|
|
$
|
2,686
|
|
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$
|
4,017
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Accrued payroll and related benefits
|
|
|
5,035
|
|
|
|
7,896
|
|
Interest payable
|
|
|
240
|
|
|
|
2,552
|
|
Television broadcast rights payable
|
|
|
8,970
|
|
|
|
7,849
|
|
Income taxes payable
|
|
|
1,250
|
|
|
|
|
|
Current portion of accrued retirement benefits
|
|
|
1,117
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|
|
|
1,117
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Other current liabilities
|
|
|
7,239
|
|
|
|
4,388
|
|
Liabilities of business held for sale
|
|
|
28
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|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
26,565
|
|
|
|
27,846
|
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Long-term debt
|
|
|
66,834
|
|
|
|
101,440
|
|
Accrued retirement benefits
|
|
|
18,956
|
|
|
|
18,982
|
|
Deferred income taxes, net
|
|
|
448
|
|
|
|
417
|
|
Other liabilities
|
|
|
4,953
|
|
|
|
6,981
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
117,756
|
|
|
|
155,666
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 9)
|
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|
|
|
|
|
|
|
|
|
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Stockholders Equity
|
|
|
|
|
|
|
|
|
Common stock, shares authorized 12,000,000, $1.25 par value; 8,829,490 and 8,790,399 issued and outstanding at September 30,
2011 and December 31, 2010, respectively
|
|
|
11,037
|
|
|
|
10,988
|
|
Capital in excess of par
|
|
|
14,195
|
|
|
|
13,273
|
|
Accumulated other comprehensive income (loss), net of income taxes:
|
|
|
|
|
|
|
|
|
Accumulated loss
|
|
|
(2,147
|
)
|
|
|
(2,176
|
)
|
Prior service cost
|
|
|
(71
|
)
|
|
|
(100
|
)
|
Retained earnings
|
|
|
146,574
|
|
|
|
143,241
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
169,588
|
|
|
|
165,226
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
287,344
|
|
|
$
|
320,892
|
|
|
|
|
|
|
|
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See accompanying notes to condensed consolidated financial statements.
4
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
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|
|
|
Nine months ended September 30,
|
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(in thousands)
|
|
2011
|
|
|
2010
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,333
|
|
|
$
|
1,469
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,027
|
|
|
|
10,843
|
|
Deferred income taxes
|
|
|
31
|
|
|
|
(135
|
)
|
Amortization of deferred financing fees
|
|
|
235
|
|
|
|
312
|
|
Amortization of broadcast rights
|
|
|
8,324
|
|
|
|
8,886
|
|
Payments for broadcast rights
|
|
|
(8,688
|
)
|
|
|
(9,103
|
)
|
Gain on exchange of assets, net
|
|
|
|
|
|
|
(2,057
|
)
|
Loss on extinguishment of senior notes, net
|
|
|
416
|
|
|
|
72
|
|
Loss on disposal of property, plant and equipment
|
|
|
75
|
|
|
|
215
|
|
Gain on sale of radio station
|
|
|
(48
|
)
|
|
|
|
|
Gain on sale of real estate, net
|
|
|
(4,089
|
)
|
|
|
|
|
Amortization of non-cash contract termination fee
|
|
|
(1,096
|
)
|
|
|
(1,096
|
)
|
Equity in operations of equity investee
|
|
|
188
|
|
|
|
41
|
|
Stock-based compensation
|
|
|
1,174
|
|
|
|
958
|
|
Change in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
1,791
|
|
|
|
(1,419
|
)
|
Prepaid expenses and other
|
|
|
791
|
|
|
|
256
|
|
Cash surrender value of life insurance and annuity contracts
|
|
|
1,819
|
|
|
|
(692
|
)
|
Other assets
|
|
|
203
|
|
|
|
(46
|
)
|
Accounts payable, accrued payroll and related benefits and other current liabilities
|
|
|
(1,593
|
)
|
|
|
6,161
|
|
Interest payable
|
|
|
(2,312
|
)
|
|
|
(2,782
|
)
|
Income taxes receivable and payable
|
|
|
2,514
|
|
|
|
10,993
|
|
Accrued retirement benefits
|
|
|
31
|
|
|
|
45
|
|
Other liabilities
|
|
|
(783
|
)
|
|
|
(507
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
10,343
|
|
|
|
22,414
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of radio station
|
|
|
48
|
|
|
|
|
|
Contribution to equity investee
|
|
|
(88
|
)
|
|
|
(23
|
)
|
Net cash in consolidation of equity investee
|
|
|
|
|
|
|
75
|
|
Purchase of radio stations
|
|
|
(113
|
)
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(5,070
|
)
|
|
|
(8,854
|
)
|
Proceeds from sale of real estate
|
|
|
4,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,059
|
)
|
|
|
(8,802
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Repurchase of senior notes
|
|
|
(34,606
|
)
|
|
|
(17,160
|
)
|
Shares settled upon vesting of stock rights
|
|
|
(278
|
)
|
|
|
(104
|
)
|
Payments on capital lease obligations
|
|
|
(134
|
)
|
|
|
(124
|
)
|
Proceeds from exercise of stock options
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(34,943
|
)
|
|
|
(17,388
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(25,659
|
)
|
|
|
(3,776
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
52,945
|
|
|
|
43,982
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
27,286
|
|
|
$
|
40,206
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
(in thousands)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Net income
|
|
$
|
1,444
|
|
|
$
|
3,320
|
|
|
$
|
3,333
|
|
|
$
|
1,469
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated income
|
|
|
15
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
Effect of income taxes
|
|
|
(5
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
|
15
|
|
|
|
15
|
|
|
|
45
|
|
|
|
45
|
|
Effect of income taxes
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
(16
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
19
|
|
|
|
10
|
|
|
|
58
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
1,463
|
|
|
$
|
3,330
|
|
|
$
|
3,391
|
|
|
$
|
1,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
Fisher Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 nine months ended September 30, 2011 are
not necessarily indicative of the results that may be expected for the year ending December 31, 2011, or for any other period. The balance sheet at December 31, 2010 has been derived from the audited consolidated financial statements at
that date but does not include all of the information and notes required by GAAP for annual financial statements. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the Companys audited
consolidated financial statements and accompanying notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K).
Certain reclassifications have been made to the condensed consolidated financial statements in the prior year to conform to the current
year presentation.
2.
|
Significant Accounting Policies and Recent Accounting Pronouncements
|
The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements
are disclosed in the Companys 2010 Form 10-K. With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30,
2011, as compared to the recent accounting pronouncements described in the Companys 2010 Form 10-K, that are of significance, or potential significance, to the Company.
The Company determined its six radio stations in Great Falls, Montana met the criteria for classification as a discontinued operation because of the Companys June 2011 definitive agreement to sell
the stations to STARadio Corp. In accordance with authoritative guidance, the Company has reported the results of operations of these small-market stations as discontinued operations in the accompanying unaudited condensed consolidated financial
statements. For all previously reported periods, certain amounts in the unaudited condensed consolidated financial statements have been reclassified. The assets and liabilities of the radio stations have been classified as held for sale and the net
results of the operations have been reclassified from continuing operations to discontinued operations. See Note 5 to the unaudited condensed consolidated financial statements for more information.
As part of its ongoing review of property, plant and equipment asset lives, the Company determined that the asset lives of certain of its
machinery and equipment categories should be increased. The increase in the lives ranged from one to ten years depending on the category. A change in depreciation method is considered a change in accounting estimate. The Company adjusted the
remaining lives of existing assets effective January 1, 2011 and as a result the Company expects that future depreciation will be lower than in the prior periods. The impact of this change in estimate for the three months ended
September 30, 2011 increased pre-tax income from continuing operations by approximately $815,000, increased net income by approximately $514,000 and increased diluted net income from continuing operations per share by $0.06. The impact of this
change in estimate for the nine months ended September 30, 2011 increased pre-tax income from continuing operations by approximately $2.4 million, increased net income by approximately $1.5 million and increased diluted net income from
continuing operations per share by $0.17.
3.
|
Fair Value Measurements
|
The Company measures certain financial assets at fair value on a recurring basis. 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.
7
Assets and liabilities measured at fair value on a recurring basis consist solely of
marketable securities. As of September 30, 2011 and December 31, 2010, the reported fair value of marketable securities, using Level 1 inputs, was $931,000 and $1.0 million, respectively. Marketable securities are included in other assets
on the Companys unaudited condensed consolidated balance sheets.
As of September 30, 2011 and December 31,
2010, all of the Companys debt was at a fixed rate and totaled $66.8 million and $101.4 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 Companys long-term debt, using Level 2 inputs, at September 30, 2011 and December 31, 2010 was $67.3
million and $104.2 million, respectively. The fair value of long-term debt is based on estimates made by investment bankers based on the fair value of the Companys fixed rate long-term debt. For fixed rate debt, interest rate changes do not
impact financial position, operations or cash flows.
4.
|
Goodwill and Intangible Assets
|
The following table summarizes the carrying amount of goodwill and intangible assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
|
December 31, 2010
|
|
|
|
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
|
|
|
|
(909
|
)
|
|
|
2,651
|
|
|
|
3,560
|
|
|
|
(732
|
)
|
|
|
2,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
41,275
|
|
|
$
|
(909
|
)
|
|
$
|
40,366
|
|
|
$
|
41,275
|
|
|
$
|
(732
|
)
|
|
$
|
40,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 nine months ended September 30, 2011 was $59,000 and $177,000, respectively. Total amortization expense for intangible assets subject to amortization for the three and nine months ended September 30, 2010 was $60,000 and $177,000,
respectively.
|
The Company tests goodwill and intangible assets for impairment at least
annually, as of October 1
st
of each year, or whenever
events indicate that impairment may exist. The Company has determined that the impairment test should be conducted at the reporting unit level, which, with respect to the broadcast operations, requires separate assessment of each of the
Companys 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 Companys
intangible assets subject to amortization for the remainder of 2011 and each of the next five years and thereafter (in thousands):
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
2011
|
|
$
|
59
|
|
2012
|
|
|
236
|
|
2013
|
|
|
236
|
|
2014
|
|
|
236
|
|
2015
|
|
|
236
|
|
2016
|
|
|
236
|
|
Thereafter
|
|
|
1,412
|
|
|
|
|
|
|
|
|
$
|
2,651
|
|
|
|
|
|
|
8
5.
|
Discontinued Operations
|
In June 2011, the Company entered into a definitive agreement to sell its six Great Falls, Montana radio stations (the
Montana Stations) to STARadio Corp. (STARadio), which is based in Quincy, Illinois for $1.8 million, subject to certain adjustments. The Company entered into a Time Brokerage Agreement (TBA) whereby STARadio will
provide programming and related services and will sell the advertising inventory of the Montana Stations. The TBA remains in effect until the closing of the sale or termination of the purchase and sale agreement, whichever is earlier.
In accordance with authoritative guidance the Company has reported the results of operations of the Montana Stations as discontinued
operations in the accompanying unaudited condensed consolidated financial statements. For all reported periods, the Company reclassified to discontinued operations the results of the Montana Stations. The Montana Stations were previously included in
the Companys radio segment.
In June 2011, the Company completed the sale of two real estate parcels in Seattle, Washington not essential to current
operations and received $4.2 million in pre-tax net proceeds. The Company recognized a gain of $4.1 million, which is presented as a gain on the sale of real estate, net on the Companys unaudited condensed consolidated statement of operations
for the nine months ended September 30, 2011.
In December 2010, the Company entered into a ten year Joint Sales Agreement (JSA) with NPG of Idaho, Inc.,
a subsidiary of News Press & Gazette Company (NPG), which owns and operates KIFI-TV an Idaho Falls, Idaho television station. The JSA was effective January 1, 2011. Under the JSA, NPG provides certain services
supporting the operation of the Companys television station in Idaho Falls, KIDK-TV, and sells substantially all of the stations commercial advertising. The Company pays NPG a fixed fee pursuant to the JSA, and a performance bonus based
on station performance. Contemporaneously with the JSA, the Company has entered into an option agreement with NPG, whereby NPG has a conditional option to acquire KIDK-TV from the Company until January 1, 2021, effective on the expiration
or termination of the indenture governing our 8.625% Senior Notes due in 2014 (Senior Notes). KIDK-TV is consolidated into the Companys unaudited condensed consolidated statements because the Company has determined that it is
deemed to have a controlling financial interest in KIDK-TV for financial reporting purposes as the Company does maintain ultimate control over the policies and/or operations of the station that could most significantly impact the station.
Advertising revenues earned under this JSA are recorded as revenue and JSA fees and programming expenses are recorded as operating costs.
8.
|
Extinguishment of Senior Notes
|
During the three months ended September 30, 2011, the Company redeemed or repurchased $8.7 million aggregate
principal amount of Senior Notes for a total consideration of $8.9 million in cash plus accrued interest of $263,000. The Company recorded a loss on extinguishment of debt of $298,000, including a charge for related unamortized debt issuance costs
of approximately $98,000.
During the nine months ended September 30, 2011, the Company redeemed or repurchased $34.6
million aggregate principal amount of Senior Notes for a total consideration of $35.5 million in cash plus accrued interest of $572,000. The Company recorded a loss on extinguishment of debt of $1.4 million, including a charge for related
unamortized debt issuance costs of $416,000.
During the nine months ended September 30, 2010, the Company redeemed or
repurchased $17.4 million aggregate principal amount of Senior Notes for a total consideration of $17.2 million in cash plus accrued interest of $272,000. The Company recorded a net loss on extinguishment of debt of $72,000, comprised of a charge
for related unamortized debt issuance costs of $272,000, partially offset by a gain on extinguishment of debt of $200,000.
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 Companys 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.
9
As of September 30, 2011, the Company had commitments under various agreements of $26.1
million for future rights to broadcast television programs, rights to sell available advertising time on third party radio stations and commitments under certain network affiliate agreements.
The Company has a noncontributory supplemental retirement program for former executives of the Company. No new
participants have been admitted to this program since 2001 and no current executive officers participate in the program. The program provides for vesting of benefits under certain circumstances. Funding is not required, but the Company has made
investments in annuity contracts and maintains life insurance policies on the lives of the individual participants to assist in payment of retirement benefits. The Company is the owner and beneficiary of the annuity contracts and life insurance
policies; accordingly, the cash value of the annuity contracts and the cash surrender value of the life insurance policies are reported on the consolidated balance sheet in the financial statements and the appreciation is included in the
consolidated statement of operations. The supplemental retirement program requires continued employment or disability through the date of expected retirement. The cost of the program is accrued over the average expected future lifetime of the
participants.
In June 2005, the program was amended to freeze accrual of all benefits to active participants provided under
the program. The Company continues to recognize periodic pension cost related to the program, but the amount is lower as a result of the curtailment.
The net periodic pension cost for the Companys supplemental retirement program is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Interest cost
|
|
$
|
250
|
|
|
$
|
254
|
|
|
$
|
750
|
|
|
$
|
762
|
|
Amortization of loss
|
|
|
22
|
|
|
|
10
|
|
|
|
66
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
272
|
|
|
$
|
264
|
|
|
$
|
816
|
|
|
$
|
792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The discount rate used to determine net periodic pension cost was 5.22% for both the three and nine month
periods ended September 30, 2011. The discount rate used to determine net periodic pension cost was 5.57% for both the three and nine month periods ended September 30, 2010.
Net income per share is based upon the weighted average number of shares outstanding during the period. Net income 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 Companys incentive
plans. Common stock options and restricted stock rights/units are converted using the treasury stock method.
Basic and
diluted net income per share has been computed as follows (in thousands, except per-share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Income from continuing operations, net of income taxes
|
|
$
|
1,519
|
|
|
$
|
3,264
|
|
|
$
|
3,342
|
|
|
$
|
1,390
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(75
|
)
|
|
|
56
|
|
|
|
(9
|
)
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,444
|
|
|
$
|
3,320
|
|
|
$
|
3,333
|
|
|
$
|
1,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
8,836
|
|
|
|
8,801
|
|
|
|
8,827
|
|
|
|
8,797
|
|
Weighted effect of dilutive options and rights
|
|
|
64
|
|
|
|
44
|
|
|
|
71
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding assuming dilution
|
|
|
8,900
|
|
|
|
8,845
|
|
|
|
8,898
|
|
|
|
8,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
0.17
|
|
|
$
|
0.37
|
|
|
$
|
0.38
|
|
|
$
|
0.16
|
|
From discontinued operations
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.16
|
|
|
$
|
0.38
|
|
|
$
|
0.38
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share assuming dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
0.17
|
|
|
$
|
0.37
|
|
|
$
|
0.38
|
|
|
$
|
0.16
|
|
From discontinued operations
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.16
|
|
|
$
|
0.38
|
|
|
$
|
0.37
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2011, the effect of zero restricted stock rights/units and
options to purchase 204,994 shares are excluded from the calculation of weighted average shares outstanding because such rights/units and options were anti-
10
dilutive. For the nine months ended September 30, 2011, the effect of 53 restricted stock rights/units and options to purchase 209,706 shares are excluded from the calculation of weighted
average shares outstanding because such rights/units and options were anti-dilutive.
For the three months ended
September 30, 2010, the effect of 109,046 restricted stock rights/units and options to purchase 277,365 shares are excluded from the calculation of weighted average shares outstanding because such rights/units and options were anti-dilutive.
For the nine months ended September 30, 2010, the effect of 95,866 restricted stock rights/units and options to purchase 270,631 shares are excluded from the calculation of weighted average shares outstanding because such rights/units and
options were anti-dilutive.
12.
|
Stock-Based Compensation
|
Stock-based compensation expense for the three and nine months ended September 30, 2011 was $442,000 and
$1,174,000, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2010 was $355,000 and $958,000, respectively. Stock-based compensation expense is included in selling, general and administrative
expenses in the Companys unaudited condensed consolidated statements of operations.
The Company records an income tax provision or benefit based upon its estimated annual effective tax rate, which is
estimated at 36.3% and 36.6% for the nine months ended September 30, 2011 and 2010, respectively.
The Company recognizes
tax expense related to uncertain tax provisions as part of its income tax provision and recognizes interest and penalties related to uncertain tax positions in interest expense. As of September 30, 2011 and December 31, 2010, the Company
had not accrued any amounts for interest or penalties related to uncertain tax positions.
The U.S. federal statute of
limitations remains open for the year 2007 and onward. The IRS recently completed a field examination of the Companys 2008 and 2009 U.S. tax returns, and the Company agreed upon and paid a final settlement. The State of California and the
State of Oregon are currently conducting an examination of the Companys 2007 and 2008 state tax returns.
In November
2011, the Company received a Proposed Auditors Report from the State of Oregon seeking approximately $800,000 in unpaid taxes and penalties in connection with the Companys treatment of the proceeds from its 2007 and 2008 sales of Safeco
Corporation stock. The Company intends to oppose the State of Oregons position. The final disposition of the proposed audit adjustments could require the Company to make additional tax payments, which could materially affect its effective tax
rate.
The determination of the Companys provision for income taxes and valuation allowance requires significant
judgment, the use of estimates and the interpretation and application of complex tax laws. In assessing whether and to what extent deferred tax assets can be realized, the Company considers whether it is more likely than not that some portion or all
of the deferred tax assets will be realized.
The Company assesses the likelihood of the realizability of its deferred tax
assets on a quarterly basis. Consistent with prior years, the Company recorded a full valuation allowance against the Companys state deferred tax assets, as it is more likely than not that a tax benefit for the deferred tax assets will not be
recognized based upon all available evidence. As a result, the Companys effective tax rate is not affected by changes in state rates. At September 30, 2011 and December 31, 2010, the Company has not recorded a valuation allowance on
its federal deferred tax assets as management believes that it is more likely than not that the Companys federal deferred tax assets are realizable. The amount of net deferred tax assets considered realizable, however, could be reduced in the
future if the Companys projections of future taxable income are reduced or if the Company does not perform at the levels that it is projecting. This could result in an increase in the Companys valuation allowance for federal deferred tax
assets.
The Company reports financial data for three segments: television, radio and Fisher Plaza. The television segment
includes the operations of the Companys 20 owned and/or operated television stations (including a 50%-owned television station) and the Companys internet business. The radio segment includes the operations of the Companys three
radio stations and one managed radio station. The Fisher Plaza segment includes the operations of a communications center located near downtown Seattle that serves as home of the Companys Seattle television and radio operations, the
Companys corporate offices and third-party tenants. The segment data includes additional allocation of depreciation and certain operating expenses from Fisher Plaza to our television and radio segments, and certain corporate expenses are
allocated to our television and radio segments on a pro-rata basis. Other includes corporate and administrative expenses that are not attributable to the operations of the television, radio or Fisher Plaza segments.
11
Revenue for each segment is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Television
|
|
$
|
30,522
|
|
|
$
|
31,986
|
|
|
$
|
90,557
|
|
|
$
|
89,634
|
|
Radio
|
|
|
5,344
|
|
|
|
6,179
|
|
|
|
15,876
|
|
|
|
17,057
|
|
Fisher Plaza
|
|
|
3,853
|
|
|
|
3,666
|
|
|
|
11,361
|
|
|
|
10,659
|
|
Other
|
|
|
(19
|
)
|
|
|
|
|
|
|
(192
|
)
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,700
|
|
|
$
|
41,831
|
|
|
$
|
117,602
|
|
|
$
|
117,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and nine months ended September 30, 2011 intercompany sales amounted to $19,000 and
$192,000, respectively, relating primarily to sales between the Companys television and radio segments. For the three and nine months ended September 30, 2010 intercompany sales amounted to nil and $123,000, respectively, relating
primarily to sales between the Companys television and radio segments.
Income (loss) from continuing operations for
each segment is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Television
|
|
$
|
4,417
|
|
|
$
|
4,521
|
|
|
$
|
11,261
|
|
|
$
|
9,479
|
|
Radio
|
|
|
1,155
|
|
|
|
1,599
|
|
|
|
2,423
|
|
|
|
2,241
|
|
Fisher Plaza
|
|
|
2,131
|
|
|
|
4,583
|
|
|
|
6,471
|
|
|
|
8,055
|
|
Other
|
|
|
(3,455
|
)
|
|
|
(3,317
|
)
|
|
|
(7,996
|
)
|
|
|
(10,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,248
|
|
|
$
|
7,386
|
|
|
$
|
12,159
|
|
|
$
|
9,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for each segment are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
Television
|
|
$
|
117,591
|
|
|
$
|
141,707
|
|
Radio
|
|
|
13,493
|
|
|
|
14,483
|
|
Fisher Plaza
|
|
|
104,822
|
|
|
|
108,271
|
|
Other
|
|
|
50,804
|
|
|
|
55,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286,710
|
|
|
|
320,355
|
|
Assets held for sale
|
|
|
634
|
|
|
|
537
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
287,344
|
|
|
$
|
320,892
|
|
|
|
|
|
|
|
|
|
|
15.
|
Plaza Fire Reimbursements, Net
|
In July 2009, an electrical fire contained within a garage level equipment room of the east building of Fisher Plaza
disrupted city-supplied electrical service to that building. A third-party investigation concluded that the fire appears to have been caused by a malfunction of bus duct equipment manufactured by a third-party.
The Company recorded the Plaza fire expenses as incurred and recorded insurance reimbursements within operating results in the period the
reimbursements are considered probable and certain. During the three and nine months ended September 30, 2011, the
12
Company recorded net reimbursements of $40,000 and $223,000, respectively, which is included in Plaza fire reimbursements, net on the Companys unaudited condensed consolidated statement of
operations. During the three and nine months ended September 30, 2010, the Company recorded net reimbursements of $2.9 million and $3.3 million, respectively. In total, the Company incurred approximately $6.8 million in cash expenditures
related to the Plaza fire, comprised of remediation expenses of $3.7 million and capital expenditures of $3.1 million. To date, the Company has received total insurance reimbursements of $6.1 million, which represents all of the Companys
expected reimbursements.
16.
|
Sprint Nextel Asset Exchange
|
In 2004, the Federal Communications Commission (FCC) approved a spectrum allocation exchange between Sprint
Nextel Corporation (Nextel) and public safety entities to eliminate interference caused to public safety radio licenses by Nextels operations.
In order to utilize this spectrum, Nextel was required to relocate broadcasters to new spectrum by replacing all analog equipment currently used by broadcasters with comparable digital equipment. The
Company agreed to accept the substitute equipment provided by Nextel in all of its markets, and in turn relinquished its existing equipment back to Nextel. All replacement equipment purchases were paid for directly by Nextel. All other reasonable
and necessary costs incurred by the Company in conjunction with the exchange, both internal and external, have been reimbursed by Nextel.
The Company recognized a gain of $275,000 and $2.1 million for the three and nine months ended September 30, 2010, respectively, which is included in gain on asset exchange, net on the Companys
unaudited condensed consolidated statement of operations. The gain represents the amount of the substitute equipment put into use during the quarter, including installation costs and net of assets disposed. This gain on asset exchange was not
reported as a capital expenditure on the statement of cash flows as it was not a cash outflow. The Company did not recognize a gain for the three and nine months ended September 30, 2011.
At September 30, 2011, the Company had approximately $84,000 of the substitute equipment that had been received but not yet
installed. The $84,000 is recorded as deferred gain in other current liabilities on the Companys unaudited condensed consolidated balance sheet. Once the equipment is fully installed and is in use, the deferred gain will be recorded as a gain
on the Companys unaudited condensed consolidated statement of operations.
17.
|
Financial Information for Guarantors
|
At September 30, 2011, the Company had $66.8 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 material domestic subsidiaries of the Company.
Presented below are unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2011
and 2010, and unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2011 and 2010. Also presented are the unaudited condensed consolidated balance sheets as of September 30, 2011 and
December 31, 2010. The unaudited condensed consolidated information is presented for the Company with its investments in consolidated subsidiaries 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 September 30, 2011
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
Revenue
|
|
$
|
|
|
|
$
|
39,700
|
|
|
$
|
|
|
|
$
|
39,700
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
144
|
|
|
|
17,552
|
|
|
|
8
|
|
|
|
17,704
|
|
Selling, general and administrative expenses
|
|
|
3,839
|
|
|
|
8,811
|
|
|
|
(8
|
)
|
|
|
12,642
|
|
Amortization of program rights
|
|
|
|
|
|
|
2,449
|
|
|
|
|
|
|
|
2,449
|
|
Depreciation and amortization
|
|
|
273
|
|
|
|
2,424
|
|
|
|
|
|
|
|
2,697
|
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
4,256
|
|
|
|
31,196
|
|
|
|
|
|
|
|
35,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(4,256
|
)
|
|
|
8,504
|
|
|
|
|
|
|
|
4,248
|
|
Loss on extinguishment of senior notes, net
|
|
|
(298
|
)
|
|
|
|
|
|
|
|
|
|
|
(298
|
)
|
Other income, net
|
|
|
59
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
34
|
|
Equity in income of consolidated subsidiaries
|
|
|
5,263
|
|
|
|
|
|
|
|
(5,263
|
)
|
|
|
|
|
Interest expense
|
|
|
(1,560
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
(1,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(792
|
)
|
|
|
8,467
|
|
|
|
(5,263
|
)
|
|
|
2,412
|
|
Provision (benefit) for income taxes
|
|
|
(2,236
|
)
|
|
|
3,129
|
|
|
|
|
|
|
|
893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
|
1,444
|
|
|
|
5,338
|
|
|
|
(5,263
|
)
|
|
|
1,519
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,444
|
|
|
$
|
5,263
|
|
|
$
|
(5,263
|
)
|
|
$
|
1,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Information for Guarantors
Condensed Consolidated Statement of Operations
For the nine months ended September 30, 2011
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
Revenue
|
|
$
|
|
|
|
$
|
117,602
|
|
|
$
|
|
|
|
$
|
117,602
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
417
|
|
|
|
52,158
|
|
|
|
20
|
|
|
|
52,595
|
|
Selling, general and administrative expenses
|
|
|
13,238
|
|
|
|
27,591
|
|
|
|
(20
|
)
|
|
|
40,809
|
|
Amortization of program rights
|
|
|
|
|
|
|
8,324
|
|
|
|
|
|
|
|
8,324
|
|
Depreciation and amortization
|
|
|
823
|
|
|
|
7,204
|
|
|
|
|
|
|
|
8,027
|
|
Gain on sale of real estate, net
|
|
|
(4,089
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,089
|
)
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
(223
|
)
|
|
|
|
|
|
|
(223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
10,389
|
|
|
|
95,054
|
|
|
|
|
|
|
|
105,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(10,389
|
)
|
|
|
22,548
|
|
|
|
|
|
|
|
12,159
|
|
Loss on extinguishment of senior notes, net
|
|
|
(1,356
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,356
|
)
|
Other income, net
|
|
|
196
|
|
|
|
18
|
|
|
|
|
|
|
|
214
|
|
Equity in income of consolidated subsidiaries
|
|
|
14,143
|
|
|
|
|
|
|
|
(14,143
|
)
|
|
|
|
|
Interest expense
|
|
|
(5,658
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
(5,697
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(3,064
|
)
|
|
|
22,527
|
|
|
|
(14,143
|
)
|
|
|
5,320
|
|
Provision (benefit) for income taxes
|
|
|
(6,397
|
)
|
|
|
8,375
|
|
|
|
|
|
|
|
1,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
|
3,333
|
|
|
|
14,152
|
|
|
|
(14,143
|
)
|
|
|
3,342
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,333
|
|
|
$
|
14,143
|
|
|
$
|
(14,143
|
)
|
|
$
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Financial Information for Guarantors
Condensed Consolidated Statement of Operations
For the three months ended September 30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
Revenue
|
|
$
|
|
|
|
$
|
41,831
|
|
|
$
|
|
|
|
$
|
41,831
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
115
|
|
|
|
17,274
|
|
|
|
52
|
|
|
|
17,441
|
|
Selling, general and administrative expenses
|
|
|
4,967
|
|
|
|
8,805
|
|
|
|
(52
|
)
|
|
|
13,720
|
|
Amortization of program rights
|
|
|
|
|
|
|
2,953
|
|
|
|
|
|
|
|
2,953
|
|
Depreciation and amortization
|
|
|
393
|
|
|
|
3,132
|
|
|
|
|
|
|
|
3,525
|
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
(2,919
|
)
|
|
|
|
|
|
|
(2,919
|
)
|
Gain on asset exchange, net
|
|
|
|
|
|
|
(275
|
)
|
|
|
|
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
5,475
|
|
|
|
28,970
|
|
|
|
|
|
|
|
34,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(5,475
|
)
|
|
|
12,861
|
|
|
|
|
|
|
|
7,386
|
|
Other income, net
|
|
|
37
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
31
|
|
Equity in income of consolidated subsidiaries
|
|
|
8,342
|
|
|
|
|
|
|
|
(8,342
|
)
|
|
|
|
|
Interest expense
|
|
|
(2,353
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
(2,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
551
|
|
|
|
12,840
|
|
|
|
(8,342
|
)
|
|
|
5,049
|
|
Provision (benefit) for income taxes
|
|
|
(2,769
|
)
|
|
|
4,554
|
|
|
|
|
|
|
|
1,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
|
3,320
|
|
|
|
8,286
|
|
|
|
(8,342
|
)
|
|
|
3,264
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,320
|
|
|
$
|
8,342
|
|
|
$
|
(8,342
|
)
|
|
$
|
3,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Information for Guarantors
Condensed Consolidated Statement of Operations
For the nine months ended September 30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
Revenue
|
|
$
|
|
|
|
$
|
117,227
|
|
|
$
|
|
|
|
$
|
117,227
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
332
|
|
|
|
51,344
|
|
|
|
158
|
|
|
|
51,834
|
|
Selling, general and administrative expenses
|
|
|
11,007
|
|
|
|
30,491
|
|
|
|
(158
|
)
|
|
|
41,340
|
|
Amortization of program rights
|
|
|
|
|
|
|
8,886
|
|
|
|
|
|
|
|
8,886
|
|
Depreciation and amortization
|
|
|
1,174
|
|
|
|
9,669
|
|
|
|
|
|
|
|
10,843
|
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
(3,319
|
)
|
|
|
|
|
|
|
(3,319
|
)
|
Gain on asset exchange, net
|
|
|
|
|
|
|
(2,057
|
)
|
|
|
|
|
|
|
(2,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
12,513
|
|
|
|
95,014
|
|
|
|
|
|
|
|
107,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(12,513
|
)
|
|
|
22,213
|
|
|
|
|
|
|
|
9,700
|
|
Loss on extinguishment of senior notes, net
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
(72
|
)
|
Other income, net
|
|
|
233
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
194
|
|
Equity in income of consolidated subsidiaries
|
|
|
14,389
|
|
|
|
|
|
|
|
(14,389
|
)
|
|
|
|
|
Interest expense
|
|
|
(7,581
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
(7,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(5,544
|
)
|
|
|
22,125
|
|
|
|
(14,389
|
)
|
|
|
2,192
|
|
Provision (benefit) for income taxes
|
|
|
(7,013
|
)
|
|
|
7,815
|
|
|
|
|
|
|
|
802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
|
1,469
|
|
|
|
14,310
|
|
|
|
(14,389
|
)
|
|
|
1,390
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,469
|
|
|
$
|
14,389
|
|
|
$
|
(14,389
|
)
|
|
$
|
1,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Financial Information for Guarantors
Condensed Consolidated Balance Sheet
As of September 30, 2011
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100%
Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
26,790
|
|
|
$
|
496
|
|
|
$
|
|
|
|
$
|
27,286
|
|
Receivables, net
|
|
|
|
|
|
|
28,992
|
|
|
|
|
|
|
|
28,992
|
|
Due from affiliates
|
|
|
(78,170
|
)
|
|
|
78,170
|
|
|
|
|
|
|
|
|
|
Income taxes receivable
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
92
|
|
Deferred income taxes
|
|
|
468
|
|
|
|
1,181
|
|
|
|
|
|
|
|
1,649
|
|
Prepaid expenses and other
|
|
|
708
|
|
|
|
1,364
|
|
|
|
|
|
|
|
2,072
|
|
Television broadcast rights
|
|
|
|
|
|
|
9,325
|
|
|
|
|
|
|
|
9,325
|
|
Current assets held for sale
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
(50,204
|
)
|
|
|
119,643
|
|
|
|
|
|
|
|
69,439
|
|
Investment in consolidated subsidiaries
|
|
|
275,956
|
|
|
|
|
|
|
|
(275,956
|
)
|
|
|
|
|
Cash surrender value of life insurance and annuity contracts
|
|
|
17,077
|
|
|
|
|
|
|
|
|
|
|
|
17,077
|
|
Goodwill, net
|
|
|
|
|
|
|
13,293
|
|
|
|
|
|
|
|
13,293
|
|
Intangible assets, net
|
|
|
|
|
|
|
40,366
|
|
|
|
|
|
|
|
40,366
|
|
Other assets
|
|
|
2,223
|
|
|
|
4,216
|
|
|
|
|
|
|
|
6,439
|
|
Assets held for sale
|
|
|
|
|
|
|
611
|
|
|
|
|
|
|
|
611
|
|
Property, plant and equipment, net
|
|
|
2,295
|
|
|
|
137,824
|
|
|
|
|
|
|
|
140,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
247,347
|
|
|
$
|
315,953
|
|
|
$
|
(275,956
|
)
|
|
$
|
287,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
199
|
|
|
$
|
2,487
|
|
|
$
|
|
|
|
$
|
2,686
|
|
Accrued payroll and related benefits
|
|
|
1,084
|
|
|
|
3,951
|
|
|
|
|
|
|
|
5,035
|
|
Interest payable
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
240
|
|
Television broadcast rights payable
|
|
|
|
|
|
|
8,970
|
|
|
|
|
|
|
|
8,970
|
|
Income taxes payable
|
|
|
(7,169
|
)
|
|
|
8,419
|
|
|
|
|
|
|
|
1,250
|
|
Current portion of accrued retirement benefits
|
|
|
1,117
|
|
|
|
|
|
|
|
|
|
|
|
1,117
|
|
Other current liabilities
|
|
|
820
|
|
|
|
6,419
|
|
|
|
|
|
|
|
7,239
|
|
Liabilities of business held for sale
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
(3,709
|
)
|
|
|
30,274
|
|
|
|
|
|
|
|
26,565
|
|
Long-term debt
|
|
|
66,834
|
|
|
|
|
|
|
|
|
|
|
|
66,834
|
|
Accrued retirement benefits
|
|
|
18,956
|
|
|
|
|
|
|
|
|
|
|
|
18,956
|
|
Deferred income taxes
|
|
|
(4,095
|
)
|
|
|
4,543
|
|
|
|
|
|
|
|
448
|
|
Other liabilities
|
|
|
(227
|
)
|
|
|
5,180
|
|
|
|
|
|
|
|
4,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
77,759
|
|
|
|
39,997
|
|
|
|
|
|
|
|
117,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
11,037
|
|
|
|
1,131
|
|
|
|
(1,131
|
)
|
|
|
11,037
|
|
Capital in excess of par
|
|
|
14,195
|
|
|
|
164,233
|
|
|
|
(164,233
|
)
|
|
|
14,195
|
|
Accumulated other comprehensive income (loss), net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated loss
|
|
|
(2,147
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,147
|
)
|
Prior service cost
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
Retained earnings
|
|
|
146,574
|
|
|
|
110,592
|
|
|
|
(110,592
|
)
|
|
|
146,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
169,588
|
|
|
|
275,956
|
|
|
|
(275,956
|
)
|
|
|
169,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
247,347
|
|
|
$
|
315,953
|
|
|
$
|
(275,956
|
)
|
|
$
|
287,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Financial Information for Guarantors
Condensed Consolidated Balance Sheet
As of December 31, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100%
Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
27,563
|
|
|
$
|
25,382
|
|
|
$
|
|
|
|
$
|
52,945
|
|
Receivables, net
|
|
|
|
|
|
|
30,755
|
|
|
|
|
|
|
|
30,755
|
|
Due from affiliate
|
|
|
(43,724
|
)
|
|
|
43,724
|
|
|
|
|
|
|
|
|
|
Income taxes receivable
|
|
|
16,938
|
|
|
|
(15,585
|
)
|
|
|
|
|
|
|
1,353
|
|
Deferred income taxes
|
|
|
467
|
|
|
|
1,182
|
|
|
|
|
|
|
|
1,649
|
|
Prepaid expenses and other
|
|
|
1,543
|
|
|
|
1,320
|
|
|
|
|
|
|
|
2,863
|
|
Cash surrender value of annuity contracts
|
|
|
2,397
|
|
|
|
|
|
|
|
|
|
|
|
2,397
|
|
Television broadcast rights
|
|
|
|
|
|
|
7,855
|
|
|
|
|
|
|
|
7,855
|
|
Current assets held for sale
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
5,184
|
|
|
|
94,685
|
|
|
|
|
|
|
|
99,869
|
|
Investment in consolidated subsidiaries
|
|
|
262,372
|
|
|
|
|
|
|
|
(262,372
|
)
|
|
|
|
|
Cash surrender value of life insurance and annuity contracts
|
|
|
16,499
|
|
|
|
|
|
|
|
|
|
|
|
16,499
|
|
Goodwill, net
|
|
|
|
|
|
|
13,293
|
|
|
|
|
|
|
|
13,293
|
|
Intangible assets, net
|
|
|
|
|
|
|
40,543
|
|
|
|
|
|
|
|
40,543
|
|
Other assets
|
|
|
2,874
|
|
|
|
4,502
|
|
|
|
|
|
|
|
7,376
|
|
Assets held for sale
|
|
|
|
|
|
|
485
|
|
|
|
|
|
|
|
485
|
|
Property, plant and equipment, net
|
|
|
2,265
|
|
|
|
140,562
|
|
|
|
|
|
|
|
142,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
289,194
|
|
|
$
|
294,070
|
|
|
$
|
(262,372
|
)
|
|
$
|
320,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
96
|
|
|
$
|
3,921
|
|
|
$
|
|
|
|
$
|
4,017
|
|
Payroll and related benefits
|
|
|
3,182
|
|
|
|
4,714
|
|
|
|
|
|
|
|
7,896
|
|
Interest payable
|
|
|
2,552
|
|
|
|
|
|
|
|
|
|
|
|
2,552
|
|
Television broadcast rights payable
|
|
|
|
|
|
|
7,849
|
|
|
|
|
|
|
|
7,849
|
|
Current portion of accrued retirement benefits
|
|
|
1,117
|
|
|
|
|
|
|
|
|
|
|
|
1,117
|
|
Other current liabilities
|
|
|
889
|
|
|
|
3,499
|
|
|
|
|
|
|
|
4,388
|
|
Liabilities of business held for sale
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,836
|
|
|
|
20,010
|
|
|
|
|
|
|
|
27,846
|
|
Long-term debt
|
|
|
101,440
|
|
|
|
|
|
|
|
|
|
|
|
101,440
|
|
Accrued retirement benefits
|
|
|
18,982
|
|
|
|
|
|
|
|
|
|
|
|
18,982
|
|
Deferred income taxes, net
|
|
|
(4,126
|
)
|
|
|
4,543
|
|
|
|
|
|
|
|
417
|
|
Other liabilities
|
|
|
(164
|
)
|
|
|
7,145
|
|
|
|
|
|
|
|
6,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
123,968
|
|
|
|
31,698
|
|
|
|
|
|
|
|
155,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
10,988
|
|
|
|
1,131
|
|
|
|
(1,131
|
)
|
|
|
10,988
|
|
Capital in excess of par
|
|
|
13,273
|
|
|
|
164,233
|
|
|
|
(164,233
|
)
|
|
|
13,273
|
|
Accumulated other comprehensive income (loss), net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated loss
|
|
|
(2,176
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,176
|
)
|
Prior service cost
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
Retained earnings
|
|
|
143,241
|
|
|
|
97,008
|
|
|
|
(97,008
|
)
|
|
|
143,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
165,226
|
|
|
|
262,372
|
|
|
|
(262,372
|
)
|
|
|
165,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
289,194
|
|
|
$
|
294,070
|
|
|
$
|
(262,372
|
)
|
|
$
|
320,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Financial Information for Guarantors
Condensed Consolidated Statement of Cash Flows
For the nine months ended September 30, 2011
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
Net cash provided by operating activities
|
|
$
|
5,445
|
|
|
$
|
4,898
|
|
|
$
|
|
|
|
$
|
10,343
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of capital
|
|
|
25,138
|
|
|
|
|
|
|
|
(25,138
|
)
|
|
|
|
|
Proceeds from the sale of radio station
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
48
|
|
Contribution to equity investee
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
(88
|
)
|
Purchase of radio stations
|
|
|
|
|
|
|
(113
|
)
|
|
|
|
|
|
|
(113
|
)
|
Purchases of property, plant and equipment
|
|
|
(711
|
)
|
|
|
(4,359
|
)
|
|
|
|
|
|
|
(5,070
|
)
|
Proceeds from the sale of real estate
|
|
|
4,164
|
|
|
|
|
|
|
|
|
|
|
|
4,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
28,591
|
|
|
|
(4,512
|
)
|
|
|
(25,138
|
)
|
|
|
(1,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of capital
|
|
|
|
|
|
|
(25,138
|
)
|
|
|
25,138
|
|
|
|
|
|
Repurchase of senior notes
|
|
|
(34,606
|
)
|
|
|
|
|
|
|
|
|
|
|
(34,606
|
)
|
Shares settled upon vesting of stock rights
|
|
|
(278
|
)
|
|
|
|
|
|
|
|
|
|
|
(278
|
)
|
Payments on capital lease obligations
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
(134
|
)
|
Proceeds from exercise of stock options
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(34,809
|
)
|
|
|
(25,272
|
)
|
|
|
25,138
|
|
|
|
(34,943
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(773
|
)
|
|
|
(24,886
|
)
|
|
|
|
|
|
|
(25,659
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
27,563
|
|
|
|
25,382
|
|
|
|
|
|
|
|
52,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
26,790
|
|
|
$
|
496
|
|
|
$
|
|
|
|
$
|
27,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Information for Guarantors
Condensed Consolidated Statement of Cash Flows
For the nine months ended September 30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fisher
Communications,
Inc.
|
|
|
100% Owned
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Fisher
Communications,
Inc. and
Subsidiaries
|
|
Net cash provided by operating activities
|
|
$
|
13,990
|
|
|
$
|
8,424
|
|
|
$
|
|
|
|
$
|
22,414
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of capital
|
|
|
10,000
|
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
|
|
Contribution to equity investee
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
(23
|
)
|
Net cash in consolidation of equity investee
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
75
|
|
Purchases of property, plant and equipment
|
|
|
(1,041
|
)
|
|
|
(7,813
|
)
|
|
|
|
|
|
|
(8,854
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
8,959
|
|
|
|
(7,761
|
)
|
|
|
(10,000
|
)
|
|
|
(8,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of capital
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
10,000
|
|
|
|
|
|
Repurchase of senior notes
|
|
|
(17,160
|
)
|
|
|
|
|
|
|
|
|
|
|
(17,160
|
)
|
Shares settled upon vesting of stock rights
|
|
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
(104
|
)
|
Payments on capital lease obligations
|
|
|
|
|
|
|
(124
|
)
|
|
|
|
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(17,264
|
)
|
|
|
(10,124
|
)
|
|
|
10,000
|
|
|
|
(17,388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
5,685
|
|
|
|
(9,461
|
)
|
|
|
|
|
|
|
(3,776
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
8,840
|
|
|
|
35,142
|
|
|
|
|
|
|
|
43,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
14,525
|
|
|
$
|
25,681
|
|
|
$
|
|
|
|
$
|
40,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
In November 2011, the Company completed the sale of its six Great Falls, Montana radio stations to STARadio Corp., for
approximately $1.8 million. The Company expects to record a gain on sale in the line item income (loss) from discontinued operations, net of income taxes in the fourth quarter.
19
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis should be read in conjunction with the unaudited 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, 2010, which was filed with the Securities and Exchange Commission on March 8, 2011.
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, our, or the
Company, we are referring to Fisher Communications, Inc. and its consolidated subsidiaries.
This discussion
is intended to provide an analysis of significant trends and material changes in our financial condition and operating results during the three and nine months ended September 30, 2011, compared with the corresponding periods in 2010.
Overview
We
are an integrated media company. We own or 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 of our corporate offices and our Seattle
television and radio stations. We lease almost 60% 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 consent fees, 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, particularly those affecting the Pacific Northwest 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 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, accounted for
approximately 60% percent of our television broadcasting revenue for the nine months ended September 30, 2011 and are affiliated with the ABC Television Network. We have twelve television stations which are affiliated with one of the four major
networks; six of our television stations are affiliated with Univision; and the remainder of our television stations are independent or subscribe to various programming services. We have affiliation agreements with the ABC Television Network with
current terms expiring in August 2014. Our affiliation agreements with the CBS Television Network generally expire in February 2016. Our affiliation agreement with FOX Television Network for KBFX-CA in Bakersfield, California, expired in June 2010.
A new agreement with FOX Television Network for KBFX-CA has been executed with an initial term expiring in June 2014. The expiration of our affiliation agreement with Univision was extended from September 2011 to December 2011. We are currently
negotiating the terms of a new agreement with Univision. The non-renewal of any of our major network affiliation agreements could adversely affect our business and results. 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 infrastructure provided at this facility. As of September 30, 2011 and December 31, 2010, approximately 96% of Fisher Plaza was occupied or committed for occupancy (41% 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 commercial real estate conditions, including the availability of space
in other competing properties.
20
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.
Significant Developments
The following significant developments affect the comparability of our financial statements for the three and nine months ended
September 30, 2011 and 2010.
Time Brokerage Agreement and Sale of Great Fall Radio Stations.
In June 2011, we
entered into a definitive agreement to sell our six Great Falls, Montana radio stations (the Montana Stations) to STARadio Corp. (STARadio) for $1.8 million, subject to certain adjustments. We entered into a Time Brokerage
Agreement (TBA) whereby STARadio will provide programming and related services and will sell the advertising inventory of the Montana Stations. The TBA remains in effect until the closing of the sale or termination of the purchase and
sale agreement, whichever is earlier.
In accordance with authoritative guidance we have reported the results of operations of
the Montana Stations as discontinued operations in the unaudited consolidated condensed financial statements. For all reported periods, we reclassified to discontinued operations the results of the Montana Stations. The Montana Stations were
previously included in our radio segment.
Sale of real estate.
In June 2011, we completed the sale of two real estate
parcels in Seattle, Washington not essential to our current operations and received $4.2 million in pre-tax net proceeds. We recognized a gain of $4.1 million, which is presented as a gain on the sale of real estate, net in the unaudited condensed
consolidated statement of operations for the nine months ended September 30, 2011.
Joint Sales Agreement.
In
December 2010, we entered into a ten year Joint Sales Agreement (JSA) with NPG of Idaho, Inc., a subsidiary of News Press & Gazette Company (NPG), which owns and operates KIFI-TV, an Idaho Falls, Idaho television
station. The JSA was effective January 1, 2011. Under the JSA, NPG provides certain services supporting the operation of our television station in Idaho Falls, KIDK-TV, and sells substantially all of the stations commercial advertising.
We pay NPG a fixed fee pursuant to the JSA, and a performance bonus based on station performance. Contemporaneously with the JSA, we entered into an option agreement with NPG, whereby they have a conditional option to acquire KIDK-TV from us until
January 1, 2021, effective on the expiration or termination of the indenture governing our Senior Notes. KIDK-TV is consolidated into our unaudited condensed consolidated statements. We have determined that we are deemed to have a controlling
financial interest in KIDK-TV for financial reporting purposes as we do maintain ultimate control over the policies and/or operations of the station that could most significantly impact the station. Advertising revenues earned under this JSA are
recorded as revenue and JSA fees and programming expenses are recorded as operating costs.
ACME Agreement.
In March
2010, we entered into a three year consulting and license agreement with ACME Television, LLC (ACME) which was effective April 1, 2010. Under the terms of the agreement we provide consulting services to ACMEs
The Daily
Buzz
television show and we also license certain assets of the program in order to produce unique content to be distributed on both traditional broadcast and newly created digital platforms. In conjunction with the agreement, we were granted an
option to purchase the ownership rights to
The Daily Buzz
television show until September 30, 2012. Due to the terms of the agreement and uncertainties associated with the exercise of our option agreement,
The Daily Buzz
television show does not meet the criteria for consolidation. Revenue earned under this agreement is recorded in revenue and programming and other expenses are recorded in operating costs.
Repurchase of Senior Notes.
During the third quarter of 2011, we redeemed or repurchased $8.7 million aggregate principal amount
of our 8.625% Senior Notes due in 2014 (Senior Notes) for a total consideration of $8.9 million in cash plus accrued interest of $263,000. We recorded a loss on extinguishment of debt of $298,000, including a charge for related
unamortized debt issuance costs, of approximately $98,000.
During the nine months ended September 30, 2011, we redeemed
or repurchased $34.6 million aggregate principal amount of Senior Notes for a total consideration of $35.5 million in cash plus accrued interest of $572,000. We recorded a loss on extinguishment of debt of $1.4 million, including a charge for
related unamortized debt issuance costs, of approximately $416,000.
During the nine months ended September 30, 2010, we
redeemed or repurchased $17.4 million aggregate principal amount of Senior Notes for a total consideration of $17.2 million in cash plus accrued interest of $272,000. We recorded a net loss on extinguishment of debt of $72,000, comprised of a charge
for related unamortized debt issuance costs of $272,000, partially offset by a gain on extinguishment of debt of $200,000.
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
21
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, intangibles and television and broadcast rights impairment, the useful lives of tangible and
intangible assets, valuation allowances for deferred tax assets, accounts receivable 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 Annual Report on Form 10-K for the year ended December 31, 2010 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.
For a detailed discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2010.
There have been no material changes in the application of our critical accounting policies and estimates subsequent to that report except
for those discussed below. We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors.
We determined that six radio stations in Great Falls, Montana met the criteria for classification as a discontinued operation because of our June 2011 definitive agreement to sell the stations to
STARadio. In accordance with authoritative guidance, we have reported the results of operations of these small-market stations as discontinued operations in the unaudited condensed consolidated financial statements. For all previously reported
periods, certain amounts in the unaudited condensed consolidated financial statements have been reclassified. The assets and liabilities of the radio stations have been classified as held for sale and the net results of the operations have been
reclassified from continuing operations to discontinued operations. See Note 5 to the unaudited condensed consolidated financial statements for more information.
As part of our ongoing review of property, plant and equipment asset lives, we determined that the asset lives of certain machinery and equipment categories should be increased. The increase in the lives
ranged from one to ten years depending on the category. A change in depreciation method is considered a change in accounting estimate. We adjusted the remaining lives of existing assets effective January 1, 2011 and as a result we expect that
future depreciation will be lower than in the prior periods. The impact of this change in estimate for the three months ended September 30, 2011 increased our pre-tax income from continuing operations by approximately $815,000, increased our
net income by approximately $514,000 and increased our diluted net income from continuing operations per share by $0.06. The impact of this change in estimate for the nine months ended September 30, 2011 increased our pre-tax income from
continuing operations by approximately $2.4 million, increased our net income by approximately $1.5 million and increased our diluted net income from continuing operations per share by $0.17.
Consolidated Results of Operations
We report financial data for three
reportable segments: television, radio and Fisher Plaza. The television segment includes the operations of our 20 owned and/or operated television stations (including a 50%-owned television station) and our internet business. The radio segment
includes the operations of our three radio stations and one managed radio station. The Fisher Plaza segment consists of the operations of Fisher Plaza, a retail, office and 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 or common area maintenance expenses. The segment data includes an allocation of
depreciation and certain operating expenses from Fisher Plaza to our television and radio segments, and certain corporate expenses are allocated to our television and radio segments on a pro-rata basis. The other segment includes corporate and
administrative expenses that are not attributable to the operations of the television, radio or Fisher Plaza segments.
The following table
sets forth our results of operations for the three and nine months ended September 30, 2011 and 2010, including the dollar and percentage variances between such periods. Percentage variances have been omitted where they are not considered
meaningful.
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
|
Variance
|
|
|
Nine months
ended
September 30,
|
|
|
Variance
|
|
(in thousands)
|
|
2011
|
|
|
2010
|
|
|
$
|
|
|
%
|
|
|
2011
|
|
|
2010
|
|
|
$
|
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
$
|
30,522
|
|
|
$
|
31,986
|
|
|
$
|
(1,464
|
)
|
|
|
-5
|
%
|
|
$
|
90,557
|
|
|
$
|
89,634
|
|
|
$
|
923
|
|
|
|
1
|
%
|
Radio
|
|
|
5,344
|
|
|
|
6,179
|
|
|
|
(835
|
)
|
|
|
-14
|
%
|
|
|
15,876
|
|
|
|
17,057
|
|
|
|
(1,181
|
)
|
|
|
-7
|
%
|
Fisher Plaza
|
|
|
3,853
|
|
|
|
3,666
|
|
|
|
187
|
|
|
|
5
|
%
|
|
|
11,361
|
|
|
|
10,659
|
|
|
|
702
|
|
|
|
7
|
%
|
Other
|
|
|
(19
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
(192
|
)
|
|
|
(123
|
)
|
|
|
(69
|
)
|
|
|
-56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
39,700
|
|
|
|
41,831
|
|
|
|
(2,131
|
)
|
|
|
-5
|
%
|
|
|
117,602
|
|
|
|
117,227
|
|
|
|
375
|
|
|
|
0
|
%
|
Direct operating costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
13,938
|
|
|
|
13,416
|
|
|
|
522
|
|
|
|
4
|
%
|
|
|
41,459
|
|
|
|
39,948
|
|
|
|
1,511
|
|
|
|
4
|
%
|
Radio
|
|
|
2,372
|
|
|
|
2,013
|
|
|
|
359
|
|
|
|
18
|
%
|
|
|
7,205
|
|
|
|
6,858
|
|
|
|
347
|
|
|
|
5
|
%
|
Fisher Plaza
|
|
|
917
|
|
|
|
1,148
|
|
|
|
(231
|
)
|
|
|
-20
|
%
|
|
|
2,500
|
|
|
|
3,096
|
|
|
|
(596
|
)
|
|
|
-19
|
%
|
Other
|
|
|
477
|
|
|
|
864
|
|
|
|
(387
|
)
|
|
|
-45
|
%
|
|
|
1,431
|
|
|
|
1,932
|
|
|
|
(501
|
)
|
|
|
-26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
17,704
|
|
|
|
17,441
|
|
|
|
263
|
|
|
|
2
|
%
|
|
|
52,595
|
|
|
|
51,834
|
|
|
|
761
|
|
|
|
1
|
%
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
8,146
|
|
|
|
9,125
|
|
|
|
(979
|
)
|
|
|
-11
|
%
|
|
|
24,854
|
|
|
|
26,400
|
|
|
|
(1,546
|
)
|
|
|
-6
|
%
|
Radio
|
|
|
1,695
|
|
|
|
2,367
|
|
|
|
(672
|
)
|
|
|
-28
|
%
|
|
|
5,881
|
|
|
|
7,413
|
|
|
|
(1,532
|
)
|
|
|
-21
|
%
|
Fisher Plaza
|
|
|
82
|
|
|
|
75
|
|
|
|
7
|
|
|
|
9
|
%
|
|
|
320
|
|
|
|
395
|
|
|
|
(75
|
)
|
|
|
-19
|
%
|
Other
|
|
|
2,719
|
|
|
|
2,153
|
|
|
|
566
|
|
|
|
26
|
%
|
|
|
9,754
|
|
|
|
7,132
|
|
|
|
2,622
|
|
|
|
37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
12,642
|
|
|
|
13,720
|
|
|
|
(1,078
|
)
|
|
|
-8
|
%
|
|
|
40,809
|
|
|
|
41,340
|
|
|
|
(531
|
)
|
|
|
-1
|
%
|
Amortization of program rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
2,449
|
|
|
|
2,953
|
|
|
|
(504
|
)
|
|
|
-17
|
%
|
|
|
8,324
|
|
|
|
8,886
|
|
|
|
(562
|
)
|
|
|
-6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
2,449
|
|
|
|
2,953
|
|
|
|
(504
|
)
|
|
|
-17
|
%
|
|
|
8,324
|
|
|
|
8,886
|
|
|
|
(562
|
)
|
|
|
-6
|
%
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
1,572
|
|
|
|
2,246
|
|
|
|
(674
|
)
|
|
|
-30
|
%
|
|
|
4,659
|
|
|
|
6,978
|
|
|
|
(2,319
|
)
|
|
|
-33
|
%
|
Radio
|
|
|
122
|
|
|
|
200
|
|
|
|
(78
|
)
|
|
|
-39
|
%
|
|
|
367
|
|
|
|
545
|
|
|
|
(178
|
)
|
|
|
-33
|
%
|
Fisher Plaza
|
|
|
763
|
|
|
|
779
|
|
|
|
(16
|
)
|
|
|
-2
|
%
|
|
|
2,293
|
|
|
|
2,432
|
|
|
|
(139
|
)
|
|
|
-6
|
%
|
Other
|
|
|
240
|
|
|
|
300
|
|
|
|
(60
|
)
|
|
|
-20
|
%
|
|
|
708
|
|
|
|
888
|
|
|
|
(180
|
)
|
|
|
-20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
2,697
|
|
|
|
3,525
|
|
|
|
(828
|
)
|
|
|
-23
|
%
|
|
|
8,027
|
|
|
|
10,843
|
|
|
|
(2,816
|
)
|
|
|
-26
|
%
|
Gain on sale of real estate, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,089
|
)
|
|
|
|
|
|
|
(4,089
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,089
|
)
|
|
|
|
|
|
|
(4,089
|
)
|
|
|
|
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fisher Plaza
|
|
|
(40
|
)
|
|
|
(2,919
|
)
|
|
|
2,879
|
|
|
|
99
|
%
|
|
|
(223
|
)
|
|
|
(3,319
|
)
|
|
|
3,096
|
|
|
|
93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
(40
|
)
|
|
|
(2,919
|
)
|
|
|
2,879
|
|
|
|
99
|
%
|
|
|
(223
|
)
|
|
|
(3,319
|
)
|
|
|
3,096
|
|
|
|
93
|
%
|
Gain on asset exchange, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
|
|
|
|
(275
|
)
|
|
|
275
|
|
|
|
100
|
%
|
|
|
|
|
|
|
(2,057
|
)
|
|
|
2,057
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
(275
|
)
|
|
|
275
|
|
|
|
100
|
%
|
|
|
|
|
|
|
(2,057
|
)
|
|
|
2,057
|
|
|
|
100
|
%
|
Income (loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
4,417
|
|
|
|
4,521
|
|
|
|
(104
|
)
|
|
|
-2
|
%
|
|
|
11,261
|
|
|
|
9,479
|
|
|
|
1,782
|
|
|
|
19
|
%
|
Radio
|
|
|
1,155
|
|
|
|
1,599
|
|
|
|
(444
|
)
|
|
|
-28
|
%
|
|
|
2,423
|
|
|
|
2,241
|
|
|
|
182
|
|
|
|
8
|
%
|
Fisher Plaza
|
|
|
2,131
|
|
|
|
4,583
|
|
|
|
(2,452
|
)
|
|
|
-54
|
%
|
|
|
6,471
|
|
|
|
8,055
|
|
|
|
(1,584
|
)
|
|
|
-20
|
%
|
Other
|
|
|
(3,455
|
)
|
|
|
(3,317
|
)
|
|
|
(138
|
)
|
|
|
-4
|
%
|
|
|
(7,996
|
)
|
|
|
(10,075
|
)
|
|
|
2,079
|
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
4,248
|
|
|
|
7,386
|
|
|
|
(3,138
|
)
|
|
|
-42
|
%
|
|
|
12,159
|
|
|
|
9,700
|
|
|
|
2,459
|
|
|
|
25
|
%
|
Loss on extinguishment of senior notes, net
|
|
|
(298
|
)
|
|
|
|
|
|
|
(298
|
)
|
|
|
|
|
|
|
(1,356
|
)
|
|
|
(72
|
)
|
|
|
(1,284
|
)
|
|
|
-1783
|
%
|
Other income, net
|
|
|
34
|
|
|
|
31
|
|
|
|
3
|
|
|
|
10
|
%
|
|
|
214
|
|
|
|
194
|
|
|
|
20
|
|
|
|
10
|
%
|
Interest expense
|
|
|
(1,572
|
)
|
|
|
(2,368
|
)
|
|
|
796
|
|
|
|
34
|
%
|
|
|
(5,697
|
)
|
|
|
(7,630
|
)
|
|
|
1,933
|
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
2,412
|
|
|
|
5,049
|
|
|
|
(2,637
|
)
|
|
|
-52
|
%
|
|
|
5,320
|
|
|
|
2,192
|
|
|
|
3,128
|
|
|
|
143
|
%
|
Provision for income taxes
|
|
|
893
|
|
|
|
1,785
|
|
|
|
(892
|
)
|
|
|
-50
|
%
|
|
|
1,978
|
|
|
|
802
|
|
|
|
1,176
|
|
|
|
147
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes
|
|
|
1,519
|
|
|
|
3,264
|
|
|
|
(1,745
|
)
|
|
|
-53
|
%
|
|
|
3,342
|
|
|
|
1,390
|
|
|
|
1,952
|
|
|
|
140
|
%
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(75
|
)
|
|
|
56
|
|
|
|
(131
|
)
|
|
|
-234
|
%
|
|
|
(9
|
)
|
|
|
79
|
|
|
|
(88
|
)
|
|
|
-111
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,444
|
|
|
$
|
3,320
|
|
|
$
|
(1,876
|
)
|
|
|
-57
|
%
|
|
$
|
3,333
|
|
|
$
|
1,469
|
|
|
$
|
1,864
|
|
|
|
127
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Comparison of three and nine months ended September 30, 2011 and 2010
Revenue
The following
table sets forth our main types of revenue by segment for the three and nine months ended September 30, 2011 and 2010;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2011
|
|
|
%
change
|
|
|
% total
revenue
|
|
|
2010
|
|
|
% total
revenue
|
|
|
2011
|
|
|
%
change
|
|
|
% total
revenue
|
|
|
2010
|
|
|
% total
revenue
|
|
Core advertising (local and national)
|
|
$
|
22,775
|
|
|
|
9
|
%
|
|
|
57
|
%
|
|
$
|
20,954
|
|
|
|
50
|
%
|
|
$
|
69,578
|
|
|
|
7
|
%
|
|
|
59
|
%
|
|
$
|
65,220
|
|
|
|
56
|
%
|
Political
|
|
|
947
|
|
|
|
-80
|
%
|
|
|
2
|
%
|
|
|
4,651
|
|
|
|
11
|
%
|
|
|
1,301
|
|
|
|
-81
|
%
|
|
|
1
|
%
|
|
|
6,901
|
|
|
|
6
|
%
|
Internet
|
|
|
1,408
|
|
|
|
52
|
%
|
|
|
4
|
%
|
|
|
924
|
|
|
|
2
|
%
|
|
|
3,958
|
|
|
|
67
|
%
|
|
|
3
|
%
|
|
|
2,373
|
|
|
|
2
|
%
|
Retransmission
|
|
|
3,420
|
|
|
|
4
|
%
|
|
|
9
|
%
|
|
|
3,295
|
|
|
|
8
|
%
|
|
|
10,037
|
|
|
|
9
|
%
|
|
|
9
|
%
|
|
|
9,235
|
|
|
|
8
|
%
|
Trade, barter and other
|
|
|
1,972
|
|
|
|
-9
|
%
|
|
|
5
|
%
|
|
|
2,162
|
|
|
|
5
|
%
|
|
|
5,683
|
|
|
|
-4
|
%
|
|
|
5
|
%
|
|
|
5,905
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TV
|
|
|
30,522
|
|
|
|
-5
|
%
|
|
|
77
|
%
|
|
|
31,986
|
|
|
|
76
|
%
|
|
|
90,557
|
|
|
|
1
|
%
|
|
|
77
|
%
|
|
|
89,634
|
|
|
|
76
|
%
|
Core advertising (local and national)
|
|
|
5,059
|
|
|
|
-10
|
%
|
|
|
13
|
%
|
|
|
5,635
|
|
|
|
13
|
%
|
|
|
14,951
|
|
|
|
-6
|
%
|
|
|
13
|
%
|
|
|
15,853
|
|
|
|
14
|
%
|
Political
|
|
|
22
|
|
|
|
-92
|
%
|
|
|
0
|
%
|
|
|
272
|
|
|
|
1
|
%
|
|
|
149
|
|
|
|
-60
|
%
|
|
|
0
|
%
|
|
|
377
|
|
|
|
0
|
%
|
Trade, barter and other
|
|
|
263
|
|
|
|
-3
|
%
|
|
|
1
|
%
|
|
|
272
|
|
|
|
1
|
%
|
|
|
776
|
|
|
|
-6
|
%
|
|
|
1
|
%
|
|
|
827
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio
|
|
|
5,344
|
|
|
|
-14
|
%
|
|
|
13
|
%
|
|
|
6,179
|
|
|
|
15
|
%
|
|
|
15,876
|
|
|
|
-7
|
%
|
|
|
13
|
%
|
|
|
17,057
|
|
|
|
15
|
%
|
Plaza
|
|
|
3,853
|
|
|
|
5
|
%
|
|
|
10
|
%
|
|
|
3,666
|
|
|
|
9
|
%
|
|
|
11,361
|
|
|
|
7
|
%
|
|
|
10
|
%
|
|
|
10,659
|
|
|
|
9
|
%
|
Other
|
|
|
(19
|
)
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
(192
|
)
|
|
|
56
|
%
|
|
|
0
|
%
|
|
|
(123
|
)
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
39,700
|
|
|
|
-5
|
%
|
|
|
100
|
%
|
|
$
|
41,831
|
|
|
|
100
|
%
|
|
$
|
117,602
|
|
|
|
0
|
%
|
|
|
100
|
%
|
|
$
|
117,227
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
. Television revenue decreased $1.5 million in the three months ended September 30,
2011 compared to the same period in 2010. This decrease was due to a decrease in political advertising of $3.7 million, offset by increases in core advertising of $1.8 million, internet advertising of $484,000 and retransmission revenue of $125,000.
Television revenue increased $923,000 in the nine months ended September 30, 2011 compared to the same period in 2010,
primarily due to increases in core advertising of $4.4 million, internet advertising of $1.6 million and retransmission revenue of $802,000, offset by a decrease in political spending of $5.6 million.
Automotive -related advertising, one of our largest advertising categories, increased 3% for the three months ended September 30,
2011 compared to the same period in 2010. Professional services-related advertising increased 26% and retail increased 16%, compared to the same period in 2010.
Automotive-related advertising increased 8% for the nine months ended September 30, 2011 compared to the same period in 2010. Other advertising categories including telecommunications increased 6%,
professional services increased 10% and retail increased 5% have also shown improvement compared to the same period in 2010.
Revenue from our ABC-affiliated stations decreased 7% in the three months ended September 30, 2011 and remained flat for the nine
months ended September 30, 2011 compared to the same periods in 2010, primarily due to a decrease in political revenue partially offset by increases in core advertising. Revenue from our CBS-affiliated stations decreased 7% and 4% in the three
and nine months ended September 30, 2011 compared to the same periods in 2010, as a result of a decline in political and national advertising, partially offset by an increase in local advertising.
Radio
. Radio revenue declined by 14% and 7%, respectively, in the three and nine months ended September 30, 2011 compared to
the same periods in 2010, primarily due to a decrease in core advertising as a result of a general market decline and further impacted by the format change in late 2010 at KVI and the conclusion of our ten year Joint Sales Agreement with KING FM,
which was not renewed in the second quarter of 2011.
Fisher Plaza
. Revenue increased 5% and 7%, respectively, in the
three and nine months ended September 30, 2011 compared to the same periods in 2010, primarily due to increased rental revenue and increased fees for our telecom facilities. As of September 30, 2011, approximately 96% of Fisher Plaza was
occupied or committed for occupancy (41% 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.
Direct operating costs for the television segment increased $522,000 and $1.5 million, respectively, in the three and nine months ended September 30, 2011 compared to the same periods in 2010. The
increase primarily reflects an increase in costs related to the continued development and expansion of our internet business.
Direct operating costs for the radio segment increased $359,000 and $347,000, respectively, in the three and nine months ended
September 30, 2011 compared to the same periods in 2010. The increase was primarily due to an increase in the cost of music rights and advertising for our radio stations.
Direct operating costs decreased at Fisher Plaza $231,000 and $596,000, respectively, in the three and nine months ended September 30, 2011 compared to the same periods in 2010, primarily due to
timing of planned maintenance activities.
24
The other 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
Selling, general and administrative expenses in our television segment decreased $979,000 and $1.5 million, respectively, in the three and
nine months ended September 30, 2011 compared to the same periods in 2010 as a result of a reduction in compensation costs and a credit related to a change in our vacation policy.
The decrease of $672,000 and $1.5 million, respectively, in selling, general and administrative expenses in our radio segment in the
three and nine months ended September 30, 2011 compared to the same period in 2010 was primarily due to cost savings as a result of the non-renewal of our ten year Joint Sales Agreement with KING FM, a decrease in compensation costs related to
our format change in late 2010 at KVI and a credit related to a change in our vacation policy.
Selling, general and
administrative expenses increased $7,000 and decreased $75,000, respectively, at Fisher Plaza in the three and nine months ended September 30, 2011 compared to the same periods in 2010. The decrease in the first nine months of
September 30, 2011 compared to the same period in 2010 is due to a loss on disposal of assets that was incurred in 2010.
Other selling, general and administrative expenses increased $566,000 and $2.6 million in the three and nine months ended
September 30, 2011, respectively, compared to the same periods in 2010. The increase for the three months ended September 30, 2011 was primarily due to employer contributions to the defined contribution plan and costs incurred related to
the Plaza strategic review of $198,000. The increase for the nine months ended September 30, 2011 was primarily due to costs incurred as a result of the proxy contest initiated by FrontFour Capital Group of $1.6 million, employer contributions
to the defined contribution plan and severance costs.
Amortization of program rights
Amortization of program rights for our television segment decreased $504,000 and $562,000, respectively, in the three and nine months
ended September 30, 2011 compared to the same periods in 2010, primarily due to reduced obligations as a result of renegotiated contracts.
Depreciation and amortization
Depreciation and amortization for our television segment decreased $674,000 and $2.3 million, respectively, in the three and nine months ended September 30, 2011 compared to the same periods in 2010
primarily due to the change in fixed asset lives and significantly lower capital expenditures in 2011. Refer to Note 2 of our unaudited condensed consolidated financial statements for further discussion of the change in fixed asset lives.
Depreciation and amortization for our radio segment decreased $78,000 and $178,000, respectively, in the three and nine
months ended September 30, 2011 compared to the same periods in 2010, primarily due to the change in fixed asset lives.
Depreciation and amortization for our Fisher Plaza segment decreased $16,000 and $139,000, respectively, in the three and nine months
ended September 30, 2011 compared to the same periods in 2010, primarily due to certain assets reaching the end of their depreciable lives.
Other depreciation and amortization decreased $60,000 and $180,000, respectively, in the three and nine months ended September 30, 2011 compared to the same periods in 2010, primarily due to the
change in fixed asset lives.
Gain on sale of real estate, net
In June 2011, we completed the sale of two real estate parcels in Seattle, Washington not essential to our current operations resulting in net proceeds of $4.2 million. We recognized a gain on sale of
real estate, net, of $4.1 million for the nine months ended September 30, 2011.
Plaza fire reimbursements, net
Plaza fire reimbursements, net of $40,000 and $223,000 represent net insurance reimbursements related to the July 2009 Fisher Plaza fire
received in the three and nine months ended September 30, 2011, respectively. Net insurance reimbursements of $2.9 million and $3.3 million were received in the three and nine months ended September 30, 2010, respectively.
25
Gain on asset exchange, net
Gain on asset exchange, net was $275,000 and $2.1 million for the three and nine months ended September 30, 2010, respectively. This amount represents the substitute equipment received from Sprint
Nextel and the costs of installing the equipment. Upon installation and use of the equipment, the gain net of disposals was recorded.
Loss
on extinguishment of senior notes, net
During the three months ended September 30, 2011, we redeemed or repurchased
$8.7 million aggregate principal amount of Senior Notes for a total consideration of $8.9 million in cash plus accrued interest of $263,000. We recorded a loss on extinguishment of debt of $298,000, including a charge for related unamortized debt
issuance costs, of approximately $98,000.
During the nine months ended September 30, 2011, we redeemed or repurchased
$34.6 million aggregate principal amount of Senior Notes for a total consideration of $35.5 million in cash plus accrued interest of $572,000. We recorded a loss on extinguishment of debt of $1.4 million, including a charge for related unamortized
debt issuance costs, of approximately $416,000.
During the nine months ended September 30, 2010, we redeemed or
repurchased $17.4 million aggregate principal amount of Senior Notes for a total consideration of $17.2 million in cash plus accrued interest of $272,000. We recorded a net loss on extinguishment of debt of $72,000, comprised of a charge for related
unamortized debt issuance costs of $272,000, partially offset by a gain on extinguishment of debt of $200,000.
Other income, net
Other income, net, typically consists of interest and other miscellaneous income received. During the three and nine
months ended September 30, 2011, other income, net, increased $3,000 and $20,000, compared to the same periods in 2010.
Interest
expense
Interest expense consists primarily of interest on our Senior Notes and amortization of the related financing
fees. Interest expense in the three and nine months ended September 30, 2011 decreased $796,000 and $1.9 million, respectively, from the same periods in 2010, primarily due to the decline in the outstanding principal balance following our
redemption or repurchase of Senior Notes during 2010 and 2011.
Provision for income taxes
Our effective tax rate was 36.3% and 36.6% for the nine months ended September 30, 2011 and 2010, respectively. Our effective tax
rate is calculated on the statutory rate of 35%, adjusted for estimated permanent differences, including non-deductible expenses, and changes in discrete or other non-recurring items. We record our income tax provision or benefit based upon our
estimated annual effective tax rate.
Consistent with prior years, we recorded a full valuation allowance against our state
deferred tax assets, as it is more likely than not that a tax benefit for the deferred tax assets will not be recognized based upon all available evidence. As a result, our effective tax rate is not affected by changes in state rates.
Income (loss) from discontinued operations, net of income taxes
The income (loss) from discontinued operations is related to our small market radio stations held for sale and is presented net of income taxes. See Note 5 to the unaudited condensed consolidated
financial statements for more information on our discontinued operations.
Liquidity and Capital Resources
Liquidity
Our liquidity
is primarily dependent upon cash and cash equivalents and net cash generated from operating activities. Our net cash generated from operating activities is sensitive to many factors, including changes in working capital 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 and the timing of cash receipts and payments.
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. In the future, we may obtain a credit facility depending on market conditions and our current needs.
During the nine months ended September 30, 2011, we redeemed or repurchased $34.6 million aggregate principal amount of Senior Notes
for a total consideration of $35.5 million in cash plus accrued interest of $572,000.
26
Capital Resources
Cash and cash equivalents were approximately $27.3 million as of September 30, 2011 compared to cash and cash equivalents of $52.9 million as of December 31, 2010. The decrease in cash and cash
equivalents of $25.7 million was primarily due to our redemptions and repurchases of Senior Notes for a total consideration of $35.5 million during the nine months ended September 30, 2011.
As of September 30, 2011, we had outstanding $66.8 million aggregate principal amount of our Senior Notes. See Description of
Indebtedness below. The Senior Notes Indenture contains certain restrictive and financial covenants applicable to our business, and we analyze our compliance with those covenants on an ongoing basis. We were in compliance with the debt
covenant requirements at September 30, 2011 and December 31, 2010.
Net cash provided by operating activities
Net cash provided by operating activities for the nine months ended September 30, 2011 of $10.3 million consists of our net income of
$3.3 million, adjusted for non-cash charges of $13.2 million, which consisted primarily of depreciation and amortization, amortization of broadcast rights, gain on sale of real estate, stock-based compensation and premium paid upon redemption or
repurchase of our Senior Notes, and a $2.5 million increase in working capital, which includes $2.4 million received on an annuity contract of a retiree, offset by $8.7 million of payments for broadcast rights.
Net cash provided by operating activities for the nine months ended September 30, 2010 of $22.4 million consists of our net income
of $1.5 million plus our net non-cash charges of $20 million, which consisted primarily of depreciation and amortization, amortization of broadcast rights and gain on exchange of assets and a $4 million change in working capital, of which $10.0
million related to the receipt of an income tax refund, less $9.1 million of payments for broadcast rights.
Net cash used in investing
activities
During the nine months ended September 30, 2011, net cash used in investing activities of $1.1 million
consisted primarily of purchases of property, plant and equipment of $5.1 million partially offset by $4.2 million in proceeds received from the sale of real estate. During the nine months ended September 30, 2010, net cash used in investing
activities of $8.8 million consisted primarily of purchases of property, plant and equipment.
Net cash used in financing activities
Net cash used in financing activities for the nine months ended September 30, 2011 was $34.9 million primarily due to
the redemption or repurchase of $34.6 million aggregate principal amount of Senior Notes and net share settlement for employee stock compensation tax withholding obligations of $278,000.
Net cash used in financing activities for the nine months ended September 30, 2010 was $17.4 million, primarily due to the
redemption or retirement of $17.4 million aggregate principal amount of Senior Notes for total consideration of $17.2 million in cash.
Description of Indebtedness
At September 30, 2011, we had $66.8 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.
The indenture governing our Senior Notes 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 were in compliance with the debt covenant requirements at September 30, 2011 and December 31, 2010.
We are subject to various debt covenants and other restrictions under the 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.
27
Recent Accounting Pronouncements
In August 2010, the FASB issued an exposure draft on lease accounting that would require entities to recognize assets and liabilities
arising from lease contracts on the balance sheet. The proposed exposure draft states that lessees and lessors should apply a right-of-use model in accounting for all leases. Under the proposed model, lessees would recognize an asset for
the right to use the leased asset, and a liability for the obligation to make rental payments over the lease term. The lease term is defined as the longest possible term that is more likely than not to occur. The accounting by a lessor
would reflect its retained exposure to the risks or benefits of the underlying leased asset. A lessor would recognize an asset representing its right to receive lease payments based on the expected term of the lease. Comments on this exposure draft
were due by December 15, 2010 and the final standard is expected to be issued in early 2012. We have not yet evaluated the impact, if any, this proposed standard will have on our consolidated financial statements.
In June 2011, the FASB issued an accounting standard update relating to the presentation of other comprehensive income. The accounting
update eliminates the option to present components of other comprehensive income as part of the statement of stockholders equity. Instead, other comprehensive income must be reported in either a single continuous statement of comprehensive
income (which would contain the current income statement presentation followed by the components of other comprehensive income and a total amount for comprehensive income), or in two separate, but consecutive statements. This guidance is effective
for our fiscal year beginning January 1, 2012. We do not expect the guidance to impact our consolidated financial statements.
In September 2011, the FASB issued an accounting standard update on testing goodwill for impairment. The accounting update provides an entity the option to first perform a qualitative assessment to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment
test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines the fair value of a reporting unit is less than its carrying amount, the
two-step goodwill impairment test is not required. This guidance is effective for our fiscal year beginning January 1, 2012.
28
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 activities.
At September 30, 2011 and December 31, 2010, all of
our debt was at a fixed rate and totaled $66.8 million and $101.4 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 September 30, 2011 was approximately $67.3 million, which was approximately $500,000 more than its carrying value. The
estimated fair value of our long-term debt at December 31, 2010 was approximately $104.2 million, which was approximately $2.8 million more than its carrying value. Market risk is estimated as the potential change in fair market value resulting
from a hypothetical 10% change in interest rates and, as of September 30, 2011, amounted to $1.5 million. Fair market values are determined based on market quotes by brokers. For fixed rate debt, interest rate changes do not impact financial
position, operations or cash flows.
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 September 30, 2011. Based on their
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of our fiscal quarter ended September 30, 2011, 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 SECs 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We made no change in our internal control over financial reporting during the fiscal quarter ended September 30, 2011 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.
29
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 managements 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.
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, 2010, filed with the Securities and Exchange Commission on March 8, 2011.
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
None.
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None.
ITEM 4.
|
(REMOVED AND RESERVED)
|
ITEM 5.
|
OTHER INFORMATION
|
None.
30
|
|
|
|
|
10.1*
|
|
Primary Television Affiliation Agreement, executed on July 28, 2011, by and between American Broadcasting Companies and Fisher Broadcasting-Seattle TV, LLC (with certain
confidential information deleted therefrom) (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on August 3, 2011 (File No. 000-22439)).
|
|
|
10.2*
|
|
Primary Television Affiliation Agreement, executed on July 28, 2011, by and between American Broadcasting Companies and Fisher Broadcasting-Portland TV, LLC (with certain
confidential information deleted therefrom) (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed on August 3, 2011 (File No. 000-22439)).
|
|
|
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.
|
|
|
101
|
|
The following financial information from Fisher Communication, Inc.s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible
Business Reporting Language): (i) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2011 and 2010, (ii) Condensed Consolidated Balance Sheets at September 30, 2011, and December 31, 2010, (iii) Condensed
Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010, and (iv) the Notes to Condensed Consolidated Financial Statements.
|
*
|
Incorporated herein by reference.
|
31
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: November 8, 2011
|
|
/s/ Hassan N. Natha
|
|
|
Hassan N. Natha
Senior Vice
President and
Chief Financial Officer
(Signing on behalf of the registrant and as
Principal Financial
Officer)
|
32
EXHIBIT INDEX
|
|
|
Exhibit No.
|
|
Description
|
|
|
10.1*
|
|
Primary Television Affiliation Agreement, executed on July 28, 2011, by and between American Broadcasting Companies and Fisher Broadcasting-Seattle TV, LLC (with certain
confidential information deleted therefrom) (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on August 3, 2011 (File No. 000-22439)).
|
|
|
10.2*
|
|
Primary Television Affiliation Agreement, executed on July 28, 2011, by and between American Broadcasting Companies and Fisher Broadcasting-Portland TV, LLC (with certain
confidential information deleted therefrom) (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed on August 3, 2011 (File No. 000-22439)).
|
|
|
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.
|
|
|
101
|
|
The following financial information from Fisher Communication, Inc.s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible
Business Reporting Language): (i) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2011 and 2010, (ii) Condensed Consolidated Balance Sheets at September 30, 2011, and December 31, 2010,
(iii) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010, and (iv) the Notes to Condensed Consolidated Financial Statements.
|
*
|
Incorporated herein by reference.
|
33
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