Item 1.
|
Financial Statements
|
The
following Condensed Consolidated Financial Statements are presented for Fisher Communications, Inc., and its subsidiaries.
2
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
(in thousands, except per-share amounts)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Revenue
|
|
$
|
39,895
|
|
|
$
|
39,700
|
|
|
$
|
116,097
|
|
|
$
|
117,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
16,386
|
|
|
|
17,704
|
|
|
|
48,974
|
|
|
|
52,595
|
|
Selling, general and administrative expenses
|
|
|
15,939
|
|
|
|
12,642
|
|
|
|
45,574
|
|
|
|
40,809
|
|
Amortization of broadcast rights
|
|
|
2,479
|
|
|
|
2,449
|
|
|
|
7,372
|
|
|
|
8,324
|
|
Depreciation and amortization
|
|
|
1,736
|
|
|
|
2,697
|
|
|
|
5,241
|
|
|
|
8,027
|
|
Gain on sale of real estate, net
|
|
|
|
|
|
|
|
|
|
|
(164
|
)
|
|
|
(4,089
|
)
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
(223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
36,540
|
|
|
|
35,452
|
|
|
|
106,997
|
|
|
|
105,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,355
|
|
|
|
4,248
|
|
|
|
9,100
|
|
|
|
12,159
|
|
Loss on extinguishment of senior notes, net
|
|
|
|
|
|
|
(298
|
)
|
|
|
(1,482
|
)
|
|
|
(1,356
|
)
|
Other income, net
|
|
|
49
|
|
|
|
34
|
|
|
|
143
|
|
|
|
214
|
|
Interest expense
|
|
|
(16
|
)
|
|
|
(1,572
|
)
|
|
|
(292
|
)
|
|
|
(5,697
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
3,388
|
|
|
|
2,412
|
|
|
|
7,469
|
|
|
|
5,320
|
|
Provision for income taxes
|
|
|
1,188
|
|
|
|
893
|
|
|
|
2,851
|
|
|
|
1,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes
|
|
|
2,200
|
|
|
|
1,519
|
|
|
|
4,618
|
|
|
|
3,342
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,200
|
|
|
$
|
1,444
|
|
|
$
|
4,618
|
|
|
$
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
From discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.25
|
|
|
$
|
0.16
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share assuming dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
From discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.25
|
|
|
$
|
0.16
|
|
|
$
|
0.52
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
8,878
|
|
|
|
8,836
|
|
|
|
8,866
|
|
|
|
8,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding assuming dilution
|
|
|
8,958
|
|
|
|
8,900
|
|
|
|
8,949
|
|
|
|
8,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share
|
|
$
|
10.00
|
|
|
$
|
|
|
|
$
|
10.00
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
3
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Net income
|
|
$
|
2,200
|
|
|
$
|
1,444
|
|
|
$
|
4,618
|
|
|
$
|
3,333
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated income
|
|
|
36
|
|
|
|
15
|
|
|
|
108
|
|
|
|
44
|
|
Effect of income taxes
|
|
|
(14
|
)
|
|
|
(5
|
)
|
|
|
(40
|
)
|
|
|
(15
|
)
|
Prior service cost
|
|
|
15
|
|
|
|
15
|
|
|
|
45
|
|
|
|
45
|
|
Effect of income taxes
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
Unrealized gains on security investments
|
|
|
21
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
Effect of income taxes
|
|
|
(8
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
45
|
|
|
|
19
|
|
|
|
110
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
2,245
|
|
|
$
|
1,463
|
|
|
$
|
4,728
|
|
|
$
|
3,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
4
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
(in thousands, except share and per-share amounts)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
31,316
|
|
|
$
|
143,017
|
|
Short-term debt security investments
|
|
|
72,532
|
|
|
|
33,481
|
|
Receivables, net
|
|
|
28,240
|
|
|
|
32,402
|
|
Income taxes receivable
|
|
|
|
|
|
|
117
|
|
Deferred income taxes, net
|
|
|
1,825
|
|
|
|
1,825
|
|
Prepaid expenses and other
|
|
|
1,972
|
|
|
|
3,062
|
|
Broadcast rights
|
|
|
9,219
|
|
|
|
6,789
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
145,104
|
|
|
|
220,693
|
|
Restricted cash
|
|
|
3,623
|
|
|
|
3,594
|
|
Cash surrender value of life insurance and annuity contracts
|
|
|
17,884
|
|
|
|
17,278
|
|
Goodwill, net
|
|
|
13,293
|
|
|
|
13,293
|
|
Intangible assets, net
|
|
|
40,131
|
|
|
|
40,307
|
|
Other assets
|
|
|
5,219
|
|
|
|
5,006
|
|
Deferred income taxes, net
|
|
|
3,303
|
|
|
|
3,367
|
|
Assets held for sale
|
|
|
|
|
|
|
658
|
|
Property, plant and equipment, net
|
|
|
39,344
|
|
|
|
40,921
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
267,901
|
|
|
$
|
345,117
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
|
|
|
$
|
61,834
|
|
Accounts payable
|
|
|
2,009
|
|
|
|
3,754
|
|
Accrued payroll and related benefits
|
|
|
4,558
|
|
|
|
4,660
|
|
Interest payable
|
|
|
|
|
|
|
1,556
|
|
Broadcast rights payable
|
|
|
8,936
|
|
|
|
6,541
|
|
Income taxes payable
|
|
|
2,464
|
|
|
|
21,468
|
|
Current portion of accrued retirement benefits
|
|
|
1,302
|
|
|
|
1,302
|
|
Dividends payable
|
|
|
88,795
|
|
|
|
|
|
Other current liabilities
|
|
|
9,415
|
|
|
|
8,708
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
117,479
|
|
|
|
109,823
|
|
Deferred income
|
|
|
8,633
|
|
|
|
10,036
|
|
Accrued retirement benefits
|
|
|
20,385
|
|
|
|
20,525
|
|
Other liabilities
|
|
|
2,943
|
|
|
|
2,688
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
149,440
|
|
|
|
143,072
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Common stock, shares authorized 12,000,000, $1.25 par value; 8,876,258 and 8,832,177 issued and outstanding at September 30,
2012 and December 31, 2011, respectively
|
|
|
11,095
|
|
|
|
11,040
|
|
Capital in excess of par
|
|
|
15,407
|
|
|
|
14,679
|
|
Accumulated other comprehensive loss, net of income taxes:
|
|
|
|
|
|
|
|
|
Accumulated loss
|
|
|
(3,219
|
)
|
|
|
(3,288
|
)
|
Prior service cost
|
|
|
(34
|
)
|
|
|
(62
|
)
|
Unrealized gain on available for sale securities
|
|
|
13
|
|
|
|
|
|
Retained earnings
|
|
|
95,199
|
|
|
|
179,676
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
118,461
|
|
|
|
202,045
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
267,901
|
|
|
$
|
345,117
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
Fisher Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,618
|
|
|
$
|
3,333
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,241
|
|
|
|
8,027
|
|
Deferred income taxes, net
|
|
|
64
|
|
|
|
31
|
|
Loss on extinguishment of senior notes, net
|
|
|
594
|
|
|
|
416
|
|
Loss in operations of equity investees
|
|
|
119
|
|
|
|
188
|
|
Loss on disposal of property, plant and equipment, net
|
|
|
101
|
|
|
|
75
|
|
Gain on sale of radio station, net
|
|
|
|
|
|
|
(48
|
)
|
Gain on sale of real estate, net
|
|
|
(164
|
)
|
|
|
(4,089
|
)
|
Amortization of deferred financing fees
|
|
|
19
|
|
|
|
235
|
|
Amortization of deferred gain on sale of Fisher Plaza
|
|
|
(569
|
)
|
|
|
|
|
Amortization of debt security investment premium
|
|
|
78
|
|
|
|
|
|
Amortization of non-cash contract termination fee
|
|
|
(1,096
|
)
|
|
|
(1,096
|
)
|
Amortization of broadcast rights
|
|
|
7,372
|
|
|
|
8,324
|
|
Payments for broadcast rights
|
|
|
(7,421
|
)
|
|
|
(8,688
|
)
|
Stock-based compensation
|
|
|
1,284
|
|
|
|
1,174
|
|
Change in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
4,162
|
|
|
|
1,791
|
|
Prepaid expenses and other
|
|
|
1,091
|
|
|
|
791
|
|
Cash surrender value of life insurance and annuity contracts
|
|
|
(606
|
)
|
|
|
1,819
|
|
Other assets
|
|
|
125
|
|
|
|
203
|
|
Accounts payable, accrued payroll and related benefits and other current liabilities
|
|
|
2,872
|
|
|
|
(1,593
|
)
|
Interest payable
|
|
|
(1,556
|
)
|
|
|
(2,312
|
)
|
Income taxes receivable and payable
|
|
|
(18,887
|
)
|
|
|
2,514
|
|
Accrued retirement benefits
|
|
|
(43
|
)
|
|
|
31
|
|
Other liabilities
|
|
|
675
|
|
|
|
(783
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,927
|
)
|
|
|
10,343
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Investment in equity investee
|
|
|
(50
|
)
|
|
|
(88
|
)
|
Purchase of debt security investments
|
|
|
(82,733
|
)
|
|
|
|
|
Purchase of investment in a radio station
|
|
|
(750
|
)
|
|
|
|
|
Purchase of option to acquire a radio station
|
|
|
(615
|
)
|
|
|
|
|
Proceeds from sale of debt security invesments
|
|
|
7,628
|
|
|
|
|
|
Proceeds from maturity of debt security invesments
|
|
|
35,967
|
|
|
|
|
|
Purchase of radio stations
|
|
|
|
|
|
|
(113
|
)
|
Purchase of property, plant and equipment
|
|
|
(7,565
|
)
|
|
|
(5,070
|
)
|
Proceeds from sale of radio station
|
|
|
|
|
|
|
48
|
|
Proceeds from sale of real estate
|
|
|
825
|
|
|
|
4,164
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(47,293
|
)
|
|
|
(1,059
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Repurchase of senior notes
|
|
|
(61,834
|
)
|
|
|
(34,606
|
)
|
Repurchase of common stock
|
|
|
(86
|
)
|
|
|
|
|
Shares settled upon vesting of stock rights
|
|
|
(441
|
)
|
|
|
(278
|
)
|
Payments on capital lease obligations
|
|
|
(145
|
)
|
|
|
(134
|
)
|
Proceeds from exercise of stock options
|
|
|
25
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(62,481
|
)
|
|
|
(34,943
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(111,701
|
)
|
|
|
(25,659
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
143,017
|
|
|
|
52,945
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
31,316
|
|
|
$
|
27,286
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
Fisher Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of Fisher
Communications, Inc. and its wholly-owned subsidiaries (the Company) have been prepared in accordance with generally accepted accounting principles 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 GAAP 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, 2012 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2012, or for any other period. The unaudited condensed consolidated balance sheet at December 31, 2011 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, 2011 (2011 Form 10-K).
Certain reclassifications have been made to the unaudited condensed consolidated financial statements in the prior year to conform to the
current year presentation.
The significant accounting policies used in preparation of the unaudited condensed consolidated
financial statements are disclosed in the Companys 2011 Form 10-K. Except as described below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30,
2012, as compared to the recent accounting pronouncements described in the Companys 2011 Form 10-K, that are of significance, or potential significance, to the Company.
In the third quarter of 2012, the Companys Board of Directors declared a special cash dividend of $10.00 per
common share, or approximately $88.8 million, payable on October 19, 2012 to holders of record on September 28, 2012. At September 30, 2012, the special cash dividend was reported as dividends payable in the Companys unaudited
condensed consolidated balance sheet.
In June 2011, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2011-05, which amends the disclosure requirements for presentation of comprehensive income. Subsequently, in December 2011, the FASB indefinitely deferred the effective date of the portion of
ASU No. 2011-05 requiring the separate presentation of reclassifications out of accumulated other comprehensive income. The implementation of the amended accounting guidance did not have a material impact on our consolidated financial position
or results of operations.
In July 2012, the FASB issued an accounting
standard update on testing indefinite-lived intangibles 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 indefinite-lived
intangible asset is impaired. If an entity determines that this is the case, it is required to perform the currently prescribed two-step impairment test to identify potential impairment and measure the amount of impairment loss to be recognized for
the indefinite-lived intangible asset (if any). This guidance is effective for the Companys fiscal year beginning January 1, 2013, however, the Company can choose to early adopt the revised standard. The implementation of this accounting
guidance is not expected to have a material impact on our consolidated financial position or results of operations.
2. 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 that the Company has the ability to access.
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; or the fair value is determined through the use of
models or other valuation methodologies.
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. The inputs to determine fair value require significant management judgment or estimation.
Assets and liabilities measured at fair value on a recurring basis consist of marketable securities and debt security investments. As of September 30, 2012 and December 31, 2011, the reported
fair value of marketable securities, using Level 1 inputs, was
7
$581,000 and $1.0 million, respectively. Marketable securities are included in other assets on the Companys unaudited condensed consolidated balance sheets. As of September 30, 2012
and December 31, 2011, the reported fair value of debt security investments, using Level 1 inputs, was $76.0 million and $36.9 million, respectively. Debt security investments are included in short term debt security investments and restricted
cash on the Companys unaudited condensed consolidated balance sheets.
As of September 30, 2012, the Company did
not have any outstanding fixed interest rate debt. As of December 31, 2011, all of the Companys debt was at a fixed interest rate and totaled $61.8 million. The fair market value of 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 debt, using Level 2 inputs, at December 31, 2011 was
$62.9 million. The fair value of debt is based on estimates made by investment bankers based on the fair value of the Companys fixed interest rate debt. For fixed interest rate debt, interest rate changes do not impact financial position,
operations or cash flows.
Restricted cash included $3.5 million of debt security investments and $125,000 of cash equivalents
at September 30, 2012 and December 31, 2011, for which the fair value is measured using Level 1 inputs. The debt security investments are reported at fair value and the carrying amount of cash equivalents approximates fair value.
Cash equivalents consist of $30.6 million and $145.4 million at September 30, 2012 and December 31, 2011,
respectively, for which the fair value is measured using Level 1 inputs. The carrying amount of cash equivalents approximates fair value.
3. Debt Security Investments
Corresponding with the Companys Board of Directors August 2012 declaration of a $10.00 per common share
special cash dividend and the institution of a quarterly dividend policy, the Company announced its intention to fund the dividends from existing cash and its debt security investments. As a result of these declarations, on September 30, 2012,
the Company reclassified its entire portfolio of debt security investments classified as held-to-maturity, which consisted of U.S. treasury securities, to available for sale. At September 30, 2012, these investments had a fair value and
amortized cost of $76.0 million. The investments net unrealized appreciation, net of tax, increased the Companys accumulated other comprehensive income and shareholders equity by $13,000 as of September 30, 2012.
The following table summarizes amortized cost, gross unrealized gains, gross unrealized losses and the fair value of debt security
investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
U.S. Treasury securities
|
|
$
|
76,009
|
|
|
$
|
29
|
|
|
$
|
(8
|
)
|
|
$
|
76,030
|
|
|
$
|
36,950
|
|
|
$
|
|
|
|
$
|
(6
|
)
|
|
$
|
36,944
|
|
The following table displays the gross unrealized losses and fair value of all available for sale debt security
investments that were in a continuous unrealized loss position for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair value
|
|
|
Unrealized
losses
|
|
|
Fair value
|
|
|
Unrealized
losses
|
|
|
Fair value
|
|
|
Unrealized
losses
|
|
September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
47,235
|
|
|
$
|
(8
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
47,235
|
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
36,944
|
|
|
$
|
(6
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,944
|
|
|
$
|
(6
|
)
|
8
The following table presents the amortized cost and the fair value of debt security
investments, by contractual maturity (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
Due in one year or less
|
|
$
|
56,585
|
|
|
$
|
56,583
|
|
Due after one year through five years
|
|
|
19,424
|
|
|
|
19,447
|
|
|
|
|
|
|
|
|
|
|
Total debt security investments
|
|
$
|
76,009
|
|
|
$
|
76,030
|
|
|
|
|
|
|
|
|
|
|
Debt security investments are reviewed periodically to determine if a permanent decline in fair value has occurred that
would require impairment of the carrying value. No impairments on debt security investments have been recorded as of September 30, 2012 and December 31, 2011.
4. Goodwill and Intangible Assets
The following table summarizes the carrying amount of goodwill and intangible assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
|
|
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
|
|
|
|
(1,144
|
)
|
|
|
2,416
|
|
|
|
3,560
|
|
|
|
(968
|
)
|
|
|
2,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
41,275
|
|
|
$
|
(1,144
|
)
|
|
$
|
40,131
|
|
|
$
|
41,275
|
|
|
$
|
(968
|
)
|
|
$
|
40,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2012 was $59,000 and $176,000, respectively. 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.
|
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 2012 and each of the next five years and thereafter (in thousands):
|
|
|
|
|
2012
|
|
$
|
60
|
|
2013
|
|
|
236
|
|
2014
|
|
|
236
|
|
2015
|
|
|
236
|
|
2016
|
|
|
236
|
|
2017
|
|
|
236
|
|
Thereafter
|
|
|
1,176
|
|
|
|
|
|
|
|
|
$
|
2,416
|
|
|
|
|
|
|
9
5. Discontinued Operations
In October 2011, the Company sold its six Great Falls, Montana radio stations (the Montana Stations) to
STARadio Corp. (STARadio), which is based in Quincy, Illinois for $1.8 million, which was subject to certain adjustments. 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 previously reported periods, the Company reclassified the results of the Montana Stations from continuing operations to
discontinued operations. The Montana Stations were previously included in the Companys radio segment.
6. Extinguishment of Senior Notes
In January 2012, the Company redeemed the remaining $61.8 million aggregate principal amount of its 8.625% Senior Notes
due in 2014 (Senior Notes) for a total consideration of $62.7 million in cash plus accrued interest of $1.8 million. The Company recorded a loss on extinguishment of debt of $1.5 million, including a charge for related unamortized debt
issuance costs of approximately $594,000. As a result of the redemption of the remaining outstanding Senior Notes, the Company is no longer subject to provisions contained in the Senior Notes indenture, including various debt covenants and other
restrictions, and the Company no longer is required to report financial information for its subsidiary guarantors of the 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 approximately
$416,000.
7. Broadcast Rights and Other Commitments
The Company acquires broadcast rights during the ordinary course of business. 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.
As of September 30, 2012, the Company had commitments under various agreements of $20.0 million for future rights to
broadcast television programs, rights to sell available advertising time on a third party radio station and commitments under certain network affiliate agreements.
The Company entered into a reimbursement agreement with Hines Global REIT (Hines) whereby the Company may be required to reimburse Hines up to $1.5 million if the power and/or chiller
consumption by certain existing Fisher Plaza tenants, including the Company, exceeds specified levels and Hines is required to install additional power and/or chiller facilities. This reimbursement agreement expires on December 31, 2023.
As previously announced, the Company received a commitment letter from JPMorgan Chase Bank for a five-year $30 million senior
secured revolving credit facility. The credit facility is subject to the negotiation and execution of loan and security documents that are expected to contain customary terms and conditions, including financial and other covenants. Borrowings under
the facility will bear interest at a floating rate based on LIBOR and are expected to be used for general corporate purposes and working capital, as needed. The credit facility is also expected to include an option permitting the Company to increase
the size of the facility by up to $50 million, subject to approval from participating lenders and other customary conditions.
8. Local Marketing Agreement
In June 2012, the Company amended its Local Marketing Agreement (LMA) with South Sound Broadcasting LLC
(South Sound) to manage South Sounds FM radio station licensed in Oakville, Washington for another five years. The station broadcasts the Companys KOMO NewsRadio AM programming to FM listeners in the Seattle Tacoma
radio market. Contemporaneously with the LMA, the Company entered into an option agreement with South Sound, whereby the Company has the right to acquire the station until January 2017. This amended LMA and related option agreement supersedes and
terminates a previous LMA and option agreement between the Company and South Sound. Under the terms of the previous option agreement, the Company was obligated to pay South Sound up to approximately $1.4 million, if the Company did not exercise the
option prior to its expiration. Pursuant to the amended LMA, the $1.4 million fee was eliminated and instead the Company paid South Sound $750,000 for a 7.5% ownership interest in South Sound and $615,000 for a new option agreement, pursuant to
which we have the right to acquire the station until January 2017. The consideration for the option agreement is non-refundable, but will be applied to the purchase price if the Company chooses to exercise the option. The consideration for the
option agreement and the investment in South Sound are presented within other assets on the Companys unaudited condensed consolidated balance sheet as of September 30, 2012. Due to the term of the LMA and the uncertainties associated with
the exercise of the option agreement, South Sound does not meet the criteria for consolidation. Advertising revenues earned under this LMA are recorded as revenue and LMA fees and programming expenses are recorded as operating costs.
10
9. Retirement Benefits
The Company has a noncontributory supplemental retirement program for former key members of management. 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 unaudited condensed consolidated balance sheet and the appreciation is included in the unaudited condensed
consolidated statement of operations.
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,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Interest cost
|
|
$
|
234
|
|
|
$
|
250
|
|
|
$
|
702
|
|
|
$
|
750
|
|
Amortization of loss
|
|
|
45
|
|
|
|
22
|
|
|
|
135
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
279
|
|
|
$
|
272
|
|
|
$
|
837
|
|
|
$
|
816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The discount rate used to determine net periodic pension cost was 4.48% for both the three and nine months ended
September 30, 2012. The discount rate used to determine net periodic pension cost was 5.22% for both the three and nine months ended September 30, 2011.
10. Net income per share
Net income per share is based upon the net income divided by weighted average number of shares outstanding during the
period. Net income per share assuming dilution is based upon the net income divided by 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,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Income from continuing operations, net of income taxes
|
|
$
|
2,200
|
|
|
$
|
1,519
|
|
|
$
|
4,618
|
|
|
$
|
3,342
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,200
|
|
|
$
|
1,444
|
|
|
$
|
4,618
|
|
|
$
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
8,878
|
|
|
|
8,836
|
|
|
|
8,866
|
|
|
|
8,827
|
|
Weighted effect of dilutive options and rights
|
|
|
80
|
|
|
|
64
|
|
|
|
83
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding assuming dilution
|
|
|
8,958
|
|
|
|
8,900
|
|
|
|
8,949
|
|
|
|
8,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
From discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.25
|
|
|
$
|
0.16
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share assuming dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
From discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.25
|
|
|
$
|
0.16
|
|
|
$
|
0.52
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2012, the effect of options to purchase 148,560 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, 2012, the effect of options to purchase 181,071 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, 2011, the effect of options to purchase 204,994 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,
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.
11
11. Stock-Based Compensation
Stock-based compensation expense for the three and nine months ended September 30, 2012 was $458,000 and $1.3
million, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2011 was $442,000 and $1.2 million, respectively. Stock-based compensation expense is included in selling, general and administrative
expenses in the Companys unaudited condensed consolidated statements of operations.
12. Income Taxes
The Company records an income tax provision or benefit based upon its estimated annual effective tax rate, which is
estimated at 38.2% and 36.3% for the nine months ended September 30, 2012 and 2011, respectively.
As of
September 30, 2012 and December 31, 2011, the Company had $632,000 of unrecognized tax benefits and no penalties or interest was accrued. If the unrecognized tax benefits were recognized $410,000 would impact the effective tax rate.
A reconciliation of the change in the amount of gross unrecognized income tax benefits is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
Balance at beginning of period
|
|
$
|
632
|
|
|
$
|
|
|
Increase of unrecognized tax benefits related to prior years
|
|
|
|
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
632
|
|
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
Although the timing and outcome of income tax audits is uncertain, it is possible that unrecognized tax benefits may be
reduced as a result of the lapse of the applicable statutes of limitations in federal and state jurisdictions within the next 12 months. Currently, the Company cannot reasonably estimate the amount of reductions, if any, during the next 12 months.
Any such reduction could be impacted by other changes in unrecognized tax benefits and could result in changes to in the Companys tax obligations.
The State of California conducted an examination of the Companys 2007 and 2008 state tax returns and in April 2012, the Company received a preliminary determination seeking approximately $450,000 in
unpaid taxes in connection with the Companys treatment of the proceeds from its 2008 sale of Safeco Corporation stock and dividends received. The Company opposed the State of Californias position. In October 2012, the Company received a
letter from the State of California indicating that the auditor agreed with the Company's original treatment of the proceeds from its 2008 sale of Safeco Corporation stock and dividends received. Under applicable regulations, the auditor's
determination is potentially subject to review. If the auditor's determination were overturned on review, the final disposition of the proposed audit adjustments could require the Company to make additional payments of taxes, interest and penalties,
which could materially affect its effective tax rate.
The State of Oregon conducted an examination of the Companys 2007
and 2008 state tax returns and in November 2011, the Company received a Proposed Auditors Report from the State of Oregon seeking approximately $800,000 in unpaid taxes, interest and penalties in connection with the Companys treatment of
the proceeds from its 2007 and 2008 sales of Safeco Corporation stock and dividends received. The Company has opposed the State of Oregons position. The final disposition of the proposed audit adjustments could require the Company to make
additional payments of taxes, interest and penalties, 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. As of September 30, 2012 and December 31, 2011, the Company had a valuation allowance of
approximately $480,000 on certain of its deferred tax assets. 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 deferred tax assets.
12
13. Segment Information
The Company reports financial data for two segments: television and radio. 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 developing media business. The radio segment includes the operations of the Companys three radio
stations and one managed radio station. Prior to 2012, the Company also included Fisher Plaza as a reportable segment which included the operations of a communications center located near downtown Seattle that serves as home of the Companys
Seattle-based television, radio and developing media operations, the Companys corporate offices and third-party tenants. In December 2011, the Company completed the sale of Fisher Plaza to Hines for $160.0 million in cash. The Companys
corporate headquarters and Seattle-based television, radio and developing media operations continue to be located at Fisher Plaza.
The Company discloses information about its reportable segments based on measures it uses in assessing the performance of its reportable segments. The Company uses segment income from continuing
operations to measure the operating performance of its segments which represents income from continuing operations before depreciation and amortization, loss (gain) on sale of real estate, net and Plaza fire reimbursements, net. Additionally,
the performance metric for segment income from continuing operations excludes the allocation of corporate costs and Fisher Plaza rent expense. Prior period financial information has been restated to conform to current period presentation.
Operating results and other financial data for each segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
(dollars in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
$
|
34,663
|
|
|
$
|
30,522
|
|
|
$
|
100,600
|
|
|
$
|
90,557
|
|
Radio
|
|
|
5,225
|
|
|
|
5,344
|
|
|
|
15,524
|
|
|
|
15,876
|
|
Fisher Plaza
|
|
|
|
|
|
|
3,853
|
|
|
|
|
|
|
|
11,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue
|
|
|
39,888
|
|
|
|
39,719
|
|
|
|
116,124
|
|
|
|
117,794
|
|
Intercompany and other
|
|
|
7
|
|
|
|
(19
|
)
|
|
|
(27
|
)
|
|
|
(192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,895
|
|
|
$
|
39,700
|
|
|
$
|
116,097
|
|
|
$
|
117,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
$
|
10,178
|
|
|
$
|
6,783
|
|
|
$
|
27,630
|
|
|
$
|
18,213
|
|
Radio
|
|
|
1,387
|
|
|
|
1,476
|
|
|
|
4,020
|
|
|
|
3,358
|
|
Fisher Plaza
|
|
|
|
|
|
|
2,286
|
|
|
|
|
|
|
|
6,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment income from continuing operations
|
|
|
11,565
|
|
|
|
10,545
|
|
|
|
31,650
|
|
|
|
28,509
|
|
Corporate and other
|
|
|
(5,065
|
)
|
|
|
(3,640
|
)
|
|
|
(13,540
|
)
|
|
|
(12,635
|
)
|
Fisher Plaza rent
|
|
|
(1,409
|
)
|
|
|
|
|
|
|
(3,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,091
|
|
|
$
|
6,905
|
|
|
$
|
14,177
|
|
|
$
|
15,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
$
|
1,486
|
|
|
$
|
1,200
|
|
|
$
|
4,463
|
|
|
$
|
3,526
|
|
Radio
|
|
|
29
|
|
|
|
23
|
|
|
|
88
|
|
|
|
70
|
|
Fisher Plaza
|
|
|
|
|
|
|
1,200
|
|
|
|
|
|
|
|
3,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation and amortization
|
|
|
1,515
|
|
|
|
2,423
|
|
|
|
4,551
|
|
|
|
7,204
|
|
Corporate and other
|
|
|
221
|
|
|
|
274
|
|
|
|
690
|
|
|
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,736
|
|
|
$
|
2,697
|
|
|
$
|
5,241
|
|
|
$
|
8,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
$
|
118,376
|
|
|
$
|
122,357
|
|
|
|
|
|
|
|
|
|
Radio
|
|
|
15,198
|
|
|
|
13,435
|
|
|
|
|
|
|
|
|
|
Fisher Plaza
|
|
|
|
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
133,574
|
|
|
|
136,169
|
|
|
|
|
|
|
|
|
|
Corporate and other
|
|
|
134,327
|
|
|
|
208,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
267,901
|
|
|
$
|
345,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany and other non-segment revenue relates to sales between our television and radio stations and miscellaneous
amounts not attributable to the operations of television or radio segments.
No geographic areas outside the United States
were of significance relative to consolidated revenue, segment income from continuing operations or total assets.
13
A reconciliation of segment income from continuing operations to income from continuing
operations is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Segment income from continuing operations
|
|
$
|
5,091
|
|
|
$
|
6,905
|
|
|
$
|
14,177
|
|
|
$
|
15,874
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate, net
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
|
4,089
|
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
223
|
|
Depreciation and amortization
|
|
|
(1,736
|
)
|
|
|
(2,697
|
)
|
|
|
(5,241
|
)
|
|
|
(8,027
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
3,355
|
|
|
$
|
4,248
|
|
|
$
|
9,100
|
|
|
$
|
12,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Stock Repurchase Program
In December 2011, the Companys Board of Directors approved a stock repurchase program authorizing the repurchase
of up to an aggregate of $25.0 million of its outstanding shares of common stock. Under the program, share repurchases will be made from time-to-time, at the Company's discretion, on the open market at prevailing market prices or in negotiated
transactions off the market. The repurchase program expires at the end of 2012, subject to periodic evaluation by the Board of Directors based on circumstances during the course of the year. No shares were repurchased during the three months ended
September 30, 2012. The Company repurchased and retired 2,990 shares for an aggregate cost of $86,000 during the nine months ended September 30, 2012, which reduced capital in excess of par by the excess cost over par value in the
Companys unaudited condensed consolidated balance sheet at September 30, 2012. There were no unsettled share repurchases at September 30, 2012.
15. Special Cash Dividend
During the third quarter of 2012, the Companys Board of Directors declared a special cash dividend of $10.00 per
common share, or approximately $88.8 million, payable on October 19, 2012 to holders of record on September 28, 2012.
16. Subsequent Events
In October 2012, the Companys Board of Directors declared a quarterly cash dividend of $0.15 per common share,
payable on December 17, 2012 to holders of record on November 30, 2012.
In October 2012, in connection with the
announcement of a $10.00 per share special cash dividend (SCD) and the initiation of a quarterly dividend policy, the Board of Directors and the Compensation Committee (the Committee) approved changes to both the Amended and
Restated Fisher Communications Incentive Plan of 2001 (the 2001 Plan) and the Amended and Restated 2008 Equity Incentive Plan (the 2008 Plan). The changes permit: (1) the adjustment of outstanding awards in the event of
a distribution of cash or other assets to
14
shareholders other than a normal cash dividend and (2) the amendment of outstanding awards so that such awards are credited with normal cash dividends or dividend equivalents. Effective on
October 22, 2012, all of the Companys outstanding stock options, restricted stock units issued from the 2008 plan (RSUs) and performance awards were adjusted by reducing the exercise price and/or increasing the number of
shares to preserve the intrinsic value of such awards as a result of the SCD.
The Company currently expects these award
adjustments to result in approximately $500,000 to $700,000 of incremental stock compensation expense for the three months ended December 31, 2012 and will result in an incremental increase to stock compensation over the remaining service
period for the impacted RSUs, performance awards and options.
15
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, 2011, which was filed with the Securities and Exchange Commission on March 9, 2012.
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, 2012 compared with the corresponding periods in 2011.
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 three owned radio stations (in addition to one managed radio station). Our television stations
are located in Washington, Oregon, Idaho and California, and our radio stations are located in Washington.
Our 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 revenue for the nine months ended September 30, 2012 and are affiliated with the ABC Television Network. We have thirteen television stations which are affiliated with one of the four major networks.
Six of our television stations are affiliated with Univision. Our remaining television stations are independent or subscribe to various programming services. Our two 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 agreements with FOX Television Network expire in September 2014 and September 2015. Our affiliation agreement with
Univision expires in December 2014. 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.
Management focuses on key metrics from operational data within our operations.
Information on significant trends is provided in the section entitled Consolidated Results of Operations.
Significant
Developments
The following significant developments impacted our financial statements for the three and nine months ended
September 30, 2012 and 2011.
Special and Quarterly Cash Dividend.
In the third quarter of 2012, our Board of
Directors declared a special cash dividend of $10.00 per common share, or approximately $88.8 million, which was paid on October 19, 2012 to holders of record on September 28, 2012. Additionally, in October 2012, our Board of Directors
declared a quarterly cash dividend of $0.15 per common share payable on December 17, 2012 to holders of record on November 30, 2012.
16
Local Marketing Agreement.
In June 2012, we amended our Local Marketing Agreement
(LMA) with South Sound Broadcasting LLC (South Sound) to manage South Sounds FM radio station licensed in Oakville, Washington for another five years. The station broadcasts our KOMO News Radio AM programming to FM
listeners in the Seattle Tacoma radio market. This LMA and related option agreement supersedes and terminates a previous LMA and option agreement between us and South Sound. Under the terms of the previous option agreement, we were obligated
to pay South Sound up to approximately $1.4 million if we did not exercise the option prior to its expiration. Pursuant to the amended LMA, the $1.4 million fee was eliminated and instead we paid South Sound $750,000 for a 7.5% ownership interest in
South Sound and $615,000 for a new option agreement, pursuant to which we have the right to acquire the station until January 2017. The option agreement is non-refundable, but will be applied to the purchase price if we choose to exercise the
option. The consideration for the option agreement is presented as other assets on our unaudited condensed consolidated balance sheet as of September 30, 2012. Advertising revenue earned under this LMA is recorded as operating revenue and LMA
fees and programming expenses are recorded as operating costs.
Redemption of Senior Notes.
In January 2012, we
redeemed the remaining $61.8 million aggregate principal amount of our 8.625% Senior Notes due in 2014 (Senior Notes) for a total consideration of $62.7 million in cash plus accrued interest of $1.8 million. We recorded a loss on
extinguishment of debt of $1.5 million, including a charge for related unamortized debt issuance costs, of approximately $594,000. As a result of the redemption of the remaining outstanding Senior Notes, we are no longer subject to provisions
contained in the indenture, including various debt covenants and other restrictions.
Sale and Leaseback of Fisher Plaza.
In December 2011, we completed the sale of Fisher Plaza to Hines Global REIT (Hines) for $160.0 million in cash. In connection with the sale of Fisher Plaza we entered into a lease (the Lease) with Hines pursuant to which
we leased 121,000 rentable square feet of Fisher Plaza. The Lease has an initial term that expires on December 31, 2023 and we have the right to extend the term for three successive five-year periods. Our corporate headquarters and Seattle
television, radio and developing media operations continue to be located at Fisher Plaza. Given our sale of Fisher Plaza in December 2011, our consolidated results in 2012 and in future years will not include any revenue, operating expense or
depreciation from Fisher Plaza, and will include rent expense, related to the Lease with Hines.
Expiration of KING FM
Agreement
. In May 2011, our Joint Sales Agreement with the classical music station KING FM expired and was not renewed. As a result we no longer record advertising revenue and operating expenses related to KING FM subsequent to the expiration of
the agreement.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates including, but not limited to, those affecting revenues, goodwill and intangibles impairment, the useful lives of tangible and intangible assets, valuation allowances for
receivables and broadcast rights, stock-based compensation expense, valuation allowances for deferred income taxes and liabilities and contingencies. The brief discussion below is intended to highlight some of the judgments and uncertainties that
can impact the application of these policies and the specific dollar amounts reported on our financial statements. 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, 2011 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, 2011.
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.
In the third quarter of 2012, our Board of Directors declared a special cash dividend of $10.00 per common share, or approximately $88.8
million, which was paid on October 19, 2012 to holders of record on September 28, 2012. At September 30, 2012, the special cash dividend was reported as dividends payable in our unaudited condensed consolidated balance sheet.
17
Consolidated Results of Operations
We report financial data for two reportable segments: television and radio. The television segment includes the operations of our 20 owned
and/or operated television stations (including a 50%-owned television station) and our developing media business. The radio segment includes the operations of our three owned radio stations and one managed radio station. Prior to 2012, we also
included Fisher Plaza as a reportable segment which consisted of the operations of a communications center located near downtown Seattle that serves as the home of our Seattle-based television, radio and developing media operations, our corporate
offices and third-party tenants. Our corporate headquarters and Seattle-based television, radio and developing media operations continue to be located at Fisher Plaza.
We disclose information about our reportable segments based on the measures we use in assessing the performance of those reportable segments. We use segment income from continuing operations
to measure the operating performance of our segments which represents income from continuing operations before depreciation and amortization, gain on sale of real estate, net, and Plaza fire reimbursements, net. Additionally, the performance metric
for segment income from continuing operations excludes the allocation of corporate costs and Fisher Plaza rent expense. Prior period financial information has been restated to conform to current period presentation.
18
The following table sets forth our results of operations for the three and nine months ended
September 30, 2012 and 2011, including the dollar and percentage variances between these periods. Percentage variances have been omitted where they are not considered meaningful.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
Variance
|
|
|
Nine months ended
September 30,
|
|
|
Variance
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
$
|
|
|
%
|
|
|
2012
|
|
|
2011
|
|
|
$
|
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
$
|
34,663
|
|
|
$
|
30,522
|
|
|
$
|
4,141
|
|
|
|
14
|
%
|
|
$
|
100,600
|
|
|
$
|
90,557
|
|
|
$
|
10,043
|
|
|
|
11
|
%
|
Radio
|
|
|
5,225
|
|
|
|
5,344
|
|
|
|
(119
|
)
|
|
|
(2
|
%)
|
|
|
15,524
|
|
|
|
15,876
|
|
|
|
(352
|
)
|
|
|
(2
|
%)
|
Fisher Plaza
|
|
|
|
|
|
|
3,853
|
|
|
|
(3,853
|
)
|
|
|
(100
|
%)
|
|
|
|
|
|
|
11,361
|
|
|
|
(11,361
|
)
|
|
|
(100
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue
|
|
|
39,888
|
|
|
|
39,719
|
|
|
|
169
|
|
|
|
0
|
%
|
|
|
116,124
|
|
|
|
117,794
|
|
|
|
(1,670
|
)
|
|
|
(1
|
%)
|
Intercompany and other
|
|
|
7
|
|
|
|
(19
|
)
|
|
|
26
|
|
|
|
137
|
%
|
|
|
(27
|
)
|
|
|
(192
|
)
|
|
|
165
|
|
|
|
86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenue
|
|
|
39,895
|
|
|
|
39,700
|
|
|
|
195
|
|
|
|
0
|
%
|
|
|
116,097
|
|
|
|
117,602
|
|
|
|
(1,505
|
)
|
|
|
(1
|
%)
|
Direct operating costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
13,878
|
|
|
|
13,720
|
|
|
|
(158
|
)
|
|
|
(1
|
%)
|
|
|
41,509
|
|
|
|
40,900
|
|
|
|
(609
|
)
|
|
|
(1
|
%)
|
Radio
|
|
|
2,359
|
|
|
|
2,352
|
|
|
|
(7
|
)
|
|
|
(0
|
%)
|
|
|
6,880
|
|
|
|
7,166
|
|
|
|
286
|
|
|
|
4
|
%
|
Fisher Plaza
|
|
|
|
|
|
|
1,488
|
|
|
|
1,488
|
|
|
|
100
|
%
|
|
|
|
|
|
|
4,112
|
|
|
|
4,112
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment direct operating costs
|
|
|
16,237
|
|
|
|
17,560
|
|
|
|
1,323
|
|
|
|
8
|
%
|
|
|
48,389
|
|
|
|
52,178
|
|
|
|
3,789
|
|
|
|
7
|
%
|
Corporate and other
|
|
|
149
|
|
|
|
144
|
|
|
|
(5
|
)
|
|
|
(3
|
%)
|
|
|
585
|
|
|
|
417
|
|
|
|
(168
|
)
|
|
|
(40
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated direct operating costs
|
|
|
16,386
|
|
|
|
17,704
|
|
|
|
1,318
|
|
|
|
7
|
%
|
|
|
48,974
|
|
|
|
52,595
|
|
|
|
3,621
|
|
|
|
7
|
%
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
8,128
|
|
|
|
7,570
|
|
|
|
(558
|
)
|
|
|
(7
|
%)
|
|
|
24,089
|
|
|
|
23,120
|
|
|
|
(969
|
)
|
|
|
(4
|
%)
|
Radio
|
|
|
1,479
|
|
|
|
1,516
|
|
|
|
37
|
|
|
|
2
|
%
|
|
|
4,624
|
|
|
|
5,352
|
|
|
|
728
|
|
|
|
14
|
%
|
Fisher Plaza
|
|
|
|
|
|
|
79
|
|
|
|
79
|
|
|
|
100
|
%
|
|
|
|
|
|
|
311
|
|
|
|
311
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment selling, general and administrative expenses
|
|
|
9,607
|
|
|
|
9,165
|
|
|
|
(442
|
)
|
|
|
(5
|
%)
|
|
|
28,713
|
|
|
|
28,783
|
|
|
|
70
|
|
|
|
0
|
%
|
Corporate and other
|
|
|
4,923
|
|
|
|
3,477
|
|
|
|
(1,446
|
)
|
|
|
(42
|
%)
|
|
|
12,928
|
|
|
|
12,026
|
|
|
|
(902
|
)
|
|
|
(8
|
%)
|
Fisher Plaza rent
|
|
|
1,409
|
|
|
|
|
|
|
|
(1,409
|
)
|
|
|
na
|
|
|
|
3,933
|
|
|
|
|
|
|
|
(3,933
|
)
|
|
|
na
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated selling, general and administrative expenses
|
|
|
15,939
|
|
|
|
12,642
|
|
|
|
(3,297
|
)
|
|
|
(26
|
%)
|
|
|
45,574
|
|
|
|
40,809
|
|
|
|
(4,765
|
)
|
|
|
(12
|
%)
|
Amortization of broadcast rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
2,479
|
|
|
|
2,449
|
|
|
|
(30
|
)
|
|
|
(1
|
%)
|
|
|
7,372
|
|
|
|
8,324
|
|
|
|
952
|
|
|
|
11
|
%
|
Segment income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
10,178
|
|
|
|
6,783
|
|
|
|
3,395
|
|
|
|
50
|
%
|
|
|
27,630
|
|
|
|
18,213
|
|
|
|
9,417
|
|
|
|
52
|
%
|
Radio
|
|
|
1,387
|
|
|
|
1,476
|
|
|
|
(89
|
)
|
|
|
(6
|
%)
|
|
|
4,020
|
|
|
|
3,358
|
|
|
|
662
|
|
|
|
20
|
%
|
Fisher Plaza
|
|
|
|
|
|
|
2,286
|
|
|
|
(2,286
|
)
|
|
|
(100
|
%)
|
|
|
|
|
|
|
6,938
|
|
|
|
(6,938
|
)
|
|
|
(100
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment income from continuing operations
|
|
|
11,565
|
|
|
|
10,545
|
|
|
|
1,020
|
|
|
|
10
|
%
|
|
|
31,650
|
|
|
|
28,509
|
|
|
|
3,141
|
|
|
|
11
|
%
|
Corporate and other
|
|
|
(5,065
|
)
|
|
|
(3,640
|
)
|
|
|
(1,425
|
)
|
|
|
(39
|
%)
|
|
|
(13,540
|
)
|
|
|
(12,635
|
)
|
|
|
(905
|
)
|
|
|
(7
|
%)
|
Fisher Plaza rent
|
|
|
(1,409
|
)
|
|
|
|
|
|
|
(1,409
|
)
|
|
|
na
|
|
|
|
(3,933
|
)
|
|
|
|
|
|
|
(3,933
|
)
|
|
|
na
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
5,091
|
|
|
|
6,905
|
|
|
|
(1,814
|
)
|
|
|
(26
|
%)
|
|
|
14,177
|
|
|
|
15,874
|
|
|
|
(1,697
|
)
|
|
|
(11
|
%)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
1,486
|
|
|
|
1,200
|
|
|
|
(286
|
)
|
|
|
(24
|
%)
|
|
|
4,463
|
|
|
|
3,526
|
|
|
|
(937
|
)
|
|
|
(27
|
%)
|
Radio
|
|
|
29
|
|
|
|
23
|
|
|
|
(6
|
)
|
|
|
(26
|
%)
|
|
|
88
|
|
|
|
70
|
|
|
|
(18
|
)
|
|
|
(26
|
%)
|
Fisher Plaza
|
|
|
|
|
|
|
1,200
|
|
|
|
1,200
|
|
|
|
100
|
%
|
|
|
|
|
|
|
3,608
|
|
|
|
3,608
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation and amortization
|
|
|
1,515
|
|
|
|
2,423
|
|
|
|
908
|
|
|
|
37
|
%
|
|
|
4,551
|
|
|
|
7,204
|
|
|
|
2,653
|
|
|
|
37
|
%
|
Corporate and other
|
|
|
221
|
|
|
|
274
|
|
|
|
53
|
|
|
|
19
|
%
|
|
|
690
|
|
|
|
823
|
|
|
|
133
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated depreciation and amortization
|
|
|
1,736
|
|
|
|
2,697
|
|
|
|
961
|
|
|
|
36
|
%
|
|
|
5,241
|
|
|
|
8,027
|
|
|
|
2,786
|
|
|
|
35
|
%
|
Gain on sale of real estate, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
na
|
|
|
|
(164
|
)
|
|
|
(4,089
|
)
|
|
|
(3,925
|
)
|
|
|
(96
|
%)
|
Plaza fire reimbursements, net
|
|
|
|
|
|
|
(40
|
)
|
|
|
(40
|
)
|
|
|
(100
|
%)
|
|
|
|
|
|
|
(223
|
)
|
|
|
(223
|
)
|
|
|
(100
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,355
|
|
|
|
4,248
|
|
|
|
(893
|
)
|
|
|
(21
|
%)
|
|
|
9,100
|
|
|
|
12,159
|
|
|
|
(3,059
|
)
|
|
|
(25
|
%)
|
Loss on extinguishment of senior notes, net
|
|
|
|
|
|
|
(298
|
)
|
|
|
298
|
|
|
|
100
|
%
|
|
|
(1,482
|
)
|
|
|
(1,356
|
)
|
|
|
(126
|
)
|
|
|
(9
|
%)
|
Other income, net
|
|
|
49
|
|
|
|
34
|
|
|
|
15
|
|
|
|
44
|
%
|
|
|
143
|
|
|
|
214
|
|
|
|
(71
|
)
|
|
|
(33
|
%)
|
Interest expense
|
|
|
(16
|
)
|
|
|
(1,572
|
)
|
|
|
1,556
|
|
|
|
99
|
%
|
|
|
(292
|
)
|
|
|
(5,697
|
)
|
|
|
5,405
|
|
|
|
95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
3,388
|
|
|
|
2,412
|
|
|
|
976
|
|
|
|
40
|
%
|
|
|
7,469
|
|
|
|
5,320
|
|
|
|
2,149
|
|
|
|
40
|
%
|
Provision for income taxes
|
|
|
1,188
|
|
|
|
893
|
|
|
|
(295
|
)
|
|
|
(33
|
%)
|
|
|
2,851
|
|
|
|
1,978
|
|
|
|
(873
|
)
|
|
|
(44
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of income taxes
|
|
|
2,200
|
|
|
|
1,519
|
|
|
|
681
|
|
|
|
45
|
%
|
|
|
4,618
|
|
|
|
3,342
|
|
|
|
1,276
|
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
(75
|
)
|
|
|
75
|
|
|
|
100
|
%
|
|
|
|
|
|
|
(9
|
)
|
|
|
9
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,200
|
|
|
$
|
1,444
|
|
|
$
|
756
|
|
|
|
52
|
%
|
|
$
|
4,618
|
|
|
$
|
3,333
|
|
|
$
|
1,285
|
|
|
|
39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of three and nine months ended September 30, 2012 and 2011
No comparisons for the three and nine months ended September 30, 2012 compared to the same periods in 2011 are included for the
Fisher Plaza segment in the discussion below because, effective on the sale of Fisher Plaza, it is no longer a reportable segment and is not included in results of operations for 2012.
19
Revenue
The following table sets forth our main types of revenue by segment for the three and nine months ended September 30, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
(in thousands)
|
|
2012
|
|
|
%
change
|
|
|
% total
revenue
|
|
|
2011
|
|
|
% total
revenue
|
|
|
2012
|
|
|
%
change
|
|
|
% total
revenue
|
|
|
2011
|
|
|
% total
revenue
|
|
Core advertising (local and national)
|
|
$
|
21,760
|
|
|
|
-4
|
%
|
|
|
55
|
%
|
|
$
|
22,775
|
|
|
|
57
|
%
|
|
$
|
69,917
|
|
|
|
0
|
%
|
|
|
60
|
%
|
|
$
|
69,578
|
|
|
|
59
|
%
|
Political
|
|
|
3,648
|
|
|
|
285
|
%
|
|
|
9
|
%
|
|
|
947
|
|
|
|
2
|
%
|
|
|
5,110
|
|
|
|
293
|
%
|
|
|
4
|
%
|
|
|
1,301
|
|
|
|
1
|
%
|
Internet
|
|
|
1,220
|
|
|
|
-13
|
%
|
|
|
3
|
%
|
|
|
1,408
|
|
|
|
4
|
%
|
|
|
3,800
|
|
|
|
-4
|
%
|
|
|
3
|
%
|
|
|
3,958
|
|
|
|
3
|
%
|
Retransmission
|
|
|
6,271
|
|
|
|
83
|
%
|
|
|
16
|
%
|
|
|
3,420
|
|
|
|
9
|
%
|
|
|
16,117
|
|
|
|
61
|
%
|
|
|
14
|
%
|
|
|
10,037
|
|
|
|
9
|
%
|
Trade, barter and other
|
|
|
1,764
|
|
|
|
-11
|
%
|
|
|
4
|
%
|
|
|
1,972
|
|
|
|
5
|
%
|
|
|
5,656
|
|
|
|
0
|
%
|
|
|
5
|
%
|
|
|
5,683
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
|
|
|
34,663
|
|
|
|
14
|
%
|
|
|
87
|
%
|
|
|
30,522
|
|
|
|
77
|
%
|
|
|
100,600
|
|
|
|
11
|
%
|
|
|
87
|
%
|
|
|
90,557
|
|
|
|
77
|
%
|
Core advertising (local and national)
|
|
|
4,849
|
|
|
|
-4
|
%
|
|
|
12
|
%
|
|
|
5,059
|
|
|
|
13
|
%
|
|
|
14,591
|
|
|
|
-2
|
%
|
|
|
13
|
%
|
|
|
14,951
|
|
|
|
13
|
%
|
Political
|
|
|
122
|
|
|
|
455
|
%
|
|
|
0
|
%
|
|
|
22
|
|
|
|
0
|
%
|
|
|
180
|
|
|
|
21
|
%
|
|
|
0
|
%
|
|
|
149
|
|
|
|
0
|
%
|
Trade, barter and other
|
|
|
254
|
|
|
|
-3
|
%
|
|
|
1
|
%
|
|
|
263
|
|
|
|
1
|
%
|
|
|
753
|
|
|
|
-3
|
%
|
|
|
1
|
%
|
|
|
776
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio
|
|
|
5,225
|
|
|
|
-2
|
%
|
|
|
13
|
%
|
|
|
5,344
|
|
|
|
13
|
%
|
|
|
15,524
|
|
|
|
-2
|
%
|
|
|
13
|
%
|
|
|
15,876
|
|
|
|
13
|
%
|
Fisher Plaza
|
|
|
|
|
|
|
-100
|
%
|
|
|
0
|
%
|
|
|
3,853
|
|
|
|
10
|
%
|
|
|
|
|
|
|
-100
|
%
|
|
|
0
|
%
|
|
|
11,361
|
|
|
|
10
|
%
|
Intercompany and other
|
|
|
7
|
|
|
|
-137
|
%
|
|
|
0
|
%
|
|
|
(19
|
)
|
|
|
0
|
%
|
|
|
(27
|
)
|
|
|
-86
|
%
|
|
|
0
|
%
|
|
|
(192
|
)
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
39,895
|
|
|
|
0
|
%
|
|
|
100
|
%
|
|
$
|
39,700
|
|
|
|
100
|
%
|
|
$
|
116,097
|
|
|
|
-1
|
%
|
|
|
100
|
%
|
|
$
|
117,602
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television
. Television revenue increased $4.1 million and $10.0 million in the three and nine
months ended September 30, 2012, respectively, compared to the same periods in 2011. This increase was primarily due to increases in retransmission revenue and political advertising, offset partially by decreases in core advertising.
The increase of $2.9 million and $6.1 million in retransmission revenue for the three and nine months ended
September 30, 2012 compared to the same periods in 2011 was primarily a result of finalizing the renewal of substantially all of our retransmission consent contracts for the 2012-2014 cycle in the second quarter of 2012.
Automotive-related advertising, one of our largest advertising categories, increased 9% and 11%, respectively, for the three and nine
months ended September 30, 2012, compared to the same periods in 2011. Results of other advertising categories for the three and nine months ended September 30, 2012, compared to the same periods in 2011 include retail (increased 5% and
8%, respectively) and professional services (decreased 12% and increased 1%, respectively).
Political revenue increased 285%
and 293%, respectively, for the three and nine months ended September 30, 2012, compared to the same periods in 2011.
Revenue from our ABC-affiliated stations increased 17% and 12% in the three and nine months ended September 30, 2012, respectively,
compared to the same periods in 2011, primarily due to increases in retransmission revenue and political revenue, partially offset by a decrease in national advertising revenue. Revenue from our CBS-affiliated stations increased 11% and 14% in the
three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011, as a result of increases in retransmission revenue and local and political advertising.
Radio
. Radio revenue decreased by 2% in both the three and nine months ended September 30, 2012, compared to the same periods
in 2011. The decrease for the nine months ended September 30, 2012 compared to the same period in 2011 is primarily a result of the non-renewal of our ten year Joint Sales Agreement with KING FM, which expired in the second quarter of 2011.
Direct operating costs
Direct operating costs consist primarily of costs to produce and promote programming for the television and radio segments. Many of these costs are relatively fixed in nature and do not necessarily vary
on a proportional basis with revenue.
Television
. Direct operating costs for the television segment increased $158,000
and $609,000 in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. The increase in the three and nine months ended September 30, 2012 compared to the same periods in 2011 primarily
reflects an increase in costs related to network fees.
Radio
. Direct operating costs for the radio segment increased $7,000 in the three months ended September 30, 2012 and decreased $286,000 in the nine months ended September 30, 2012,
compared to the same periods in 2011. The decrease in the nine months ended September 30, 2012, compared to the same period in 2011 was primarily due to a reduction in advertising costs for our radio stations and a decrease in music rights as
the result of an industry-wide legal settlement.
Other
. Other non-segment direct operating costs consist primarily of
the centralized network operating center and corporate engineering department. In the three and nine months ended September 30, 2012, non-segment direct operating costs increased $5,000 and $168,000 compared to the same periods in 2011,
respectively.
Selling, general and administrative expenses
Television
. Selling, general and administrative expenses in our television segment increased $558,000 and $969,000 in the three and nine months ended September 30, 2012, respectively, compared
to the same periods in 2011. Prior years expenses were reduced by vacation accrual savings related to our revised vacation policy. Additionally, in 2012, audience survey and commission costs increased compared to the same periods in 2011,
partially offset by a reduction in bad debt expense.
20
Radio
. Selling, general and administrative expenses in our radio segment decreased
$37,000 and $728,000 during the three and nine months ended September 30, 2012 compared to the same period in 2012. The decrease for the nine months ended September 30, 2012 reflects cost savings as a result of the non-renewal of our ten
year Joint Sales Agreement with KING FM, which expired in the second of quarter 2011.
Corporate and other
. Other
selling, general and administrative expenses consist primarily of corporate costs and various centralized functions. For the three and nine months ended September 30, 2012, other selling, general and administrative expenses increased $1.4
million and $902,000 compared to the same periods in 2011. The three and nine months ended September 30, 2012 included $812,000 and $959,000, respectively, of costs related to various strategic initiatives. The 2011 amounts included costs
related to the proxy contest in 2011 and savings related to our revised vacation policy.
Fisher Plaza rent
. In
connection with the December 2011 sale of Fisher Plaza we entered into a lease with Hines pursuant to which we leased 121,000 rentable square feet of Fisher Plaza. Fisher Plaza rent expense for the three and nine months ended September 30, 2012
was $1.4 million and $3.9 million, respectively. This expense reflects the costs associated with leasing Fisher Plaza which serves as our corporate headquarters and the location of our Seattle-based television, radio and developing media operations.
Amortization of broadcast rights
Television
. Amortization of program rights for our television segment increased $30,000 for the three months ended September 30, 2012 and decreased $952,000 in the nine months ended
September 30, 2012, compared to the same periods in 2011. The decrease in the nine months ended September 30, 2012 is primarily due to reduced obligations as a result of renegotiated contracts.
Depreciation and amortization
Television
. Depreciation and amortization for our television segment increased $286,000 and $937,000 in the three and nine months ended September 30, 2012 compared to the same periods in 2011,
respectively, primarily due to investments in our broadcasting equipment at KOMO and KATU.
Radio
. Depreciation and
amortization for our radio segment increased $6,000 and $18,000 in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011.
Other
. Other depreciation and amortization decreased $53,000 and $133,000 in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011 as certain
assets have become fully depreciated.
Gain on sale of real estate, net
In January 2012, we completed the sale of two real estate parcels not essential to current operations and received $570,000 in net
proceeds. In June 2012, we completed the sale of a real estate parcel not essential to current operations and received $253,000 in net proceeds. We recognized a gain on sale of real estate, net of $164,000 for the nine months ended
September 30, 2012.
In June 2011, we completed the sale of two real estate parcels not essential to current operations
and received $4.2 million in net proceeds. We recognized a gain on the sale of real estate, net of $4.1 million for the nine months ended September 30, 2011.
Plaza fire reimbursements, net
No Plaza fire reimbursements were received
in the three and nine months ended September 30, 2012. 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.
Loss on extinguishment of senior notes, net
In January 2012, we redeemed the remaining $61.8 million aggregate principal amount of Senior Notes for a total consideration of $62.7
million in cash plus accrued interest of $1.8 million. We recorded a loss on extinguishment of debt of $1.5 million, including a charge for related unamortized debt issuance costs, of approximately $594,000.
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.
21
Other income, net
Other income, net, typically consists of interest and other miscellaneous income received. During the three and nine months ended September 30, 2012, other income, net, increased $15,000 and
decreased $71,000, respectively, compared to the same periods in 2011. The decrease in the nine months ended September 30, 2012 compared to the same period in 2011 was primarily due to a miscellaneous insurance reimbursement received in 2011.
Interest expense
Interest expense in the three and nine months ended September 30, 2012 decreased $1.6 million and $5.4 million, respectively, from the same periods in 2011, due to the redemption of outstanding
Senior Notes in January 2012.
Provision for income taxes
Our effective tax rate was 38.2% and 36.3% for the nine months ended September 30, 2012 and 2011, respectively. Our effective tax rate is calculated on the statutory rate of 35%, adjusted for state
income taxes, changes in certain tax account balances and 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.
Income from discontinued operations, net of income taxes
In October 2011, we completed the sale of our Montana Stations to STARadio for $1.8 million, subject to certain adjustments. In accordance
with authoritative guidance we have reported the results of operations of the Montana Stations as discontinued operations in the unaudited condensed consolidated financial statements. 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, investments in debt securities 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, cash equivalents and investments in debt securities 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 August 2012, we received a commitment letter from JPMorgan Chase Bank for a five-year $30 million senior secured revolving credit facility. The credit facility is subject to the negotiation and
execution of loan and security documents that are expected to contain customary terms and conditions, including financial and other covenants. Borrowings under the facility will bear interest at a floating rate based on LIBOR and are expected to be
used for general corporate purposes and working capital, as needed. The credit facility is also expected to include an option permitting us to increase the size of the facility by up to $50 million, subject to approval from participating lenders and
other customary conditions.
In January 2012, we redeemed the remaining $61.8 million aggregate principal amount of our Senior
Notes for a total consideration of $62.7 million in cash plus accrued interest of $1.8 million. We recorded a loss on extinguishment of debt of $1.5 million, including a charge for related unamortized debt issuance costs, of approximately $594,000.
As a result of our redemption of the remaining outstanding Senior Notes, we are no longer subject to provisions contained in the Senior Notes indenture, including various debt covenants and other restrictions.
In the third quarter of 2012, our Board of Directors declared a special cash dividend of $10.00 per common share, or approximately $88.8
million, which was paid on October 19, 2012 to holders of record on September 28, 2012. Additionally, in October 2012, our Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on December 17, 2012 to
holders of record on November 30, 2012.
22
Capital Resources
Cash, cash equivalents and short-term debt security investments were approximately $103.8 million as of September 30, 2012 compared to $176.5 million as of December 31, 2011. The decrease of
$72.7 million was primarily due to our redemption of the remaining $61.8 million of outstanding principal of our senior notes in January 2012. Cash used in operating activities for the nine months ended September 30, 2012 of $1.9 million
consists of $23.1 million of cash generated from operations offset by $21.7 million in income tax payments, net of refunds received, $1.5 million of debt extinguishment costs and $1.8 million of interest payments on our retired senior notes. Our
debt security investments are held in U.S. Treasury securities and are carried at fair market value.
Due to the Board of
Directors August 2012 declaration of a $10.00 per common share special cash dividend and the institution of a quarterly dividend policy we announced our intention to fund the dividends from existing cash and debt security investments. As a
result, on September 30, 2012, we reclassified our entire portfolio of debt security investments classified as held-to-maturity, which consisted of U.S. Treasury securities, to available for sale. At September 30, 2012, these investments
had a fair value and amortized cost of $76.0 million. The investments net unrealized appreciation, net of tax, increased our accumulated other comprehensive income and shareholders equity by $13,000 as of September 30, 2012.
The following table summarizes our debt security investments (on the basis of carrying value) as of September 30, 2012
and December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity (at amortized cost):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
|
|
|
|
0.0
|
%
|
|
$
|
36,950
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale (at fair value):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
76,030
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt security investments
|
|
$
|
76,030
|
|
|
|
100.0
|
%
|
|
$
|
36,950
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In October 2012, debt security investments with a carrying value of $6.2 million reached maturity and we
sold debt security investments with a carrying value of $66.3 million for a loss of $20,000. The proceeds from the sale and maturity of these investments were used to fund the special cash dividend paid on October 19, 2012.
Net cash provided by (used in) operating activities
Net cash used in operating activities for the nine months ended September 30, 2012 of $1.9 million consists of our net income of $4.6 million, adjusted for non-cash charges of $13.0 million, which
consisted primarily of depreciation and amortization, amortization of broadcast rights and stock-based compensation, offset by a $12.1 million decrease in working capital, which includes income tax payments, net, of $21.7 million, and $7.4 million
of payments for broadcast rights.
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 our non-cash charges of $13.2 million, which consisted primarily of depreciation and amortization, amortization of broadcast rights, gain on sale of real estate, net, and
stock-based compensation, 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 used in investing activities
During the nine months ended September 30, 2012, net cash used in investing activities of $47.3 million consisted primarily of purchases of debt security investments of $82.7 million in the form of
U.S. Treasury securities and purchases of property, plant and equipment of $7.6 million, partially offset by $43.6 million in proceeds received from the sale or maturity of debt security investments in the form of U.S. Treasury securities.
23
During the nine months ended September 30, 2011, cash flows used in investing
activities of $1.1 million consisted primarily of $5.1 million in purchases of property, plant and equipment, partially offset by proceeds received from the sale of real estate of $4.2 million.
Net cash used in financing activities
Net cash used in financing activities for the nine months ended September 30, 2012 was $62.5 million primarily due to the redemption of $61.8 million aggregate principal amount of Senior Notes and
net share settlement for employee stock compensation tax withholding obligations of $441,000.
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.
Recent Accounting Pronouncements
Refer to Note 1 of our unaudited condensed consolidated financial statements included in Part I, Item 1 of this report.
24